filings.toolsItem 16. Form 10-K Summary.
197K characters. Original on sec.gov ·
Item 16. Form 10-K Summary.
None.
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 12, 2024 | By: | /s/ Wendell P. Weeks |
| Wendell P. Weeks | ||
| Chairman of the Board of Directors, | ||
| Chief Executive Officer |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Edward A. Schlesinger, Lewis A. Steverson and Stefan Becker, 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 12th day of February, 2024.
| Signature | Capacity | |
|---|---|---|
| /s/ Wendell P. Weeks | Chairman of the Board of Directors, Chief Executive Officer, and Director | |
| Wendell P. Weeks | (Principal Executive Officer) | |
| /s/ Edward A. Schlesinger | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |
| Edward A. Schlesinger | ||
| /s/ Stefan Becker | Senior Vice President and Corporate Controller (Principal Accounting Officer) | |
| Stefan Becker | ||
| /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/ Thomas D. French | Director | |
| Thomas D. French | ||
| /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 |
2023 Annual Report
Index to Financial Statements
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, 2023 and 2022, 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, 2023, 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, 2023, 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, 2023 and 2022**,** and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, 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 Matters
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, 6, and 9 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 2019. The Company is required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessment. The Company believes that it is more likely than not that the Company will prevail in the appeals process and as a result, management recorded a non-current receivable of $261 million as of December 31, 2023.
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 assessment; 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 appeals 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 12, 2024
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) | 2023 | 2022 | 2021 | |||||||||
| Net sales | $ | 12,588 | $ | 14,189 | $ | 14,082 | ||||||
| Cost of sales | 8,657 | 9,683 | 9,019 | |||||||||
| Gross margin | 3,931 | 4,506 | 5,063 | |||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative expenses | 1,843 | 1,898 | 1,827 | |||||||||
| Research, development and engineering expenses | 1,076 | 1,047 | 995 | |||||||||
| Amortization of purchased intangibles | 122 | 123 | 129 | |||||||||
| Operating income | 890 | 1,438 | 2,112 | |||||||||
| Interest income | 38 | 15 | 11 | |||||||||
| Interest expense | (329 | ) | (292 | ) | (300 | ) | ||||||
| Translated earnings contract gain, net (Note 13) | 161 | 351 | 354 | |||||||||
| Other income, net | 56 | 285 | 249 | |||||||||
| Income before income taxes | 816 | 1,797 | 2,426 | |||||||||
| Provision for income taxes (Note 6) | (168 | ) | (411 | ) | (491 | ) | ||||||
| Net income | 648 | 1,386 | 1,935 | |||||||||
| Net income attributable to non-controlling interest | (67 | ) | (70 | ) | (29 | ) | ||||||
| Net income attributable to Corning Incorporated | $ | 581 | $ | 1,316 | $ | 1,906 | ||||||
| Earnings per common share available to common shareholders: | ||||||||||||
| Basic (Note 15) | $ | 0.69 | $ | 1.56 | $ | 1.30 | ||||||
| Diluted (Note 15) | $ | 0.68 | $ | 1.54 | $ | 1.28 | ||||||
| Reconciliation of net income attributable to Corning Incorporated versus net income available to common shareholders: | ||||||||||||
| Net income attributable to Corning Incorporated | $ | 581 | $ | 1,316 | $ | 1,906 | ||||||
| Series A convertible preferred stock dividend | (24 | ) | ||||||||||
| Excess consideration paid for redemption of preferred stock (1) | (803 | ) | ||||||||||
| Net income available to common shareholders | $ | 581 | $ | 1,316 | $ | 1,079 |
| (1) | Refer to Note 14 (Shareholders’ Equity) in the accompanying notes 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) | 2023 | 2022 | 2021 | |||||||||
| Net income | $ | 648 | $ | 1,386 | $ | 1,935 | ||||||
| Foreign currency translation adjustments and other (Note 14) | (230 | ) | (779 | ) | (604 | ) | ||||||
| Unamortized (losses) gains and prior service (costs) credits for postretirement benefit plans | (24 | ) | 154 | 178 | ||||||||
| Realized and unrealized gains (losses) on derivatives | 36 | (30 | ) | (9 | ) | |||||||
| Other comprehensive loss, net of tax | (218 | ) | (655 | ) | (435 | ) | ||||||
| Comprehensive income | 430 | 731 | 1,500 | |||||||||
| Comprehensive income attributable to non-controlling interest | (67 | ) | (70 | ) | (29 | ) | ||||||
| Comprehensive income attributable to Corning Incorporated | $ | 363 | $ | 661 | $ | 1,471 |
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) | 2023 | 2022 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,779 | $ | 1,671 | ||||
| Trade accounts receivable, net of doubtful accounts - $30 and $40 | 1,572 | 1,721 | ||||||
| Inventories (Note 4) | 2,666 | 2,904 | ||||||
| Other current assets (Notes 9 and 13) | 1,195 | 1,157 | ||||||
| Total current assets | 7,212 | 7,453 | ||||||
| Property, plant and equipment, net of accumulated depreciation - $14,553 and $14,147 (Note 7) | 14,630 | 15,371 | ||||||
| Goodwill (Note 8) | 2,380 | 2,394 | ||||||
| Other intangible assets, net (Note 8) | 905 | 1,029 | ||||||
| Deferred income taxes (Note 6) | 1,153 | 1,073 | ||||||
| Other assets (Notes 9 and 13) | 2,220 | 2,179 | ||||||
| Total Assets | $ | 28,500 | $ | 29,499 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt and short-term borrowings (Note 10) | $ | 320 | $ | 224 | ||||
| Accounts payable | 1,466 | 1,804 | ||||||
| Other accrued liabilities (Notes 9 and 12) | 2,533 | 3,147 | ||||||
| Total current liabilities | 4,319 | 5,175 | ||||||
| Long-term debt (Note 10) | 7,206 | 6,687 | ||||||
| Postretirement benefits other than pensions (Note 11) | 398 | 407 | ||||||
| Other liabilities (Notes 9 and 12) | 4,709 | 4,955 | ||||||
| Total liabilities | 16,632 | 17,224 | ||||||
| Commitments and contingencies (Note 12) | ||||||||
| Shareholders’ equity (Note 14): | ||||||||
| Common stock – Par value $0.50 per share; Shares authorized 3.8 billion; Shares issued: 1.8 billion and 1.8 billion | 916 | 910 | ||||||
| Additional paid-in capital – common stock | 16,929 | 16,682 | ||||||
| Retained earnings | 16,391 | 16,778 | ||||||
| Treasury stock, at cost; Shares held: 980 million and 977 million | (20,637 | ) | (20,532 | ) | ||||
| Accumulated other comprehensive loss | (2,048 | ) | (1,830 | ) | ||||
| Total Corning Incorporated shareholders’ equity | 11,551 | 12,008 | ||||||
| Non-controlling interest | 317 | 267 | ||||||
| Total equity | 11,868 | 12,275 | ||||||
| Total Liabilities and Equity | $ | 28,500 | $ | 29,499 |
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) | 2023 | 2022 | 2021 | |||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net income | $ | 648 | $ | 1,386 | $ | 1,935 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation | 1,247 | 1,329 | 1,352 | |||||||||
| Amortization of purchased intangibles | 122 | 123 | 129 | |||||||||
| Loss on disposal of assets, net | 155 | 189 | 57 | |||||||||
| Severance charges (reversals) | 187 | 70 | (13 | ) | ||||||||
| Severance payments | (96 | ) | (11 | ) | (26 | ) | ||||||
| Share-based compensation expense | 218 | 175 | 190 | |||||||||
| Translation gain on Japanese yen-denominated debt | (100 | ) | (191 | ) | (180 | ) | ||||||
| Deferred tax (benefit) provision | (75 | ) | (46 | ) | 16 | |||||||
| Translated earnings contract gain | (161 | ) | (351 | ) | (354 | ) | ||||||
| Unrealized translation loss on transactions | 61 | 68 | 77 | |||||||||
| Tax deposit refund | 99 | |||||||||||
| Changes in assets and liabilities: | ||||||||||||
| Trade accounts receivable | 50 | 113 | (54 | ) | ||||||||
| Inventories | 157 | (522 | ) | (103 | ) | |||||||
| Other current assets | (80 | ) | (139 | ) | (224 | ) | ||||||
| Accounts payable and other current liabilities | (238 | ) | 349 | 772 | ||||||||
| Customer deposits and government incentives | (42 | ) | 110 | 28 | ||||||||
| Deferred income | (5 | ) | (49 | ) | (116 | ) | ||||||
| Other, net | (142 | ) | 12 | (74 | ) | |||||||
| Net cash provided by operating activities | 2,005 | 2,615 | 3,412 | |||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Capital expenditures | (1,390 | ) | (1,604 | ) | (1,637 | ) | ||||||
| Proceeds from sale of equipment to related party | 67 | |||||||||||
| Proceeds from sale of business | 76 | 103 | ||||||||||
| Investments in and proceeds from unconsolidated entities, net | (17 | ) | (38 | ) | 84 | |||||||
| Realized gains on translated earnings contracts and other | 326 | 300 | 67 | |||||||||
| Premiums paid on hedging contracts | (9 | ) | (75 | ) | (48 | ) | ||||||
| Other, net | 23 | (14 | ) | 12 | ||||||||
| Net cash used in investing activities | (1,000 | ) | (1,355 | ) | (1,419 | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Repayments of debt | (284 | ) | (87 | ) | (860 | ) | ||||||
| Proceeds from issuance of debt | 82 | 127 | 22 | |||||||||
| Proceeds from issuance of euro bonds | 918 | |||||||||||
| Proceeds from other financing arrangements | 54 | |||||||||||
| Repayment of other financing arrangements | (54 | ) | ||||||||||
| Payment for redemption of preferred stock | (507 | ) | (507 | ) | (507 | ) | ||||||
| Payments of employee withholding tax on stock awards | (106 | ) | (47 | ) | (61 | ) | ||||||
| Proceeds from exercise of stock options | 42 | 40 | 97 | |||||||||
| Purchases of common stock for treasury | (221 | ) | (274 | ) | ||||||||
| Dividends paid | (989 | ) | (932 | ) | (871 | ) | ||||||
| Other, net | (39 | ) | (22 | ) | 2 | |||||||
| Net cash used in financing activities | (883 | ) | (1,649 | ) | (2,452 | ) | ||||||
| Effect of exchange rates on cash | (14 | ) | (88 | ) | (65 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | 108 | (477 | ) | (524 | ) | |||||||
| Cash and cash equivalents at beginning of year | 1,671 | 2,148 | 2,672 | |||||||||
| Cash and cash equivalents at end of year | $ | 1,779 | $ | 1,671 | $ | 2,148 |
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 | interest | Total | |||||||||||||||||||||||||||
| Balance as of 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 loss | (435 | ) | (435 | ) | (1 | ) | (436 | ) | ||||||||||||||||||||||||||||
| Redemption of preferred stock (1) | (700 | ) | (803 | ) | (1,503 | ) | (1,503 | ) | ||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock (1) | (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) | 2 | (61 | ) | (59 | ) | (7 | ) | (66 | ) | |||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | - | $ | 907 | $ | 16,475 | $ | 16,389 | $ | (20,263 | ) | $ | (1,175 | ) | $ | 12,333 | $ | 212 | $ | 12,545 | ||||||||||||||||
| Net income | 1,316 | 1,316 | 70 | 1,386 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | (655 | ) | (655 | ) | (2 | ) | (657 | ) | ||||||||||||||||||||||||||||
| Purchase of common stock for treasury | (221 | ) | (221 | ) | (221 | ) | ||||||||||||||||||||||||||||||
| Shares issued to benefit plans and for option exercises | 3 | 207 | 210 | 210 | ||||||||||||||||||||||||||||||||
| Common dividends ($1.08 per share) | (926 | ) | (926 | ) | (926 | ) | ||||||||||||||||||||||||||||||
| Other, net (2) | (1 | ) | (48 | ) | (49 | ) | (13 | ) | (62 | ) | ||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | - | $ | 910 | $ | 16,682 | $ | 16,778 | $ | (20,532 | ) | $ | (1,830 | ) | $ | 12,008 | $ | 267 | $ | 12,275 | ||||||||||||||||
| Net income | 581 | 581 | 67 | 648 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | (218 | ) | (218 | ) | (1 | ) | (219 | ) | ||||||||||||||||||||||||||||
| Shares issued to benefit plans and for option exercises | 6 | 247 | 253 | 253 | ||||||||||||||||||||||||||||||||
| Common dividends ($1.12 per share) | (968 | ) | (968 | ) | (968 | ) | ||||||||||||||||||||||||||||||
| Other, net (2) | (105 | ) | (105 | ) | (16 | ) | (121 | ) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | - | $ | 916 | $ | 16,929 | $ | 16,391 | $ | (20,637 | ) | $ | (2,048 | ) | $ | 11,551 | $ | 317 | $ | 11,868 |
| (1) | Refer to Note 14 (Shareholders’ Equity) in the accompanying notes to the consolidated financial statements for additional information. |
|---|---|
| (2) | Treasury stock includes the deemed surrender to the Company of common stock to satisfy employee tax withholding obligations |
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
The consolidated financial statements include the consolidated accounts of Corning Incorporated and its subsidiaries that are consolidated in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts, transactions and profits have been eliminated. Investments in partially-owned affiliates are accounted for by the equity method when the Company exercises significant influence, which typically occurs when its ownership interest exceeds 20% and the Company does not have a controlling interest. The Company’s share of earnings or losses of these affiliated companies is included in the consolidated operating results.
The Company consolidates variable interest entities (“VIEs”) when it has the power to direct the significant activities of the entity and the obligation to absorb losses or receive benefits from the entity that may be significant. The Company did not have any material consolidated or nonconsolidated VIEs in its operations for the presented reporting periods.
Certain prior year amounts have been reclassified to conform to the current year 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 fair value 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.
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. 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.
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 and excluded from revenue. Incidental contract costs that are not material in the context of the delivery of goods and services are recognized as an expense.
62
1. Summary of Significant Accounting Policies (Continued)
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 as of December 31, 2023 and 2022.
In addition, the Company has contractual arrangements with certain customers, mainly related to Telecommunications products and comprised of design, installation, training and software maintenance services, 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. Corning’s other revenue was not material for the years ended December 31, 2023, 2022 and 2021.
Contract Assets and Liabilities
Contract assets, such as incremental costs to obtain or fulfill contracts, are an insignificant component of Corning’s revenue recognition process. Most of Corning’s fulfillment costs as a manufacturer of products are classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types. Other fulfillment costs are immaterial due to the nature of the products and their respective manufacturing processes.
Contract liabilities include customer deposits, deferred revenue and other advanced payments. Customer deposits are primarily related to Display products and deferred revenue is primarily related to Hemlock Semiconductor Group (“HSG”). Other advanced payments are not significant to operations and are recorded within other accrued liabilities on the consolidated balance sheets.
Research and Development Costs
Research and development costs are charged to expense as incurred. Research and development costs totaled $0.9 billion, $0.9 billion and $0.8 billion for the years ended December 31, 2023, 2022 and 2021, 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, foreign currency revaluation and remeasurement gains and losses are included in income for the period in which the exchange rates changed. A net foreign currency revaluation and remeasurement gain of $59 million, $130 million and $126 million was recorded for the years ended December 31, 2023, 2022 and 2021, respectively.
Foreign subsidiary functional currency balance sheet accounts have been translated at period-end exchange rates, and statement of operations accounts have been translated using average exchange rates for the period. 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 loss attributable to that investment are reported as a gain or loss for the period in which the sale or liquidation occurs.
Share-Based Compensation
Corning maintains long-term incentive plans (the “Plans”) for employees and non-employee members of its Board of Directors. The Plans are established to grant equity-based compensation awards, including time-based restricted stock and restricted stock units, performance-based restricted stock units, stock options, stock appreciation rights or a combination of awards (collectively, “share-based awards”).
63
1. Summary of Significant Accounting Policies (Continued)
Share-based compensation cost is allocated to cost of sales, selling, general and administrative expenses and research, development and engineering expenses in the consolidated statements of income.
The cost of share-based compensation awards is equal to the fair value of the award at the grant date and compensation expense is recognized for awards expected to ultimately vest. The number of awards expected to vest equals the total awards granted less an estimation of the number of forfeitures expected to occur prior to vesting. The Company reassesses the probability of vesting annually and adjusts share-based compensation expense based on its probability assessment.
The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. 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. As a result, changes in the forfeiture assumptions do not impact the total amount of expense ultimately recognized over the service period. Rather, different forfeiture assumptions would only impact the timing of expense recognition over the service period.
For awards granted to non-employee members of the Company’s Board of Directors, the Company recognizes the compensation expense over the service period for awards with vesting terms and immediately for awards with no vesting terms. For awards granted to employees, the Company recognizes the compensation expense over the service period. For awards containing retirement provisions that are granted to retirement eligible employees, share-based compensation expense is recognized over the period in which the required service is expected to be met.
During the requisite service period, the Company also recognizes a deferred income tax benefit for the expense recognized. At the time of subsequent vesting, exercise, forfeiture, or expiration of an award, the difference between the Company’s actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in current income tax expense/benefit during the current period.
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.
Performance-Based Restricted Stock Units
Performance-based restricted stock units are issued by the Company on a discretionary basis, earned upon the achievement of certain targets and are payable in shares of the Company’s common stock upon vesting, typically over a three year period. The fair value is based on the closing market price of the Company’s common stock on the grant date and assumes that the target payout level will be achieved.
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 closing market price on the grant date and generally become exercisable in tranches 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”).
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.
64
1. Summary of Significant Accounting Policies (Continued)
The following table presents supplemental disclosures of cash flow information (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Non-cash transactions: | ||||||||||||
| Accruals for capital expenditures | $ | 217 | $ | 414 | $ | 357 | ||||||
| Cash paid for interest and income taxes: | ||||||||||||
| Interest (1) | $ | 274 | $ | 275 | $ | 287 | ||||||
| Income taxes, net of refunds received | $ | 213 | $ | 426 | $ | 377 |
| (1) | Includes approximately $40 million, $48 million and $36 million of interest costs that were capitalized as part of property, plant and equipment during the years ended December 31, 2023, 2022 and 2021, respectively. |
|---|
Trade Accounts Receivable, net of 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 allowance 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.
Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method.
Property, Plant and Equipment, Net of Accumulated Depreciation
Land, buildings and equipment, including precious metals, are recorded at cost. Depreciation is based on the estimated useful life of the respective assets using the straight-line method. The estimated useful lives generally range from 10 to 40 years for buildings and improvements and 2 to 20 years for equipment, excluding precious metals as discussed below. Interest on borrowings is capitalized during the active construction period of major capital projects, added to the cost of the underlying assets and amortized over the useful life of the assets.
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.
65
1. Summary of Significant Accounting Policies (Continued)
Leases
Corning leases certain real estate, vehicles and equipment from third parties, which are classified as operating or finance leases. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Right-of-use assets and the corresponding lease liabilities are recognized at the commencement date based on the present value of lease payments for all leases with terms longer than twelve months. To determine the present value of lease payments, the Company uses its incremental borrowing rate based on information available on the lease commencement date or the implicit rate if it is readily determinable. The Company has elected to combine lease and non-lease components of a contract for its leases.
Renewal and termination options are included in the calculation of the right-of-use assets and lease liabilities when considered to be reasonably certain to be exercised.
Lease expense is recognized on a straight-line basis over the lease term for operating leases. Interest expense and amortization of the right-of-use assets relating to finance leases are calculated and recognized using the effective interest and straight-line methods, respectively.
Corning does not have any significant agreements as a lessor.
Impairment of Long-Lived Assets
The recoverability of long-lived assets, such as property, 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. The Company is required to assess the recoverability of the carrying value of long-lived assets when an indicator of impairment has been identified. The Company performs this review each quarter and exercises judgment in assessing whether impairment indicators are present. 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, if applicable. The recoverability of the carrying value of long-lived assets is 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.
Goodwill
Goodwill reflects the purchase price of a business acquisition in excess of the fair values assigned to identifiable assets acquired and liabilities assumed. The Company's goodwill relates, and is assigned directly, to one of our six reporting units.
Goodwill is tested for impairment at the reporting unit level, annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, by performing a qualitative assessment before performing a quantitative assessment. If the Company determines, based on the qualitative factors considered, that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, the Company will not need to proceed to the quantitative goodwill impairment process, except that the Company performs a detailed quantitative assessment at least every three years. The Company’s qualitative assessment is performed by assessing various factors including, but not limited to, expectations for the long-term growth of the business, forecasted future cash flows, changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, or a sustained decrease in share price.
During the current year, the Company performed its detailed triennial quantitative impairment test as of October 1, 2023 and determined that no goodwill impairment was required as the implied fair values for each of the Company's reporting units significantly exceeded the reporting unit's carrying amount. In estimating the fair value of a reporting unit, the Company used an income approach using a discounted cash flow model. The estimates and key assumptions and inputs used in the model include management’s internal projections of future cash flows, the weighted-average cost of capital and the long-term growth rate. The fair value measurement is classified as a Level 3 within the fair value hierarchy due to the unobservable inputs used. Estimates are based upon historical experience, current knowledge from commercial relationships and available external information about future trends. If the fair value is less than the carrying value, the difference between the implied fair value and the carrying amount would be recorded as an impairment to goodwill. Changes in these estimates and key assumptions could affect the determination of fair value.
66
1. Summary of Significant Accounting Policies (Continued)
Government Assistance
The Company receives government assistance, typically in the form of cash incentives primarily for capital expansion projects and tax credits that are refundable or transferable. Incentives are recognized when it is probable that the Company will comply with any contractual conditions and that the incentives will be received. Incentives are classified as an asset when they are recognized but have not been received and as a liability when they are received but have not been recognized. Incentives relating to the purchase of property, plant and equipment are deducted from the cost of the relevant asset. Incentives relating to project costs or other expenses are recognized in the statements of income as an offset to the related expense.
During the year ended December 31, 2023, incentives recognized in net income were $186 million and incentives recognized as a reduction of property, plant and equipment were not material. As of December 31, 2023, the Company had $98 million classified within other assets and $61 million classified within other liabilities in the consolidated balance sheet. Other amounts on the balance sheet as of December 31, 2023 were not material.
During the year ended December 31, 2022, incentives recognized in net income or as a reduction of property, plant and equipment were not material. As of December 31, 2022, the Company had $92 million classified within other accrued liabilities and $74 million classified within other liabilities in the consolidated balance sheet for cash incentives received, which primarily relate to capital expansion projects within Display Technologies and Pharmaceutical Technologies and are expected to be realized over the next 1-2 years. Other amounts on the balance sheet as of December 31, 2022 were not material.
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.
Equity Method Investments
As of December 31, 2023 and 2022, Corning had investments in affiliated companies accounted for by the equity method totaling $296 million and $261 million, respectively. During the years ended December 31, 2023, 2022 and 2021 Corning had sales to affiliated companies of $211 million, $228 million and $312 million, respectively.
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 investments 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. These investments were not material as of December 31, 2023 and 2022.
67
1. Summary of Significant Accounting Policies (Continued)
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 cost 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.
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. 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 based upon the available evidence, including consideration of tax planning strategies.
The effective tax rate reflects the assessment of the ultimate outcome of tax audits. In evaluating the tax benefits associated with the Company’s various tax filing positions, a tax benefit for uncertain tax positions is recorded 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 return containing the tax position is filed 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 within 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.
Generally, Corning will indefinitely reinvest the foreign earnings of: (1) any subsidiary that lacks sufficient local statutory earnings from which to make a distribution or otherwise lacks the ability to repatriate its earnings, (2) any subsidiary where Corning’s intention is to reinvest those earnings in operations, (3) legal entities for which Corning holds a non-controlling interest, (4) any subsidiary with an accumulated deficit in earnings and profits, or (5) any subsidiary where a future distribution would trigger a significant net cost.
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, equity method investments, other investments and asset retirement obligations. Non-financial assets and liabilities or financial assets and liabilities other than derivatives measured at fair value either on a recurring or nonrecurring basis were not significant as of December 31, 2023 and 2022.
68
1. Summary of Significant Accounting Policies (Continued)
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.
A three-level valuation hierarchy, based upon the observable and unobservable inputs, is used for fair value measurements. 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 used to measure fair value: Level 1, quoted market prices in active markets for identical instruments, Level 2, significant other observable inputs and Level 3, significant unobservable inputs.
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. Financial exposure is managed in accordance with corporate policies and procedures. The Company also utilizes derivatives that are bifurcated from its precious metals lease contracts to manage the exposure of its separate accounting pool of leased precious metals to changes in market prices.
The most significant foreign currency exposures relate to the Japanese yen, South Korean won, New Taiwan dollar, Chinese yuan and the euro. Corning seeks to mitigate the impact of exchange rate movements in the 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.
All derivatives are recorded at fair value on the consolidated balance sheets. 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 derivatives designated as cash flow hedges 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 within the same line item of the consolidated statements of income where the underlying hedged transaction was recorded, typically sales, cost of sales or other income, net. Changes in the fair value, excluding the time value component, of derivatives designated as fair value hedges are recognized in current operating results within other income, net in the consolidated statements of income. Changes in the fair value of derivatives not designated as hedging instruments are recognized within translated earnings contract gain, net and other income, net in the consolidated statements of income.
Designated Hedges
Corning uses OTC foreign exchange forward contracts designated as cash flow hedges, with maturities through 2024, 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. 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. As of December 31, 2023, the amount expected to be reclassified into earnings within the next 12 months is a pre-tax gain of $58 million.
Corning has entered into leases of precious metals, with maturities through 2025. To offset the risk of changes in the fair value of the Company’s separate accounting pool of leased precious metals due to adverse changes in the respective market prices, Corning designated the bifurcated embedded derivatives included in these leases as fair value hedges. The gain or loss on the derivatives, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings. The amounts representing the time value component of the derivatives are excluded from the assessment of effectiveness and amortized in earnings. The impact of the excluded component 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.
69
1. Summary of Significant Accounting Policies (Continued)
Net Investment Hedges
From time to time, Corning utilizes derivative and non-derivative net investment hedges to offset risk against investments in foreign subsidiaries with non-USD functional currencies. Changes in the value of these hedging instruments due to foreign currency gains or losses are deferred in other comprehensive loss on the consolidated statements of comprehensive income, within the foreign currency translation adjustments and other line, and will remain in accumulated other comprehensive loss until the hedged investment is sold or substantially liquidated. We evaluate the effectiveness of the net investment hedges each quarter using the critical terms match method.
Undesignated Hedges
Corning uses OTC foreign exchange forward and option contracts not designated as hedging instruments for accounting purposes to offset foreign 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 Chinese yuan, Japanese yen and South Korean won. The Company has contracts through 2025 for the Japanese yen and 2026 for both the Chinese yuan and South Korean won.
New Accounting Standards
In November 2023, the FASB issued Accounting Standards Update 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improves segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and application should be applied retrospectively, unless it is impracticable to do so. We are currently assessing the potential impact of adopting ASU 2023-07 on our consolidated financial statements.
In December 2023, the FASB issued Accounting Standards Update 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and application may be applied prospectively or retrospectively. We are currently assessing the potential impact of adopting ASU 2023-09 on our consolidated financial statements.
70
2. Restructuring, Impairment and Other Charges and Credits
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.
The following table presents the restructuring, impairment and other charges and credits (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Severance (1) | $ | 187 | $ | 70 | $ | (13 | ) | |||||
| Capacity optimization | 176 | 219 | 46 | |||||||||
| Other charges and credits (2) | 108 | 125 | 77 | |||||||||
| Total restructuring, impairment and other charges and credits | $ | 471 | $ | 414 | $ | 110 |
| (1) | Severance charges in the year ended December 31, 2023 include $20 million in curtailment and special termination benefit charges. |
|---|---|
| (2) | Other charges and credits primarily includes disposal costs and inventory write-downs. |
During the year ended December 31, 2023, Corning recorded $471 million in severance, asset write-offs and other related charges. Capacity optimization charges include asset write-offs associated with the exit of certain facilities, product lines and other exit activities primarily within Optical Communications, Specialty Materials and Life Sciences. Severance charges were recorded across all segments and as of December 31, 2023, the severance accrual of $118 million was reflected within other accrued liabilities on the consolidated balance sheet and is expected to be substantially completed within the next twelve months.
During the year ended December 31, 2022, Corning recorded $414 million in severance, accelerated depreciation, asset write-offs and other related charges. Capacity optimization charges include accelerated depreciation and asset write-offs associated with the exit of certain facilities, product lines and other exit activities primarily within Display Technologies, Specialty Materials and an emerging growth business. Severance charges were recorded across all segments and as of December 31, 2022, the severance accrual was $66 million and reflected within other accrued liabilities on the consolidated balance sheet.
71
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 in the consolidated statements of income (in millions):
| Year ended December 31, 2023 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selling, | Research, | |||||||||||||||||||
| general | development | |||||||||||||||||||
| and | and | |||||||||||||||||||
| Gross | administrative | engineering | ||||||||||||||||||
| margin (1) | expenses | expenses | Other | Total | ||||||||||||||||
| Severance | $ | 65 | $ | 69 | $ | 33 | $ | 20 | $ | 187 | ||||||||||
| Capacity optimization | 121 | 21 | 13 | 21 | 176 | |||||||||||||||
| Other charges and credits | 97 | 1 | 10 | 108 | ||||||||||||||||
| Total restructuring, impairment and other charges and credits | $ | 283 | $ | 91 | $ | 46 | $ | 51 | $ | 471 |
| Year ended December 31, 2022 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selling, | Research, | |||||||||||||||||||
| general | development | |||||||||||||||||||
| and | and | |||||||||||||||||||
| Gross | administrative | engineering | ||||||||||||||||||
| margin (1) | expenses | expenses | Other | Total | ||||||||||||||||
| Severance | $ | 25 | $ | 32 | $ | 13 | $ | 70 | ||||||||||||
| Capacity optimization | 215 | 4 | 219 | |||||||||||||||||
| Other charges and credits | 97 | 15 | 3 | $ | 10 | 125 | ||||||||||||||
| Total restructuring, impairment and other charges and credits | $ | 337 | $ | 51 | $ | 16 | $ | 10 | $ | 414 |
| 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 optimization | 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 |
| (1) | Activity reflected in cost of sales. |
|---|
72
Disaggregated Revenue
The following table shows revenue by major product category, similar to the Company’s reportable segment disclosure. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty 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 revenues are recognized at the point in time when control transfers to the customer.
The following table presents revenues by product category (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Telecommunication products | $ | 4,012 | $ | 5,023 | $ | 4,349 | ||||||
| Display products | 2,694 | 2,829 | 3,666 | |||||||||
| Specialty glass products | 1,854 | 1,996 | 2,008 | |||||||||
| Environmental substrate and filter products | 1,660 | 1,492 | 1,584 | |||||||||
| Life science products | 922 | 1,187 | 1,232 | |||||||||
| Polycrystalline silicon products | 1,014 | 1,191 | 892 | |||||||||
| All other products | 432 | 471 | 351 | |||||||||
| Total Revenue | $ | 12,588 | $ | 14,189 | $ | 14,082 |
Customer Deposits
As of December 31, 2023 and 2022, Corning had customer deposits of approximately $1.2 billion and $1.3 billion, respectively. Most of these customer deposits were non-refundable and allowed customers to secure rights to products produced by Corning under long-term supply agreements. The duration of these long-term supply agreements ranges up to 10 years. As products are delivered to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability.
For the years ended December 31, 2023 and 2022, customer deposits recognized were $103 million and $198 million, respectively.
Refer to Note 9 (Other Assets and Other Liabilities) for additional information.
Deferred Revenue
As of December 31, 2023 and 2022, Corning had deferred revenue of approximately $860 million and $869 million, respectively. Deferred revenue was primarily related to the performance obligations of non-refundable consideration previously received by HSG from its customers under long term supply agreements.
Deferred revenue is tracked on a per-customer contract-unit basis. As customers take delivery of the committed volumes under the terms of the contract, a per-unit amount of deferred revenue is recognized when control of the promised goods is transferred to the customer based upon the units delivered compared to the remaining contractual units. During the years ended December 31, 2023, 2022 and 2021, the amount of deferred revenue recognized in the consolidated statements of income was not material.
Refer to Note 9 (Other Assets and Other Liabilities) for additional information.
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Inventories consisted of the following (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Finished goods | $ | 1,242 | $ | 1,315 | ||||
| Work in process | 551 | 571 | ||||||
| Raw materials and accessories | 445 | 537 | ||||||
| Supplies and packing materials | 428 | 481 | ||||||
| Inventories | $ | 2,666 | $ | 2,904 |
The following table presents the components of lease cost (in millions) (1):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Operating lease cost | $ | 171 | $ | 147 | $ | 139 | ||||||
| Variable lease cost | 57 | 51 | 59 | |||||||||
| Short-term lease cost | 2 | 2 | 2 | |||||||||
| Total lease cost | $ | 230 | $ | 200 | $ | 200 |
| (1) | Finance lease costs were not material for the years ended December 31, 2023, 2022 and 2021. |
|---|
The following table presents the components of cash paid for amounts included in the measurement of lease liabilities (in millions) (1):
| December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Operating cash outflows from operating leases | $ | 153 | $ | 116 | $ | 134 |
| (1) | Cash payments for operating leases have been classified as operating activities on the consolidated statements of cash flows. Principal and interest payments for finance leases have been classified as financing activities and operating activities, respectively, on the consolidated statements of cash flows, and were not material for the years ended December 31, 2023, 2022 and 2021. |
|---|
The following table presents supplemental consolidated balance sheet information (in millions, except lease term and discount rate) (1):
| December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Location of lease balances | 2023 | 2022 | |||||||
| Operating lease right-of-use assets | Other assets | $ | 883 | $ | 842 | ||||
| Operating lease liabilities - current | Other current liabilities | $ | 112 | $ | 111 | ||||
| Operating lease liabilities - noncurrent | Other liabilities | $ | 846 | $ | 795 | ||||
| Weighted-average remaining lease term (in years) | 13.6 | 14.3 | |||||||
| Weighted-average discount rate | 4.4 | % | 4.2 | % |
| (1) | Finance leases were not material as of December 31, 2023 and 2022. |
|---|
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5. Leases (Continued)
As of December 31, 2023, maturities of operating lease liabilities are as follows (in millions) (1):
| December 31, 2023 | ||||
|---|---|---|---|---|
| 2024 | $ | 140 | ||
| 2025 | $ | 116 | ||
| 2026 | $ | 104 | ||
| 2027 | $ | 89 | ||
| 2028 | $ | 80 | ||
| After 2028 | $ | 782 | ||
| Total operating payments | $ | 1,311 | ||
| Less: imputed discount | $ | 353 | ||
| Present value of lease payments | $ | 958 |
| (1) | Finance leases were not material as of December 31, 2023. |
|---|
As of December 31, 2023, Corning had additional operating leases, primarily for new production equipment, that have not yet commenced or been recorded, of approximately $138 million on an undiscounted basis. These operating leases will commence in 2025 with lease terms of 4 years.
The following table presents the components of income before income taxes (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| U.S. companies | $ | 105 | $ | 1,157 | $ | 1,282 | ||||||
| Non-U.S. companies | 711 | 640 | 1,144 | |||||||||
| Income before income taxes | $ | 816 | $ | 1,797 | $ | 2,426 |
The following table presents the current and deferred amounts of the provision for income taxes (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Current: | ||||||||||||
| Federal | $ | (82 | ) | $ | (191 | ) | $ | (172 | ) | |||
| State and municipal | (13 | ) | (16 | ) | (13 | ) | ||||||
| Foreign | (148 | ) | (250 | ) | (290 | ) | ||||||
| Deferred: | ||||||||||||
| Federal | 76 | 52 | (97 | ) | ||||||||
| State and municipal | 7 | 8 | (7 | ) | ||||||||
| Foreign | (8 | ) | (14 | ) | 88 | |||||||
| Provision for income taxes | $ | (168 | ) | $ | (411 | ) | $ | (491 | ) |
Amounts reflected in the preceding tables are based on the location of the taxing authorities.
75
6. Income Taxes (Continued)
The following table presents the reconciliation of the statutory U.S. federal income tax rate to the effective tax rate:
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
| State income tax (benefit) provision, net of federal effect | (0.3 | ) | 0.7 | 1.0 | ||||||||
| Tax credits | (6.9 | ) | (3.3 | ) | (2.6 | ) | ||||||
| Non-Taxable Items | (4.0 | ) | ||||||||||
| Foreign derived intangible income | (2.3 | ) | (2.7 | ) | (1.3 | ) | ||||||
| Stock compensation | (2.1 | ) | (0.8 | ) | (1.5 | ) | ||||||
| Remeasurement of deferred tax assets and liabilities | (0.3 | ) | (0.1 | ) | ||||||||
| Differential arising from foreign earnings (1) | 0.3 | 2.2 | 2.0 | |||||||||
| Non-deductible Items | 4.7 | 1.4 | ||||||||||
| Audit settlements & change in reserve | 4.8 | 3.7 | 1.6 | |||||||||
| Valuation allowance | 5.7 | 2.1 | (0.5 | ) | ||||||||
| Intercompany loan adjustment | 0.6 | |||||||||||
| Global intangible low-taxed income | 0.2 | |||||||||||
| Other items, net | (0.5 | ) | (1.1 | ) | ||||||||
| Effective tax rate | 20.6 | % | 22.9 | % | 20.2 | % |
| (1) | Includes impact of intercompany asset sales. |
|---|
During the year ended December 31, 2023, the Company distributed an immaterial amount from foreign subsidiaries to their respective U.S. parent companies. As of December 31, 2023, Corning has approximately $1.4 billion of indefinitely reinvested foreign earnings. It remains impracticable to calculate the tax cost of repatriating unremitted earnings which are considered indefinitely reinvested.
The following table presents the tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Loss and tax credit carryforwards | $ | 275 | $ | 281 | ||||
| Other assets | 245 | 232 | ||||||
| Research and development capitalization | 362 | 280 | ||||||
| Asset impairments and restructuring reserves | 43 | 41 | ||||||
| Postretirement medical and life benefits | 103 | 102 | ||||||
| Other accrued liabilities | 319 | 311 | ||||||
| Other employee benefits | 344 | 346 | ||||||
| Gross deferred tax assets | 1,691 | 1,593 | ||||||
| Valuation allowances | (207 | ) | (166 | ) | ||||
| Total deferred tax assets | 1,484 | 1,427 | ||||||
| Intangible and other assets | (117 | ) | (108 | ) | ||||
| Fixed assets | (223 | ) | (289 | ) | ||||
| Finance leases | (209 | ) | (200 | ) | ||||
| Total deferred tax liabilities | (549 | ) | (597 | ) | ||||
| Net deferred tax assets | $ | 935 | $ | 830 |
| (1) | The Company also has Luxembourg deferred tax asset net operating losses of up to $3.1 billion that have a remote possibility of realization and therefore, are not recognized in the deferred tax table above. |
|---|
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6. Income Taxes (Continued)
Net deferred tax assets on the consolidated balance sheets consisted of the following (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Deferred tax assets | $ | 1,153 | $ | 1,073 | ||||
| Other liabilities | (218 | ) | (243 | ) | ||||
| Net deferred tax assets | $ | 935 | $ | 830 |
The following table presents details of the deferred tax assets for loss and tax credit carryforwards (in millions):
| Expiration | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | 2024-2028 | 2029-2033 | 2034-2038 | Indefinite | ||||||||||||||||
| Net operating losses | $ | 274 | $ | 63 | $ | 38 | $ | 33 | $ | 140 | ||||||||||
| Tax credits | 1 | 1 | ||||||||||||||||||
| Balance as of December 31, 2023 | $ | 275 | $ | 63 | $ | 39 | $ | 33 | $ | 140 |
The following table presents the changes in the deferred tax valuation allowance (in millions):
| 2023 | 2022 | 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as of January 1 | $ | 166 | $ | 138 | $ | 167 | ||||||
| Additions | 66 | 81 | 13 | |||||||||
| Reductions | (25 | ) | (53 | ) | (42 | ) | ||||||
| Balance as of December 31 | $ | 207 | $ | 166 | $ | 138 |
The following table presents the reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):
| 2023 | 2022 | 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as of January 1 | $ | 206 | $ | 178 | $ | 131 | ||||||
| Additions based on tax positions related to the current year | 54 | 10 | 54 | |||||||||
| Additions for tax positions of prior years | 127 | 24 | 17 | |||||||||
| Reductions for tax positions of prior years | (3 | ) | (5 | ) | (21 | ) | ||||||
| Settlements and lapse of statute of limitations | (11 | ) | (1 | ) | (3 | ) | ||||||
| Balance as of December 31 | $ | 373 | $ | 206 | $ | 178 |
During 2020, the Internal Revenue Service (“IRS”) opened an audit for tax years 2015-2018. In addition, during 2023, the IRS opened an audit for tax years 2019-2020. The Company does 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 the current position, the 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 as of December 31, 2023, 2022 and 2021 are $174 million, $169 million and $120 million, respectively, of unrecognized tax benefits that would impact the Company’s effective tax rate if recognized.
Interest and penalties associated with uncertain tax positions are recognized as part of tax expense. For the years ended December 31, 2023, 2022 and 2021 the amounts recognized were not material.
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6. Income Taxes (Continued)
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. The Company 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, 2023, 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, 2013. 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 (2014), Japan (2016), Taiwan (2018) and South Korea (2014).
Corning Precision Materials, a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims for tax years 2010 through 2019. The Company was required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessment. During 2023, $99 million was no longer under dispute and was refunded to the Company. The non-current receivable balance was $261 million and $349 million as of December 31, 2023 and December 31, 2022, respectively, for the amount on deposit with the South Korean government. Corning believes that it is more likely than not that the Company will prevail in the appeals process relating to these matters.
7. Property, Plant and Equipment, Net of Accumulated Depreciation
Property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Land | $ | 412 | $ | 420 | ||||
| Buildings | 5,931 | 5,963 | ||||||
| Equipment (1) | 20,896 | 20,800 | ||||||
| Construction in progress | 1,944 | 2,335 | ||||||
| Subtotal | 29,183 | 29,518 | ||||||
| Accumulated depreciation | (14,553 | ) | (14,147 | ) | ||||
| Property, plant and equipment, net of accumulated depreciation (2) | $ | 14,630 | $ | 15,371 |
| (1) | Manufacturing equipment includes certain components of production equipment that are constructed of precious metals. As of December 31, 2023 and 2022, the carrying value of precious metals was $3.1 billion and $3.4 billion, respectively, and significantly lower than the fair market value. Depletion expense for precious metals for the years ended December 31, 2023, 2022 and 2021 was $35 million, $27 million and $28 million, respectively. |
|---|---|
| (2) | Approximately $40 million, $48 million and $36 million of interest costs were capitalized as part of property, plant and equipment during the years ended December 31, 2023, 2022 and 2021, respectively. |
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8. Goodwill and Other Intangible Assets
The following table presents the changes in the carrying amount of goodwill (in millions):
| Optical Communications | Display Technologies | Specialty Materials | Life Sciences | Hemlock and Emerging Growth Businesses | Total | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as of December 31, 2021 | $ | 915 | $ | 125 | $ | 150 | $ | 616 | $ | 615 | $ | 2,421 | ||||||||||||
| Acquired goodwill | 4 | 1 | 5 | |||||||||||||||||||||
| Foreign currency translation adjustment and other | (14 | ) | (4 | ) | (10 | ) | (4 | ) | (32 | ) | ||||||||||||||
| Balance as of December 31, 2022 | $ | 905 | $ | 121 | $ | 151 | $ | 606 | $ | 611 | $ | 2,394 | ||||||||||||
| Foreign currency translation adjustment and other | (1 | ) | (2 | ) | 1 | (12 | ) | (14 | ) | |||||||||||||||
| Balance as of December 31, 2023 | $ | 904 | $ | 119 | $ | 151 | $ | 607 | $ | 599 | $ | 2,380 |
Corning’s gross goodwill balance and accumulated impairment losses were $8.9 billion and $6.5 billion, respectively, as of December 31, 2023 and 2022. Accumulated impairment losses were generated primarily through goodwill impairments related to the Optical Communications segment.
Management completed its fiscal 2023 annual impairment test as of October 1, 2023. The impairment test resulted in implied fair values of our reporting units that substantially exceeded each reporting unit’s carrying value. Based on the quantitative test performed in 2023, no goodwill impairment was required.
Other Intangible Assets, Net
Other intangible assets, net consisted of the following (in millions):
| December 31, | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||||||||||||||||||
| Gross | Accumulated amortization | Net | Gross | Accumulated amortization | Net | |||||||||||||||||||
| Amortized intangible assets: | ||||||||||||||||||||||||
| Patents, trademarks & trade names | $ | 493 | $ | 318 | $ | 175 | $ | 496 | $ | 300 | $ | 196 | ||||||||||||
| Customer lists and other (1) | 1,464 | 734 | 730 | 1,461 | 628 | 833 | ||||||||||||||||||
| Other intangible assets, net | $ | 1,957 | $ | 1,052 | $ | 905 | $ | 1,957 | $ | 928 | $ | 1,029 |
| (1) | Other consists of intangible assets related to developed technologies and intellectual know-how. |
|---|
Corning’s amortized intangible assets are primarily related to Optical Communications, Life Sciences and certain businesses within Hemlock and Emerging Growth Businesses. The net carrying amount of intangible assets decreased during the year, primarily driven by amortization of $122 million.
Annual amortization expense is expected to be approximately $126 million, $119 million, $98 million, $94 million and $88 million for years 2024 through 2028, respectively.
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9. Other Assets and Other Liabilities
Other assets consisted of the following (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Current assets: | ||||||||
| Derivative instruments (Note 13) | $ | 501 | $ | 454 | ||||
| Other current assets | 694 | 703 | ||||||
| Other current assets | $ | 1,195 | $ | 1,157 | ||||
| Non-current assets: | ||||||||
| Derivative instruments (Note 13) | $ | 130 | $ | 224 | ||||
| South Korean tax deposits (Note 6) | 261 | 349 | ||||||
| Operating leases (Note 5) | 883 | 842 | ||||||
| Investments | 414 | 360 | ||||||
| Other non-current assets | 532 | 404 | ||||||
| Other assets | $ | 2,220 | $ | 2,179 |
Other liabilities consisted of the following (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Current liabilities: | ||||||||
| Wages and employee benefits | $ | 609 | $ | 727 | ||||
| Income taxes (Note 6) | 69 | 127 | ||||||
| Derivative instruments (Note 13) | 66 | 174 | ||||||
| Deferred revenue (Note 3) | 181 | 144 | ||||||
| Customer deposits (Note 3) | 148 | 132 | ||||||
| Share repurchase liability (Note 14) | 506 | |||||||
| Short-term operating leases (Note 5) | 112 | 111 | ||||||
| Other current liabilities | 1,348 | 1,226 | ||||||
| Other accrued liabilities | $ | 2,533 | $ | 3,147 | ||||
| Non-current liabilities: | ||||||||
| Defined benefit pension plan liabilities (Note 11) | $ | 721 | $ | 668 | ||||
| Derivative instruments (Note 13) | 31 | 17 | ||||||
| Deferred revenue (Note 3) | 679 | 725 | ||||||
| Customer deposits (Note 3) | 1,083 | 1,137 | ||||||
| Deferred tax liabilities (Note 6) | 218 | 243 | ||||||
| Long-term operating leases (Note 5) | 846 | 795 | ||||||
| Other non-current liabilities | 1,131 | 1,370 | ||||||
| Other liabilities | $ | 4,709 | $ | 4,955 |
80
Debt consisted of the following (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Long-term debt | ||||||||
| Medium-term notes, average rate 0.70%, due through 2024 | $ | 149 | $ | 45 | ||||
| Debentures, 6.85%, due 2029 | 157 | 159 | ||||||
| Debentures, callable, 7.25%, due 2036 | 249 | 249 | ||||||
| Debentures, 4.70%, due 2037 | 296 | 296 | ||||||
| Debentures, 5.75%, due 2040 | 396 | 396 | ||||||
| Debentures, 4.75%, due 2042 | 497 | 496 | ||||||
| Debentures, 5.35%, due 2048 | 545 | 544 | ||||||
| Debentures, 3.90%, due 2049 | 395 | 395 | ||||||
| Debentures, 4.375%, due 2057 | 743 | 743 | ||||||
| Debentures, 5.85%, due 2068 | 297 | 297 | ||||||
| Debentures, 5.45%, due 2079 | 1,086 | 1,086 | ||||||
| Yen-denominated debentures, 0.698%, due 2024 | 160 | |||||||
| Yen-denominated debentures, 0.722%, due 2025 | 71 | 76 | ||||||
| Yen-denominated debentures, 0.992%, due 2027 | 263 | 358 | ||||||
| Yen-denominated debentures, 1.043%, due 2028 | 181 | 232 | ||||||
| Yen-denominated debentures, 1.219%, due 2030 | 177 | 190 | ||||||
| Yen-denominated debentures, 1.153%, due 2031 | 221 | 237 | ||||||
| Yen-denominated debentures, 1.583%, due 2037 | 71 | 76 | ||||||
| Yen-denominated debentures, 1.513%, due 2039 | 41 | 45 | ||||||
| Euro-denominated notes, 3.875%, due 2026 | 330 | |||||||
| Euro-denominated notes, 4.125%, due 2031 | 602 | |||||||
| Financing Leases, average discount rate 4.6%, due through 2043 | 195 | 190 | ||||||
| Other, average rate 3.85%, due through 2043 | 564 | 641 | ||||||
| Total long-term debt, including current portion | 7,526 | 6,911 | ||||||
| Less current portion of long-term debt | 320 | 224 | ||||||
| Long-term debt | $ | 7,206 | $ | 6,687 |
Based on borrowing rates currently available to us for loans with similar terms and maturities, the fair value of long-term debt was $7.0 billion and $6.1 billion as of December 31, 2023 and 2022, respectively, compared to recorded book values of $7.2 billion and $6.7 billion as of December 31, 2023 and 2022, respectively. The Company measures the fair value of its long-term debt using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.
Corning did not have outstanding commercial paper as of December 31, 2023 and 2022.
During 2022, Corning amended and restated its existing revolving credit agreement, which provides a committed $1.5 billion unsecured multi-currency line of credit, primarily to extend the term to 2027. There were no outstanding amounts under this facility as of December 31, 2023 and 2022. In addition, Corning had a 25 billion Japanese yen liquidity facility, which was schedule to mature in 2025. In the fourth quarter of 2023, the 25 billion Japanese yen liquidity facility was terminated. There were never any amounts outstanding under this facility.
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10. Debt (Continued)
Corning is the obligor to Chinese yuan-denominated unsecured variable rate loan facilities, whose proceeds are used for capital investment and general corporate purposes. As of December 31, 2023 and 2022, amounts outstanding under these facilities totaled $293 million and $352 million, respectively, and these facilities had variable interest rates ranging from 3.2% to 4.1% and 3.3% to 4.3%, respectively, and maturities ranging from 2024 to 2032. As of December 31, 2023, Corning had 779 million Chinese yuan of unused capacity, equivalent to approximately $110 million.
The following table presents debt maturities by year as of December 31, 2023 (in millions) (1):
| 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| $ | 320 | $ | 188 | $ | 397 | $ | 312 | $ | 210 | $ | 6,203 |
| (1) | Excludes impact of an interest rate swap, bond discounts and deferred expenses. |
|---|
Debt Issuances and Redemptions
In the fourth quarter of 2023, Corning repurchased ¥14.7 billion (equivalent to $100 million) of ¥9.8 billion 0.992% notes due 2027 and ¥4.9 billion 1.043% notes due 2028. The repurchase transactions resulted in an insignificant gain in the current period.
On May 15, 2023, the Company issued €300 million 3.875% Notes due 2026 ( “2026 Notes”) and €550 million 4.125% Notes due 2031 ( “2031 Notes”). The proceeds from the 2026 Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of issuance. The net proceeds received were approximately $918 million and will be used for general corporate purposes. As of December 31, 2023, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $932 million.
The full amounts of the 2026 Notes and 2031 Notes have been designated as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. Refer to Note 13 (Financial Instruments) for additional information.
During the year ended December 31, 2021, Corning redeemed $375 million of 2.9% debentures due in 2022 and $250 million of 3.7% debentures due in 2023, paying premiums of $10 million and $19 million, respectively, by exercising the make-whole call. The bond redemptions resulted in an $11 million and $20 million loss, respectively. Losses on bond redemption have been recorded within other income, net in the consolidated statements of income.
Defined Benefit Plans
Corning has defined benefit pension plans covering certain domestic and international employees. The Company may contribute, as necessary, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During the year ended December 31, 2023, voluntary cash contributions to domestic plans were not material and cash contributions of $25 million were made to international pension plans. During the year ended December 31, 2022, voluntary cash contributions were not material to domestic and international defined benefit plans. In 2024, the Company plans to make cash contributions of $11 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 2023 and 2022, no voluntary cash contributions were made to domestic postretirement plans. 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.
82
11. Employee Retirement Plans (Continued)
Obligations and Funded Status
The following table presents the change in benefit obligation and the funded status of the defined benefit pension and post-retirement benefit plans (in millions):
| Domestic pension benefits | International pension benefits | Postretirement benefits | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Change in benefit obligation | ||||||||||||||||||||||||
| Benefit obligation at beginning of year | $ | 3,182 | $ | 4,075 | $ | 549 | $ | 736 | $ | 434 | $ | 654 | ||||||||||||
| Service cost | 80 | 105 | 18 | 22 | 5 | 9 | ||||||||||||||||||
| Interest cost | 168 | 98 | 20 | 11 | 23 | 15 | ||||||||||||||||||
| Plan participants’ contributions | 9 | 7 | ||||||||||||||||||||||
| Plan amendments | 28 | |||||||||||||||||||||||
| Actuarial gain | 89 | (925 | ) | 9 | (137 | ) | (7 | ) | (209 | ) | ||||||||||||||
| Other (1) | 14 | 3 | (3 | ) | (1 | ) | 1 | |||||||||||||||||
| Benefits paid | (222 | ) | (202 | ) | (25 | ) | (21 | ) | (40 | ) | (42 | ) | ||||||||||||
| Foreign currency translation | 10 | (61 | ) | |||||||||||||||||||||
| Benefit obligation at end of year | $ | 3,311 | $ | 3,182 | $ | 578 | $ | 549 | $ | 425 | $ | 434 | ||||||||||||
| Change in plan assets | ||||||||||||||||||||||||
| Fair value of plan assets at beginning of year | $ | 2,683 | $ | 3,598 | $ | 381 | $ | 584 | $ | 5 | $ | 9 | ||||||||||||
| Actual gain (loss) on plan assets | 281 | (728 | ) | 10 | (139 | ) | ||||||||||||||||||
| Employer contributions | 18 | 15 | 32 | 8 | 26 | 31 | ||||||||||||||||||
| Plan participants’ contributions | 9 | 7 | ||||||||||||||||||||||
| Benefits paid | (222 | ) | (202 | ) | (25 | ) | (21 | ) | (40 | ) | (42 | ) | ||||||||||||
| Foreign currency translation | 7 | (51 | ) | |||||||||||||||||||||
| Fair value of plan assets at end of year | $ | 2,760 | $ | 2,683 | $ | 405 | $ | 381 | $ | — | $ | 5 | ||||||||||||
| Funded status at end of year | ||||||||||||||||||||||||
| Fair value of plan assets | $ | 2,760 | $ | 2,683 | $ | 405 | $ | 381 | $ | — | $ | 5 | ||||||||||||
| Benefit obligations | (3,311 | ) | (3,182 | ) | (578 | ) | (549 | ) | (425 | ) | (434 | ) | ||||||||||||
| Funded status of plans | $ | (551 | ) | $ | (499 | ) | $ | (173 | ) | $ | (168 | ) | $ | (425 | ) | $ | (429 | ) | ||||||
| Amounts recognized in the consolidated balance sheets consist of: | ||||||||||||||||||||||||
| Noncurrent asset | $ | 24 | $ | 26 | ||||||||||||||||||||
| Current liability | $ | (17 | ) | $ | (18 | ) | (8 | ) | (7 | ) | $ | (27 | ) | $ | (22 | ) | ||||||||
| Noncurrent liability | (534 | ) | (481 | ) | (189 | ) | (187 | ) | (398 | ) | (407 | ) | ||||||||||||
| Recognized liability | $ | (551 | ) | $ | (499 | ) | $ | (173 | ) | $ | (168 | ) | $ | (425 | ) | $ | (429 | ) | ||||||
| Amounts recognized in accumulated other comprehensive loss consist of: | ||||||||||||||||||||||||
| Net actuarial loss (gain) | $ | 259 | $ | 259 | $ | 10 | $ | (2 | ) | $ | (212 | ) | $ | (226 | ) | |||||||||
| Prior service cost (credit) | 34 | 44 | (1 | ) | (10 | ) | (15 | ) | ||||||||||||||||
| Amounts recognized at end of year | $ | 293 | $ | 303 | $ | 10 | $ | (3 | ) | $ | (222 | ) | $ | (241 | ) |
| (1) | Other consists of domestic plan special termination benefits charge and curtailment and international plan settlements. Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) in the notes to the consolidated financial statements for more information. |
|---|
83
11. Employee Retirement Plans (Continued)
Across total pension benefits, an actuarial loss of $0.1 billion was recognized in 2023 primarily due to decreases in bond yields during the year, leading to domestic and international plan weighted-average discount rates that were 34 and 16 basis points lower, respectively, than the prior year. In 2022, an actuarial gain of $1.1 billion was recognized primarily due to increases in bond yields during the year, leading to domestic and international plan weighted-average discount rates that were 263 and 126 basis points higher, respectively, than the prior year. The accumulated benefit obligation for defined benefit pension plans was $3.7 billion and $3.5 billion as of December 31, 2023 and 2022, respectively.
For the years ended December 31, 2023 and 2022, postretirement benefits actuarial gains of $7 million and $209 million, respectively, were recognized. The decrease in actuarial gain recognized is primarily due to changes in weighted-average discount rates in response to bond yields during the year. For the years ended December 31, 2023 and 2022, the changes in weighted-average discount rates were a decrease of 34 basis points and an increase of 259 basis points, respectively.
The following table presents information for pension plans where the projected benefit obligation or the accumulated benefit obligation exceeded the fair value of plan assets (in millions):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| Projected benefit obligation | $ | 3,540 | $ | 3,406 | ||||
| Fair value of plan assets | $ | 2,791 | $ | 2,712 | ||||
| Accumulated benefit obligation | $ | 3,376 | $ | 3,238 | ||||
| Fair value of plan assets | $ | 2,791 | $ | 2,712 |
The following table presents the components of net periodic benefit expense (income) for employee retirement plans, which other than the service cost component is recorded in other income, net in the consolidated statements of income (in millions):
| Domestic pension benefits | International pension benefits | Postretirement benefits | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||
| Service cost | $ | 80 | $ | 105 | $ | 102 | $ | 18 | $ | 22 | $ | 25 | $ | 5 | $ | 9 | $ | 10 | ||||||||||||||||||
| Interest cost | 168 | 98 | 78 | 20 | 11 | 10 | 23 | 15 | 15 | |||||||||||||||||||||||||||
| Expected return on plan assets | (176 | ) | (210 | ) | (209 | ) | (13 | ) | (9 | ) | (7 | ) | ||||||||||||||||||||||||
| Amortization of prior service cost (credit) | 6 | 6 | 4 | (1 | ) | (1 | ) | (5 | ) | (5 | ) | (6 | ) | |||||||||||||||||||||||
| Amortization of actuarial (gain) loss | (22 | ) | (5 | ) | 2 | |||||||||||||||||||||||||||||||
| Recognition of actuarial (gain) loss | (16 | ) | 29 | 10 | 1 | 8 | 1 | |||||||||||||||||||||||||||||
| Total net periodic benefit expense (income) | $ | 62 | $ | 28 | $ | (15 | ) | $ | 26 | $ | 31 | $ | 28 | $ | 1 | $ | 14 | $ | 21 | |||||||||||||||||
| Settlement charge | $ | 2 | ||||||||||||||||||||||||||||||||||
| Curtailment charge | $ | 3 | ||||||||||||||||||||||||||||||||||
| Special termination benefit charge | 15 | $ | 2 | $ | 1 | |||||||||||||||||||||||||||||||
| Total expense (income) | $ | 80 | $ | 30 | $ | (15 | ) | $ | 26 | $ | 33 | $ | 28 | $ | 2 | $ | 14 | $ | 21 | |||||||||||||||||
| Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income: | ||||||||||||||||||||||||||||||||||||
| Curtailment effects | $ | (4 | ) | |||||||||||||||||||||||||||||||||
| Settlements | $ | 11 | ||||||||||||||||||||||||||||||||||
| Current year actuarial (loss) gain | (16 | ) | $ | 16 | $ | (105 | ) | $ | 14 | (27 | ) | $ | (7 | ) | $ | 5 | $ | (209 | ) | $ | (105 | ) | ||||||||||||||
| Amortization of actuarial gain (loss) | 22 | 5 | (2 | ) | ||||||||||||||||||||||||||||||||
| Recognition of actuarial gain (loss) | 16 | (29 | ) | (10 | ) | 1 | 20 | (1 | ) | |||||||||||||||||||||||||||
| Current year prior service cost | 28 | |||||||||||||||||||||||||||||||||||
| Amortization of prior service (cost) credit | (6 | ) | (6 | ) | (4 | ) | 1 | 1 | (8 | ) | 5 | 6 | ||||||||||||||||||||||||
| Total recognized in other comprehensive (loss) income | $ | (10 | ) | $ | 9 | $ | (119 | ) | $ | 15 | $ | 5 | $ | (7 | ) | $ | 19 | $ | (199 | ) | $ | (101 | ) |
84
11. 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, with no change in 2022 or 2023. 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 2022 or 2023. 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 following table presents the weighted-average assumptions used to determine benefit obligations:
| Pension benefits | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Domestic | International | Postretirement benefits | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||
| Discount rate | 5.16 | % | 5.50 | % | 2.87 | % | 2.30 | % | 2.46 | % | 1.20 | % | 5.24 | % | 5.58 | % | 2.99 | % | ||||||||||||||||||
| Rate of compensation increase | 3.97 | % | 3.48 | % | 3.50 | % | 3.74 | % | 3.73 | % | 3.63 | % | ||||||||||||||||||||||||
| Cash balance crediting rate | 4.22 | % | 4.14 | % | 3.86 | % | 0.82 | % | 0.82 | % | 0.91 | % | ||||||||||||||||||||||||
| Employee contributions crediting rate | 5.25 | % | 4.62 | % | 1.57 | % |
The following table presents the weighted-average assumptions used to determine net periodic benefit expense (income):
| Pension benefits | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Domestic | International | Postretirement benefits | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||
| Discount rate | 5.50 | % | 2.88 | % | 2.50 | % | 2.46 | % | 1.20 | % | 1.02 | % | 5.58 | % | 2.99 | % | 2.69 | % | ||||||||||||||||||
| Expected return on plan assets | 6.75 | % | 6.00 | % | 6.00 | % | 3.85 | % | 1.64 | % | 1.26 | % | ||||||||||||||||||||||||
| Rate of compensation increase | 3.87 | % | 3.50 | % | 4.16 | % | 3.73 | % | 3.63 | % | 3.55 | % | ||||||||||||||||||||||||
| Cash balance crediting rate | 3.86 | % | 3.86 | % | 3.84 | % | 0.82 | % | 0.91 | % | 0.94 | % | ||||||||||||||||||||||||
| Employee contributions crediting rate | 4.62 | % | 1.57 | % | 0.62 | % |
The following table presents the assumed health care trend rates:
| Assumed health care trend rates as of December 31 | 2023 | 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
| Health care cost trend rate assumed for next year (pre-65 / post-65 retirees) | 6.75% / 14.75% | 7.00% / 4.25% | ||||||
| Ultimate health care trend rate | 5 | % | 5 | % | ||||
| Year that the rate reaches the ultimate trend rate | 2031 | 2031 |
85
11. Employee Retirement Plans (Continued)
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 50% which includes large, mid and small-cap companies and investments in both developed and emerging markets. The target allocation for bond investments is 50%, which predominately includes corporate bonds. Long-duration fixed income assets are utilized to mitigate the sensitivity of funding ratios to changes in interest rates.
The following table presents the fair values of domestic defined benefit and post-retirement benefit plan assets, by asset category (in millions):
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Equity securities: | ||||||||||||||||||||||||||||||||
| U.S. companies | $ | 1,260 | $ | 9 | $ | 1,251 | $ | 1,168 | $ | 63 | $ | 1,105 | ||||||||||||||||||||
| International companies | ||||||||||||||||||||||||||||||||
| Fixed income: | ||||||||||||||||||||||||||||||||
| U.S. treasury bonds | 204 | 204 | 400 | 400 | ||||||||||||||||||||||||||||
| U.S. corporate bonds | 946 | 946 | 1,060 | 1,060 | ||||||||||||||||||||||||||||
| Preferred securities | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||
| Private equity (1) | 24 | $ | 24 | |||||||||||||||||||||||||||||
| Real estate (2) | 3 | $ | 3 | 7 | 7 | |||||||||||||||||||||||||||
| Cash equivalents | 346 | 339 | 7 | 28 | 28 | |||||||||||||||||||||||||||
| Total | $ | 2,760 | $ | 552 | $ | 2,205 | $ | 3 | $ | 2,688 | $ | 491 | $ | 2,166 | $ | 31 |
| (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 table presents the fair values of international defined benefit plan assets, by asset category (in millions):
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Fixed income: | ||||||||||||||||||||||||||||||||
| International fixed income | $ | 96 | $ | 96 | $ | 87 | $ | 87 | ||||||||||||||||||||||||
| Insurance contracts | 195 | $ | 195 | 192 | $ | 192 | ||||||||||||||||||||||||||
| Mortgages | 43 | 43 | 42 | 42 | ||||||||||||||||||||||||||||
| Cash equivalents | 59 | 59 | 48 | 48 | ||||||||||||||||||||||||||||
| Other | 12 | 12 | 12 | 1 | 11 | |||||||||||||||||||||||||||
| Total | $ | 405 | $ | 155 | $ | - | $ | 250 | $ | 381 | $ | 136 | $ | - | $ | 245 |
86
11. Employee Retirement Plans (Continued)
The following table presents the changes in the fair value of the defined benefit plans’ Level 3 assets (in millions):
| Domestic | International | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Private equity | Real estate | Mortgages | Insurance contracts | Other | ||||||||||||||||
| Balance as of December 31, 2021 | $ | 41 | $ | 10 | $ | 22 | $ | 2 | ||||||||||||
| Actual return on plan assets relating to assets still held at the reporting date | (8 | ) | 1 | |||||||||||||||||
| Actual return on plan assets relating to assets sold during the reporting period | 1 | |||||||||||||||||||
| Asset (sales) purchases | (9 | ) | (3 | ) | 18 | 190 | $ | 11 | ||||||||||||
| Balance as of December 31, 2022 | $ | 24 | $ | 7 | $ | 42 | $ | 192 | $ | 11 | ||||||||||
| Actual return on plan assets relating to assets still held at the reporting date | (12 | ) | 1 | |||||||||||||||||
| Actual return on plan assets relating to assets sold during the reporting period | ||||||||||||||||||||
| Asset (sales) purchases | (12 | ) | (4 | ) | 3 | 1 | ||||||||||||||
| Balance as of December 31, 2023 | $ | — | $ | 3 | $ | 43 | $ | 195 | $ | 12 |
Credit Risk
42% of domestic plan assets are invested in bonds with an average credit rating of AA-. 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.
Liquidity Risk
Less than 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.
As of December 31, 2023 and 2022, the amount of Corning common stock included in equity securities was not significant.
Cash Flow Data
The following table presents the gross benefit payments 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 | |||||||||||
| 2024 | $ | 260 | $ | 30 | $ | 28 | |||||||
| 2025 | $ | 257 | $ | 38 | $ | 28 | |||||||
| 2026 | $ | 260 | $ | 39 | $ | 29 | |||||||
| 2027 | $ | 267 | $ | 39 | $ | 29 | |||||||
| 2028 | $ | 267 | $ | 44 | $ | 29 | |||||||
| 2029-2033 | $ | 1,401 | $ | 237 | $ | 148 |
Other Benefit Plans
Corning offers defined contribution plans covering employees meeting certain eligibility requirements. Total consolidated defined contribution plan expense was $118 million, $117 million and $98 million for the years ended December 31, 2023, 2022 and 2021, respectively.
87
12. Commitments, Contingencies and Guarantees
Guarantees
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.
Purchase Commitments
Purchase obligations are enforceable and legally binding obligations. The Company has purchase commitments primarily for raw materials and energy-related take-or-pay contracts. Commitments made under these obligations as of December 31, 2023 are as follows (in millions):
| Amount of commitment expiration per period | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Less than 1 year | 1 to 3 years | 3 to 5 years | 5 years and thereafter | |||||||||||||
| Purchase obligations | $ | 264 | $ | 207 | $ | 99 | $ | 434 |
Litigation, Environmental and Indemnifications
Corning is a defendant in various lawsuits and is subject to various claims that arise in the normal course of business, the most significant of which are summarized below. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on Corning’s consolidated financial position, liquidity, or results of operations, is remote.
Dow Corning Chapter 11 Related Matters
Until June 1, 2016, Corning and The Dow Chemical Company (“Dow”) each owned 50% of the common stock of Dow Corning Corporation (“Dow Corning”). On May 31, 2016, Corning and Dow realigned their ownership interest in Dow Corning. Following the realignment, Corning no longer owned any interest in Dow Corning. With the realignment, Corning agreed to indemnify Dow for 50% of Dow Corning’s non-ordinary course, pre-closing liabilities to the extent such liabilities exceed the amounts reserved for them by Dow Corning as of May 31, 2016, subject to certain conditions and limits. In January 2024, we entered into an agreement to settle the Dow Corning Chapter 11 Related Matters and the amount reserved as of December 31, 2023 was not material.
Dow Corning Environmental Claims
Beginning in September 2019, Dow formally notified Corning of certain environmental matters for which Dow asserts that it has or will experience losses arising from remediation and response at a number of sites. Subject to certain conditions and limits, Corning may be required to indemnify Dow for up to 50% of such losses. As of December 31, 2023, Corning has determined that a potential liability for these environmental matters is probable and the amount reserved was not material.
Environmental Litigation
Corning has been designated by federal or state governments under environmental laws, including Superfund, as a potentially responsible party that may be liable for cleanup costs associated with 19 hazardous waste sites. It is Corning’s policy to accrue for its estimated liability related to such hazardous waste sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants. As of December 31, 2023 and 2022, Corning had accrued approximately $88 million and $109 million, respectively, for the estimated undiscounted liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability.
88
The following table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis as of December 31, 2023 and 2022 (in millions):
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notional amount | Fair value asset (1) | Fair value liability (1) | Notional amount | Fair value asset (1) | Fair value liability (1) | |||||||||||||||||||
| Derivatives designated as hedging instruments (2): | ||||||||||||||||||||||||
| Foreign exchange and precious metals lease contracts (3) | $ | 241 | $ | 287 | $ | 419 | $ | 104 | $ | (1 | ) | |||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||
| Foreign exchange contracts | 1,988 | 20 | $ | (17 | ) | 2,231 | 44 | (49 | ) | |||||||||||||||
| Translated earnings contracts | 5,042 | 324 | (80 | ) | 7,543 | 530 | (141 | ) | ||||||||||||||||
| Total derivatives | $ | 7,271 | $ | 631 | $ | (97 | ) | $ | 10,193 | $ | 678 | $ | (191 | ) |
| (1) | All of the Company’s derivative contracts are measured at fair value are classified as Level 2 within the fair value hierarchy. Derivative assets are presented in Other current assets or Other assets. Derivative liabilities are presented in Other current liabilities or Other liabilities. Refer to Note 9 (Other Assets and Other Liabilities) for additional information. |
|---|---|
| (2) | The amounts above do not include €850 million of euro-denominated debt ($932 million equivalent as of December 31, 2023), which is a non-derivative financial instrument designated as a net investment hedge. |
| (3) | As of December 31, 2023, derivatives designated as hedging instruments include foreign exchange cash flow hedges with gross notional amounts of $241 million and fair value hedges of leased precious metals with a gross notional amount of 20,160 troy ounces. As of December 31, 2022, derivatives designated as hedging instruments include foreign exchange cash flow hedges with gross notional amounts of $419 million and fair value hedges of leased precious metals with a gross notional amount of 23,152 troy ounces. Fair value assets include designated derivatives pertaining to precious metals lease contracts in the amounts of $229 million and $69 million as of December 31, 2023 and 2022, respectively. |
The following table summarizes the total gross notional value for translated earnings contracts as of December 31, 2023 and 2022 (in millions):
| Year ended December 31, | |||||||
| 2023 | 2022 | ||||||
| Average rate forward contracts: | |||||||
| Chinese yuan-denominated | $ | 684 | $ | 479 | |||
| Japanese yen-denominated | 463 | 93 | |||||
| South Korean won-denominated | 1,609 | 2,117 | |||||
| Other foreign currencies (1) | 198 | 237 | |||||
| Option contracts: | |||||||
| Japanese yen-denominated (2) | 2,088 | 4,617 | |||||
| Total gross notional value for translated earning contracts | $ | 5,042 | $ | 7,543 |
| (1) | Denominational currencies for average rate forward contracts include the New Taiwan dollar, British pound and euro. |
|---|---|
| (2) | Japanese yen-denominated option contracts include purchased put and call options and zero-cost collars. With respect to the 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. |
89
13. Financial Instruments (Continued)
The following tables summarize the effect in the consolidated statements of income relating to Corning’s derivative financial instruments (in millions). The accumulated derivative gain included in accumulated other comprehensive loss on the consolidated balance sheets as of December 31, 2023 and 2022 is $54 million and $19 million, respectively.
| Gain recognized in other comprehensive income (OCI) | Location of gain (loss) reclassified from accumulated OCI into income | Gain (loss) reclassified from accumulated OCI into income | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | effective (ineffective) | 2023 | 2022 | 2021 | |||||||||||||||||||
| Derivatives hedging relationships for cash flow and fair value hedges: | |||||||||||||||||||||||||
| Foreign exchange and precious metals lease contracts | $ | 81 | $ | 52 | $ | 47 | Net sales | $ | 52 | $ | 14 | ||||||||||||||
| Cost of sales | $ | 49 | 32 | 39 | |||||||||||||||||||||
| Other income, net | (3 | ) | (3 | ) | (1 | ) | |||||||||||||||||||
| Total cash flow and fair value hedges | $ | 81 | $ | 52 | $ | 47 | $ | 46 | $ | 81 | $ | 52 |
| Gain recognized in income | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Undesignated derivatives | 2023 | 2022 | 2021 | Location of gain recognized in income | |||||||||
| Foreign exchange contracts | $ | 26 | $ | 46 | $ | 38 | Other income, net | ||||||
| Translated earnings contracts | 161 | 351 | 354 | Translated earnings contract gain, net | |||||||||
| Total undesignated | $ | 187 | $ | 397 | $ | 392 |
Net Investment Hedges
In May 2023, Corning designated the full amount of its 2026 Notes and 2031 Notes with a total notional amount of €850 million, which are non-derivative financial instruments, as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. As of December 31, 2023, the net investment hedges are deemed to be effective. During the year ended December 31, 2023, foreign currency losses associated with these net investment hedges recognized in other comprehensive loss was not material.
Refer to Note 10 (Debt) for additional information.
Leased Precious Metals Contracts
The carrying amount of the leased precious metals pool, which is included within property, plant and equipment, net of accumulated depreciation in the consolidated balance sheets, is $90 million and $278 million, respectively, as of December 31, 2023 and 2022. The carrying amount of the leased precious metals pool includes cumulative fair value loss of $239 million and $95 million as of December 31, 2023 and 2022, respectively. These losses are offset by changes in the fair value of the hedges.
90
Common Stock Dividends
On February 7, 2024, Corning’s Board of Directors declared a $0.28 per share common stock dividend.
Fixed Rate Cumulative Convertible Preferred Stock, Series A
The Company had 2,300 outstanding shares of Fixed Rate Cumulative Convertible Preferred Stock, Series A (the “Preferred Stock”) as of December 31, 2020. On January 16, 2021, the Preferred Stock became convertible into 115 million common shares. On April 5, 2021 Corning and Samsung Display Co., Ltd. (“SDC”) executed the Share Repurchase Agreement (“SRA”), and the Preferred Stock was fully converted as of April 8, 2021. Immediately following the conversion, Corning repurchased and retired 35 million of the common shares held by SDC for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid in April in each of 2023, 2022 and 2021.
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 April 8, 2021. 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. These common shares were included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share.
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, 2023 and 2022, the fair value of the option was $17 million, when measured using Level 2 significant other observable inputs. |
|---|
| • | The remaining 58 million shares of common shares are subject to a seven-year lock-up period expiring in 2027. |
|---|
Share Repurchase Program
In 2019, the Board authorized the repurchase of up to $5.0 billion of additional common stock upon the completion of the 2018 repurchase plan (“2019 Authorization”).
In addition to the common shares repurchased under the SRA as discussed above, the Company repurchased 6.0 million and 7.3 million shares of common stock under its 2019 Authorization for approximately $221 million and $274 million, respectively, during the years ended December 31, 2022 and 2021, respectively. No shares were repurchased under our 2019 Authorization during the year ended December 31, 2023.
As of December 31, 2023, approximately $3.3 billion remains available under the Company’s 2019 Authorization.
91
14. Shareholders’ Equity (Continued)
The following table presents changes in capital stock (in millions):
| Common stock | Treasury stock | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares | Par value | Shares | Cost | |||||||||||||
| Balance as of 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 as of December 31, 2021 | 1,815 | $ | 907 | (970 | ) | $ | (20,263 | ) | ||||||||
| Shares issued to benefit plans and for option exercises | 5 | 3 | ||||||||||||||
| Shares purchased for treasury | (6 | ) | (221 | ) | ||||||||||||
| Other, net (1) | (1 | ) | (48 | ) | ||||||||||||
| Balance as of December 31, 2022 | 1,820 | $ | 910 | (977 | ) | $ | (20,532 | ) | ||||||||
| Shares issued to benefit plans and for option exercises | 11 | 6 | ||||||||||||||
| Other, net (1) | (3 | ) | (105 | ) | ||||||||||||
| Balance as of December 31, 2023 | 1,831 | $ | 916 | (980 | ) | $ | (20,637 | ) |
| (1) | Includes the deemed surrender to the Company of common stock to satisfy employee tax withholding obligations. |
|---|
92
14. Shareholders’ Equity (Continued)
Accumulated Other Comprehensive Loss
The following table presents the changes in the components of accumulated other comprehensive loss, including the proportionate share of equity method investee’s accumulated other comprehensive loss (in millions) (1):
| Foreign currency translation adjustments and other | Unamortized actuarial gains (losses) and prior service (costs) credits | Net unrealized losses on investments | Realized and unrealized gains (losses) on derivatives | Accumulated other comprehensive loss | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as of December 31, 2020 | $ | (329 | ) | $ | (450 | ) | $ | (3 | ) | $ | 42 | $ | (740 | ) | ||||||
| Other comprehensive (loss) income before reclassifications (2) | $ | (582 | ) | $ | 178 | $ | 43 | $ | (361 | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss (5) | (52 | ) | (52 | ) | ||||||||||||||||
| Equity method affiliates (6) | (22 | ) | (22 | ) | ||||||||||||||||
| Net current-period other comprehensive (loss) income | (604 | ) | 178 | — | (9 | ) | (435 | ) | ||||||||||||
| Balance as of December 31, 2021 | $ | (933 | ) | $ | (272 | ) | $ | (3 | ) | $ | 33 | $ | (1,175 | ) | ||||||
| Other comprehensive (loss) income before reclassifications (3) | $ | (762 | ) | $ | 151 | $ | 31 | $ | (580 | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss (5) | 3 | (61 | ) | (58 | ) | |||||||||||||||
| Equity method affiliates (6) | (17 | ) | (17 | ) | ||||||||||||||||
| Net current-period other comprehensive (loss) income | (779 | ) | 154 | — | (30 | ) | (655 | ) | ||||||||||||
| Balance as of December 31, 2022 | $ | (1,712 | ) | $ | (118 | ) | $ | (3 | ) | $ | 3 | $ | (1,830 | ) | ||||||
| Other comprehensive (loss) income before reclassifications (4) | $ | (235 | ) | $ | 1 | $ | 71 | $ | (163 | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss (5) | (25 | ) | (35 | ) | (60 | ) | ||||||||||||||
| Equity method affiliates (6) | 5 | 5 | ||||||||||||||||||
| Net current-period other comprehensive (loss) income | (230 | ) | (24 | ) | — | 36 | (218 | ) | ||||||||||||
| Balance as of December 31, 2023 | $ | (1,942 | ) | $ | (142 | ) | $ | (3 | ) | $ | 39 | $ | (2,048 | ) |
| (1) | All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive loss. |
|---|
| (2) | 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. |
|---|
| (3) | Amounts are net of total tax benefit of $22 million, primarily driven by $29 million and $24 million related to foreign currency translation adjustments and the hedging component, respectively, offset by negative impacts of $31 million related to retirement plans. |
|---|
| (4) | Amounts are net of total tax benefit of $19 million, primarily driven by $12 million and $8 million related to foreign currency translation adjustments and the hedging component, respectively, offset by negative impacts of $1 million related to retirement plans. |
|---|
| (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. |
93
14. Shareholders’ Equity (Continued)
The following table presents reclassifications out of accumulated other comprehensive income (“AOCI”) by component (in millions) (1):
| Amount reclassified from AOCI | Affected line item | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year ended December 31, | in the consolidated | ||||||||||||||
| Details about AOCI Components | 2023 | 2022 | 2021 | statements of income | |||||||||||
| Amortization of net actuarial gains (loss) | $ | 39 | $ | (4 | ) | $ | (3 | ) | (2) | ||||||
| Amortization of prior service (cost) credit | (1 | ) | 3 | (2) | |||||||||||
| 38 | (4 | ) | — | Total before tax | |||||||||||
| (13 | ) | 1 | Tax (provision) benefit | ||||||||||||
| $ | 25 | $ | (3 | ) | $ | — | Net of tax | ||||||||
| Realized gains on designated hedges | $ | 52 | $ | 14 | Sales | ||||||||||
| $ | 49 | 32 | 39 | Cost of sales | |||||||||||
| (3 | ) | (3 | ) | Other expense, net | |||||||||||
| 46 | 81 | 53 | Total before tax | ||||||||||||
| (11 | ) | (20 | ) | (1 | ) | Tax expense | |||||||||
| $ | 35 | $ | 61 | $ | 52 | Net of tax | |||||||||
| Total reclassifications for the period | $ | 60 | $ | 58 | $ | 52 | Net of tax |
| (1) | Amounts in parentheses indicate debits to the consolidated statements of income. |
|---|
| (2) | These accumulated other comprehensive loss components are included in net periodic pension cost. Refer to Note 11 (Employee Retirement Plans) in the notes to the consolidated financial statements for additional details. |
|---|
94
Basic earnings per common share are computed by dividing net 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 following table presents the reconciliation of the amounts used to compute basic and diluted earnings per common share (in millions, except per share amounts):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Net income attributable to Corning Incorporated | $ | 581 | $ | 1,316 | $ | 1,906 | ||||||
| Less: Series A convertible preferred stock dividend | 24 | |||||||||||
| Less: Excess consideration paid for redemption of preferred shares (1) | 803 | |||||||||||
| Net income available to common shareholders - basic | 581 | 1,316 | 1,079 | |||||||||
| Net income available to common shareholders - diluted | $ | 581 | $ | 1,316 | $ | 1,079 | ||||||
| Weighted-average common shares outstanding - basic | 848 | 843 | 828 | |||||||||
| Effect of dilutive securities: | ||||||||||||
| Stock options and other awards | 11 | 14 | 16 | |||||||||
| Weighted-average common shares outstanding - diluted | 859 | 857 | 844 | |||||||||
| Basic earnings per common share | $ | 0.69 | $ | 1.56 | $ | 1.30 | ||||||
| Diluted earnings per common share | $ | 0.68 | $ | 1.54 | $ | 1.28 | ||||||
| Anti-dilutive potential shares excluded from diluted earnings per common share: | ||||||||||||
| Series A convertible preferred stock dividend (1)(2) | 31 | |||||||||||
| Stock options and other awards | 2 | 1 | ||||||||||
| Total | 2 | 1 | 31 |
| (1) | Refer to Note 14 (Shareholders’ Equity) in the notes to the consolidated financial statements for more information. |
|---|---|
| (2) | For the year ended December 31, 2021, the Preferred Stock was anti-dilutive and therefore excluded from the calculation of diluted earnings per share. |
95
The following table presents share-based compensation cost and the unrecognized compensation cost by award type (in millions):
| Amount of share-based compensation cost recognized | Unrecognized compensation cost | Weighted-average remaining term in years | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year ended December 31, | December 31, | |||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||||||
| Time-based restricted stock and restricted stock units | $ | 172 | $ | 111 | $ | 94 | $ | 211 | 2.1 | |||||||||||
| Performance-based restricted stock units | 36 | 52 | 79 | 17 | 1.7 | |||||||||||||||
| Stock Options | 2 | 7 | 9 | |||||||||||||||||
| Other | 8 | 5 | 8 | |||||||||||||||||
| Total share-based compensation cost (1) | $ | 218 | $ | 175 | $ | 190 |
| (1) | The income tax benefit realized from share-based compensation was $17 million, $16 million and $37 million, respectively, for the years ended December 31, 2023, 2022 and 2021. |
|---|
As of December 31, 2023, there were approximately 23 million unissued common shares available for future grants authorized under the Plans.
Incentive Stock Plans
Time-Based Restricted Stock and Restricted Stock Units
The following table summarizes the changes in non-vested time-based restricted stock and restricted stock units during the year ended December 31, 2023:
| Number of shares (in thousands) | Weighted-average grant-date fair value | |||||||
|---|---|---|---|---|---|---|---|---|
| Non-vested shares and share units as of December 31, 2022 | 11,299 | $ | 29.19 | |||||
| Granted | 7,438 | 34.90 | ||||||
| Vested | (4,832 | ) | 24.44 | |||||
| Forfeited | (584 | ) | 34.03 | |||||
| Non-vested shares and share units as of December 31, 2023 | 13,321 | $ | 33.89 |
The total fair value of time-based restricted stock and restricted stock units that vested during the years ended December 31, 2023, 2022 and 2021 was approximately $118 million, $93 million and $88 million, respectively.
96
16. Share-Based Compensation (Continued)
Performance-Based Restricted Stock Units
The following table summarizes the changes in non-vested performance-based restricted stock units during the year ended December 31, 2023:
| Number of shares (in thousands) | Weighted-average grant-date fair value | |||||||
|---|---|---|---|---|---|---|---|---|
| Non-vested share units as of December 31, 2022 | 4,696 | $ | 35.41 | |||||
| Granted | 1,674 | 35.08 | ||||||
| Vested | (3,587 | ) | 33.37 | |||||
| Performance adjustments | (726 | ) | 35.43 | |||||
| Forfeited | (31 | ) | 36.26 | |||||
| Non-vested share units as of December 31, 2023 | 2,026 | $ | 38.89 |
The total fair value of performance-based restricted stock units that vested during the years ended December 31, 2023, 2022 and 2021 was approximately $120 million, $5 million and $3 million, respectively.
Stock Options
The following table summarizes information concerning stock options as of December 31, 2023 and the related activity for the year ended December 31, 2023:
| 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, 2022 | 9,665 | $ | 22.92 | |||||||||||||
| Exercised | (2,114 | ) | 19.78 | |||||||||||||
| Forfeited and expired | (52 | ) | 19.65 | |||||||||||||
| Options outstanding as of December 31, 2023 | 7,499 | 23.82 | 4.95 | 54,327 | ||||||||||||
| Options vested and exercisable as of December 31, 2023 | 7,499 | 23.82 | 4.95 | 54,327 |
The aggregate intrinsic value (market value of stock less option exercise price) in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price as of December 31, 2023, 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 no options granted in 2023, 2022 or 2021. The total fair value of options that vested during the years ended December 31, 2023, 2022 and 2021 was approximately $6 million, $20 million and $16 million, respectively.
Proceeds received from the exercise of stock options were $42 million, with a corresponding realized tax benefit of $4 million, for the year ended December 31, 2023. The total intrinsic value of options exercised for the years ended December 31, 2023, 2022 and 2021 was approximately $29 million, $36 million and $100 million, respectively.
97
The Company has determined that it has five reportable segments for financial reporting purposes, as follows:
| • | Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry; the carrier network group consists primarily of products and solutions for optical-based communications infrastructure for services such as video, data and voice communications, and the enterprise network group consists primarily of optical-based communication networks sold to businesses, governments and individuals for their own use. |
|---|
| • | Display Technologies – manufactures high quality glass substrates for flat panel displays including liquid crystal displays and organic light-emitting diodes that are used primarily in televisions, notebook computers, desktop monitors, tablets and handheld devices. |
|---|
| • | Specialty Materials – manufactures products that provide material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs across a wide variety of commercial and industrial markets, including materials optimized for mobile consumer electronics, semiconductor equipment optics and consumables, aerospace and defense optics, radiation shielding products, sunglasses and telecommunications components. |
|---|
| • | Environmental Technologies – manufactures ceramic substrates and filter products for emissions control systems in mobile applications. |
|---|
| • | Life Sciences – develops, manufactures and supplies laboratory products, including labware, equipment, media, serum and reagents enabling workflow solutions for drug discovery and bioproduction. |
|---|
All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as Hemlock and Emerging Growth Businesses. Net sales for this group are mainly attributable to HSG, an operating segment produces solar and semiconductor products. The emerging growth businesses primarily consist of Pharmaceutical Technologies, Auto Glass Solutions and the Emerging Innovations Group.
Financial results for the reportable segments and Hemlock and Emerging Growth Businesses are prepared on a basis consistent with the internal disaggregation of financial information to assist the chief operating decision maker (“CODM”) in making internal operating decisions. As a significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar, management believes it is important to understand the impact on segment net sales and segment net income of translating these currencies into U.S. dollars. Therefore, the Company utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact on segment sales and segment net income (loss) from the Japanese yen, South Korean won, Chinese yuan, New Taiwan dollar and euro, as applicable to the segment. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment. The constant-currency rates established for our core performance measures are internally derived long-term management estimates, which are closely aligned with our hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt.
The Company believes that the use of constant-currency reporting allows management to understand segment results without the volatility of currency fluctuation, analyze underlying trends in the businesses and establish operational goals and forecasts.
Constant-currency rates are as follows and are applied to all periods presented and to all foreign exchange exposures during the period, even though we may be less than 100% hedged:
| Currency | Japanese yen | Korean won | Chinese yuan | New Taiwan dollar | Euro | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Rate | ¥107 | ₩1,175 | ¥6.7 | NT$31 | €.81 |
98
17. Reportable Segments (Continued)
In addition, certain income and expenses are excluded from segment net income (loss) and included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These items are not used by the CODM in allocating resources or evaluating the results of the segments and include the following: the impact of translating the Japanese yen-denominated debt; the impact of the translated earnings contracts; acquisition-related costs; certain discrete tax items and other tax-related adjustments; restructuring, impairment and other charges and credits; certain litigation, regulatory and other legal matters; pension mark-to-market adjustments; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.
Corning's administrative and staff functions are performed on a centralized basis and such costs and expenses are allocated among the segments differently than they would be for stand-alone financial reporting purposes. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income to consolidated net income. 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)
| Optical Communications | Display Technologies | Specialty Materials | Environmental Technologies | Life Sciences | Hemlock and Emerging Growth Businesses | Total | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the year ended December 31, 2023 | ||||||||||||||||||||||||||||
| Segment net sales | $ | 4,012 | $ | 3,532 | $ | 1,865 | $ | 1,766 | $ | 959 | $ | 1,446 | $ | 13,580 | ||||||||||||||
| Depreciation (1) | $ | 263 | $ | 481 | $ | 149 | $ | 129 | $ | 69 | $ | 144 | $ | 1,235 | ||||||||||||||
| Research, development and engineering expenses (2) | $ | 238 | $ | 102 | $ | 229 | $ | 99 | $ | 33 | $ | 162 | $ | 863 | ||||||||||||||
| Income tax provision (3) | $ | (130 | ) | $ | (220 | ) | $ | (53 | ) | $ | (103 | ) | $ | (13 | ) | $ | (22 | ) | $ | (541 | ) | |||||||
| Segment net income | $ | 478 | $ | 842 | $ | 202 | $ | 386 | $ | 50 | $ | 15 | $ | 1,973 | ||||||||||||||
| Investment in affiliated companies, at equity | $ | 3 | $ | 105 | $ | 11 | $ | 3 | $ | 174 | $ | 296 | ||||||||||||||||
| Segment assets (4) | $ | 3,241 | $ | 7,899 | $ | 2,476 | $ | 1,873 | $ | 782 | $ | 2,307 | $ | 18,578 | ||||||||||||||
| Capital expenditures | $ | 176 | $ | 363 | $ | 175 | $ | 31 | $ | 41 | $ | 303 | $ | 1,089 | ||||||||||||||
| For the year ended December 31, 2022 | ||||||||||||||||||||||||||||
| Segment net sales | $ | 5,023 | $ | 3,306 | $ | 2,002 | $ | 1,584 | $ | 1,228 | $ | 1,662 | $ | 14,805 | ||||||||||||||
| Depreciation (1) | $ | 249 | $ | 547 | $ | 155 | $ | 128 | $ | 60 | $ | 146 | $ | 1,285 | ||||||||||||||
| Research, development and engineering expenses (2) | $ | 230 | $ | 124 | $ | 222 | $ | 98 | $ | 37 | $ | 163 | $ | 874 | ||||||||||||||
| Income tax provision (3) | $ | (180 | ) | $ | (203 | ) | $ | (90 | ) | $ | (78 | ) | $ | (40 | ) | $ | (24 | ) | $ | (615 | ) | |||||||
| Segment net income | $ | 661 | $ | 769 | $ | 340 | $ | 292 | $ | 153 | $ | 39 | $ | 2,254 | ||||||||||||||
| Investment in affiliated companies, at equity | $ | 3 | $ | 102 | $ | 8 | $ | 4 | $ | 144 | $ | 261 | ||||||||||||||||
| Segment assets (4) | $ | 3,295 | $ | 8,104 | $ | 2,419 | $ | 2,061 | $ | 862 | $ | 2,136 | $ | 18,877 | ||||||||||||||
| Capital expenditures | $ | 368 | $ | 495 | $ | 306 | $ | 110 | $ | 116 | $ | 218 | $ | 1,613 | ||||||||||||||
| For the year ended December 31, 2021 | ||||||||||||||||||||||||||||
| Segment net sales | $ | 4,349 | $ | 3,700 | $ | 2,008 | $ | 1,586 | $ | 1,234 | $ | 1,243 | $ | 14,120 | ||||||||||||||
| Depreciation (1) | $ | 224 | $ | 605 | $ | 161 | $ | 139 | $ | 52 | $ | 134 | $ | 1,315 | ||||||||||||||
| Research, development and engineering expenses (2) | $ | 216 | $ | 110 | $ | 208 | $ | 111 | $ | 33 | $ | 160 | $ | 838 | ||||||||||||||
| Income tax (provision) benefit (3) | $ | (152 | ) | $ | (249 | ) | $ | (99 | ) | $ | (72 | ) | $ | (51 | ) | $ | 11 | $ | (612 | ) | ||||||||
| Segment net income (loss) | $ | 553 | $ | 960 | $ | 371 | $ | 269 | $ | 194 | $ | (51 | ) | $ | 2,296 | |||||||||||||
| Investment in affiliated companies, at equity | $ | 3 | $ | 109 | $ | 6 | $ | 4 | $ | 142 | $ | 264 | ||||||||||||||||
| Segment assets (4) | $ | 3,183 | $ | 8,672 | $ | 2,328 | $ | 2,150 | $ | 791 | $ | 2,024 | $ | 19,148 | ||||||||||||||
| Capital expenditures | $ | 301 | $ | 710 | $ | 183 | $ | 228 | $ | 128 | $ | 149 | $ | 1,699 |
| (1) | Depreciation expense for Corning’s reportable segments and Hemlock and Emerging Growth Businesses 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) | Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation, and associated equity companies. |
|---|
99
17. Reportable Segments (Continued)
The following table presents a reconciliation of net sales of reportable segments to consolidated net sales (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Net sales of reportable segments | $ | 12,134 | $ | 13,143 | $ | 12,877 | ||||||
| Net sales of Hemlock and Emerging Growth Businesses | 1,446 | 1,662 | 1,243 | |||||||||
| Impact of constant currency reporting (1) | (992 | ) | (616 | ) | (38 | ) | ||||||
| Consolidated net sales | $ | 12,588 | $ | 14,189 | $ | 14,082 |
| (1) | This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment. |
|---|
The following table presents a reconciliation of net income of reportable segments to consolidated net income (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Net income of reportable segments | $ | 1,958 | $ | 2,215 | $ | 2,347 | ||||||
| Net income (loss) of Hemlock and Emerging Growth Businesses | 15 | 39 | (51 | ) | ||||||||
| Unallocated amounts: | ||||||||||||
| Impact of constant currency reporting | (744 | ) | (480 | ) | (87 | ) | ||||||
| Gain on foreign currency hedges related to translated earnings | 161 | 348 | 354 | |||||||||
| Translation gain on Japanese yen-denominated debt | 100 | 191 | 180 | |||||||||
| Litigation, regulatory and other legal matters | (61 | ) | (100 | ) | (16 | ) | ||||||
| Research, development, and engineering expense (1)(2) | (162 | ) | (163 | ) | (151 | ) | ||||||
| Amortization of intangibles | (122 | ) | (123 | ) | (129 | ) | ||||||
| Interest expense, net | (244 | ) | (237 | ) | (265 | ) | ||||||
| Income tax benefit | 373 | 204 | 120 | |||||||||
| Pension mark-to-market | (15 | ) | (11 | ) | (32 | ) | ||||||
| Severance (charges) credits (2) | (187 | ) | (70 | ) | 13 | |||||||
| Capacity optimization and other charges and credits (3) | (284 | ) | (344 | ) | (123 | ) | ||||||
| Bond redemption loss (4) | (31 | ) | ||||||||||
| Gain on sale of business | 53 | 54 | ||||||||||
| Other corporate items | (207 | ) | (206 | ) | (277 | ) | ||||||
| Net income | $ | 581 | $ | 1,316 | $ | 1,906 |
| (1) | Amount does not include research, development and engineering expense related to restructuring, impairment and other charges and credits and pension mark-to-market. |
|---|
| (2) | Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) in the notes to the consolidated financial statements for additional information. |
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| (3) | Amount includes charges associated with impairment losses, asset write-offs, accelerated depreciation, disposal costs and inventory write-downs. Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) in the notes to the consolidated financial statements for additional information. |
|---|---|
| (4) | Refer to Note 10 (Debt) in the notes to the consolidated financial statements for additional information. |
The following table presents a reconciliation of total assets of reportable segments to consolidated total assets (in millions):
| December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | ||||||||||
| Total assets of reportable segments | $ | 16,271 | $ | 16,741 | $ | 17,124 | ||||||
| Total assets of Hemlock and Emerging Growth Businesses | 2,307 | 2,136 | 2,024 | |||||||||
| Unallocated amounts: | ||||||||||||
| Current assets (1) | 2,522 | 2,823 | 3,163 | |||||||||
| Investments (2) | 119 | 99 | 54 | |||||||||
| Property, plant and equipment, net (3) | 1,038 | 1,385 | 1,426 | |||||||||
| Other non-current assets (4) | 6,243 | 6,315 | 6,363 | |||||||||
| Total assets | $ | 28,500 | $ | 29,499 | $ | 30,154 |
| (1) | Includes cash, other receivables, prepaid expenses and current portion of long-term derivative assets. |
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| (2) | Represents other corporate investments. |
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| (3) | Represents corporate property not specifically identifiable to an operating segment. |
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| (4) | Includes goodwill, other intangible assets, pension assets, long-term derivative assets, operating leases and deferred income taxes. |
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100
17. Reportable Segments (Continued)
The following table presents selected financial information about the Company’s product lines and reportable segments (in millions):
| Year ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue from external customers | 2023 | 2022 | 2021 | |||||||||
| Optical Communications | ||||||||||||
| Carrier network | $ | 2,871 | $ | 3,760 | $ | 3,200 | ||||||
| Enterprise network | 1,141 | 1,263 | 1,149 | |||||||||
| Total Optical Communications | 4,012 | 5,023 | 4,349 | |||||||||
| Display Technologies | 3,532 | 3,306 | 3,700 | |||||||||
| Specialty Materials | ||||||||||||
| Corning® Gorilla® Glass | 1,136 | 1,331 | 1,403 | |||||||||
| Advanced optics and other specialty glass | 729 | 671 | 605 | |||||||||
| Total Specialty Materials | 1,865 | 2,002 | 2,008 | |||||||||
| Environmental Technologies | ||||||||||||
| Automotive and other | 1,123 | 934 | 936 | |||||||||
| Diesel | 643 | 650 | 650 | |||||||||
| Total Environmental Technologies | 1,766 | 1,584 | 1,586 | |||||||||
| Life Sciences | ||||||||||||
| Labware | 487 | 657 | 671 | |||||||||
| Cell culture products | 472 | 571 | 563 | |||||||||
| Total Life Science | 959 | 1,228 | 1,234 | |||||||||
| Hemlock and Emerging Growth Businesses | ||||||||||||
| Polycrystalline Silicon | 1,014 | 1,191 | 892 | |||||||||
| Other | 432 | 471 | 351 | |||||||||
| Total Hemlock and Emerging Growth Businesses | 1,446 | 1,662 | 1,243 | |||||||||
| Net sales of reportable segments | 12,134 | 13,143 | 12,877 | |||||||||
| Net sales of Hemlock and Emerging Growth Businesses | 1,446 | 1,662 | 1,243 | |||||||||
| Impact of constant currency reporting (1) | (992 | ) | (616 | ) | (38 | ) | ||||||
| Consolidated net sales | $ | 12,588 | $ | 14,189 | $ | 14,082 |
| (1) | This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment. |
|---|
101
17. Reportable Segments (Continued)
The following table presents information relating to the Company’s operations by geographic area (in millions):
| 2023 | 2022 | 2021 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales (1) | Long-lived assets (2) | Net sales (1) | Long-lived assets (2) | Net sales (1) | Long-lived assets (2) | |||||||||||||||||||
| North America: | ||||||||||||||||||||||||
| United States | $ | 4,439 | $ | 8,698 | $ | 5,149 | $ | 8,937 | $ | 4,539 | $ | 8,600 | ||||||||||||
| Canada | 317 | 95 | 503 | 99 | 472 | 114 | ||||||||||||||||||
| Mexico | 84 | 211 | 96 | 180 | 93 | 289 | ||||||||||||||||||
| Total North America | 4,840 | 9,004 | 5,748 | 9,216 | 5,104 | 9,003 | ||||||||||||||||||
| Asia Pacific: | ||||||||||||||||||||||||
| Japan | 667 | 388 | 617 | 429 | 780 | 496 | ||||||||||||||||||
| Taiwan | 855 | 1,515 | 813 | 1,696 | 983 | 1,923 | ||||||||||||||||||
| China | 4,439 | 4,575 | 4,435 | 4,794 | 4,495 | 4,966 | ||||||||||||||||||
| Korea | 418 | 3,092 | 514 | 3,294 | 640 | 3,479 | ||||||||||||||||||
| Other | 620 | 88 | 729 | 81 | 459 | 84 | ||||||||||||||||||
| Total Asia Pacific | 6,999 | 9,658 | 7,108 | 10,294 | 7,357 | 10,948 | ||||||||||||||||||
| Europe: | ||||||||||||||||||||||||
| Germany | 535 | 464 | 539 | 459 | 462 | 500 | ||||||||||||||||||
| Other | 998 | 956 | 1,116 | 937 | 925 | 910 | ||||||||||||||||||
| Total Europe | 1,533 | 1,420 | 1,655 | 1,396 | 1,387 | 1,410 | ||||||||||||||||||
| All Other | 208 | 53 | 294 | 67 | 272 | 68 | ||||||||||||||||||
| Total | $ | 13,580 | $ | 20,135 | $ | 14,805 | $ | 20,973 | $ | 14,120 | $ | 21,429 |
| (1) | Net sales are attributed to countries based on location of customer. |
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| (2) | Long-lived assets primarily include investments, plant and equipment, goodwill and other intangible assets. |
|---|