Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The sections titled “Proposal 1 Election of Directors,” “Corporate Governance and the Board of Directors” and “Delinquent Section 16(a) Reports” in our Definitive Proxy Statement relating to our Annual Meeting of Shareholders to be held on April 28, 2022, are incorporated by reference in this Annual Report on Form 10-K.

Executive Officers of the Registrant

Refer to Part I, Item 1. of this Form 10-K for a listing of executive officers.

Corning’s Board of Directors

Donald W. Blair  Retired Executive Vice President and Chief Financial Officer, NIKE, Inc.

Mr. Blair was the executive vice president and chief financial officer of NIKE, Inc. from 1999 to October 2015. Prior to joining NIKE, he served 15 years at PepsiCo, Inc. in a number of senior executive-level corporate and operating unit financial assignments, including chief financial officer roles for PepsiCo Japan (based in Tokyo) and Pepsi-Cola International’s Asia Division (based in Hong Kong). He began his career in 1981 as an accountant with Deloitte Haskins & Sells. Mr. Blair joined Corning’s Board in 2014. Age 63. 

Leslie A. Brun  Chairman and Chief Executive Officer, Sarr Group LLC

Mr. Brun is chairman and chief executive officer of Sarr Group, LLC, co-founder, chairman and chief executive officer of Ariel Alternatives, LLC, vice chairman and senior advisor of G100 Companies and World 50 and a member of the Council on Foreign Relations. He is also the founder and former chief executive officer and chairman of Hamilton Lane, where he served as chief executive officer and chairman from 1991 until 2005, former lead director of Merck & Co., Inc.; a former director and chairman of the board of Automatic Data Processing, Inc., and a former director of Hewlett Packard Enterprise Company. In addition, Mr. Brun also served as a managing director and co-founder of the investment banking group of Fidelity Bank, and vice president in the corporate finance division of E.F. Hutton & Co. Mr. Brun joined Corning’s Board in 2018. Age 69.

Stephanie A. Burns  Retired Chairman and Chief Executive Officer, Dow Corning Corporation

Dr. Burns has nearly 37 years of global innovation and business leadership experience. Dr. Burns joined Dow Corning in 1983 as a researcher and specialist in organosilicon chemistry. In 1994, she became the company’s first director of women’s health. She was elected to the Dow Corning Board of Directors in 2001 and elected as president in 2003. She served as chief executive officer from 2004 until May 2011 and served as chair from 2006 until her retirement in December 2011.  Dr. Burns joined Corning’s Board in 2012. Age 67.

Richard T. Clark  Retired Chairman, Chief Executive Officer and President, Merck & Co., Inc. Lead Independent Director

Mr. Clark retired from Merck in 2011. He joined Merck in 1972 and held a broad range of senior management positions. He became president and chief executive officer of Merck in May 2005 and chairman of the board in April 2007. He transitioned from the chief executive officer role in January 2011 and served as Merck board chairman through November 2011. He was president of the Merck Manufacturing Division (June 2003 to May 2005) of Merck Sharp & Dohme Corp. He is chairman emeritus of the board of Project Hope and a trustee of several charitable non-profit organizations. Mr. Clark joined Corning’s Board in 2011. Age 76.

Pamela J. Craig  Retired Chief Financial Officer, Accenture plc.

From 2006 through 2013, Ms. Craig served as chief financial officer of Accenture plc., a global management consulting, technology services and outsourcing company, following many other leadership roles in line management, consulting and operations during her 34 years with the company. Ms. Craig has extensive finance, management, operational, technology and international business expertise, including her accomplishments and executive abilities as chief financial officer at Accenture. Ms. Craig joined Corning’s Board in 2021. Age 65.

Robert F. Cummings, Jr.  Retired Vice Chairman of Investment Banking, JPMorgan Chase & Co.

Mr. Cummings retired as vice chairman of Investment Banking at JPMorgan Chase & Co. (JPM) in February 2016. He had served in that role since December 2010, advising on client opportunities across sectors and industry groups. Mr. Cummings began his business career in the investment banking division of Goldman, Sachs & Co. in 1973 and was a partner of that firm from 1986 until his retirement in 1998. He served as an advisory director at Goldman Sachs until 2002. Mr. Cummings joined Corning’s Board in 2006. Age 72.

Roger W. Ferguson, Jr.  Retired President and Chief Executive Officer, TIAA

Mr. Ferguson was the President and Chief Executive Officer of TIAA from April 2008 – March 2021. He is also the former Vice Chairman of the Board of Governors of the U.S. Federal Reserve System. Prior to joining TIAA in April 2008, Mr. Ferguson was head of financial services for Swiss Re and Chairman of Swiss Re America Holding Corporation. From 1984 to 1997, he was an Associate and Partner at McKinsey & Company. He began his career as an attorney at the New York City office of Davis Polk & Wardwell. Mr. Ferguson joined Corning’s Board in 2021. Age 70.

Deborah A. Henretta   Retired Group President of Global E-Business, Procter & Gamble Company

Ms. Henretta has over 36 years of business leadership experience across both developed and developing markets, as well as expertise in brand building, marketing, philanthropic program development and government relations. She joined Procter & Gamble (P&G) in 1985. In 2005, she was appointed President of P&G’s business in ASEAN, Australia and India. She was appointed group president, P&G Asia in 2007, group president of P&G Global Beauty Sector in June 2013, and group president of P&G E-Business in February 2015. She retired from P&G in June 2015. Ms. Henretta joined Corning’s Board in 2013. Age 60.

Daniel P. Huttenlocher  Dean, MIT Stephen A. Schwarzman College of Computing

Dr. Huttenlocher is the Dean of the MIT Schwarzman College of Computing. Prior to joining MIT, Dr. Huttenlocher served as dean and vice provost of Cornell Tech from 2012 – 2019 and worked for Cornell University from 1988 to 2012 in various positions. Before Cornell, Dr. Huttenlocher worked at Xerox Palo Alto Research Center and was Chief Technology Officer at Intelligent Markets, Inc. Mr. Huttenlocher joined Corning’s Board in 2015. Age 63.

Kurt M. Landgraf  Retired President, Washington College

From July 2017 to July 2020, Mr. Landgraf was president of Washington College. He previously served as president and chief executive officer of Educational Testing Service (ETS), a private non-profit educational testing and measurement organization, from 2000 until his retirement in December 2013. Prior to that, he was executive vice president and chief operating officer of E.I. Du Pont de Nemours and Company (DuPont), where he previously held a number of senior leadership positions, including chief financial officer. Mr. Landgraf joined Corning’s Board in 2007. Age 75.

Kevin J. Martin  Vice President, US Public Policy, Meta Platforms, Inc.

Mr. Martin is Vice President, US Public Policy at Meta Platforms, Inc. Prior to joining Meta, he was a partner and co-chair of the telecommunications practice at Squire Patton Boggs, an international law firm (2009 to 2015). From March 2005 to January 2009, he was chairman of the Federal Communications Commission (FCC). Mr. Martin joined Corning’s Board in 2013. Age 55.

Deborah D. Rieman  Retired Executive Chairman, Metamarkets Group

Dr. Rieman has more than 33 years of experience in the software industry. In 2016, she retired as executive chairman of Metamarkets Group. Previously, she was managing director of Equus Management Company, a private investment fund. From 1995 to 1999, she served as president and chief executive officer of Check Point Software Technologies, Incorporated. Dr. Rieman joined Corning’s Board in 1999. Age 72.

Hansel E. Tookes II  Retired Chairman and Chief Executive Officer, Raytheon Aircraft Company

Mr. Tookes retired from Raytheon Company in December 2002. He joined Raytheon in 1999 and served as president of Raytheon International, chairman and chief executive officer of Raytheon Aircraft, and executive vice president of Raytheon Company. From 1980 to 1999, Mr. Tookes served United Technologies Corporation as president of Pratt and Whitney’s Large Military Engines Group and in a variety of other leadership positions. Mr. Tookes joined Corning’s Board in 2001. Age 74.

Wendell P. Weeks  Chairman and Chief Executive Officer

Mr. Weeks joined Corning in 1983 in the finance group.  He has held a variety of financial, business development, commercial, and general management roles.  He was named vice president and general manager of the Optical Fiber business in 1996 and president of Corning’s Optical Communications division in 2001.  He became Corning’s president and chief operation officer in April 2002. He was named chief executive officer in April 2005 and chairman of the board in April 2007.  Mr. Weeks is a director of Amazon.com, Inc.  Mr. Weeks joined Corning’s Board in 2000.  Age 62.

Mark S. Wrighton  Interim President, George Washington University

Dr. Wrighton has more than 28 years of leadership experience overseeing large research universities. He currently serves as interim president of George Washington University, on sabbatical from his position as a professor and chancellor emeritus of Washington University in St. Louis where he served 24 years as its chief executive officer and 14 years as chancellor. Before joining Washington University in St. Louis, he was a researcher and professor at the Massachusetts Institute of Technology, where he was head of the Department of Chemistry from 1987 to 1990, and then provost from 1990 to 1995. Dr. Wrighton served as a presidential appointee to the National Science Board from 2000 to 2006. He is also a past chair of the Association of American Universities, the Business Higher Education Forum, and the Consortium on Financing Higher Education. He was elected to membership in the American Academy of Arts and Sciences and the American Philosophical Society, and he is a Fellow of the American Association for the Advancement of Science. Dr. Wrighton joined Corning’s Board in 2009.  Age 72.

Code of Ethics

Our Board of Directors adopted the Code of Ethics ("Code") for the Chief Executive Officer and Financial Executives. This Code has been in existence for more than ten years. The Code applies to our Chief Executive Officer, Chief Financial Officer, Controller and other financial executives.  During 2021, no amendments to or waivers of the provisions of the Code were made with respect to any of our directors or executive officers. A copy of the Code of Ethics is available on our website at http://www.corning.com/worldwide/en/about-us/investor-relations/codes-of-conduct-ethics.html. We will also provide a copy of the Code of Ethics to shareholders without charge upon written request to Corporate Secretary, Corning Incorporated, Corning, NY 14831. We will disclose future amendments to, or waivers from, the Code of Ethics on our website within four business days following the date of such amendment or waiver.

Item 11. Executive Compensation

The sections titled “Compensation Discussion and Analysis”, “Director Compensation” and "Compensation Committee Interlocks and Insider Participation" in our Definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 2022, are incorporated by reference in this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The section titled “Beneficial Ownership Table” in our Definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 2022, are incorporated by reference in this Annual Report on Form 10-K.

Equity Compensation Plan Information

The following table shows the total number of outstanding stock options and shares available for other future issuances of options under existing equity compensation plans as of December 31, 2021:

		A				B				C
		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted-average exercise price of outstanding options, warrants and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column A)
Equity compensation plans approved by security holders (1)			11,904,441			$	22.31				38,657,008
Equity compensation plans not approved by security holders
Total			11,904,441			$	22.31				38,657,008

(1)	Shares indicated are total grants under the most recent shareholder approved plans.

Item 13. Certain Relationships and Related Transactions and Director Independence

The sections entitled “Policy on Transactions with Related Persons”, “Director Independence” and “Corporate Governance and the Board of Directors-Committees” in our Definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 2022, are incorporated by reference in this Annual Report on Form 10-K.

Item 14. Principal Accounting Fees and Services

The sections entitled “Fees Paid to Independent Registered Public Accounting Firm” and “Policy Regarding Audit Committee Pre-Approval of Audit and Permitted Non-Audit Services of Independent Registered Public Accounting Firm” in our Definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 2022, are incorporated by reference in this Annual Report on Form 10-K.

In April 2021, PricewaterhouseCoopers LLP (PwC) issued its annual Public Company Accounting Oversight Board Rule 3526 independence letter to the Audit Committee of our Board of Directors and therein reported that it is independent under applicable standards in connection with its audit opinion for the financial statements contained in this report. The Audit Committee has discussed with PwC its independence from Corning and concurred with PwC.

PART IV

Item 15. Exhibits

(a)	Documents filed as part of this report:
					Page
	1.	Financial statements			65
			See separate index to financial statements
(b)	Exhibits filed as part of this report:

	2.1	Framework Agreement, dated as of October 22, 2013, by and among Samsung Display Co., Ltd.; Corning Incorporated and the other parties thereto. (Incorporated by reference to Exhibit 10.65 to Corning’s Form 10-K filed on February 10, 2014, as amended by its Form 10-K/A filed on March 21, 2014). The Company has omitted certain schedules, exhibits and similar attachments to the Framework Agreement pursuant to Item 601(b)(2) of Regulation S-K.
	2.2	Transaction Agreement, dated December 10, 2015, by and between Corning Incorporated, The Dow Chemical Company, Dow Corning Corporation and HS Upstate Inc. (Incorporated by reference to Exhibit 1.1 of Corning’s Form 8-K filed on December 11, 2015).
	2.3	Assignment Agreement, dated as of December 29, 2015, between Samsung Display Co., Ltd., Corning Incorporated, Corning Precision Materials Co., Ltd., and Corning Luxembourg S.àr.l., Corning Hungary Data Services Limited Liability Company, Corning Japan K.K., and Samsung Corning Advanced Glass LLC (Incorporated by reference to Exhibit 2.1 of Corning’s Form 8-K filed on December 29, 2015).
	3.1	Restated Certificate of Incorporation dated April 27, 2012, filed with the Secretary of State of the State of New York on April 27, 2012 (Incorporated by reference to Exhibit 3(i) 1 of Corning’s Form 8-K filed on May 1, 2012).
	3.2	Certificate of Amendment to the Restated Certificate of Incorporation dated January 14, 2014, filed with the Secretary of State of the State of New York on January 14, 2014 (Incorporated by reference to Exhibit 3.1 of Corning’s Form 8-K filed on January 15, 2014).
	3.3	Amended and Restated By-Laws of Corning Incorporated, effective as of February 2, 2022 (Incorporated by reference to Exhibit 3.1 of Corning’s Form 8-K filed February 3, 2022).
	4.1	Indenture, dated November 8, 2000, by and between the Company and of The Bank of New York Mellon Trust Company, N.A. (successor to J. P. Morgan Chase & Co., formerly The Chase Manhattan Bank), as trustee (Incorporated by reference to Exhibit 4.01 to Corning’s Registration Statement on Form S-3, Registration Statement No. 333-251135). The Company agrees to furnish to the Commission on request copies of other instruments with respect to long-term debt.
	4.2	Form of certificate for shares of the common stock (Incorporated by reference to Exhibit 4.4 to Corning’s registration statement on Form S-8 dated May 7, 2010 (Registration Statement No. 333-166642)).
	4.3	Shareholder Agreement, dated as of October 22, 2013, by and between Samsung Display Co., Ltd. and Corning Incorporated (Incorporated by reference to Exhibit 10.66 to Corning’s Form 10-K filed on February 10, 2014, as amended by its Form 10-K/A filed on March 21, 2014 and further amended by the First Amendment to Shareholder Agreement, dated April 5, 2021, incorporated by reference to Exhibit 10.2 to Corning's Form 8-K filed on April 5, 2021).
	4.4	Standstill Agreement, dated as of October 22, 2013, by and among Samsung Electronics Co., Ltd., Samsung Display Co., Ltd. and Corning Incorporated (Incorporated by reference to Exhibit 10.67 to Corning’s Form 10-K filed on February 10, 2014, as amended by its Form 10-K/A filed on March 21, 2014).
	4.5	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (Incorporated by reference to Exhibit 4.5 to Corning’s Form 10-K filed on February 12, 2021.)
	10.1	2000 Employee Equity Participation Program and 2003 Amendments (Incorporated by reference to Exhibit 1 of Corning Proxy Statement, Definitive 14A filed March 10, 2003 for April 24, 2003 Annual Meeting of Shareholders).
	10.2	2003 Variable Compensation Plan (Incorporated by reference to Exhibit 2 of Corning Proxy Statement, Definitive 14A filed March 10, 2003 for April 24, 2003 Annual Meeting of Shareholders).
	10.3	2003 Equity Plan for Non-Employee Directors (Incorporated by reference to Exhibit 3 of Corning Proxy Statement, Definitive 14A filed March 10, 2003 for April 24, 2003 Annual Meeting of Shareholders).
	10.4	Form of Officer Severance Agreement dated as of February 1, 2004 between Corning Incorporated and each of the following individuals: Lawrence D. McRae and Eric S. Musser (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed May 4, 2004).

‎	10.5	Form of Amendment dated as of February 1, 2004 to Change In Control Agreement dated as of October 4, 2000 between Corning Incorporated and Lawrence D. McRae (Incorporated by reference to Exhibit 10.4 of Corning’s Form 10-Q filed May 4, 2004).
	10.6	Form of Change In Control Amendment dated as of October 4, 2000 between Corning Incorporated and Lawrence D. McRae (Incorporated by reference to Exhibit 10.5 of Corning’s Form 10-Q filed May 4, 2004).
	10.7	Amendment dated as of February 1, 2004 to Change In Control Agreement dated as of April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.8 of Corning’s Form 10-Q filed May 4, 2004).
	10.8	Change In Control Agreement dated as of April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.9 of Corning’s Form 10-Q filed May 4, 2004).
	10.9	Form of Corning Incorporated Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.4 of Corning’s Form 10-Q filed October 28, 2004).
	10.10	2005 Employee Equity Participation Program (Incorporated by reference to Exhibit I of Corning Proxy Statement, Definitive 14A filed March 1, 2005 for April 28, 2005 Annual Meeting of Shareholders).
	10.11	2006 Variable Compensation Plan (Incorporated by reference to Appendix J of Corning Proxy Statement, Definitive 14A filed March 8, 2006 for April 27, 2006 Annual Meeting of Shareholders).
	10.12	Amended 2003 Equity Plan for Non-Employee Directors (Incorporated by reference to Appendix K of Corning Proxy Statement, Definitive 14A filed March 8, 2006 for April 27, 2006 Annual Meeting of Shareholders).
	10.13	Amended Corning Incorporated 2003 Equity Plan for Non-Employee Directors effective October 4, 2006 (Incorporated by reference to Exhibit 10.28 of Corning’s Form 10-K filed February 27, 2007).
	10.14	Amended Corning Incorporated 2005 Employee Equity Participation Program effective October 4, 2006 (Incorporated by reference to Exhibit 10.29 of Corning’s Form 10-K filed February 27, 2007).
	10.15	Form of Corning Incorporated Incentive Stock Plan Agreement for Restricted Stock Grants, amended effective December 6, 2006 (Incorporated by reference to Exhibit 10.30 of Corning’s Form 10-K filed February 27, 2007).
	10.16	Executive Supplemental Pension Plan effective February 7, 2007 and signed February 12, 2007 (Incorporated by reference to Exhibit 10.31 of Corning’s Form 10-K filed February 27, 2007).
	10.17	Executive Supplemental Pension Plan as restated and signed April 10, 2007 (Incorporated by reference to Exhibit 10 of Corning’s Form 10-Q filed April 27, 2007).
	10.18	Amendment No. 1 to 2006 Variable Compensation Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.34 of Corning’s Form 10-K filed February 14, 2008).
	10.19	Corning Incorporated Goalsharing Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.35 of Corning’s Form 10-K filed February 14, 2008).
	10.20	Corning Incorporated Performance Incentive Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.36 of Corning’s Form 10-K filed February 14, 2008).
	10.21	Amendment No. 1 to Deferred Compensation Plan for Directors dated October 3, 2007 (Incorporated by reference to Exhibit 10.37 of Corning’s Form 10-K filed February 14, 2008).
	10.22	Corning Incorporated Supplemental Pension Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.38 of Corning’s Form 10-K filed February 14, 2008).
	10.23	Corning Incorporated Supplemental Investment Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.39 of Corning’s Form 10-K filed February 14, 2008).
	10.24	Form of Corning Incorporated Non-Qualified Stock Option Agreement, amended effective December 5, 2007 (Incorporated by reference to Exhibit 10.41 of Corning’s Form 10-K filed February 14, 2008).
	10.25	Amendment No. 2 dated February 13, 2008 and Amendment dated as of February 1, 2004 to Letter of Understanding between Corning Incorporated and Wendell P. Weeks, and Letter of Understanding dated April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.42 of Corning’s Form 10-K filed February 14, 2008).
	10.26	Form of Change in Control Agreement Amendment No. 2, effective December 5, 2007 (Incorporated by reference to Exhibit 10.43 of Corning’s Form 10-K filed February 14, 2008).
	10.27	Form of Officer Severance Agreement Amendment, effective December 5, 2007 (Incorporated by reference to Exhibit 10.44 of Corning’s Form 10-K filed February 14, 2008).
	10.28	Amendment No. 1 to Corning Incorporated Supplemental Investment Plan, approved December 17, 2007 (Incorporated by reference to Exhibit 10.45 of Corning’s Form 10-K filed February 14, 2008).
	10.29	Amendment No. 1 to Corning Incorporated Supplemental Pension Plan, approved December 17, 2007 (Incorporated by reference to Exhibit 10.46 of Corning’s Form 10-K filed February 14, 2008).
	10.30	Amendment No. 1 to Corning Incorporated Executive Supplemental Pension Plan, approved December 17, 2007 (Incorporated by reference to Exhibit 10.47 of Corning’s Form 10-K filed February 14, 2008).

	10.31	Second Amended 2005 Employee Equity Participation Program (Incorporated by reference to Exhibit 10 of Corning’s Form 8-K filed April 25, 2008).
	10.32	Amendment No. 2 to Executive Supplemental Pension Plan effective July 16, 2008 (Incorporated by reference to Exhibit 10 of Corning’s Form 10-Q filed July 30, 2008).
	10.33	Form of Corning Incorporated Non-Qualified Stock Option Agreement effective as of December 3, 2008 (Incorporated by reference to Exhibit 10.50 of Corning’s Form 10-K filed February 24, 2009).
	10.34	Form of Change of Control Agreement Amendment No. 3 effective December 19, 2008 (Incorporated by reference to Exhibit 10.53 of Corning’s Form 10-K filed February 24, 2009).
	10.35	Form of Officer Severance Agreement Amendment No. 2 effective December 19, 2008 (Incorporated by reference to Exhibit 10.54 of Corning’s Form 10-K filed February 24, 2009).
	10.36	Amendment No. 3 dated December 19, 2008 to Letter of Understanding dated April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.55 of Corning’s Form 10-K filed February 24, 2009).
	10.37	Amendment No. 2 to Corning Incorporated Supplemental Investment Plan approved April 29, 2009 (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed July 29, 2009).
	10.38	Amendment No. 2 to Deferred Compensation Plan dated April 29, 2009 (Incorporated by reference to Exhibit 10.2 of Corning’s Form 10-Q filed July 29, 2009).
	10.39	Amendment No. 2 to 2006 Variable Compensation Plan dated December 2, 2009 (Incorporated by reference to Exhibit 10.58 of Corning’s Form 10-K filed February 10, 2010).
	10.40	2010 Variable Compensation Plan (Incorporated by reference to Appendix A of Corning’s Proxy Statement, Definitive 14A filed March 15, 2010 for April 29, 2010 Annual Meeting of Shareholders).
	10.41	2010 Equity Plan for Non-Employee Directors (Incorporated by reference to Appendix B of Corning Proxy Statement, Definitive 14A filed March 15, 2010 for April 29, 2010 Annual Meeting of Shareholders).
	10.42	Amendment No. 2 to Corning Incorporated Supplemental Pension Plan dated December 18, 2008 (Incorporated by reference to Exhibit 10.66 of Corning’s Form 10-K filed February 10, 2011).
	10.43	Amendment No. 2 to Deferred Compensation Plan for Directors dated February 1, 2012 (Incorporated by reference to Exhibit 10.62 of Corning’s Form 10-K filed February 13, 2012).
	10.44	Amendment No. 3 to Corning Incorporated Executive Supplemental Pension Plan effective December 31, 2008 (Incorporated by reference to Exhibit 10.59 of Corning’s Form 10-K filed February 13, 2013).
	10.45	2021 Long-Term Incentive Plan (Incorporated by reference to Appendix B of Corning Proxy Statement, Definitive 14A filed March 18, 2021, for April 29, 2021 Annual Meeting of Shareholders).
	10.46	Amendment No. 3 to Deferred Compensation Plan for Directors dated December 28, 2012 (Incorporated by reference to Exhibit 10.61 of Corning’s Form 10-K filed February 13, 2013).
	10.47	Amendment No. 4 to Corning Incorporated Executive Supplemental Pension Plan effective December 31, 2012 (Incorporated by reference to Exhibit 10.62 of Corning’s Form 10-K filed February 13, 2013).
	10.48	Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2014 (Incorporated by reference to Exhibit 10.69 to Corning’s Form 10-K filed on February 10, 2014, as amended by its Form 10-K/A filed on March 21, 2014).
	10.49	Amendment No. 4 to Deferred Compensation Plan for Directors dated September 30, 2014 (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed on October 29, 2014).
	10.50	2014 Variable Compensation Plan (Incorporated by reference to Appendix B of Corning’s Proxy Statement, Definitive 14A filed March 13, 2014 for the April 29, 2014 Annual Meeting of Shareholders).
	10.51	Form of Corning Incorporated Incentive Stock Rights Agreement, effective January 1, 2015 (Incorporated by reference to Exhibit 10.64 of Corning’s Form 10-K filed February 13, 2015).
	10.52	Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2015 (Incorporated by reference to Exhibit 10.65 of Corning’s Form 10-K filed February 13, 2015).
	10.53	Form of Officer Severance Agreement dated as of January 1, 2015 between Corning Incorporated and each of the following individuals: Eric S. Musser; Lewis A. Steverson and R. Tony Tripeny (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed July 30, 2015).
	10.54	Form of Change in Control Agreement dated as of January 1, 2015 between Corning Incorporated and each of the following individuals: Eric S. Musser; Lewis A. Steverson and R. Tony Tripeny (Incorporated by reference to Exhibit 10.2 of Corning’s Form 10-Q filed July 30, 2015).
	10.55	Tax Matters Agreement, dated December 10, 2015, by and between Corning Incorporated, The Dow Chemical Company, Dow Corning Corporation and HS Upstate Inc. (Incorporated by reference to Exhibit 1.2 of Corning’s Form 8-K filed on December 11, 2015).
	10.56	Form of Corning Incorporated Incentive Stock Rights Agreement, effective January 1, 2016 (Incorporated by reference to Exhibit 10.69 of Corning’s Form 10-K filed February 12, 2016).

	10.57	Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2016 (Incorporated by reference to Exhibit 10.70 of Corning’s Form 10-K filed February 12, 2016).
	10.58	Form of Corning Incorporated Incentive Stock Rights Agreement for Employees, effective January 1, 2017 (Incorporated by reference to Exhibit 10.71 of Corning’s Form 10-K filed February 6, 2017).
	10.59	Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2017 (Incorporated by reference to Exhibit 10.73 of Corning’s Form 10-K filed February 6, 2017).
	10.60	Form of Corning Incorporated Restricted Stock Unit Grant Notice and Agreement for Non-Employee Directors (for grants made under the 2012 Equity Plan for Non-Employee Directors), effective January 1, 2017 (Incorporated by reference to Exhibit 10.74 of Corning’s Form 10-K filed February 6, 2017).
	10.61	Form of Corning Incorporated Incentive Stock Rights Agreement for Employees, effective January 1, 2018 (Incorporated by reference to Exhibit 10.74 of Corning’s Form 10-K filed February 15, 2018).
	10.62	Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2018 (Incorporated by reference to Exhibit 10.75 of Corning’s Form 10-K filed February 15, 2018).
	10.63	Credit Agreement dated as of August 15, 2018, among Corning Incorporated, JPMorgan Chase Bank, N.A., Citibank, N.A., Bank of America, N.A., Goldman Sachs Bank USA, HSBC Bank USA, National Association, Morgan Stanley Bank, N.A., MUFG Bank, Ltd., Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, Wells Fargo Bank, National Association, Bank of China New York Branch, and The Bank of New York Mellon (Incorporated by reference to Exhibit 10.1 to Corning’s Form 8-K filed on August 15, 2018).
	10.64	Corning Incorporated Deferred Compensation Plan for Non-Employee Directors as Amended and Restated on January 1, 2018 (Incorporated by reference to Exhibit 10.77 of Corning’s Form 10-K filed February 14, 2020).
	10.65	2019 Equity Plan for Non-Employee Directors (Incorporated by reference to Appendix B of Corning Proxy Statement, Definitive 14A filed March 22, 2019 for May 2, 2019 Annual Meeting of Shareholders).
	10.66	Form of Corning Incorporated Restricted Stock Unit Grant Notice and Agreement for Non-Employee Directors (for grants made under the 2019 Equity Plan for Non-Employee Directors), effective January 1, 2020 (Incorporated by reference to Exhibit 10.79 of Corning’s Form 10-K filed February 14, 2020).
	10.67	Form of Corning Incorporated Performance Share Unit Agreement, effective January 1, 2020 (Incorporated by reference to Exhibit 10.80 of Corning’s Form 10-K filed February 14, 2020).
	10.68	Share Repurchase Agreement, dated April 5, 2021, between Samsung Display Co., Ltd. and Corning Incorporated (Incorporated by reference to Exhibit 10.1 to Corning's Form 8-K filed on April 5, 2021).
	14	Corning Incorporated Code of Ethics for Chief Executive Officer and Financial Executives, and Code of Conduct for Directors and Executive Officers (Incorporated by reference to Appendix G of Corning Proxy Statement, Definitive 14A filed March 13, 2012 for April 26, 2012 Annual Meeting of Shareholders).
	21	Subsidiaries of the Registrant at December 31, 2021.
	23	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
	24	Powers of Attorney (included on the Signatures page of this Annual Report on Form 10-K).
	31.1	Certification Pursuant to Rule 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification Pursuant to Rule 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS	Inline XBRL Instance Document
	101.SCH	Inline XBRL Taxonomy Extension Schema Document
	101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document
	101.LAB	Inline XBRL Taxonomy Label Linkbase Document
	101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document
	101.DEF	Inline XBRL Taxonomy Definition Document
	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Item 16. Form 10-K Summary.

None.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused his report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Corning Incorporated
Date: February 14, 2022	By:	/s/ Wendell P. Weeks
		Wendell P. Weeks
		Chairman of the Board of Directors,
		Chief Executive Officer

Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints R. Tony Tripeny, Lewis A. Steverson and Edward A. Schlesinger, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities as indicated and on the 14th day of February, 2022.

Signature		Capacity
/s/ Wendell P. Weeks		Chairman of the Board of Directors, ‎Chief Executive Officer, and Director
Wendell P. Weeks		(Principal Executive Officer)
/s/ R. Tony Tripeny		Executive Vice President and Chief Financial Officer ‎(Principal Financial Officer)
R. Tony Tripeny
/s/ Edward A. Schlesinger		Senior Vice President and Corporate Controller ‎(Principal Accounting Officer)
Edward A. Schlesinger
/s/ Donald W. Blair		Director
Donald W. Blair
/s/ Leslie A. Brun		Director
Leslie A. Brun
/s/ Stephanie A. Burns		Director
Stephanie A. Burns
/s/ Richard T. Clark		Director
Richard T. Clark
/s/ Pamela J. Craig		Director
Pamela J. Craig

Signature		Capacity
/s/ Robert F. Cummings, Jr.		Director
Robert F. Cummings, Jr.
/s/ Roger W. Ferguson Jr.		Director
Roger W. Ferguson Jr.
/s/ Deborah A. Henretta		Director
Deborah A. Henretta
/s/Daniel P. Huttenlocher		Director
Daniel P. Huttenlocher
/s/ Kurt M. Landgraf		Director
Kurt M. Landgraf
/s/ Kevin J. Martin		Director
Kevin J. Martin
/s/ Deborah D. Rieman		Director
Deborah D. Rieman
/s/ Hansel E. Tookes II		Director
Hansel E. Tookes II
/s/ Mark S. Wrighton		Director
Mark S. Wrighton

Corning Incorporated

2021 Annual Report

Index to Financial Statements

			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			63
Consolidated Statements of Income			65
Consolidated Statements of Comprehensive Income			66
Consolidated Balance Sheets			67
Consolidated Statements of Cash Flows			68
Consolidated Statements of Changes in Shareholders’ Equity			69
Notes to Consolidated Financial Statements
	1.	Summary of Significant Accounting Policies	70
	2.	Restructuring, Impairment and Other Charges and Credits	76
	3.	Investments	77
	4.	HSG Transactions and Acquisitions	80
	5.	Revenue	81
	6.	Inventories, Net	83
	7.	Leases	84
	8.	Income Taxes	85
	9.	Property, Plant and Equipment, Net of Accumulated Depreciation	89
	10.	Goodwill and Other Intangible Assets	89
	11.	Other Assets and Other Liabilities	91
	12.	Debt	92
	13.	Employee Retirement Plans	94
	14.	Commitments, Contingencies and Guarantees	100
	15.	Hedging Activities	102
	16.	Fair Value Measurements	105
	17.	Shareholders’ Equity	106
	18.	Earnings Per Common Share	110
	19.	Share-Based Compensation	111
	20.	Reportable Segments	114

Report of Independent Registered Public Accounting Firm 

To the Board of Directors and Shareholders of Corning Incorporated

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Corning Incorporated and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020**,** and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. 

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes - Receivables for South Korean Tax Disputes

As described in Notes 1, 8, and 11 to the consolidated financial statements, in evaluating the tax benefits associated with the Company’s various tax filing positions, management records a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. Adjustments are made to the asset or liability for unrecognized tax benefits in the period in which the Company files the return containing the tax position or when new information becomes available. The Company is currently appealing certain South Korean tax assessments and tax refund claims for tax years 2010 through 2018. The Company is required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessments. The Company believes that it is more likely than not that the Company will prevail in the appeal process and as a result, management recorded a non-current receivable of $350 million as of December 31, 2021.

The principal considerations for our determination that performing procedures relating to the receivables for South Korean tax disputes is a critical audit matter are (i) the significant judgment by management when applying the more likely than not recognition criteria to the Company’s uncertain tax positions based on the application of the tax law; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to management’s assumption that the Company will prevail in the appeal of any tax assessments; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to uncertain tax positions, including management’s assessment of the South Korean tax disputes. These procedures also included, among others, obtaining management’s assessment and evidence supporting the more-likely-than-not tax position on the South Korean tax disputes and evaluating the reasonableness of the likelihood that the tax positions will ultimately be sustained upon examination by the South Korean tax authorities and through the appeal process. Professionals with specialized skill and knowledge were used to assist in evaluating management’s assessment and supporting evidence related to the application of the tax law.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 14, 2022

We have served as the Company’s auditor since 1944.

Consolidated Statements of Income	Corning Incorporated and Subsidiary Companies

		Year ended December 31,
(In millions, except per share amounts)		2021				2020				2019
Net sales		$	14,082			$	11,303			$	11,503
Cost of sales			9,019				7,772				7,468
Gross margin			5,063				3,531				4,035
Operating expenses:
Selling, general and administrative expenses			1,827				1,747				1,585
Research, development and engineering expenses			995				1,154				1,031
Amortization of purchased intangibles			129				121				113
Operating income			2,112				509				1,306
Equity in earnings (losses) of affiliated companies (Note 3)			35				(25	)			17
Interest income			11				15				21
Interest expense			(300	)			(276	)			(221	)
Translated earnings contract gain (loss), net (Note 15)			354				(38	)			248
Transaction-related gain, net (Note 4)							498
Other income (expense), net			185				(60	)			(155	)
Income before income taxes			2,397				623				1,216
Provision for income taxes (Note 8)			(491	)			(111	)			(256	)
Net income attributable to Corning Incorporated		$	1,906			$	512			$	960
Earnings per common share attributable to Corning Incorporated:
Basic (Note 18)		$	1.30			$	0.54			$	1.11
Diluted (Note 18)		$	1.28			$	0.54			$	1.07
Reconciliation of net income attributable to Corning Incorporated versus net income available to common shareholders:
Net income attributable to Corning Incorporated		$	1,906			$	512			$	960
Series A convertible preferred stock dividend			(24	)			(98	)			(98	)
Excess consideration paid for redemption of preferred stock (1)			(803	)
Net income available to common shareholders		$	1,079			$	414			$	862

(1)	Refer to Note 17 (Shareholders' Equity) and Note 18 (Earnings per Common Share) to the consolidated financial statements for additional information.

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

Consolidated Statements of Comprehensive Income	Corning Incorporated and Subsidiary Companies

		Year ended December 31,
(In millions)		2021				2020				2019
Net income attributable to Corning Incorporated		$	1,906			$	512			$	960
Foreign currency translation adjustments and other (Note 17)			(604	)			528				(143	)
Net unrealized gains on investments											1
Unamortized gains (losses) and prior service credits (costs) for postretirement benefit plans			178				(88	)			(64	)
Net unrealized (losses) gains on designated hedges			(9	)			(9	)			45
Other comprehensive (loss) income, net of tax			(435	)			431				(161	)
Comprehensive income attributable to Corning Incorporated		$	1,471			$	943			$	799

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

Consolidated Balance Sheets	Corning Incorporated and Subsidiary Companies

		December 31,
(In millions, except share and per share amounts)		2021				2020
Assets
Current assets:
Cash and cash equivalents		$	2,148			$	2,672
Trade accounts receivable, net of doubtful accounts - $42 and $46			2,004				2,133
Inventories, net (Note 6)			2,481				2,438
Other current assets (Note 11 and 15)			1,026				761
Total current assets			7,659				8,004
Property, plant and equipment, net of accumulated depreciation - $13,969 and $13,663 (Note 9)			15,804				15,742
Goodwill, net (Note 10)			2,421				2,460
Other intangible assets, net (Note 10)			1,148				1,308
Deferred income taxes (Note 8)			1,066				1,121
Other assets (Note 11 and 15)			2,056				2,140
Total Assets		$	30,154			$	30,775
Liabilities and Equity
Current liabilities:
Current portion of long-term debt and short-term borrowings (Note 12)		$	55			$	156
Accounts payable			1,612				1,174
Other accrued liabilities (Note 11 and 14)			3,139				2,437
Total current liabilities			4,806				3,767
Long-term debt (Note 12)			6,989				7,816
Postretirement benefits other than pensions (Note 13)			622				727
Other liabilities (Note 11 and 14)			5,192				5,017
Total liabilities			17,609				17,327
Commitments and contingencies (Note 14)
Shareholders’ equity (Note 17):
Convertible preferred stock, Series A – Par value $100 per share; Shares authorized 10 million; Shares issued: 0 and 2,300							2,300
Common stock – Par value $0.50 per share; Shares authorized 3.8 billion; Shares issued: 1.8 billion and 1.7 billion			907				863
Additional paid-in capital – common stock			16,475				14,642
Retained earnings			16,389				16,120
Treasury stock, at cost; Shares held: 970 million and 961 million			(20,263	)			(19,928	)
Accumulated other comprehensive loss			(1,175	)			(740	)
Total Corning Incorporated shareholders’ equity			12,333				13,257
Noncontrolling interest			212				191
Total equity			12,545				13,448
Total Liabilities and Equity		$	30,154			$	30,775

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

Consolidated Statements of Cash Flows	Corning Incorporated and Subsidiary Companies

		Year ended December 31,
(In millions)		2021				2020				2019
Cash Flows from Operating Activities:
Net income		$	1,906			$	512			$	960
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			1,352				1,399				1,390
Amortization of purchased intangibles			129				121				113
Loss on disposal of assets			57				138				123
Severance (reversals) charges			(13	)			148				63
Severance payments			(26	)			(147	)			(28	)
Share-based compensation expense			190				207				56
Equity in (earnings) losses of affiliated companies			(35	)			25				(17	)
Translation (gain) loss on Japanese yen-denominated debt			(180	)			86				3
Dividends received from affiliated companies			8				1				106
Deferred tax provision (benefit)			16				(20	)			(191	)
Pension plan contributions			(24	)			(221	)			(2	)
Translated earnings contract (gain) loss			(354	)			38				(248	)
Unrealized translation loss (gain) on transactions			77				(133	)			33
Asbestos claim payments							(130	)			(50	)
Tax assessment refunds							101
Asset impairment							217
Transaction-related gain, net							(498	)
Gain on investment							(107	)
Changes in assets and liabilities:
Trade accounts receivable			(54	)			(274	)			48
Inventories			(103	)			423				(298	)
Other current assets			(224	)			(25	)			(300	)
Accounts payable and other current liabilities			806				139				31
Customer deposits and incentives			97				238				89
Deferred income			(116	)			(46	)
Other, net			(97	)			(12	)			150
Net cash provided by operating activities			3,412				2,180				2,031
Cash Flows from Investing Activities:
Capital expenditures			(1,637	)			(1,377	)			(1,978	)
Proceeds from sale or disposal of assets			17				37
Proceeds from sale of business			103
Proceeds from and investment in unconsolidated entities, net			84				(28	)			(26	)
Sale of equipment for related party											78
Realized gains on translated earnings contracts			67				12				55
Other, net			(53	)			46				(20	)
Net cash used in investing activities			(1,419	)			(1,310	)			(1,891	)
Cash Flows from Financing Activities:
Repayments of short-term borrowings			(144	)			(100	)
Repayments of long-term debt			(716	)			(121	)			(300	)
Proceeds from issuance of long-term debt			22				243				1,831
Payment for redemption of preferred stock			(507	)
Payments of employee withholding tax on stock awards			(61	)			(11	)			(17	)
Proceeds from exercise of stock options			97				124				58
Purchases of common stock for treasury			(274	)			(105	)			(940	)
Dividends paid			(871	)			(787	)			(742	)
Other, net			2				28				63
Net cash used in financing activities			(2,452	)			(729	)			(47	)
Effect of exchange rates on cash			(65	)			97				(14	)
Net (decrease) increase in cash and cash equivalents			(524	)			238				79
Cash and cash equivalents at beginning of year			2,672				2,434				2,355
Cash and cash equivalents at end of year		$	2,148			$	2,672			$	2,434

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

Consolidated Statements of Changes in Shareholders’ Equity	Corning Incorporated and Subsidiary Companies

										Additional												Accumulated				Total Corning
		Convertible								paid-in												other				Incorporated				Non-
		preferred				Common				capital				Retained				Treasury				comprehensive				shareholders’				controlling
(In millions)		stock				stock				common				earnings				stock				loss				equity				interests				Total
Balance at December 31, 2018		$	2,300			$	857			$	14,212			$	16,303			$	(18,870	)		$	(1,010	)		$	13,792			$	94			$	13,886
Net income															960												960				19				979
Other comprehensive loss																							(161	)			(161	)							(161	)
Purchase of common stock for treasury																			(925	)							(925	)							(925	)
Shares issued to benefit plans and for option exercises							2				111																113								113
Common dividends ($0.80 per share)															(625	)											(625	)							(625	)
Preferred dividends ($42,500 per share)															(98	)											(98	)							(98	)
Other, net (1)															(132	)			(17	)							(149	)			(23	)			(172	)
Balance at December 31, 2019		$	2,300			$	859			$	14,323			$	16,408			$	(19,812	)		$	(1,171	)		$	12,907			$	90			$	12,997
Net income															512												512				11				523
Other comprehensive income																							431				431				1				432
Purchase of common stock for treasury																			(105	)							(105	)							(105	)
Shares issued to benefit plans and for option exercises							4				319																323								323
Common dividends ($0.88 per share)															(681	)											(681	)							(681	)
Preferred dividends ($42,500 per share)															(98	)											(98	)							(98	)
Non-controlling interest in HSG (2)																															102				102
Other, net															(21	)			(11	)							(32	)			(13	)			(45	)
Balance at December 31, 2020		$	2,300			$	863			$	14,642			$	16,120			$	(19,928	)		$	(740	)		$	13,257			$	191			$	13,448
Net income															1,906												1,906				29				1,935
Other comprehensive income																							(435	)			(435	)			(1	)			(436	)
Redemption of preferred stock (3)			(700	)											(803	)											(1,503	)							(1,503	)
Conversion of preferred stock to common stock (4)			(1,600	)			40				1,560
Purchase of common stock for treasury																			(274	)							(274	)							(274	)
Shares issued to benefit plans and for option exercises							4				273																277								277
Common dividends ($0.96 per share)															(812	)											(812	)							(812	)
Preferred dividends ($10,625 per share)															(24	)											(24	)							(24	)
Other, net															2				(61	)							(59	)			(7	)			(66	)
Balance at December 31, 2021		$	-			$	907			$	16,475			$	16,389			$	(20,263	)		$	(1,175	)		$	12,333			$	212			$	12,545

(1)

Adjustments to retained earnings include the effect of the accounting changes recorded for the adoption of the new standard for reclassification of stranded tax effects in accumulated other comprehensive loss in the amount of $53 million and the impact of an equity affiliate’s adoption of the new revenue standard in January 2019. A net reduction of $186 million net of tax was recorded to beginning retained earnings for performance obligations of which a significant amount settled by the end of 2019.

(2)	Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.
(3)	Refer to Note 17 (Shareholders' Equity) and Note 18 (Earnings per Common Share) to the consolidated financial statements for additional information.
(4)	Refer to Note 17 (Shareholders' Equity) to the consolidated financial statement for additional information.

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

Corning Incorporated and Subsidiary Companies

Notes to Consolidated Financial Statements

1.  Summary of Significant Accounting Policies

Organization

Corning Incorporated is a provider of high-performance glass for notebook computers, flat panel desktop monitors, display televisions, and other information display applications; carrier network and enterprise network products for the telecommunications industry; ceramic substrates for gasoline and diesel engines in automotive and heavy-duty vehicle markets; laboratory products for the scientific community and specialized polymer products for biotechnology applications; advanced optical materials for the semiconductor industry and the scientific community; polycrystalline silicon products and other technologies. In these notes, the terms “Corning,” “Company,” “we,” “us,” or “our” mean Corning Incorporated and subsidiary companies.

Basis of Presentation and Principles of Consolidation

Corning’s consolidated financial statements were prepared in conformity with generally accepted accounting principles in the U.S. and include the assets, liabilities, revenue and expenses of all majority-owned subsidiaries over which Corning exercises control.

The equity method of accounting is used for investments in affiliated companies that are not controlled by Corning and in which our interest is generally between 20% and 50% and we have significant influence over the entity. Our share of earnings or losses of these affiliated companies is included in consolidated operating results.

For our investments in companies that we do not control and for which we do not have the ability to exercise significant influence over operating and financial policies, we use the fair value method to account for the investments if readily determinable fair values are available. For the investments without readily determinable fair values, we measure them at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

On September 9, 2020, HSG redeemed the entire ownership interest of DuPont in HSG with a value of $250 million.  Upon completion of the Redemption, the Company obtained a 100% interest in HS LLC and an 80.5% interest in HSO LLC, which are affiliated entities within HSG.  HSG's results have been consolidated in “All Other”.  Refer to Note 3 (Investments) and Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.

All intercompany accounts, transactions and profits are eliminated in consolidation.

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

Use of Estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions affecting reported amounts of assets, liabilities, revenue, 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 include estimates associated with revenue recognition, restructuring charges, goodwill and long-lived asset impairment tests, estimates of acquired assets and liabilities, estimates of fair value of investments, equity interests, environmental and legal liabilities, income taxes and deferred tax valuation allowances, assumptions used in calculating pension and other postretirement employee benefit expenses and the fair value of share-based compensation. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

70

1.  Summary of Significant Accounting Policies (Continued)

Revenue Recognition 

Most of the Company’s revenue is generated by delivery of products to customers and recognized at a point in time based on evaluation of when the customer obtains control of the products. Revenue is recognized when all performance obligations under the terms of a contract are satisfied, and control of the product has been transferred to the customer. If customer acceptance clauses are present and it cannot be objectively determined that control has been transferred, revenue is only recorded when customer acceptance is received and all performance obligations have been satisfied. Sales of goods typically do not include multiple product and/or service elements.

Revenue is measured as the amount of consideration expected in exchange for transferring goods or providing services. Sales tax, value-added tax, and other taxes are collected concurrently with revenue-producing activities are excluded from revenue. Incidental contract costs that are not material in the context of the delivery of goods and services are recognized as expense.

At the time revenue is recognized, allowances are recorded, with the related reduction to revenue, for estimated product returns, allowances and price discounts based upon historical experience and related terms of customer arrangements. Where product warranties are offered, liabilities are established for estimated warranty costs based upon historical experience and specific warranty provisions. Warranty liabilities are adjusted when experience indicates the expected outcome will differ from initial estimates of the liability.

In addition, Corning also has contractual arrangements with certain customers in which revenue is recognized over time. The performance obligations under these contracts generally require services to be performed over time, resulting in either a straight-line amortization method or an input method using incurred and forecasted expense to predict revenue recognition patterns which follows satisfaction of the performance obligation.

Research and Development Costs

Research and development costs are charged to expense as incurred. Research and development costs totaled $0.8 billion, $1.0 billion and $0.8 billion in 2021, 2020 and 2019, respectively.

Foreign Currency Translation and Transactions

The determination of the functional currency for Corning’s foreign subsidiaries is made based on the appropriate economic factors. For most foreign operations, the local currencies are generally considered to be the functional currencies. Corning’s most significant exception is a Taiwanese subsidiary, which uses the Japanese yen as its functional currency. For all transactions denominated in a currency other than a subsidiary’s functional currency, exchange rate gains and losses are included in income for the period in which the exchange rates changed.  A net foreign currency translation gain of $126 million was recorded for the year ended December 31, 2021.  Net losses of $37 million and $19 million were recorded for foreign currency transaction activity for the years ended December 31, 2020 and 2019, respectively.  Foreign subsidiary functional currency balance sheet accounts are translated at current exchange rates, and statement of operations accounts are translated at average exchange rates for the year. Translation gains and losses are recorded as a separate component of accumulated other comprehensive loss in shareholders’ equity. The effects of remeasuring non-functional currency assets and liabilities into the functional currency are included in current earnings, except for those related to intra-entity foreign currency transactions of a long-term investment nature, which are recorded together with translation gains and losses in accumulated other comprehensive loss in shareholders’ equity. Upon sale or substantially complete liquidation of an investment in a foreign entity, the amount of net translation gains or losses that have been accumulated in other comprehensive income attributable to that investment are reported as a gain or loss for the period in which the sale or liquidation occurs.

71

1.  Summary of Significant Accounting Policies (Continued)

Share-Based Compensation

Corning’s share-based compensation programs include employee stock option grants, time-based or performance-based restricted stock and restricted stock units, as more fully described in Note 19 (Share-Based Compensation) to the consolidated financial statements.

The cost of share-based compensation awards is equal to the fair value of the award at the date of grant and compensation expense is recognized for those awards earned over the vesting period. Corning estimates the fair value of share-based awards using a multiple-point Black-Scholes option valuation model, which incorporates assumptions including expected volatility, dividend yield, risk-free rate, expected term and departure rates.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments that are readily convertible into cash. Securities with contractual maturities of three months or less, when purchased, are considered cash equivalents. The carrying amount of these securities approximates fair value because of the short-term maturity of these instruments.

Supplemental disclosure of cash flow information is as follows (in millions):

		Year ended December 31,
		2021				2020				2019
Non-cash transactions:
Accruals for capital expenditures		$	357			$	231			$	592
Cash paid for interest and income taxes:
Interest (1)		$	287			$	298			$	248
Income taxes, net of refunds received		$	377			$	220			$	474

(1)	Included in this amount are approximately $36 million, $58 million and $54 million of interest costs that were capitalized as part of property, plant and equipment, net of accumulated depreciation, in 2021, 2020 and 2019, respectively.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on the best estimate of the amount of probable lifetime credit losses in existing accounts receivable. The Company determines the allowances based on historical write-off experience and expected future default rate by industry. In addition, in circumstances where the Company is made aware of a specific customer’s inability to meet its financial obligations, a specific allowance is established. The Company does not have any significant off-balance-sheet credit exposure related to its customers.

Environmental Liabilities

The Company accrues for its environmental investigation, remediation, operating and maintenance costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. For environmental matters, the most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to each individual site, current laws and regulations and prior remediation experience. For sites with multiple potentially responsible parties, the Company considers its likely proportionate share of the anticipated remediation costs and the ability of the other parties to fulfill obligations in establishing a provision for those costs. Where no amount within a range of estimates is more likely to occur than another, the minimum undiscounted amount is accrued. When future liabilities are determined to be reimbursable by insurance coverage, an accrual is recorded for the potential liability and a receivable is recorded related to the insurance reimbursement when reimbursement is virtually certain.

The uncertain nature inherent in such remediation and the possibility that initial estimates may not reflect the outcome could result in additional costs being recognized by the Company in future periods.

Inventories, net

Inventories are stated at the lower of cost or net realizable value, which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Cost is determined on a first-in, first-out basis.

72

1.  Summary of Significant Accounting Policies (Continued)

Property, Plant and Equipment, Net of Accumulated Depreciation

Land, buildings, and equipment, including precious metals, are recorded at cost. Depreciation is based on estimated useful lives of properties using the straight-line method. Except as described in Note 9 (Property, Plant and Equipment, Net of Accumulated Depreciation) to the consolidated financial statements related to the depletion of precious metals, the estimated useful lives range from 10 to 40 years for buildings and 2 to 20 years for equipment.

Included in the subcategory of equipment are the following types of assets (excluding precious metals):

Asset type		Range of useful life (in years)
Computer hardware and software		3 to 7
Manufacturing equipment		2 to 15
Furniture and fixtures		5 to 10
Transportation equipment		3 to 20

Manufacturing equipment includes certain components of production equipment that are constructed of precious metals. These assets are not depreciated because they have very low physical losses and are repeatedly reclaimed and reused in the Company’s manufacturing processes over a very long useful life. The physical loss of precious metals in the manufacturing and reclamation process is treated as depletion and these losses are accounted for as a period expense based on actual units lost. Precious metals are integral to many glass production processes and are only acquired to support operations. These metals are not held for trading or other purposes.

Leases

Corning leases certain real estate, vehicles and equipment from third parties, which are classified as operating or finance leases.   The Right of Use (“ROU”) assets for operating leases are included in other assets, with the corresponding liability in other accrued liabilities and other liabilities, on the consolidated balance sheets.  The ROU assets for finance leases are included in Property, Plant & Equipment, with the corresponding liability in current and long-term debt, on the consolidated balance sheets.  Lease expense is recognized on a straight-line basis over the lease term for operating leases.  Interest expense and amortization of the ROU assets related to finance leases are calculated and recognized using the effective interest and straight-line methods, respectively.  Renewals and terminations are included in the calculation of the ROU assets and lease liabilities when considered to be reasonably certain to be exercised. When the implicit rate is unknown, the incremental borrowing rate, based on commencement date, is used in determining the present value of lease payments.

As a practical expedient, lease and non-lease components of a contract are accounted for as a single lease component across all underlying asset classes. Corning does not have any significant agreements as a lessor.

Corning’s leases do not include residual value guarantees. The Company is not the primary beneficiary in, and does not have other forms of variable interests, with the lessor of the leased assets.

Refer to Note 7 (Leases) to the consolidated financial statements for additional information.

Impairment of Long-Lived Assets

The recoverability of long-lived assets, such as plant and equipment and intangible assets, is reviewed when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. When impairment indicators are present, the estimated undiscounted future cash flows, including the eventual disposition of the asset group at market value, is compared to the assets’ carrying value to determine if the asset group is recoverable. For an asset group that fails the test of recoverability, the estimated fair value of long-lived assets is determined using an “income approach” that starts with the forecast of all the expected future net cash flows including the eventual disposition at market value of long-lived assets, and considers the fair market value of all precious metals. The recoverability of the carrying value of long-lived assets was assessed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If there is an impairment, a loss is recorded to reflect the difference between the assets’ fair value and carrying value.

73

1.  Summary of Significant Accounting Policies (Continued)

We are required to assess the recoverability of the carrying value of long-lived assets when an indicator of impairment has been identified. We review long-lived assets in each quarter in which impairment indicators are present. We must exercise judgment in assessing whether an event of impairment has occurred.  Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) to the consolidated financial statements for more information.

Employee Retirement Plans

Corning offers employee retirement plans consisting of defined benefit pension plans covering certain domestic and international employees and postretirement plans that provide health care and life insurance benefits for eligible retirees and dependents. The costs and obligations related to these benefits reflect the Company’s assumptions related to general economic conditions, particularly interest rates, expected return on plan assets, rate of compensation increase for employees and health care trend rates. The cost of providing plan benefits depends on demographic assumptions including retirements, mortality, turnover and plan participation.

Costs for defined benefit pension plans consist of two elements: (1) on-going costs recognized quarterly, which are comprised of service and interest costs, expected return on plan assets and amortization of prior service costs; and (2) mark-to-market gains and losses outside of the corridor, where the corridor is equal to 10% of the greater of the benefit obligation or the market-related value of plan assets at the beginning of the year, which are recognized annually in the fourth quarter of each year. These gains and losses result from changes in actuarial assumptions and the differences between actual and expected return on plan assets. Any interim remeasurement, triggered by a curtailment, settlement or significant plan change, as well as any true-up to the annual valuation, is recognized as a mark-to-market adjustment in the quarter in which such event occurs.

Costs for postretirement benefit plans consist of on-going costs recognized quarterly, and are comprised of service and interest costs, amortization of prior service costs and amortization of actuarial gains and losses. Actuarial gains and losses resulting from changes in actuarial assumptions are recognized as a component of accumulated other comprehensive loss in shareholders’ equity on an annual basis and amortized into operating results over the average remaining service period of employees expected to receive benefits under the plans, to the extent such gains and losses are outside the corridor.

Refer to Note 13 (Employee Retirement Plans) to the consolidated financial statements for additional detail.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax bases.

The effective income tax rate reflects the assessment of the ultimate outcome of tax audits. In evaluating the tax benefits associated with our various tax filing positions, we record a tax benefit for uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. Adjustments are made to our asset or liability for unrecognized tax benefits in the period in which we file the return containing the tax position or when new information becomes available. The liability for unrecognized tax benefits, including accrued penalties and interest, is included in other accrued liabilities and other long-term liabilities on the consolidated balance sheets and in income tax expense in the consolidated statements of income.

Discrete events such as audit settlements or changes in tax laws are recognized in the period in which they occur. Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized.

Generally, Corning will indefinitely reinvest the foreign earnings of: (1) any subsidiaries that lack sufficient local statutory earnings from which to make a distribution or otherwise lacks the ability to repatriate its earnings, (2) any subsidiaries where Corning’s intention is to reinvest those earnings in operations, (3) legal entities for which Corning holds a non-controlling interest, (4) any subsidiaries with an accumulated deficit in earnings and profits, or (5) any subsidiaries where a future distribution would trigger a significant net cost to the U.S. shareholder.

74

1.  Summary of Significant Accounting Policies (Continued)

Equity Method Investments

Equity method investments are reviewed for impairment on a periodic basis, or if an event occurs or circumstances change that indicate the carrying amount may be impaired. This assessment is based on a review of the equity investments’ performance and a review of indicators of impairment to determine whether there is evidence of a loss in value.

For an equity investment with impairment indicators, the fair value is measured based on discounted cash flows, or other appropriate valuation methods, depending on the nature of the company involved. If it is probable that the carrying amount of the investment cannot be recovered, the impairment is considered other-than-temporary and recorded in earnings, and the equity investment balance is reduced to its fair value.

All equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value with changes therein reflected in net income. The Company utilizes the measurement alternative for equity investments that do not have readily determinable fair values and measures these investments at cost less impairment, plus or minus observable price changes in orderly transactions. The balance of these investments is disclosed in Note 3 (Investments) to the consolidated financial statements.

Fair Value Measurements

Major categories of financial assets and liabilities, including short-term investments, other assets and derivatives are measured at fair value on a recurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis when impaired, which include long-lived assets, goodwill, asset retirement obligations, equity method investments and other investments that Corning cannot significantly influence.

Fair value is the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the principal, or most advantageous, market in which Corning would transact is analyzed. Assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance, are considered.

Derivative Instruments

The Company enters into a variety of foreign exchange forward contracts and foreign exchange option contracts to manage the exposure to fluctuations in foreign exchange rates.  Interest rate swaps are utilized to reduce the risk of changes in a benchmark interest rate from the probable forecasted issuance of debt and manage the mix of fixed and floating rate debt.  Financial exposure is managed in accordance with corporate policies and procedures.

All derivatives are recorded at fair value on the consolidated balance sheets.  Changes in the fair value of derivatives designated as cash flow hedges and hedges of net investments in foreign operations are not recognized in current operating results but are recorded in accumulated other comprehensive loss.  Amounts related to cash flow hedges are reclassified from accumulated other comprehensive loss when the underlying hedged item impacts earnings.  This reclassification is recorded in the same line item of the consolidated statements of income where the underlying hedging transaction was recorded, typically sales, cost of sales or other income (expense), net.  Changes in the fair value of derivatives not designated as hedging instruments are recorded in the consolidated statements of income in the translated earnings contract gain (loss), net and the other income (expense), net lines.

New Accounting Standards

During the first quarter of 2021, Corning early adopted ASU 2020-06. This simplifies an issuer’s accounting for convertible instruments by eliminating separate accounting for beneficial and cash conversion features under ASC 470-20. The ASU clarifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification under ASC 815-40. Entities are required to use the if-converted method for all convertible instruments in the diluted earnings per share calculation, to include the effect of potential share settlement if the effect is more dilutive, for instruments that may be settled in cash or shares under ASC 260. The adoption of ASU 2020-06 did not have a one-time impact on Corning’s consolidated financial statements as of January 1, 2021.

75

1.  Summary of Significant Accounting Policies (Continued)

In November 2021, the FASB issued ASU 2021-10 Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.  The ASU requires business entities that account for transactions with a government by analogizing to a grant or contribution accounting model to make certain annual disclosures.  ASU 2021-10 is effective for annual periods beginning after December 15, 2021.  We expect that the impact of adoption will not have a material impact on Corning’s financial statements.  Adoption of the new standard is effective January 1, 2022.

As of December 31, 2021, there are no other newly issued accounting standards expected to have a material impact on Corning’s financial statements or disclosures.

2.  Restructuring, Impairment and Other Charges and Credits

The following restructuring, impairment and other charges and credits were recorded (in millions):

		Year ended December 31,
		2021				2020				2019
Severance		$	(13	)		$	148			$	63
Asset impairment							217
Capacity realignment			46				304				312
Other charges and credits			77				158				64
Total restructuring, impairment and other charges and credits		$	110			$	827			$	439

Corning periodically assesses the operating efficiency and cost structure of the Company's asset base and global workforce and takes appropriate actions to align corporate resources with the business environment.

In 2020, and in response to uncertain global economic conditions, Corning undertook actions to transform the Company’s cost structure and improve operational efficiency. These actions included a corporate-wide workforce reduction program, disposals of certain assets and accelerated depreciation associated with the capacity realignment of certain manufacturing facilities as well as other exit charges and credits.

Severance

In the second quarter of 2020, the Company implemented a corporate-wide workforce reduction program. Severance charges were primarily incurred to facilitate realignment of capacity in the Asia regions for the Display Technologies segment, optimize the Optical Communications segment and contain corporate costs. For the years ended December 31, 2020 and 2019, severance charges were $148 million and $63 million, respectively.  As of December 31, 2021, the payments related to the severance liability have been substantially completed.

Asset Impairment

For the year ended December 31, 2020, Corning incurred a long-lived asset impairment and disposal loss for an asset group related to the reassessment of research and development programs within “All Other”. Given the economic environment and market opportunities, Corning discontinued its investment in these research and development programs. The impairment analysis and disposition of certain assets resulted in a total pre-tax charge of $217 million, which was substantially all the carrying value, inclusive of an insignificant amount of goodwill.

Capacity Realignment

Capacity realignment for the year ended December 31, 2020, primarily includes accelerated depreciation and asset disposals associated with the exit of certain facilities and other exit activities in the Display Technologies and Specialty Materials business segments.  Capacity realignment for the year ended December 31, 2019, is primarily comprised of accelerated depreciation associated with the exit of certain facilities in the Display Technologies segment.

76

2.  Restructuring, Impairment and Other Charges and Credits (Continued)

The following tables present the impact and respective location of total restructuring, impairment, and other charges and credits on the consolidated statements of income (in millions):

		Year ended December 31, 2021
						Selling,				Research,
						general				development
						and				and
		Gross				administrative				engineering
		margin (1)				expenses				expenses				Other				Total
Severance		$	(6	)		$	(5	)		$	(2	)						$	(13	)
Capacity realignment			36				7				3								46
Other charges and credits			50				(5	)						$	32				77
Total restructuring, impairment and other charges and credits		$	80			$	(3	)		$	1			$	32			$	110

		Year ended December 31, 2020
						Selling,				Research,
						general				development
						and				and
		Gross				administrative				engineering
		margin (1)				expenses				expenses				Other				Total
Severance		$	83			$	34			$	31							$	148
Asset impairment							6				211								217
Capacity realignment			288				16												304
Other charges and credits			72				60				5			$	21				158
Total restructuring, impairment and other charges and credits		$	443			$	116			$	247			$	21			$	827

		Year ended December 31, 2019
						Selling,				Research,
						general				development
						and				and
		Gross				administrative				engineering
		margin (1)				expenses				expenses				Other				Total
Severance		$	30			$	20			$	13							$	63
Capacity realignment			298								14								312
Other charges and credits			60				8				3			$	(7	)			64
Total restructuring, impairment and other charges and credits		$	388			$	28			$	30			$	(7	)		$	439

(1)	Activity reflected in cost of sales.

3.  Investments

Investments are comprised of the following (in millions):

		Ownership			December 31,
		interest			2021				2020
Affiliated companies accounted for by the equity method		50% or less			$	264			$	258
Other investments						64				177
Total investment assets					$	328			$	435

77

3.  Investments (Continued)

Affiliated Companies at Equity Method

The results of operations and financial position of the investments accounted for under the equity method are presented below as of December 31 for each respective year (in millions):

		2021				2020				2019
Statement of operations (1):
Net sales		$	816			$	1,201			$	1,508
Gross profit		$	104			$	136			$	79
Net income (loss)		$	113			$	(48	)		$	(102	)
Net income (loss) attributable to the affiliated companies		$	114			$	(15	)		$	70
Corning’s equity in earnings (losses) of affiliated companies		$	35			$	(25	)		$	17
Related party transactions:
Corning sales to affiliated companies		$	312			$	253			$	277
Corning purchases from affiliated companies		$	12			$	8			$	12
Corning transfers of assets, at cost, to affiliated companies		$	1			$	9			$	8
Dividends received from affiliated companies		$	6			$	1			$	106
Intercompany sales within HSG (included in net sales)						$	55			$	112

		2021				2020
Balance sheet:
Current assets		$	648			$	534
Noncurrent assets		$	549			$	466
Short-term borrowings, including current portion of long-term debt		$	6			$	2
Other current liabilities		$	159			$	164
Long-term debt		$	58			$	60
Other long-term liabilities		$	66			$	11
Related party transactions:
Balances due from affiliated companies		$	38			$	36
Balances due to affiliated companies		$	1			$	1

(1)	The year ended December 31, 2020, only includes HSG’s results of operations through September 8, 2020. Immediately following the Redemption, Corning began consolidating HSG on September 9, 2020.

As of December 31, 2021 and 2020, the undistributed earnings of equity companies included in retained earnings were not material.

Hemlock Semiconductor Group (“HSG”)

In 2016, Corning realigned its ownership interest in Dow Corning, exchanging its 50% interest in the joint venture between Corning and Dow Chemical for a newly formed company that held a 49.9% interest in Hemlock Semiconductor LLC and a 40.25% interest in Hemlock Semiconductor Operations LLC which were recorded as equity method investments of Corning and are affiliated companies of HSG. DuPont de Nemours, Inc. (“DuPont”) subsequently undertook Dow Chemical Company’s ownership interest in HSG. HSG manufactures polysilicon products for the semiconductor and solar industries, and it is one of the world’s leading providers of ultra-pure polycrystalline silicon to the semiconductor industry.

78

3.  Investments (Continued)

On September 9, 2020, HSG entered into a series of agreements with DuPont resulting in a change in control and consolidation for Corning.

Through the agreements, HSG acquired DuPont’s TCS manufacturing assets, which were determined to be a business and recorded as a business combination. The fair value of the purchase price was $255 million.  In conjunction with this acquisition, HSG settled the pre-existing TCS relationship (“TCS Settlement”) for a contractual amount of $175 million, which was determined to have a fair value of $200 million.  HSG is paying for the TCS Settlement over three years with equal annual payments of approximately $58 million.  Corning’s share of the pre-tax loss related to the TCS Settlement was $81 million and was recorded in equity in earnings (losses) of affiliated companies in the consolidated statements of income (loss) for the year ended December 31, 2020.  

HSG also completed the Redemption, redeeming Dupont’s entire ownership of HSG with a value of $250 million.  The Redemption was funded with HSG’s existing cash on-hand of $75 million and its newly obtained third-party debt of $175 million, maturing on September 8, 2021.  Debt repayments have been recorded as a financing activity on Corning's consolidated statements of cash flows.   As of December 31, 2021, the third-party debt has been fully repaid.

Upon completion of the Redemption, Corning obtained a 100% interest in HS LLC and an 80.5% interest in HSO LLC.  Corning accounted for the Redemption under the acquisition method of accounting in accordance with business combinations without the transfer of net cash consideration.  The Redemption price of $250 million approximated the fair value of Corning’s equity interest in HSG immediately preceding the Redemption.

See Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.

HSG’s results of operations and balance sheet as of September 8, 2020 were as follows (in millions):

		2020				2019
Statement of operations:
Net sales		$	423			$	779
Gross profit		$	87			$	9
Net income (loss) (1)		$	11			$	(117	)
Net income attributable to HSG		$	44			$	54
Corning’s equity in earnings of affiliated companies		$	22			$	27
Related party transactions:
Dividends received from affiliated companies						$	100
Intercompany sales within HSG (included in net sales)		$	55			$	112

		2020
Balance sheet:
Current assets		$	853
Noncurrent assets		$	725
Short-term borrowings, including current portion of long-term debt		$	178
Other current liabilities		$	337
Long-term debt		$	6
Other long-term liabilities		$	1,499
Non-controlling interest		$	9
Related party transactions:
Intercompany receivables and payables within HSG (included in current assets and other current liabilities)		$	8

(1)

HSG’s net income for the period ended September 8, 2020, included a pre-tax gain recorded in the second quarter of 2020, related to the settlement of a long-term supply agreement of approximately $165 million, partially offset by an inventory provision of approximately $44 million associated with the settlement of the agreement. Prior to the Redemption, in the third quarter of 2020, HSG recorded a pre-tax loss of $200 million resulting from the TCS Settlement, of which Corning’s share of the pre-tax loss was $81 million. Accordingly, Corning’s share of the net impact was an equity loss of $19 million.

79

 

4.  HSG Transactions and Acquisitions

HSG Transactions

On September 9, 2020, HSG acquired DuPont’s TCS manufacturing assets, which was determined to be a business and recorded as a business combination. The fair value of the purchase price was $255 million. 

On  September 9, 2020, HSG redeemed Dupont’s entire ownership of HSG with a value of $250 million.  Upon completion of the Redemption, Corning obtained a 100% interest in HS LLC and 80.5% interest in HSO LLC. Corning accounted for the Redemption under the acquisition method of accounting in accordance with business combinations without the transfer of net cash consideration. The Redemption price of $250 million approximated the fair value of Corning’s equity interest in HSG immediately preceding the Redemption.

The fair value of Corning’s equity interest in HSG was estimated by applying the income approach, which was based on significant assumptions such as projected revenue and discount rate. The Company used a discount rate of 16.5% and terminal growth rate of zero. As no net-cash consideration was transferred, the fair value of Corning’s previously held equity interest in HSG was used to measure the goodwill resulting from the Redemption and the Company’s controlling interest after the Redemption. 

Corning recognized a pre-tax gain of $498 million on its previously held equity investment in HSG as a result of the consolidation resulting from the Redemption. The gain was calculated based on the difference between the fair value and carrying value of the equity method investment immediately preceding the Redemption and included in the transaction-related gain, net in Corning’s consolidated statements of income for the year ended December 31, 2020.

The net gain on previously owned equity was calculated as follows (in millions):

Fair value of previously held equity investment		$	250
Equity investment liability balance as of acquisition date			(248	)
Corning's gain on previously held equity investment		$	498

The following table summarizes the amounts of recorded assets acquired and liabilities assumed on September 9, 2020, which include the TCS assets and liabilities acquired by HSG immediately prior to the Redemption and the consolidation by Corning.

Recognized amounts of identified assets and liabilities recorded at fair value (in millions):

Inventory		$	503
Property, plant and equipment			651
Intangible assets			285
Other current and non-current assets (1)			173
Short-term borrowings			(178	)
Trade payables and other accrued liabilities			(329	)
Other liabilities			(1,261	)
Total identified net liabilities			(156	)
Non-controlling interests (2)			(102	)
Total fair value of Corning's previously held equity investment (2)			(250	)
Goodwill (3)		$	508

(1)	The other current and non-current assets included a contingent consideration asset of $20 million at fair value for a cost adjustment contract related to the TCS Transaction. Refer to Note 16 (Fair Value Measurements) to the consolidated financial statements for additional information.

(2)	The purchase price used to measure the goodwill of the Redemption is $352 million, including the fair value of Corning’s previously held equity interest and non-controlling interest, in the amount of $250 million and $102 million, respectively.

(3)	The goodwill recognized is not deductible for U.S. income tax purposes. The goodwill was allocated to “All Other” within segment reporting as disclosed in Note 20 (Reportable Segments) to the consolidated financial statements for more information.

Upon completion of the Redemption and resulting consolidation, Corning recorded assets acquired and liabilities assumed from HSG, including a customer deposit liability and deferred revenue.

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4.  HSG Transactions and Acquisitions (Continued)

Corning recorded a customer deposit liability of $264 million at the fair value of refundable payments that HSG received from a customer under a long-term supply agreement. The discount rates used to calculate the present value of the customer deposit range from 2.54% to 3.23%. The deposits will be repaid from 2029 to 2034 provided that all purchase obligations of this customer under the supply agreement have been satisfied.

Corning also recorded deferred revenue of $1,070 million at fair value related to the performance obligations of non-refundable consideration previously received by HSG from its customers under long term supply agreements. The fair values of deferred revenue were estimated by applying a bottoms-up cost buildup method of the cost approach based on significant inputs such as the cost to fulfill the obligations as well as key inputs including a normal profit margin.

The goodwill is primarily related to other intangibles and synergies of the acquired business which do not qualify for separate recognition. Intangible assets consist primarily of $215 million of developed technologies and know-how, and $70 million of other intangibles that are amortized over the weighted average useful life of approximately 20 and 15 years, respectively. Acquisition-related costs of $12 million for the year ended December 31, 2020, included costs for legal and other professional services and were included in selling, general and administrative expense in the consolidated statements of income.

The fair value of the non-controlling interest in HSG was estimated to be $102 million by applying the income approach, using the same key assumptions as the estimate of fair value for Corning’s equity interest in HSG.

Since September 9, 2020, HSG’s revenue has been consolidated in “All Other” in Corning’s consolidated statements of income. The amount of net income is not material to Corning’s consolidated financial statements for the years ended December 31, 2021 and 2020.

Acquisitions

There were no other material acquisitions completed in 2021, 2020 or 2019.

5.  Revenue

Product Revenue (Point in Time)

Most of the Company’s revenue is generated by delivery of products to customers and recognized at a point in time based on evaluation of when the customer obtains control of the products. Revenue is recognized when all performance obligations under the terms of a contract are satisfied, and control of the product has been transferred to the customer. If customer acceptance clauses are present and it cannot be objectively determined that control has been transferred, revenue is only recorded when customer acceptance is received and all performance obligations have been satisfied. Sales of goods typically do not include multiple product and/or service elements.

Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. Sales tax, value-added tax, and other taxes are collected concurrently with revenue-producing activities and excluded from revenue. Incidental contract costs that are not material in the context of the delivery of goods and services are recognized as expense.

At the time revenue is recognized, allowances are recorded, with the related reduction to revenue, for estimated product returns, allowances and price discounts based upon historical experience and related terms of customer arrangements. Where product warranties are offered, liabilities are established for estimated warranty costs based upon historical experience and specific warranty provisions. Warranty liabilities are adjusted when experience indicates the expected outcome will differ from initial estimates of the liability. Product warranty liabilities were not material at December 31, 2021 and 2020.

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5.  Revenue (Continued)

Other Revenue (Over Time)

Corning’s revenue over time is mainly related to Telecommunications products, and comprised of design, installation, training and software maintenance services. The performance obligations under these contracts generally require services to be performed over time, resulting in either a straight-line amortization method or an input method using incurred and forecasted expense to predict revenue recognition patterns which follow satisfaction of the performance obligations. Corning’s other revenue is not material to consolidated results.

Revenue Disaggregation Table

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

Revenue by product category is as follows (in millions):

		Year ended December 31,
		2021				2020				2019
Display products		$	3,666			$	3,077			$	3,180
Telecommunication products			4,349				3,563				4,064
Specialty glass products			2,008				1,884				1,594
Environmental substrate and filter products			1,584				1,333				1,440
Life science products			1,232				981				995
All Other (1)			1,243				465				230
Total Revenue		$	14,082			$	11,303			$	11,503
Impact of foreign currency movements (2)			38				44				153
Cumulative adjustment related to customer contract (3)							105
Net sales of reportable segments and All Other		$	14,120			$	11,452			$	11,656

(1)	The Company obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in "All Other" beginning on September 9, 2020.
(2)	This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment.
(3)	Amount represents the negative impact of a cumulative adjustment to reduce revenue by $105 million recorded during the first quarter of 2020. The adjustment was associated with a previously recorded commercial benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that substantially exited its production of LCD panels.

Refer to Note 20 (Reportable Segments) to the consolidated financial statements for additional information.

Contract Assets and Liabilities

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

Contract liabilities include deferred revenue, other advanced payments and customer deposits. Other advanced payments are not significant to operations and are classified as part of other accrued liabilities in the financial statements. Customer deposits are predominately related to Display products and deferred revenue is predominately related to obtaining a controlling interest in HSG. 

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5.  Revenue (Continued)

Customer Deposits

As of December 31, 2021 and 2020, Corning had customer deposits of approximately $1.3 billion and $1.4 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.  The duration of these long-term supply agreements ranges up to 10 years.  As products are shipped to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability. 

In the years ended December 31, 2021 and 2020, customer deposits used were $216 million and $140 million, respectively. As of December 31, 2021 and 2020, $1.1 billion was recorded as an other long-term liability. The remaining $223 million and $211 million, respectively, were classified as other current liabilities.

Deferred Revenue

As of December 31, 2021 and 2020, Corning had deferred revenue of approximately $912 million and $1.0 billion, respectively.  The deferred revenue was related to the performance obligations of non-refundable consideration previously received by HSG from its customers under long term supply agreements.

The 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 revenue is recognized from deferred revenue when control of the promised goods is transferred to the customer based upon the units shipped compared to the remaining contractual units.

As of December 31, 2021 and 2020, $764 million and $872 million, respectively, were classified as a long-term liability and $148 million and $152 million, respectively, were classified as a current liability. 

Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information.

Practical Expedients and Exemptions

The value of unsatisfied performance obligations is not disclosed for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue has been recognized at an amount for which the right exists to invoice for services performed.

Shipping and handling fees are treated as fulfillment costs and not as separate performance obligations under the terms of revenue contracts due to the perfunctory nature of the shipping and handling obligations.

Significant Customers

For 2021, 2020 and 2019, no customer met or exceeded 10% of Corning’s consolidated net sales.

6.  Inventories, Net

Inventories, net, are comprised of the following (in millions):

		December 31,
		2021				2020
Finished goods		$	1,190			$	1,236
Work in process			358				357
Raw materials and accessories			427				370
Supplies and packing materials			506				475
Total inventories, net		$	2,481			$	2,438

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7.  Leases

Corning has operating and finance leases for real estate, vehicles, and equipment.

The following table shows components of lease expense (in millions):

		Year ended December 31,
		2021				2020
Finance:
Depreciation of right-of-use assets		$	17			$	15
Interest on lease liabilities			8				7
Total finance lease expense		$	25			$	22
Operating lease expense		$	139			$	133
Variable lease expense			59				41
Short-term lease expense			2				4
Total lease expense		$	225			$	200

The following table shows components of cash paid for amounts included in the measurement of lease liabilities (in millions) (1):

		December 31,
		2021				2020
Finance:
Principal		$	13			$	10
Interest			8				7
Total finance lease payments		$	21			$	17
Operating lease payments		$	134			$	121
Total lease payments		$	155			$	138

(1)	Principle payments for finance leases have been classified as an investing outflow, and cash payments for operating leases, along with interest payments for finance leases, have been classified as an operating outflow on the consolidated statements of cash flows.

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

		December 31,
		2021				2020
Operating Leases:
Operating lease right-of-use assets, net (1)		$	741			$	680
Other current liabilities		$	94			$	96
Operating lease liabilities (2)			691				633
Total operating lease liabilities		$	785			$	729
Finance Leases:
Property and equipment, at cost		$	200			$	184
Accumulated depreciation			(40	)			(27	)
Property and equipment, net		$	160			$	157
Current portion of long-term debt		$	15			$	10
Long-term debt			168				163
Total finance lease liabilities		$	183			$	173

(1)	Included in other assets.

(2)	Included in other liabilities.

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7.  Leases (Continued)  

The weighted average remaining lease terms and weighted average discount rates for operating and finance leases, respectively, are 12.9 years and 15.0 years and 4.0% and 4.4%, respectively.

As of December 31, 2021, maturities of lease liabilities are as follows (in millions):

		2022				2023				2024				2025				2026				After 2026				Gross Total				Imputed Discount				Total
Operating leases		$	103			$	110			$	97			$	85			$	78			$	553			$	1,026			$	(241	)		$	785
Finance leases			22				27				21				15				32				142				259				(76	)			183

As of December 31, 2021, Corning had additional operating leases, primarily for new production facilities, that have not yet commenced or been recorded, of approximately $122 million on an undiscounted basis. These operating leases will commence in fiscal years 2022 and 2023 with lease terms between 10 and 20 years.

8.  Income Taxes

Income before income taxes follows (in millions):

		Year ended December 31,
		2021				2020				2019
U.S. companies		$	1,254			$	(71	)		$	504
Non-U.S. companies			1,143				694				712
Income before income taxes		$	2,397			$	623			$	1,216

The current and deferred amounts of the provision for income taxes are as follows (in millions):

		Year ended December 31,
		2021				2020				2019
Current:
Federal		$	(172	)		$	88			$	(82	)
State and municipal			(13	)			(16	)			(12	)
Foreign			(290	)			(203	)			(354	)
Deferred:
Federal			(97	)			7				64
State and municipal			(7	)			3				13
Foreign			88				10				115
Provision for income taxes		$	(491	)		$	(111	)		$	(256	)

Amounts are reflected in the preceding tables based on the location of the taxing authorities.

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8.  Income Taxes (Continued)

Reconciliation of the U.S. statutory income tax rate to the effective tax rate for operations is as follows:

		Year ended December 31,
		2021				2020				2019
Statutory U.S. income tax rate			21.0	%			21.0	%			21.0	%
State income tax, net of federal effect			1.0				1.4				0.6
Global intangible low-taxed income			0.2				(0.5	)			1.2
Foreign derived intangible income			(1.3	)							(8.5	)
Remeasurement of deferred tax assets and liabilities							(13.4	)			(0.6	)
Differential arising from foreign earnings (1)			2.0				15.2				5.4
IRS settlements & change in reserve			1.6				12.1				8.5
Valuation allowance			(0.5	)			2.5				(3.7	)
Tax credits			(2.6	)			(29.7	)			(2.8	)
Stock compensation			(1.5	)			(1.7	)			(0.6	)
Legal entity rationalization							(2.2	)
Intercompany loan adjustment							6.2				(0.5	)
Non-deductible expenses			1.4				7.0				2.1
Other items, net			(0.8	)			(0.1	)			(1.0	)
Effective income tax rate			20.5	%			17.8	%			21.1	%

(1)	Includes impact of intercompany asset sales.

On September 9, 2020, Corning obtained a 100% controlling interest in HS LLC and an 80.5% controlling interest in HSO LLC. As a result, the deferred tax liability on the outside basis difference between book and tax basis for Corning’s investment in HS LLC and HSO LLC was adjusted by approximately $116 million.

Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information.

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8.  Income Taxes (Continued)

During 2021, the Company distributed approximately $2.3 billion from foreign subsidiaries to their respective U.S. parent companies.  As of December 31, 2021, Corning has approximately $2.4 billion of indefinitely reinvested foreign earnings.  It remains impracticable to calculate the tax cost of repatriating unremitted earnings which are considered indefinitely reinvested.

The tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities are as follows (in millions):

		December 31,
		2021				2020
Loss and tax credit carryforwards		$	375			$	637
Other assets			281				269
Asset impairments and restructuring reserves			30				29
Postretirement medical and life benefits			154				171
Other accrued liabilities			354				162
Other employee benefits			329				337
Gross deferred tax assets			1,523				1,605
Valuation allowances			(138	)			(167	)
Total deferred tax assets			1,385				1,438
Intangible and other assets			(103	)			(95	)
Fixed assets			(300	)			(375	)
Finance leases			(174	)			(160	)
Total deferred tax liabilities			(577	)			(630	)
Net deferred tax assets		$	808			$	808

The net deferred tax assets in the consolidated balance sheets are as follows (in millions):

		December 31,
		2021				2020
Deferred tax assets		$	1,066			$	1,121
Other liabilities			(258	)			(313	)
Net deferred tax assets		$	808			$	808

Details on deferred tax assets for loss and tax credit carryforwards are as follows (in millions):

						Expiration
		Amount					2022-2026				2027-2031				2032-2041			Indefinite
Net operating losses		$	303			$	102			$	16			$	41			$	144
Tax credits			72				7				1				59				5
Balance as of December 31, 2021		$	375			$	109			$	17			$	100			$	149

Details of the deferred tax valuation allowances are as follows (in millions):

Deferred Tax Valuation Allowance		Balance at beginning of period				Additions				Net deductions and other				Balance at end of period
Year ended December 31, 2021		$	167			$	13			$	42			$	138
Year ended December 31, 2020		$	215			$	27			$	75			$	167
Year ended December 31, 2019		$	317			$	10			$	112			$	215

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8.  Income Taxes (Continued)

The following is a tabular reconciliation of the total amount of unrecognized tax benefits (in millions):

		2021				2020				2019
Balance at January 1		$	131			$	62			$	435
Additions based on tax positions related to the current year			54				19				3
Additions for tax positions of prior years			17				53				2
Reductions for tax positions of prior years			(21	)
Settlements and lapse of statute of limitations			(3	)			(3	)			(378	)
Balance at December 31		$	178			$	131			$	62

During 2020, the Internal Revenue Service (“IRS”) opened an audit for tax years 2015-2018. We do not expect additional material exposure for the tax years under audit. However, if upon conclusion of these matters, the ultimate determination of taxes owed is for an amount materially different than our current position, our overall tax expense and effective tax rate could be materially impacted in the period of adjustment. 

The additions for tax positions of prior years were primarily due to tax audits, development of tax court cases, and tax law changes in various jurisdictions.

Included in the balance at  December 31, 2021, 2020 and 2019 are $120 million, $102 million and $35 million, respectively, of unrecognized tax benefits that would impact the Company’s effective tax rate if recognized.

Accrued interest and penalties associated with uncertain tax positions are recognized as part of tax expense. For the years ended  December 31, 2021, 2020 and 2019 the amount recognized in interest expense and accrued for the payment of interest and penalties were not material.

It is possible that the amount of unrecognized tax benefits will change due to one or more of the following events during the next twelve months: audit activity, tax payments, or final decisions in matters that are the subject of controversy in various jurisdictions. Corning believes that adequate tax reserves are provided for these matters. However, if upon conclusion of these matters, the ultimate determination of taxes owed is for an amount materially different than the current reserves, the Company’s overall tax expense and effective tax rate could be materially impacted in the period of adjustment. As of December 31, 2021, the company is not expecting any significant movements in the uncertain tax benefits in the next twelve months.

Corning Incorporated, as the common parent company, and all 80%-or-more-owned of its U.S. subsidiaries join in the filing of consolidated U.S. federal income tax returns. The statute of limitations is closed for all periods ending through December 31, 2012. All returns for periods ended through December 31, 2014, have been audited by and settled with the IRS.

Corning Incorporated and its U.S. subsidiaries file income tax returns on a combined, unitary or stand-alone basis in multiple state and local jurisdictions, which generally have statutes of limitations ranging from 3 to 5 years. Various state income tax returns are currently in the process of examination or administrative appeal. The Company does not expect any material proposed adjustments from any of these audits.

Corning’s foreign subsidiaries file income tax returns in the countries where their operations are located.  Generally, these countries have statutes of limitations ranging from 3 to 10 years.  The statute of limitations is closed through the following years in these major jurisdictions:  China (2008), Japan (2012), Taiwan (2015) and South Korea (2013).

CPM (“Corning Precision Materials”), a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims for tax years 2010 through 2018. The Company is required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessments. We believe that it is more likely than not that the Company will prevail in the appeal process.  The non-current receivable balance was $350 million and $365 million as of  December 31, 2021 and  December 31, 2020, respectively, for the amount on deposit with the South Korean government. 

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9.  Property, Plant and Equipment, Net of Accumulated Depreciation

Property, plant and equipment, net of accumulated depreciation follow (in millions):

		December 31,
		2021				2020
Land		$	441			$	471
Buildings			6,145				6,453
Equipment			21,208				20,563
Construction in progress			1,979				1,918
Subtotal			29,773				29,405
Accumulated depreciation			(13,969	)			(13,663	)
Total		$	15,804			$	15,742

Approximately $36 million, $58 million and $54 million of interest costs were capitalized as part of property, plant and equipment, net of accumulated depreciation, in 2021, 2020 and 2019, respectively.

Manufacturing equipment includes certain components of production equipment that are constructed of precious metals. At December 31, 2021 and 2020, the recorded value of precious metals totaled $3.5 billion and $3.4 billion, respectively. Depletion expense for precious metals in the years ended  December 31, 2021, 2020 and 2019 was $28 million, $24 million and $16 million, respectively.

10.  Goodwill and Other Intangible Assets

Goodwill

Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination.  Goodwill relates, and is assigned directly, to a specific reporting unit.  Reporting units are either operating segments or one level below the operating segment.  Impairment testing for goodwill is done at a reporting unit level.  Goodwill is reviewed for indicators of impairment quarterly, or if an event occurs or circumstances change that indicate that the carrying amount may be impaired.  Corning also performs a detailed quantitative impairment test every three years, even if there are no impairment indicators present.  We use this calculation as quantitative validation of the qualitative process; this process does not represent an election to perform the quantitative impairment test in place of the qualitative review.

The qualitative process includes an extensive review of expectations for the long-term growth of our businesses and forecasted future cash flows.  If we are required to perform the quantitative impairment analysis, our valuation method is an “income approach” using a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate of return.  Our estimates are based upon historical experience, current knowledge from our commercial relationships, and available external information about future trends.  If the fair value is less than the carrying value, a loss is recorded to reflect the difference between the fair value and carrying value.  The most recent quantitative test was performed in 2020, and the fair value of the Company's reporting units significantly exceeded the respective carrying values.

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10.  Goodwill and Other Intangible Assets (Continued)

Changes in the carrying amount of goodwill for the twelve months ended December 31, 2021 and 2020, were as follows (in millions):

		Display Technologies				Optical Communications				Specialty Materials				Life Sciences				All Other				Total
Balance at December 31, 2019		$	129			$	931			$	150			$	616			$	109			$	1,935
Acquired goodwill (1)																			495				495
Foreign currency translation adjustment and other			3				12								2				13				30
Balance at December 31, 2020		$	132			$	943			$	150			$	618			$	617			$	2,460
Foreign currency translation adjustment and other			(7	)			(28	)							(2	)			(2	)			(39	)
Balance at December 31, 2021		$	125			$	915			$	150			$	616			$	615			$	2,421

(1)	The Company obtained a controlling interest in HSG during the third quarter of 2020. Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information on this transaction.

Corning’s gross goodwill balance and accumulated impairment losses were $8.9 billion and $6.5 billion, respectively, for the year ended December 31, 2021. Corning’s gross goodwill balance and accumulated impairment losses were $9.0 billion and $6.5 billion, respectively, for the year ended December 31, 2020. Accumulated impairment losses were generated primarily through goodwill impairments related to the Optical Communications segment.

Other Intangible Assets

Other intangible assets were as follows (in millions):

		December 31,
		2021												2020
		Gross				Accumulated amortization				Net				Gross				Accumulated amortization				Net
Amortized intangible assets:
Patents, trademarks & trade names		$	498			$	279			$	219			$	500			$	255			$	245
Customer lists and other (1)			1,464				535				929				1,517				454				1,063
Total		$	1,962			$	814			$	1,148			$	2,017			$	709			$	1,308

(1)	Other is comprised of intangible assets related to developed technologies and intellectual know-how.

Corning’s amortized intangible assets are primarily related to the Optical Communications and Life Sciences segments and “All Other”.  The net carrying amount of intangible assets decreased during the year, primarily driven by amortization of $129 million, disposals of $24 million and foreign currency translation and other adjustments of $7 million.

Amortization expense related to all intangible assets is expected to be approximately $120 million annually for years 2022 through 2026.

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11.  Other Assets and Other Liabilities

Other assets were as follows (in millions):

		December 31,
		2021				2020
Current assets:
Derivative instruments (Note 15)		$	336			$	148
Other current assets			690				613
Other current assets		$	1,026			$	761
Non-current assets:
Derivative instruments (Note 15)		$	164			$	123
South Korean tax deposits			350				365
Operating leases (Note 7)			741				680
Investments (Note 3)			318				435
Other non-current assets			483				537
Other assets		$	2,056			$	2,140

South Korean tax deposits

CPM is currently appealing certain tax assessments and tax refund claims for tax years 2010 through 2018.  The Company is required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessments.  Corning believes that it is more likely than not that we will prevail in the appeal process.  Refer to Note 8 (Income Taxes) to the consolidated financial statements for additional information.

Other liabilities were as follows (in millions):

		December 31,
		2021				2020
Current liabilities:
Wages and employee benefits		$	824			$	572
Income taxes			196				173
Derivative instruments (Note 15)			144				189
Deferred revenue (Note 5)			148				152
Settlement liability (Note 4)			58				58
Customer deposits (Note 5)			223				211
Share repurchase liability (Note 17)			506
Short-term leases (Note 7)			94				96
Other current liabilities			946				986
Other accrued liabilities		$	3,139			$	2,437
Non-current liabilities:
Defined benefit pension plan liabilities		$	707			$	887
Derivative instruments (Note 15)			49				155
Deferred revenue (Note 5)			764				872
Settlement liability (Note 4)			58				117
Customer deposits (Note 5)			1,072				1,148
Share repurchase liability (Note 17)			517
Deferred tax liabilities			258				313
Long-term leases (Note 7)			691				633
Asbestos and other litigation			35				94
Other non-current liabilities			1,041				798
Other liabilities		$	5,192			$	5,017

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12.  Debt

(In millions)

		December 31,
		2021				2020
Current portion of long-term debt		$	55			$	81
Short-term borrowings							75
Current portion of long-term debt and short-term borrowings		$	55			$	156
Long-term debt
Debentures, 8.875%, due 2021						$	63
Debentures, 2.90%, due 2022							374
Debentures, 3.70%, due 2023							249
Medium-term notes, average rate 7.66%, due through 2023		$	45				45
Debentures, 3.90%, due 2049			395				394
Debentures, 5.45%, due 2079			1,086				1,084
Yen-denominated debentures, 0.698%, due 2024			182				203
Yen-denominated debentures, 0.722%, due 2025			87				96
Yen-denominated debentures, 0.992%, due 2027			407				453
Yen-denominated debentures, 1.043%, due 2028			264				293
Yen-denominated debentures, 1.153%, due 2031			270				301
Yen-denominated debentures, 1.513%, due 2039			51				56
Debentures, 6.85%, due 2029			160				161
Yen-denominated debentures, 1.219%, due 2030			216				239
Debentures, callable, 7.25%, due 2036			249				249
Debentures, 4.70%, due 2037			296				296
Yen-denominated debentures, 1.583%, due 2037			86				96
Debentures, 5.75%, due 2040			396				396
Debentures, 4.75%, due 2042			496				496
Debentures, 5.35%, due 2048			544				543
Debentures, 4.375%, due 2057			743				743
Debentures, 5.85%, due 2068			297				296
Financing Leases, average discount rate 4.4%, due through 2044			183				173
Other, average rate 4.33%, due through 2043			591				598
Total long-term debt, including current portion			7,044				7,897
Less current portion of long-term debt			55				81
Long-term debt		$	6,989			$	7,816

Based on borrowing rates currently available to us for loans with similar terms and maturities, the fair value of long-term debt was $8.3 billion and $9.4 billion at December 31, 2021 and 2020, respectively, compared to recorded book values of $7.0 billion and $7.8 billion at December 31, 2021 and December 31, 2020, 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.

On a quarterly basis, Corning will recognize the foreign currency translation gains and losses resulting from changes in exchanges rates within accumulated other comprehensive loss in shareholders’ equity. Cash proceeds from loans and debt issuances are disclosed as financing activities, and cash payments for interest and bond redemptions are disclosed as operating activities and financing activities, respectively, in the consolidated statements of cash flows. 

Corning did not have outstanding commercial paper at December 31, 2021 and 2020.

Corning maintains a revolving credit agreement (the “Revolving Credit Agreement”) which provides a committed $1.5 billion unsecured multi-currency line of credit and expires on August 15, 2023. At December 31, 2021, there were no outstanding amounts under the Revolving Credit Agreement.

92

12.  Debt (Continued)

The following table shows debt maturities by year at  December 31, 2021 (in millions) (1):

2022				2023				2024				2025				2026				Thereafter
$	55				141			$	293			$	166			$	36			$	6,353

(1)	Excludes interest rate swap gains, bond discounts and deferred expenses.

Debt Issuances and Repayments

2021

In the third quarter of 2021, Corning redeemed $250 million of 3.7% debentures due in 2023, paying a premium of $19 million by exercising our make-whole call.  The bond redemption resulted in a $20 million loss during the same quarter.  The total payment of $269 million is disclosed in financing activities in the consolidated statements of cash flows.

In the second quarter of 2021, Corning redeemed $375 million of 2.9% debentures due in 2022, paying a premium of $10 million by exercising our make-whole call.  The bond redemption resulted in an $11 million loss during the same quarter.  The total payment of $385 million is disclosed in financing activities in the consolidated statements of cash flows.

Losses on bond redemption have been recorded in other income (expense), net on the consolidated statements of income during the quarter in which they occurred. 

Borrowings under the three unsecured variable rate loan facilities for the year ended December 31, 2021, totaled 1,764 million Chinese yuan, or approximately $277 million.

As of December 31, 2021, the 25 billion Japanese yen facility, equivalent to $217 million, has not been drawn upon. 

2020

During the fourth quarter of 2020, Corning redeemed $100 million of 7.0% debentures due in 2024 with a carrying amount of $99 million, paying a $21 million make-whole call premium. The total payment of $121 million is disclosed in financing activities in the consolidated statements of cash flows. The redemption resulted in a loss of $22 million.

In conjunction with the change in control of HSG on September 9, 2020, a variable interest rate loan of $175 million, maturing on September 8, 2021, was made to DC HSC Holdings, LLC, now a consolidated subsidiary of Corning.  As of December 31, 2021, the third-party debt has been fully repaid.  Refer to Note 3 (Investments) to the consolidated financial statements for additional information.

During the second quarter of 2020, Corning established an incremental liquidity facility for 25 billion Japanese yen, equivalent to $232 million with a maturity of three years. As of December 31, 2020, the facility has not been drawn upon.

In the first quarter of 2020, Corning established two unsecured variable rate loan facilities for 1,050 million Chinese yuan, equivalent to $150 million, and 749 million Chinese yuan, equivalent to $105 million, each with a maturity of five years.  In the fourth quarter of 2020, Corning established a third unsecured variable rate loan facility for 546 million Chinese yuan, equivalent to $84 million, with a maturity of five years. Borrowings under these loan facilities for the year ended December 31, 2020, totaled 1,691 million Chinese yuan, or approximately $243 million. These Chinese yuan-denominated proceeds will not be converted into USD and will be used for capital projects. Payments of principal and interest on the Notes will be in Chinese yuan, or should yuan be unavailable due to circumstances beyond Corning’s control, a USD equivalent. These loans are the sole obligations of the subsidiary borrowers and are not guaranteed by any other Corning entity.

93

 

13.  Employee Retirement Plans

Defined Benefit Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company’s funding policy has been to contribute, as necessary, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. In 2021, no voluntary cash contributions were made to domestic defined benefit pension plans.  Voluntary cash contributions of $24 million were made to international pension plans. In 2020, voluntary cash contributions were made to domestic defined benefit pension plans and international pension plans in the amount of $180 million and $41 million, respectively.  During 2022, the Company plans to make cash contributions of $29 million to international pension plans.

Corning offers postretirement plans that provide health care and life insurance benefits for retirees and eligible dependents. Certain employees may become eligible for such postretirement benefits upon reaching retirement age and service requirements. In 2021, no voluntary cash contributions were made to domestic postretirement plans. Voluntary cash contributions of $30 million were made to domestic postretirement plans in 2020. For current retirees (including surviving spouses) and active employees eligible for the salaried retiree medical program, Corning has placed a “cap” on the amount to be contributed toward retiree medical coverage in the future. The cap is equal to 120% of the 2005 contributions toward retiree medical benefits. Once contributions toward salaried retiree medical costs reach this cap, impacted retirees will have to pay the excess amount in addition to their regular contributions for coverage. This cap was attained for post-65 retirees in 2008 and attained for pre-65 retirees in 2010. Furthermore, employees hired or rehired on or after January 1, 2007 will be eligible for Corning retiree medical benefits upon retirement; however, these employees will pay 100% of the cost.

94

13.  Employee Retirement Plans (Continued)

Obligations and Funded Status

The change in benefit obligation and funded status of our defined benefit pension and post-retirement benefit plans are as follows (in millions):

		Domestic pension benefits								International pension benefits								Postretirement benefits
December 31,		2021				2020				2021				2020				2021				2020
Change in benefit obligation
Benefit obligation at beginning of year		$	4,203			$	3,856			$	778			$	725			$	764			$	705
Service cost			102				92				25				26				10				9
Interest cost			78				110				10				12				15				20
Plan participants’ contributions							1												7				8
Plan amendments							1
Actuarial (gain) loss			(107	)			329				(17	)			29				(105	)			58
Other							8				(2	)			(37	)							2
Benefits paid			(201	)			(194	)			(26	)			(19	)			(37	)			(38	)
Foreign currency translation											(32	)			42
Benefit obligation at end of year		$	4,075			$	4,203			$	736			$	778			$	654			$	764
Change in plan assets
Fair value of plan assets at beginning of year		$	3,575			$	3,153			$	598			$	518			$	30
Actual gain (loss) on plan assets			208				420				(2	)			49
Employer contributions			16				195				31				50				9			$	60
Plan participants’ contributions							1												7				8
Benefits paid			(201	)			(194	)			(26	)			(44	)			(37	)			(38	)
Foreign currency translation											(17	)			25
Fair value of plan assets at end of year		$	3,598			$	3,575			$	584			$	598			$	9			$	30
Funded status at end of year
Fair value of plan assets		$	3,598			$	3,575			$	584			$	598			$	9			$	30
Benefit obligations			(4,075	)			(4,203	)			(736	)			(778	)			(654	)			(764	)
Funded status of plans		$	(477	)		$	(628	)		$	(152	)		$	(180	)		$	(645	)		$	(734	)
Amounts recognized in the consolidated balance sheets consist of:
Noncurrent asset										$	100			$	99
Current liability		$	(15	)		$	(13	)			(7	)			(7	)		$	(23	)		$	(7	)
Noncurrent liability			(462	)			(615	)			(245	)			(272	)			(622	)			(727	)
Recognized liability		$	(477	)		$	(628	)		$	(152	)		$	(180	)		$	(645	)		$	(734	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss (gain)		$	272			$	387			$	(3	)		$	7			$	(22	)		$	86
Prior service cost (credit)			22				26				1				1				(20	)			(26	)
Amounts recognized at end of year		$	294			$	413			$	(2	)		$	8			$	(42	)		$	60

95

13.  Employee Retirement Plans (Continued)

Across total pension benefits, an actuarial gain of $124 million was recognized in 2021 primarily due to increases in bond yields during the year, leading to domestic and international plan weighted-average discount rates that were 37 and 18 basis points higher, respectively, than the prior year. In 2020, an actuarial loss of $358 million was recognized primarily due to decreases in bond yields during the year, leading to a domestic plan weighted-average discount rate that was 78 basis points lower than the prior year. The accumulated benefit obligation for defined benefit pension plans was $4.5 billion and $4.7 billion at December 31, 2021 and 2020, respectively.

For postretirement benefits, an actuarial gain of $105 million was recognized in 2021 due to current year increases in bond yields, leading to a weighted-average discount rate that was 30 basis points higher than the prior year. In 2020, an actuarial loss of $58 million was recognized due to current year decreases in bond yields, leading to a weighted-average discount rate that was 72 basis points lower than the prior year.

The following information is presented for pension plans where the projected benefit obligation or the accumulated benefit obligation exceeded the fair value of plan assets (in millions):

		December 31,
		2021				2020
Projected benefit obligation		$	4,358			$	4,665
Fair value of plan assets		$	3,627			$	3,758
Accumulated benefit obligation		$	4,110			$	4,247
Fair value of plan assets		$	3,627			$	3,603

The components of net periodic benefit (income) expense for employee retirement plans are presented in the following tables (in millions):

		Domestic pension benefits												International pension benefits												Postretirement benefits
December 31,		2021				2020				2019				2021				2020				2019				2021				2020				2019
Service cost		$	102			$	92			$	76			$	25			$	26			$	25			$	10			$	9			$	9
Interest cost			78				110				133				10				12				15				15				20				27
Expected return on plan assets			(209	)			(186	)			(161	)			(7	)			(9	)			(10	)
Amortization of prior service cost (credit)			4				6				7				(1	)			(1	)			(1	)			(6	)			(5	)			(7	)
Amortization of actuarial loss (gain)																											2				1				(1	)
Recognition of actuarial loss			10				12				66				1				10				24
Total net periodic benefit (income) expense		$	(15	)		$	34			$	121			$	28			$	38			$	53			$	21			$	25			$	28
Special termination benefit charge							8				6																				1				1
Total (income) expense		$	(15	)		$	42			$	127			$	28			$	38			$	53			$	21			$	26			$	29
Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:
Curtailment effects																		$	(4	)
Current year actuarial (gain) loss		$	(105	)		$	94			$	47			$	(7	)			(11	)		$	41			$	(105	)		$	58			$	6
Amortization of actuarial (loss) gain																											(2	)			(1	)			1
Recognition of actuarial loss			(10	)			(12	)			(66	)			(1	)			(10	)			(24	)
Current year prior service cost							1																												5
Amortization of prior service (cost) credit			(4	)			(6	)			(7	)			1				1				1				6			$	5				7
Total recognized in other comprehensive (loss) income		$	(119	)		$	77			$	(26	)		$	(7	)		$	(24	)		$	18			$	(101	)		$	62			$	19

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

96

13.  Employee Retirement Plans (Continued)

Corning uses a hypothetical yield curve and associated spot rate curve to discount the plan’s projected benefit payments. Once the present value of projected benefit payments is calculated, the suggested discount rate is equal to the level rate that results in the same present value. The yield curve is based on actual high-quality corporate bonds across the full maturity spectrum, which also includes private placements and eurobonds that are denominated in U.S. currency. The curve is developed from yields on hundreds of bonds from four grading sources, Moody’s, S&P, Fitch and the Dominion Bond Rating Service. A bond will be included if at least half of the grades from these sources are Aa, non-callable bonds. The very highest 10% yields and the lowest 40% yields are excluded from the curve to eliminate outliers in the bond population.

Mortality is one of the key assumptions used in valuing liabilities of retirement plans. It is used to assign a probability of payment for benefits that are contingent upon participants’ survival. To make this assumption, benefit plan sponsors typically use a base mortality table and an improvement scale to mortality rates for future anticipated changes to historical death rates.

As of December 31, 2021, Corning updated the adjustment factors applied to its base mortality assumption (PRI-2012 white collar table and PRI-2012 blue collar table for non-union and union participants, respectively) to value its U.S. benefit plan obligation. In addition, Corning also updated to the MP-2020 projection scale and the mortality assumption applied to disabled participants (PRI-2012 disabled mortality base table with future improvements using MP-2020) for the year ended December 31, 2020, with no change in 2021.  As the Society of Actuaries publishes additional mortality improvement scales and base mortality tables, Corning considers these revised schedules in setting its mortality assumptions. 

Measurement of postretirement benefit expense is based on assumptions used to value the postretirement benefit obligation at the beginning of the year.

The weighted-average assumptions used to determine benefit obligations were as follows:

		Pension benefits
		Domestic												International												Postretirement benefits
		2021				2020				2019				2021				2020				2019				2021				2020				2019
Discount rate			2.87	%			2.50	%			3.28	%			1.20	%			1.02	%			1.34	%			2.99	%			2.69	%			3.41	%
Rate of compensation increase			3.50	%			4.16	%			3.50	%			3.63	%			3.55	%			2.96	%
Cash balance crediting rate			3.86	%			3.84	%			3.94	%			0.91	%			0.94	%			0.97	%
Employee contributions crediting rate			1.57	%			0.62	%			2.03	%

The weighted-average assumptions used to determine net periodic benefit (income) expense were as follows:

		Pension benefits
		Domestic												International												Postretirement benefits
		2021				2020				2019				2021				2020				2019				2021				2020				2019
Discount rate			2.50	%			3.28	%			4.28	%			1.02	%			1.34	%			1.96	%			2.69	%			3.41	%			4.33	%
Expected return on plan assets			6.00	%			6.00	%			6.00	%			1.26	%			1.71	%			2.01	%
Rate of compensation increase			4.16	%			3.50	%			3.50	%			3.55	%			2.96	%			2.96	%
Cash balance crediting rate			3.84	%			3.94	%			3.94	%			0.94	%			0.97	%			0.97	%
Employee contributions crediting rate			0.62	%			2.03	%			3.47	%

Assumed health care trend rates are as follows:

Assumed health care trend rates at December 31		2021				2020
Health care cost trend rate assumed for next year			6.25	%			6.50	%
Rate that the cost trend rate gradually declines to			5	%			5	%
Year that the rate reaches the ultimate trend rate		2027				2027

Plan Assets

The Company’s primary objective is to ensure the plan has sufficient return on assets to fund the plan’s current and future obligations as they become due. Investments are primarily made in public securities to ensure adequate liquidity to support benefit payments. Domestic and international stocks provide diversification to the portfolio. The target allocation range equity investment is 40% which includes large, mid and small-cap companies and investments in both developed and emerging markets. The target allocation for bond investments is 60%, which predominately includes corporate bonds. Long-duration fixed income assets are utilized to mitigate the sensitivity of funding ratios to changes in interest rates.

97

13.  Employee Retirement Plans (Continued)

The following tables provide fair value measurement information for the Company’s major categories; Level 1 (quoted market prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 (significant unobservable inputs) of domestic defined benefit plan assets:

		December 31, 2021																December 31, 2020
(in millions)		Total				(Level 1)				(Level 2)				(Level 3)				Total				(Level 1)				(Level 2)				(Level 3)
Equity securities:
U.S. companies		$	977			$	20			$	957							$	781			$	1			$	780
International companies			234								234								441								441
Fixed income:
U.S. treasury bonds			256				256												147				147
U.S. corporate bonds			1,770								1,770								1,951								1,951
Preferred securities			11								11								11								11
Private equity (1)			41											$	41				51											$	51
Real estate (2)			10												10				140												140
Cash equivalents			308				308												83				83
Total		$	3,607			$	584			$	2,972			$	51			$	3,605			$	231			$	3,183			$	191

(1)	This category includes venture capital, leverage buyouts and distressed debt limited partnerships invested primarily in U.S. companies. The inputs are valued by discounted cash flow analysis and comparable sale analysis.

(2)	This category includes industrial, office, apartments, hotels, infrastructure and retail investments which are limited partnerships predominately in the U.S. The inputs are valued by discounted cash flow analysis; comparable sale analysis and periodic external appraisals.

The following tables provide fair value measurement information for the Company’s major categories; Level 1 (quoted market prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 (significant unobservable inputs) of international defined benefit plan assets:

		December 31, 2021																December 31, 2020
(in millions)		Total				(Level 1)				(Level 2)				(Level 3)				Total				(Level 1)				(Level 2)				(Level 3)
Fixed income:
International fixed income		$	500			$	416			$	84							$	519			$	426			$	93
Insurance contracts			2											$	2				3											$	3
Mortgages			22												22				20												20
Cash equivalents			60				60												56				56
Total		$	584			$	476			$	84			$	24			$	598			$	482			$	93			$	23

The following table sets forth a summary of changes in the fair value of the defined benefit plans Level 3 assets:

		Level 3 assets – domestic								Level 3 assets – international
(in millions)		Private equity				Real estate				Mortgages				Insurance contracts
Balance at December 31, 2019		$	64			$	145			$	21			$	2
Actual return on plan assets relating to assets still held at the reporting date			4
Asset (sales) purchases			(17	)			(5	)			(1	)			1
Balance at December 31, 2020		$	51			$	140			$	20			$	3
Actual return on plan assets relating to assets still held at the reporting date			21				1				2
Actual return on plan assets relating to assets sold during the reporting period							4
Asset sales			(31	)			(135	)							(1	)
Balance at December 31, 2021		$	41			$	10			$	22			$	2

98

13.  Employee Retirement Plans (Continued)

Credit Risk

56% of domestic plan assets are invested in long duration bonds. The average rating for these bonds is A. These bonds are subject to both credit and default risk and changes in the risk could lead to a decline in the value of these bonds. 

Currency Risk

6% of domestic assets are valued in non-U.S. dollar denominated investments that are subject to currency fluctuations. The value of these securities will decline if the U.S. dollar increases in value relative to the value of the currencies in which these investments are denominated.

Liquidity Risk

1% of the domestic securities are invested in Level 3 securities. These are long-term investments in private equity and private real estate investments that may not mature or be sellable in the near-term without significant loss.

At December 31, 2021 and 2020, the amount of Corning common stock included in equity securities was not significant.

Cash Flow Data

The following reflects the gross benefit payments that are expected to be paid for domestic and international defined benefit pension plans and the postretirement medical and life plans (in millions):

		Expected benefit payments
		Domestic pension benefits				International pension benefits				Postretirement benefits
2022		$	232			$	28			$	33
2023		$	233			$	34			$	33
2024		$	242			$	33			$	33
2025		$	251			$	36			$	33
2026		$	254			$	40			$	33
2027-2031		$	1,333			$	221			$	166

Other Benefit Plans

Corning offers defined contribution plans covering employees meeting certain eligibility requirements. Total consolidated defined contribution plan expense was $98 million, $76 million and $108 million for the years ended December 31, 2021, 2020 and 2019, respectively.  

99

 

14.  Commitments, Contingencies and Guarantees

The amounts of obligations are as follows (in millions):

						Amount of commitment and contingency expiration per period
		Total				Less than 1 year				1 to 3 years				3 to 5 years				5 years and thereafter
Performance bonds and guarantees		$	215			$	41			$	77			$	3			$	94
Stand-by letters of credit (1)			69				43				17								9
Subtotal of commitment expirations per period		$	284			$	84			$	94			$	3			$	103
Purchase obligations (2)		$	994			$	232			$	219			$	111			$	432
Capital expenditure obligations (3)			357				357
Debentures (4)			6,315								227				87				6,001
Finance leases and financing obligations			729				55				207				115				352
Interest on debentures (5)			8,306				265				523				519				6,999
Imputed interest on finance leases and financing obligations			271				32				53				39				147
Operating lease obligations			1,026				103				207				163				553
Uncertain tax positions (6)			80				9				12				51				8
Subtotal of contractual obligation payments due by period		$	18,078			$	1,053			$	1,448			$	1,085			$	14,492
Total commitments and contingencies		$	18,362			$	1,137			$	1,542			$	1,088			$	14,595

(1)	At December 31, 2021, the Company had stand-by letters of credit commitments of $108 million; $39 million was included in other accrued liabilities on the consolidated balance sheets.

(2)	Purchase obligations are enforceable and legally binding obligations which primarily consist of raw material and energy-related take-or-pay contracts.

(3)	Capital expenditure obligations primarily reflect amounts associated with capital expansion activities.

(4)	Debentures are stated at maturity value and excludes interest rate swap gains or losses and bond discounts.

(5)	The estimate of interest payments assumes interest is paid through the date of maturity or expiration of the related debt, based upon stated rates in the respective debt instruments.

(6)	At December 31, 2021, $80 million was included on the consolidated balance sheets related to uncertain tax positions.

The Company is required, at the time a guarantee is issued, to recognize a liability for the fair value or market value of the obligation it assumes. In the normal course of business, the Company does not routinely provide significant third-party guarantees. Generally, third-party guarantees provided by Corning are limited to certain financial guarantees, including stand-by letters of credit and performance bonds, and the incurrence of contingent liabilities in the form of purchase price adjustments related to attainment of milestones. These guarantees have various terms, and none of these guarantees are individually significant. The Company believes a significant majority of these guarantees and contingent liabilities will expire without being funded.

Product warranty liability accruals at  December 31, 2021 and 2020 were insignificant.

The ability of certain subsidiaries and affiliated companies to transfer funds is limited by provisions of foreign government regulations, affiliate agreements and certain loan agreements. At December 31, 2021, the amount of equity subject to such restrictions for consolidated subsidiaries and affiliated companies was not significant. While this amount is legally restricted, it does not result in operational difficulties since the Company has generally permitted subsidiaries to retain a majority of equity to support growth programs.

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.

100

14.  Commitments, Contingencies and Guarantees (Continued)

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.

Dow Corning Breast Implant Litigation

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

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

Dow Corning Bankruptcy Pendency Interest Claims

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

Dow Corning Environmental Claims

In September 2019, Dow formally notified Corning of certain environmental matters for which Dow asserts that it has or will experience losses arising from remediation and response at a number of sites. In the event Dow is liable for these claims, Corning may be required to indemnify Dow for up to 50% of that liability, subject to certain conditions and limits. As of December 31, 2021, Corning has determined a potential liability for these environmental matters is probable, and the amount reserved was not material. 

Environmental Litigation

Corning has been named by the Environmental Protection Agency (the "Agency") under the Superfund Act, or by state governments under similar state laws, as a potentially responsible party for 15 active hazardous waste sites. Under the Superfund Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally liable for the cost of cleanup unless the Agency agrees otherwise. It is Corning’s policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants. At December 31, 2021 and 2020, Corning had accrued approximately $55 million and $68 million, respectively, for the undiscounted estimated liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability and that the risk of an additional loss in an amount materially higher than accrued is remote.

101

 

15.  Hedging Activities

Corning is primarily exposed to foreign currency risks due to fluctuations in exchange rates. These fluctuations affect the Company's financial instruments and transactions denominated in foreign currencies, which impact earnings.

The most significant foreign currency exposures relate to the Japanese yen, South Korean won, new Taiwan dollar, Chinese yuan, the euro and British pound. Corning seeks to mitigate the impact of exchange rate movements in our income statement by using over-the-counter ("OTC") derivative instruments including foreign exchange forward and option contracts. In general, the expirations of these contracts coincide with the timing of the underlying foreign currency commitments and transactions.

Corning is exposed to potential losses in the event of non-performance by counterparties to these derivative contracts. However, this risk is minimized by maintaining a portfolio with a diverse group of highly-rated major financial institutions. The Company does not expect to record any losses due to counterparty default. Neither the Company nor its counterparties are required to post collateral for these financial instruments. The Company qualified for and elected the end-user exception to the mandatory swap clearing requirement of the Dodd-Frank Act.

Designated Hedges

Corning uses OTC foreign exchange forward contracts designated as cash flow hedges to reduce the risk that movements in exchange rates will adversely affect the net cash flows resulting from the sale of products to customers and purchases from suppliers. The total gross notional values for foreign currency cash flow hedges are $780 million and $1.1 billion at December 31, 2021 and 2020, respectively, with maturities spanning the years 2022 through 2023. Corning defers gains and losses related to the cash flow hedges into accumulated other comprehensive loss on the consolidated balance sheets until the hedged item impacts earnings. At December 31, 2021, the amount expected to be reclassified into earnings within the next 12 months is a pre-tax gain of $47 million.

In 2021, Corning entered into leases of precious metals, with maturities through 2025. To offset the risk of changes in the fair value of the Company's separate accounting pool of leased precious metals due to adverse changes in the respective market prices, Corning designated the bifurcated embedded derivatives included in these leases as fair value hedges. The gain or loss on the derivatives, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings. The amounts representing the time value component of the derivatives are excluded from the assessment of effectiveness and amortized in earnings. The impact of the excluded component on Corning's other comprehensive income and earnings is not material. The carrying amount of the leased precious metals pool, which is included in the property, plant and equipment, net of accumulated depreciation line of the consolidated balance sheets, is $107 million at December 31, 2021. The cumulative amount of fair value changes included in the carrying amount of the leased precious metals pool is not material.

Corning uses regression analysis or the critical term match method to assess initial hedge effectiveness. Following the inception of a hedging relationship, hedge effectiveness is assessed quarterly based on qualitative factors. 

Undesignated Hedges

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

A significant portion of the Company's non-U.S. revenue and expenses are denominated in Japanese yen, South Korean won, new Taiwan dollar, Chinese yuan, and euro. When this revenue and these expenses are translated back to U.S. dollars, the Company is exposed to foreign exchange rate movements. To protect translated earnings against movements in these currencies, the Company has entered into a series of average rate forwards and option contracts. Most of these contracts hedge a significant portion of the Company’s exposure to the Japanese yen with maturities spanning years 2022 through 2024.  

102

15.  Hedging Activities (Continued)

The following table summarizes the total gross notional value for translated earnings contracts at December 31, 2021 and 2020 (in billions):

		Year ended December 31,
		2021				2020
Average rate forward contracts:
Japanese yen-denominated		$	2.9			$	4.5
South Korean won-denominated			1.2				0.4
Euro-denominated			0.2				0.5
Other foreign currencies (1)			0.1				0.1
Option contracts:
Japanese yen-denominated (2)			3.6				2.0
Other foreign currencies (3)			0.9
Total gross notional value outstanding		$	8.9			$	7.5

(1)	Denominated currencies for average rate forward contracts include the Chinese yuan and British pound.
(2)	Japanese yen-denominated option contracts include zero-cost collars, purchased put and call options. With respect to zero-cost collars, the gross notional amount includes the value of the put and call options. However, due to the nature of zero-cost collars, only the put or the call option can be exercised at maturity.
(3)	Other foreign currencies option contracts are purchased basket options that include a basket of underlying currencies, including the Japanese yen, South Korean won, Chinese yuan, euro, and British pound, and each basket option will be settled against USD.

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

The following table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis for  December 31, 2021 and 2020 (in millions):

									Asset derivatives									Liability derivatives
		Notional amount									Fair value									Fair value
		2021				2020			Balance sheet location		2021				2020			Balance sheet location		2021				2020
Derivatives designated as hedging instruments (1)
Foreign exchange contracts and other		$	780			$	1,143		Other current assets		$	49			$	37		Other accrued liabilities		$	(2	)		$	(3	)
									Other assets			10				21		Other liabilities			(9	)			(1	)
Derivatives not designated as hedging instruments
Foreign exchange contracts			3,864				6,144		Other current assets			91				45		Other accrued liabilities			(95	)			(76	)
									Other assets							41		Other liabilities							(59	)
Translated earnings contracts			8,899				7,453		Other current assets			196				66		Other accrued liabilities			(47	)			(110	)
									Other assets			154				61		Other liabilities			(40	)			(95	)
Total derivatives		$	13,543			$	14,740				$	500			$	271				$	(193	)		$	(344	)

(1)

At December 31, 2021, derivatives designated as hedging instruments include foreign exchange cash flow hedges with gross notional amounts of $780 million and fair value hedges of leased precious metals with a gross notional amount of 7,559 troy ounces. At December 31, 2020, derivatives designated as hedging instruments include foreign currency contracts with notional amounts of $892 million and $251 million, respectively, for cash flow hedges and net investment hedges.

103

15.  Hedging Activities (Continued)

The following tables summarize the effect on 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 at  December 31, 2021 and 2020 is $52 million and $60 million, respectively. 

Derivatives in hedging relationships		Gain (loss) recognized in other comprehensive income (OCI)											Location of gain (loss) reclassified from accumulated OCI into income		Gain (loss) reclassified from accumulated OCI into income
for cash flow and fair value hedges		2021				2020				2019			effective (ineffective)		2021				2020				2019
													Net sales		$	14			$	(6	)
													Cost of sales			39				13			$	11
Foreign exchange contracts and other		$	47			$	(19	)			72		Other expense, net (1)							(14	)
Total cash flow and fair value hedges		$	47			$	(19	)		$	72				$	53			$	(7	)		$	11

			Gain (loss) recognized in income
Undesignated derivatives	Location of gain (loss) recognized in income		2021				2020				2019
Foreign exchange contracts	Other income (expense), net (1)		$	38			$	(93	)		$	21
Translated earnings contracts	Translated earnings contract gain (loss), net			354				(38	)			248
Total undesignated			$	392			$	(131	)		$	269

(1)	A loss of $14 million was reclassified from accumulated other comprehensive loss into other expense, net, resulting from the de-designation of certain cash flow hedges during the year ended December 31, 2020.

104

 

16.  Fair Value Measurements

Fair value standards under U.S. GAAP define fair value, establish a framework for measuring fair value in applying generally accepted accounting principles, and require disclosures about fair value measurements. The standards also identify two kinds of inputs that are used to determine the fair value of assets and liabilities: observable and unobservable. Observable inputs are based on market data or independent sources while unobservable inputs are based on the Company’s own market assumptions. Once inputs have been characterized, the inputs are prioritized into one of three broad levels (provided in the table below) used to measure fair value. Fair value standards apply whenever an entity is measuring fair value under other accounting pronouncements that require or permit fair value measurement and require the use of observable market data when available.

The following tables provide fair value measurement information for the Company’s major categories of financial assets and liabilities measured on a recurring basis; Level 1, quoted market prices in active markets for identical assets, Level 2, significant other observable inputs, and Level 3, significant unobservable inputs (in millions):

						Fair value measurements at reporting date																Fair value measurements at reporting date
		December 31,																December 31,
(in millions)		2021				(Level 1)				(Level 2)				(Level 3)				2020				(Level 1)				(Level 2)				(Level 3)
Current assets:
Other current assets (1)(2)		$	352			$	10			$	336			$	6			$	152							$	148			$	4
Non-current assets:
Investments (3)																		$	137			$	137
Other assets (1)		$	175							$	164			$	11			$	139							$	123			$	16
Current liabilities:
Other accrued liabilities (1)		$	144							$	144							$	189							$	189
Non-current liabilities:
Other liabilities (1)(4)		$	66							$	66							$	155							$	155

(1)	Derivative assets and liabilities include foreign exchange contracts which are measured using observable inputs for similar assets and liabilities.
(2)	Equity securities with readily available fair values that were measured using Level 1 inputs were reclassified from investments to other current assets and subsequently sold for $84 million during the year ended December 31, 2021.

(3)	Included in investments as of December 31, 2020 were equity securities with readily available fair values that were measured using Level 1 inputs. A pre-tax gain of $107 million was recorded from the initial public offering of an investment for the year ended December 31, 2020.

(4)	Other liabilities as of December 31, 2021 include a $17 million put option pursuant to the Share Repurchase Agreement with SDC, which was measured using significant other observable (Level 2) inputs. Refer to Note 17 (Shareholders' Equity) to the consolidated financial statements for additional information

Assets and Liabilities Measured on a Non-Recurring Basis

For the year ended December 31, 2020, Corning incurred a long-lived asset impairment and disposal loss for an asset group related to the reassessment of research and development programs within “All Other”. Given the economic environment and market opportunities, Corning discontinued its investment in these research and development programs. The impairment analysis and disposition of certain assets resulted in a total pre-tax charge of $217 million, which was substantially all the carrying value, inclusive of an insignificant amount of goodwill. The fair value of the asset group for the impairment analysis was measured using unobservable (Level 3) inputs.

Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) to the consolidated financial statements for additional information about this impairment.

Fair value measurements (Level 3) related to the Redemption are disclosed in Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements. There were no other significant financial assets and liabilities measured on a nonrecurring basis as of December 31, 2021 and 2020.

105

 

17.  Shareholders’ Equity

Common Stock Dividends 

On February 2, 2022, Corning’s Board of Directors declared a 13% increase in the Company’s quarterly common stock dividend, which increased the quarterly dividend from $0.24 to $0.27 per share of common stock, beginning with the dividend paid in the first quarter of 2022. This increase marks the eleventh dividend increase since October 2011.

On February 3, 2021, Corning’s Board of Directors declared a 9% increase in the Company’s quarterly common stock dividend, which increased the quarterly dividend from $0.22 to $0.24 per share of common stock, beginning with the dividend paid in the first quarter of 2021. 

On February 5, 2020, Corning’s Board of Directors declared a 10% increase in the Company’s quarterly common stock dividend, which increased the quarterly dividend from $0.20 to $0.22 per share of common stock, beginning with the dividend paid in the first quarter of 2020.

Fixed Rate Cumulative Convertible Preferred Stock, Series A

As of December 31, 2020, Corning had 2,300 outstanding shares of Preferred Stock.   

On January 16, 2021, the Preferred Stock became convertible into 115 million Common Shares, in whole or in part, at the option of Samsung Display Co., Ltd. ("SDC").  On April 5, 2021, Corning and SDC executed the Share Repurchase Agreement ("SRA"). 

Pursuant to the SRA, on the Initial Closing Date, the Preferred Stock was fully converted.  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 on the Initial Closing Date. Subsequent payments of approximately $507 million will be paid on each of the first and second anniversaries of the Initial Closing Date.

•	The 35 million Common Shares repurchased by Corning were excluded from the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share starting on the Initial Closing Date.

•	The Common Shares repurchased were accounted for as a redemption of Preferred Stock. The excess of the $1.5 billion consideration paid over the carrying value of the Preferred Stock reduced the net income available to common shareholders by $803 million.

The remaining 80 million Common Shares were accounted for as a conversion of Preferred Stock and resulted in an increase of common stock and additional paid-in-capital based on the carrying value of the Preferred Stock and were included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share.

Pursuant to the SRA, with respect to the 80 million Common Shares outstanding held by SDC:

•

SDC has the option to sell an additional 22 million Common Shares 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 December 31, 2021, the fair value of the option was $17 million when measured using significant other observable inputs.

•	The remaining 58 million shares of Common Shares are subject to a seven-year lock-up period expiring in 2027.

Refer to Note 16 (Fair Value Measurements) to the consolidated financial statements for additional information

106

17.  Shareholders’ Equity (Continued)

Share Repurchases

2021 Share Repurchases

For the year ended December 31, 2021, the Company repurchased 7.3 million shares of common stock on the open market for approximately $274 million, as part of its 2019 Repurchase Program.

On April 8, 2021, the Company repurchased 35 million shares of common stock, under the 2018 and 2019 Repurchase Programs, for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid on the Initial Closing Date. Subsequent payments of approximately $507 million will be paid on each of the first and second anniversaries of the Initial Closing Date.  These shares were repurchased immediately following the conversion of the Preferred Stock, as discussed above.

2020 Share Repurchases

For the year ended December 31, 2020, the Company repurchased 4.1 million shares of common stock on the open market for approximately $105 million, as part of its 2018 Repurchase Program.

2019 Share Repurchases

On April 26, 2018, Corning’s Board of Directors approved a $2 billion share repurchase program with no expiration date (the “2018 Repurchase Program”). On July 17, 2019, Corning’s Board of Directors authorized $5 billion in share repurchases with no expiration date (the “2019 Repurchase Program”). During the year ended December 31, 2019, the Company repurchased 31.0 million shares of common stock on the open market for approximately $925 million as part of its 2018 Repurchase Program.

The following table presents changes in capital stock (in millions):

		Common stock								Treasury stock
		Shares				Par value				Shares				Cost
Balance at December 31, 2018			1,713			$	857				(925	)		$	(18,870	)
Shares issued to benefit plans and for option exercises			5				2
Shares purchased for treasury											(31	)			(925	)
Other, net (1)															(17	)
Balance at December 31, 2019			1,718			$	859				(956	)		$	(19,812	)
Shares issued to benefit plans and for option exercises			8				4
Shares purchased for treasury											(4	)			(105	)
Other, net (1)											(1	)			(11	)
Balance at December 31, 2020			1,726			$	863				(961	)		$	(19,928	)
Shares issued to benefit plans and for option exercises			9				4
Shares purchased for treasury											(7	)			(274	)
Conversion of preferred stock to common stock			115				58
Repurchase of converted common stock			(35	)			(18	)
Other, net (1)											(2	)			(61	)
Balance at December 31, 2021			1,815			$	907				(970	)		$	(20,263	)

(1)	Consists of tax withholdings on share repurchases.

107

17.  Shareholders’ Equity (Continued)

Accumulated Other Comprehensive Loss 

A summary of changes in the components of accumulated other comprehensive loss, including the proportionate share of equity method investee’s accumulated other comprehensive loss, is as follows (in millions) (1):

		Foreign currency translation adjustments and other				Unamortized actuarial gains (losses) and prior service (costs) credits				Net unrealized gains (losses) on investments				Net unrealized gains (losses) on designated hedges				Accumulated other comprehensive loss
Balance at December 31, 2018		$	(714	)		$	(298	)		$	(4	)		$	6			$	(1,010	)
Other comprehensive (loss) income before reclassifications (2)		$	(129	)		$	(79	)		$	1			$	54			$	(153	)
Amounts reclassified from accumulated other comprehensive income (loss) (5)							15								(9	)			6
Equity method affiliates (6)			(14	)															(14	)
Net current-period other comprehensive (loss) income			(143	)			(64	)			1				45				(161	)
Balance at December 31, 2019		$	(857	)		$	(362	)		$	(3	)		$	51			$	(1,171	)
Other comprehensive income (loss) before reclassifications (3)		$	511			$	(106	)						$	(14	)		$	391
Amounts reclassified from accumulated other comprehensive income (loss) (5)							18								5				23
Equity method affiliates (6)			17																17
Net current-period other comprehensive income (loss)			528				(88	)							(9	)			431
Balance at December 31, 2020		$	(329	)		$	(450	)		$	(3	)		$	42			$	(740	)
Other comprehensive (loss) income before reclassifications (4)		$	(582	)		$	178							$	43			$	(361	)
Amounts reclassified from accumulated other comprehensive (loss) income (5)															(52	)			(52	)
Equity method affiliates (6)			(22	)															(22	)
Net current-period other comprehensive (loss) income			(604	)			178								(9	)			(435	)
Balance at December 31, 2021		$	(933	)		$	(272	)		$	(3	)		$	33			$	(1,175	)

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

(2)	Amounts are net of total tax benefit of $8 million, primarily driven by $7 million related to foreign currency translation adjustments; embedded in this number is the negative impact of $18 million related to the hedging component, offset by the positive impact of $19 million related to retirement plans.

(3)	Amounts are net of total tax expense of $22 million, primarily driven by $55 million related to foreign currency translation adjustments; embedded in this number are positive impacts of $5 million related to the hedging component and $28 million related to retirement plans.

(4)	Amounts are net of total tax expense of $4 million, primarily driven by $51 million related to retirement plans, offset by positive impacts of $44 million and $3 million related to foreign currency translation adjustments and the hedging component, respectively.

(5)	Tax effect of reclassifications are disclosed separately within the footnote.
(6)	Tax effects related to equity method affiliates are not significant in the reported periods.

108

17.  Shareholders’ Equity (Continued)

(In millions)

Reclassifications Out of Accumulated Other Comprehensive Income ("AOCI") by Component (1)
		Amount reclassified from AOCI												Affected line item
		Year ended December 31,												in the consolidated
Details about AOCI Components		2021				2020				2019				statements of income
Amortization of net actuarial loss		$	(3	)		$	(23	)		$	(89	)		(2)
Amortization of prior service credit (cost)			3								1			(2)
							(23	)			(88	)		Total before tax
							5				73			Tax benefit (3)
		$	—			$	(18	)		$	(15	)		Net of tax
Realized gains (losses) on designated hedges		$	14			$	(6	)						Sales
			39				13			$	11			Cost of sales
							(14	)						Other expense, net
			53				(7	)			11			Total before tax
			(1	)			2				(2	)		Tax benefit (expense)
		$	52			$	(5	)		$	9			Net of tax
Total reclassifications for the period		$	52			$	(23	)		$	(6	)		Net of tax

(1)	Amounts in parentheses indicate debits to the statement of income.

(2)	These accumulated other comprehensive loss components are included in net periodic pension cost. Refer to Note 13 (Employee Retirement Plans) to the consolidated financial statements for additional details.

(3)	Includes $52 million that was recognized during the first quarter of 2019 due to adoption of the new standard related to Income Statement - Reporting Comprehensive Income, which allows for reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects.

109

 

18.  Earnings Per Common Share

Basic earnings per common share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share assumes the issuance of common shares for all potentially dilutive securities outstanding.

The reconciliation of the amounts used to compute basic and diluted earnings per common share from operations is as follows (in millions, except per share amounts):

		Year ended December 31,
		2021				2020				2019
Net income attributable to Corning Incorporated		$	1,906			$	512			$	960
Less: Series A convertible preferred stock dividend			24				98				98
Less: Excess consideration paid for redemption of preferred stock			803
Net income available to common shareholders - basic			1,079				414				862
Plus: Series A convertible preferred stock dividend											98
Net income available to common shareholders - diluted		$	1,079			$	414			$	960
Weighted-average common shares outstanding - basic			828				761				776
Effect of dilutive securities:
Stock options and other dilutive securities			16				11				8
Series A convertible preferred stock (1)											115
Weighted-average common shares outstanding - diluted			844				772				899
Basic earnings per common share		$	1.30			$	0.54			$	1.11
Diluted earnings per common share		$	1.28			$	0.54			$	1.07
Anti-dilutive potential shares excluded from diluted earnings per common share:
Series A convertible preferred stock dividend (1)			31				115
Employee stock options and awards							2				2
Total			31				117				2

(1)	For the years ended December 31, 2021 and 2020, the Preferred Stock was anti-dilutive and therefore excluded from the calculation of diluted earnings per share.

Fixed Rate Cumulative Convertible Preferred Stock, Series A 

As of December 31, 2020, Corning had 2,300 outstanding shares of Fixed Rate Cumulative Convertible Preferred Stock, Series A.   

On January 16, 2021, the Preferred Stock became convertible into 115 million Common Shares, in whole or in part, at the option of the holder, SDC.  On April 5, 2021, Corning and SDC executed an SRA. 

Pursuant to the SRA, on the Initial Closing Date, the Preferred Stock was fully converted into 115 million Common Shares.  The Company repurchased 35 million of the converted Common Shares pursuant to the SRA and excluded them from the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share.  The redemption of these Common Shares resulted in a reduction of retained earnings of $803 million which reduced the net income available to common shareholders.

The remaining 80 million Common Shares are outstanding and are included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share. 

Refer to Note 17 (Shareholders’ Equity) to the consolidated financial statements for more information.

110

 

19.  Share-Based Compensation

Corning maintains long-term incentive plans (the “Plans”) for key employees and non-employee members of its Board of Directors. The Plans allow us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards or a combination of awards (collectively, share-based awards). At December 31, 2021, there were approximately 39 million unissued common shares available for future grants authorized under the Plans.

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

Stock Compensation Plans

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

The fair value of awards granted that are expected to ultimately vest is recognized as expense over the requisite service periods. The number of options expected to vest equals the total options granted less an estimation of the number of forfeitures expected to occur prior to vesting. The forfeiture rate is calculated based on 15 years of historical data and is adjusted if actual forfeitures differ significantly from the original estimates. The effect of any change in estimated forfeitures would be recognized through a cumulative adjustment that would be included in compensation cost in the period of the change in estimate.

Total share-based compensation cost was approximately $190 million, $207 million and $56 million, respectively, for the years ended December 31, 2021, 2020 and 2019. 

The income tax benefit realized from share-based compensation was $37 million, $12 million and $9 million, respectively, for the years ended December 31, 2021, 2020 and 2019. Refer to Note 8 (Income Taxes) to the consolidated financial statements for additional information.

Stock Options

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

The following table summarizes information concerning stock options outstanding, including the related transactions under the stock option plans for the year ended December 31, 2021:

		Number of shares (in thousands)				Weighted-average exercise price				Weighted-average remaining contractual term in years				Aggregate intrinsic value (in thousands)
Options Outstanding as of December 31, 2020			17,095			$	21.60
Exercised			(4,818	)			19.85
Forfeited and expired			(373	)			21.40
Options outstanding as of December 31, 2021			11,904				22.31				6.59			$	177,634
Options expected to vest as of December 31, 2021			11,830				22.32				6.57				176,328
Options exercisable as of December 31, 2021			6,573				21.19				5.42				105,412

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19.  Share-Based Compensation (Continued)

The aggregate intrinsic value (market value of stock less option exercise price) in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price on December 31, 2021, which would have been received by the option holders had all option holders exercised their “in-the-money” options as of that date. There were approximately 7 million “in-the-money” options exercisable on December 31, 2021.

There were no options granted in 2021.  The weighted-average grant-date fair value for options granted for the years ended  December 31, 2020 and 2019 was $3.67 and $8.78, respectively.  The total fair value of options that vested during the years ended December 31, 2021, 2020 and 2019 was approximately $16 million, $31 million and $10 million, respectively. Compensation cost related to stock options for the years ended December 31, 2021, 2020 and 2019, was approximately $9 million, $23 million and $13 million, respectively.

As of December 31, 2021, there was approximately $10 million of unrecognized compensation cost related to stock options granted under the Plans. The cost is expected to be recognized over a weighted-average period of 1.3 years.

Proceeds received from the exercise of stock options were $97 million, with a corresponding realized tax benefit of $15 million, for the year ended December 31, 2021. The total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was approximately $100 million, $99 million and $47 million, respectively.

Corning uses a multiple-point Black-Scholes valuation model to estimate the fair value of stock option grants. Corning utilizes a blended approach for calculating the volatility assumption used in the multiple-point Black-Scholes valuation model defined as the weighted average of the short-term implied volatility, the most recent volatility for the period equal to the expected term, and the most recent 15-year historical volatility. The expected term is the period the options are expected to be outstanding and is calculated using a combination of historical exercise experience adjusted to reflect the current vesting period of options being valued, and partial life cycles of outstanding options. The risk-free rates used in the multiple-point Black-Scholes valuation model are the implied rates for a zero-coupon U.S. Treasury bond with a term equal to the option’s expected term. The ranges given below reflect results from separate groups of employees exhibiting different exercise behavior.

The following inputs were used for the valuation of option grants under the stock option plans awarded during 2020 and 2019:

			2020						2019
Expected volatility			32.9	%			29.5		-			29.9	%
Weighted-average volatility			32.9	%			29.5		-			29.9	%
Expected dividends			4.48	%			2.36		-			2.95	%
Risk-free rate			0.5	%			1.5		-			2.4	%
Average risk-free rate			0.5	%			1.5		-			2.4	%
Expected term (in years)			7.4						7.4
Pre-vesting executive departure rate			0.6	%					0.6	%
Pre-vesting non-executive departure rate			2.5	%

Incentive Stock Plans

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

Time-Based Restricted Stock and Restricted Stock Units

Time-based restricted stock and restricted stock units are issued by the Company on a discretionary basis, and are payable in shares of the Company’s common stock upon vesting. The fair value is based on the closing market price of the Company’s stock on the grant date. Compensation cost is recognized over the requisite vesting period and adjusted for actual forfeitures before vesting.

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19.  Share-Based Compensation (Continued)

The following table represents a summary of the status of the Company’s non-vested time-based restricted stock and restricted stock units as of December 31, 2020 and changes which occurred during the year ended December 31, 2021:

		Number of shares (in thousands)				Weighted-average grant-date fair value
Non-vested shares and share units at December 31, 2020			12,943			$	22.87
Granted			1,890				40.77
Vested			(3,774	)			23.40
Forfeited			(465	)			23.74
Non-vested shares and share units at December 31, 2021			10,594			$	25.83

As of December 31, 2021, there was approximately $117 million of unrecognized compensation cost related to non-vested time-based restricted stock and restricted stock unit compensation arrangements granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.1 years. The total fair value of time-based restricted stock and restricted stock units that vested during the years ended December 31, 2021, 2020 and 2019 was approximately $88 million, $38 million and $33 million, respectively. Compensation cost related to time-based restricted stock and restricted stock units was approximately $94 million, $95 million and $43 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Performance-Based Restricted Stock Units

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

113

19.  Share-Based Compensation (Continued)

The following table summarizes information concerning the Company’s non-vested performance-based restricted stock units, including the related transactions under the performance-based restricted stock units plan for the year ended December 31, 2021:

		Number of shares (in thousands)				Weighted-average grant-date fair value
Non-vested share units at December 31, 2020			1,765			$	28.06
Granted			1,222				38.82
Vested			(119	)			28.06
Performance adjustments			917				38.82
Forfeited			(101	)			33.25
Non-vested share units at December 31, 2021			3,684			$	34.17

As of December 31, 2021, there was approximately $30 million of unrecognized compensation cost related to non-vested performance-based restricted stock unit compensation arrangements granted under the Plan. The cost is expected to be recognized over a weighted-average period of 1.4 years. Compensation cost related to performance-based restricted stock units for the years ended December 31, 2021 and 2020 was approximately $79 million and $81 million, respectively, largely driven by retirement-eligible employees.

20.  Reportable Segments

Reportable segments are as follows:

•	Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.

•	Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.

•	Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.

•	Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.

•	Life Sciences – manufactures glass and plastic labware, equipment, media, serum and reagents enabling workflow solutions for drug discovery and bioproduction.

All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as “All Other.” This group is primarily comprised of the results of HSG, pharmaceutical technologies, auto glass, new product lines and development projects, as well as other businesses and certain corporate investments.

The Company obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in “All Other” since September 9, 2020.  Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information on this transaction.

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. The impact of changes in the Japanese yen, South Korean won, Chinese yuan and new Taiwan dollar are excluded from segment sales and segment net income for the Display Technologies and Specialty Materials segments. The impact of changes in the euro and Chinese yuan are excluded from segment sales and segment net income for the Environment Technologies segment. The impact of changes in the euro, Chinese yuan and Japanese yen are excluded from segment sales and segment net income for the Life Sciences segment. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of or in allocating resources to the segments and include the following items: the impact of the translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; adjustments relating to acquisitions; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

114

20.  Reportable Segments (Continued)

Earnings of equity affiliates that are closely associated with the reportable segments are included in the respective segment’s net income (loss). Certain common expenses among reportable segments have been allocated differently than they would for stand-alone financial information. Segment net income (loss) may not be consistent with measures used by other companies.

The following provides historical segment information as described above:

Segment Information (in millions)

		Display Technologies				Optical Communications				Specialty Materials				Environmental Technologies				Life Sciences				All Other				Total
For the year ended December 31, 2021
Segment net sales		$	3,700			$	4,349			$	2,008			$	1,586			$	1,234			$	1,243			$	14,120
Depreciation (1)		$	605			$	224			$	161			$	139			$	52			$	134			$	1,315
Research, development and engineering expenses (2)		$	110			$	216			$	208			$	111			$	33			$	160			$	838
Income tax (provision) benefit (3)		$	(249	)		$	(152	)		$	(99	)		$	(72	)		$	(51	)		$	11			$	(612	)
Net income (loss) (4)		$	960			$	553			$	371			$	269			$	194			$	(51	)		$	2,296
Investment in affiliated companies, at equity		$	109			$	3			$	6							$	4			$	142			$	264
Segment assets (5)		$	8,498			$	3,183			$	2,308			$	2,150			$	791			$	2,024			$	18,954
Capital expenditures		$	710			$	301			$	183			$	228			$	128			$	149			$	1,699
For the year ended December 31, 2020
Segment net sales		$	3,172			$	3,563			$	1,884			$	1,370			$	998			$	465			$	11,452
Depreciation (1)		$	548			$	242			$	162			$	132			$	50			$	81			$	1,215
Research, development and engineering expenses (2)		$	99			$	204			$	155			$	100			$	26			$	170			$	754
Income tax (provision) benefit (3)		$	(190	)		$	(101	)		$	(113	)		$	(52	)		$	(37	)		$	58			$	(435	)
Net income (loss) (4)		$	717			$	366			$	423			$	197			$	139			$	(214	)		$	1,628
Investment in affiliated companies, at equity		$	107			$	3			$	4							$	2			$	142			$	258
Segment assets (5)		$	8,777			$	2,868			$	2,551			$	1,986			$	683			$	2,157			$	19,022
Capital expenditures		$	311			$	127			$	125			$	159			$	83			$	123			$	928
For the year ended December 31, 2019
Segment net sales		$	3,254			$	4,064			$	1,594			$	1,499			$	1,015			$	230			$	11,656
Depreciation (1)		$	583			$	237			$	145			$	128			$	49			$	50			$	1,192
Research, development and engineering expenses (2)		$	119			$	218			$	154			$	118			$	21			$	237			$	867
Income tax (provision) benefit (3)		$	(206	)		$	(134	)		$	(81	)		$	(70	)		$	(40	)		$	80			$	(451	)
Net income (loss) (4)		$	786			$	489			$	302			$	263			$	150			$	(289	)		$	1,701
Investment in affiliated companies, at equity		$	145			$	3			$	3							$	3			$	137			$	291
Segment assets (5)		$	9,022			$	3,004			$	2,433			$	1,912			$	627			$	1,028			$	18,026
Capital expenditures		$	872			$	329			$	176			$	287			$	80			$	155			$	1,899

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

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

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

(4)

Many of Corning’s administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal, are allocated to segments, primarily as a percentage of sales. Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income (loss) to consolidated net income.

(5)	Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation, and associated equity companies. HSG assets are included as of December 31, 2021 and 2020.

115

20.  Reportable Segments (Continued)

A reconciliation of reportable segments and “All Other” net sales to consolidated net sales is as follows (in millions):

		Year ended December 31,
		2021				2020				2019
Net sales of reportable segments and All Other		$	14,120			$	11,452			$	11,656
Impact of foreign currency movements (1)			(38	)			(44	)			(153	)
Cumulative adjustment related to customer contract (2)							(105	)
Consolidated net sales		$	14,082			$	11,303			$	11,503

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

(2)

Amount represents the negative impact of a cumulative adjustment recorded during the first quarter of 2020 to reduce revenue in the amount of $105 million. The adjustment was associated with a previously recorded commercial benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that substantially exited its production of LCD panels. Refer to Note 5 (Revenue) to the consolidated financial statements for additional information.

A reconciliation of reportable segment net income (loss) to consolidated net income follows (in millions):

		Year ended December 31,
		2021				2020				2019
Net income of reportable segments		$	2,347			$	1,842			$	1,990
Net loss of All Other (1)			(51	)			(214	)			(289	)
Unallocated amounts:
Impact of foreign currency movements not included in segment net loss			(87	)			(22	)			(115	)
Gain (loss) on foreign currency hedges related to translated earnings			354				(46	)			245
Translation gain (loss) on Japanese yen-denominated debt			180				(86	)			(3	)
Litigation, regulatory and other legal matters			(16	)			(144	)			17
Research, development, and engineering expense (2)(3)			(149	)			(153	)			(134	)
Transaction-related gain, net (4)							498
Equity in earnings (losses) of affiliated companies (5)			5				(24	)			15
Amortization of intangibles			(129	)			(121	)			(113	)
Interest expense, net			(265	)			(261	)			(200	)
Income tax benefit			120				324				195
Pension mark-to-market			(32	)			(31	)			(95	)
Cumulative adjustment related to customer contract (6)							(105	)
Severance charges (3)			13				(148	)			(63	)
Asset impairment (3)							(217	)
Capacity realignment and other charges and credits (3)			(123	)			(462	)			(376	)
Bond redemption loss (7)			(31	)			(22	)
(Loss) gain on investment (8)			(23	)			107
Gain on sale of business			54
Other corporate items			(261	)			(203	)			(114	)
Net income		$	1,906			$	512			$	960

(1)	The Company obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in “All Other” since September 9, 2020.

(2)	Amount does not include research, development, and engineering expense related to restructuring, impairment and other charges and credits.

(3)	Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) to the consolidated financial statements for additional information on restructuring activities and impairment.
(4)	Amount represents the pre-tax gain recorded on Corning’s previously held equity investment in HSG recorded in 2020. Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information on this transaction.

(5)	Primarily represents the equity earnings of HSG prior to September 9, 2020. Refer to Note 3 (Investments) and Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.

(6)

Amount represents the negative impact of a cumulative adjustment to reduce revenue in the amount of $105 million recorded during the first quarter of 2020. The adjustment was associated with a previously recorded commercial benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that substantially exited its production of LCD panels. Refer to Note 5 (Revenue) to the consolidated financial statements for additional information.

(7)	Refer to Note 12 (Debt) to the consolidated financial statements for additional information on the bond redemption loss.

(8)	Primarily represents the gain recognized from the initial public offering of an investment in the fourth quarter of 2020.

116

20.  Reportable Segments (Continued)

A reconciliation of reportable segment assets to consolidated total assets follows (in millions):

		December 31,
		2021				2020				2019
Total assets of reportable segments		$	16,930			$	16,865			$	16,998
Total assets of All Other			2,024				2,157				1,028
Unallocated amounts:
Current assets (1)			3,163				3,434				3,301
Investments (2)			54				177				43
Property, plant and equipment, net (3)			1,620				1,548				1,764
Other non-current assets (4)			6,363				6,594				5,764
Total assets		$	30,154			$	30,775			$	28,898

(1)	Includes current corporate assets, including cash, other receivables, prepaid expenses and current portion of long-term derivative assets.

(2)	Represents other corporate investments. Asset balance does not include equity method affiliate liability balance of $270 million for HSG in 2019. HSG became a fully consolidated subsidiary of Corning on September 9, 2020.

(3)	Represents corporate property not specifically identifiable to an operating segment.

(4)	Includes non-current corporate assets, including goodwill, other intangible assets, pension assets, long-term derivative assets, operating leases and deferred income taxes.

117

20.  Reportable Segments (Continued)

Selected financial information concerning the Company’s product lines and reportable segments follow (in millions):

		Year ended December 31,
Revenue from external customers		2021				2020				2019
Display Technologies		$	3,700			$	3,172			$	3,254
Optical Communications
Carrier network			3,200				2,612				2,885
Enterprise network			1,149				951				1,179
Total Optical Communications			4,349				3,563				4,064
Specialty Materials
Corning® Gorilla® Glass			1,403				1,420				1,180
Advanced optics and other specialty glass			605				464				414
Total Specialty Materials			2,008				1,884				1,594
Environmental Technologies
Automotive and other			936				883				907
Diesel			650				487				592
Total Environmental Technologies			1,586				1,370				1,499
Life Sciences
Labware			671				552				550
Cell culture products			563				446				465
Total Life Science			1,234				998				1,015
All Other
Polycrystalline Silicon			892				194
Other			351				271				230
Total All Other			1,243				465				230
Net sales of reportable segments and All Other			14,120				11,452				11,656
Impact of foreign currency movements (1)			(38	)			(44	)			(153	)
Cumulative adjustment related to customer contract (2)							(105	)
Consolidated net sales		$	14,082			$	11,303			$	11,503

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

(2)

Amount represents the negative impact of a cumulative adjustment recorded during the first quarter of 2020 to reduce revenue in the amount of $105 million. The adjustment was associated with a previously recorded commercial benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that is exiting its production of LCD panels. Refer to Note 5 (Revenue) to the consolidated financial statements for additional information.

118

20.  Reportable Segments (Continued)

Information concerning principal geographic areas for reportable segments and "All Other" was as follows (in millions):

		2021								2020								2019
		Net sales (1)(3)				Long-lived assets (2)(3)				Net sales (1)(3)				Long-lived assets (2)(3)				Net sales (1)				Long-lived assets (2)
North America:
United States		$	4,539			$	8,600			$	3,412			$	8,718			$	3,760			$	7,654
Canada			472				114				274				121				277				126
Mexico			93				289				75				239				55				267
Total North America			5,104				9,003				3,761				9,078				4,092				8,047
Asia Pacific:
Japan			780				496				505				583				441				893
Taiwan			983				1,923				887				2,247				880				2,280
China			4,495				4,966				3,734				4,469				3,096				3,816
Korea			640				3,479				748				3,597				1,051				3,625
Other			459				84				340				83				401				86
Total Asia Pacific			7,357				10,948				6,214				10,979				5,869				10,700
Europe:
Germany			462				500				378				579				435				546
Other			925				910				838				931				886				914
Total Europe			1,387				1,410				1,216				1,510				1,321				1,460
All Other			272				68				261				83				374				71
Total		$	14,120			$	21,429			$	11,452			$	21,650			$	11,656			$	20,278

(1)	Net sales are attributed to countries based on location of customer.

(2)	Long-lived assets primarily include investments, plant and equipment, goodwill and other intangible assets.

(3)	Includes HSG’s net sales and long-lived assets as of December 31, 2021 and on and after September 9, 2020. Refer to Note 3 (Investments) and Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.