Corning GLW Form 10-Q filing Q3 FY2024

OVERVIEW

Corning is vital to progress. We are the world leaders in glass science, ceramic science and optical physics – along with four proprietary manufacturing and engineering platforms – and we apply our capabilities to invent and make category-defining, highly engineered products; drive profitable and durable growth; and create long-term value. Today, our markets include optical communications, mobile consumer electronics, display, automotive, solar, semiconductor and life sciences.

Progress on our three-year Springboard plan

Springboard is our plan to add more than $3 billion in annualized core sales and to achieve a core operating margin of 20% by the end of 2026. We expect a number of upward cyclical factors and secular trends to drive growth across our Market-Access Platforms. As we capture this growth, we expect to deliver powerful incremental profit and cash flow; we already have the required production capacity and technical capabilities in place, and the cost and capital are already reflected in our financials. With the success of the plan, we also expect to be able to accelerate the return of cash to shareholders.

In the third quarter of 2024, we continued making strong progress on Springboard - most notably in Display Technologies and Optical Communications.

• In Display Technologies, our Springboard plan is centered on maintaining stable U.S. dollar net income. To achieve this, we are raising glass prices. We expect that our price actions, in combination with the hedges we have in place through 2026, will deliver consistent profitability in the segment. In the segment, we expect to deliver segment net income of $900 to $950 million next year – and to deliver segment net income margin of 25%, consistent with the last five years. We expect our price increases to offset the weaker yen in our hedges, and enable us to maintain the same profitability. Most importantly, we will continue to be the low-cost technology and market leader in Display.
• In Optical Communications, our Springboard plan is about revenue growth. When we introduced new Generative AI products in June of 2024, we said we expected to grow our Enterprise business at a 25% CAGR over the next four years, and strong demand for these products drove record Enterprise sales in the second and third quarter of 2024.

2024 Corporate Outlook

We expect core net sales of approximately $3.75 billion for the fourth quarter of 2024.

RESULTS OF OPERATIONS

The following table presents selected highlights from our operations (in millions):

• Not meaningful

Net sales

For the three months ended September 30, 2024, net sales increased $218 million, or 7% when compared to the same period in 2023. This was primarily driven by an increase in telecommunication product sales of $328 million, partially offset by decreases in environmental substrate and filter products of $58 million and polycrystalline silicon product sales of $36 million.

For the nine months ended September 30, 2024, net sales increased $23 million when compared to the same period in 2023. This was primarily driven by increases in telecommunication product sales of $180 million and specialty glass product sales of $106 million, offset by decreases in polycrystalline silicon product sales of $156 million and environmental substrate and filter products of $67 million.

Cost of sales / Gross margin

The types of expenses included in cost of sales are: raw materials consumption, including direct and indirect materials; salaries, wages and benefits; depreciation and amortization; production utilities; production-related purchasing; warehousing (including receiving and inspection); repairs and maintenance; inter-location inventory transfer costs; production and warehousing facility property insurance; rent for production facilities; freight and logistics costs; and other production overhead.

For the three months ended September 30, 2024, gross margin increased $133 million, or 13%, and increased as a percentage of sales by 2 percentage points when compared to the same period in 2023. This is primarily driven by the increase in net sales, as discussed above.

For the nine months ended September 30, 2024, gross margin increased $59 million, or 2%, and slightly increased as a percentage of sales when compared to the same period in 2023.

Selling, general and administrative expenses

The types of expenses included in the selling, general and administrative expenses line item are salaries, wages and benefits; share-based compensation expense; travel; sales commissions; professional fees; and depreciation and amortization, utilities and rent for administrative facilities.

For the three months ended September 30, 2024, selling, general and administrative expenses increased $42 million, or 9%, and remained consistent as a percentage of sales when compared to the same period in 2023. For the nine months ended September 30, 2024, selling, general and administrative expense increased $103 million, or 8%, and slightly increased as a percentage of sales in the current period as compared to the same period in 2023.

Research, development and engineering expenses

For the three and nine months ended September 30, 2024, research, development and engineering expenses increased 9% and 3%, respectively, and remained consistent as a percentage of sales when compared to the same periods in 2023.

Translated earnings contract (loss) gain, net

Included in translated earnings contract (loss) gain, net, is the impact of foreign currency contracts which economically hedge the translation exposure arising from movements in the Japanese yen, South Korean won, new Taiwan dollar, euro, Chinese yuan and Mexican peso and its impact on net (loss) income.

The following table provides detailed information on the impact of translated earnings contract (loss) gain, net (in millions):

(Loss) income before income taxes

For the three and nine months ended September 30, 2024, income before income taxes decreased $309 million and $478 million, respectively, when compared to the same periods in 2023, primarily driven by losses on our translated earnings contracts, as discussed above, and the recognition of $62 million in non-cash foreign currency translation losses in the third quarter of 2024 related to the substantial liquidation of an optical communications manufacturing plant as discussed in Note 2 (Restructuring, Impairment and Other Charges and Credits) in the accompanying notes to the consolidated financial statements.

Provision for Income Taxes

For the three months ended September 30, 2024, the effective tax rate differed from the United States (“U.S.”) statutory rate of 21%, primarily due to certain pre-tax losses with no corresponding expected tax benefit, changes in estimates based on the final 2023 U.S. Federal Income Tax Return, and the impact of foreign exchange losses. For the nine months ended September 30, 2024, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to certain pre-tax losses with no corresponding expected tax benefit.

For the three months ended September 30, 2023, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings partially offset by changes in estimates based on the final 2022 U.S. Federal Income Tax Return. For the nine months ended September 30, 2023, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings, changes in estimates based on the final 2022 U.S. Federal Income Tax Return and adjustments related to share-based compensation, partially offset by changes in valuation allowance assessments.

For the three and nine months ended September 30, 2024, the effective tax rate differed when compared to the same period in 2023 primarily due to changes in certain pre-tax losses with no corresponding expected tax benefit and the impact of foreign exchange losses.

Net (loss) income attributable to Corning Incorporated

As a result of the items discussed above, net (loss) income attributable to Corning Incorporated and per share data were as follows (in millions, except per share amounts):

Comprehensive income (loss) attributable to Corning Incorporated

Comprehensive income attributable to Corning Incorporated for the three months ended September 30, 2024 was $467 million compared to comprehensive loss attributable to Corning Incorporated of $39 million for the three months ended September 30, 2023. This movement is driven by the increase in net gains on foreign currency translation adjustments of $816 million, primarily driven by gains in the Japanese yen, Korean won, Chinese yuan and euro, partially offset by a $277 million decrease in net income.

Comprehensive income attributable to Corning Incorporated for the nine months ended September 30, 2024 was $236 million compared to $49 million for the nine months ended September 30, 2023. This movement is driven by the increase in net gains on foreign currency translation adjustments of $666 million, primarily driven by gains in the Japanese yen, Korean won Chinese yuan and euro, partially offset by a $424 million decrease in net income.

SEGMENT ANALYSIS

Financial results for the reportable segments and Hemlock and Emerging Growth Businesses are prepared on a basis consistent with the internal disaggregation of financial information to assist the chief operating decision maker (“CODM”) in making internal operating decisions, which is more fully discussed within Note 15 (Reportable Segments) in the accompanying notes to the consolidated financial statements and includes a reconciliation of our segment information to the corresponding amounts in our consolidated statements of (loss) income.

Segment net income may not be consistent with measures used by other companies.

The following table presents segment net sales by reportable segment and Hemlock and Emerging Growth Businesses (in millions):

(1) Refer to Note 15 (Reportable Segments) in the accompanying notes to the consolidated financial statements for the reconciliation to consolidated net sales.

Optical Communications

The increase in segment net sales for the three- and nine-month periods was primarily driven by continued strong adoption of AI-related connectivity solutions in our Enterprise business. Our Carrier business had an increase in volume in the third quarter of 2024 compared to the same period in prior year as demand begins to recover.

Display Technologies

The increase in segment net sales for both the three- and nine-month periods was due to higher sales volume, attributable to increased panel maker utilization, as well as pricing actions taken in the second half of 2023 and currency-based price adjustments implemented in the third quarter of 2024.

Specialty Materials

Segment net sales for the three-month period slightly decreased as compared to the same period in 2023. The increase in segment net sales for the nine-month period was due to continued strong demand for premium glass for mobile devices as well as semiconductor-related products.

Environmental Technologies

The decrease in segment net sales for both the three- and nine-month periods was primarily due to a decline in heavy-duty diesel, reflecting the continued impact of the Class 8 truck downcycle in North America.

Life Sciences

The increase in segment net sales for both the three- and nine-month periods was primarily due to increased demand as customers are completing their inventory drawdowns.

Hemlock and Emerging Growth Businesses

The decrease in segment net sales for the three-month period was primarily due to a decrease in our HSG business driven by lower pricing for solar-grade polysilicon, partially offset by an increase in our Automotive Glass Solutions business. The decrease in segment net sales for the nine-month period was primarily due to a decrease in our HSG business driven by lower pricing for solar-grade polysilicon and lower sales in our Pharmaceutical Technologies business due to the completion of volume commitments for COVID-related products.

The following table presents segment net income by reportable segment and Hemlock and Emerging Growth Businesses (in millions):

• Not meaningful

(1) Refer to Note 15 (Reportable Segments) in the accompanying notes to the consolidated financial statements for the reconciliation to net (loss) income attributable to Corning Incorporated.

Optical Communications

The increase in segment net income for both the three- and nine-month periods was primarily driven by strong incremental profit on higher sales volume, as outlined above.

Display Technologies

The increase in segment net income for both the three- and nine-month periods was primarily driven by the increase in sales, as outlined above.

Specialty Materials

Segment net income for the three-month period was flat with the prior year. The increase in segment net income for the nine-month period was primarily driven by the increase in sales, as outlined above, and manufacturing improvements.

Environmental Technologies

The decrease in segment net income for both the three- and nine-month periods was primarily driven by the decrease in sales, as outlined above.

Life Sciences

The increase in segment net income for both the three- and nine-month periods was primarily driven by profitability improvements from productivity actions taken.

Hemlock and Emerging Growth Businesses

The decrease in segment net income for both the three- and nine-month periods was primarily driven by our HSG and Pharmaceutical Technologies businesses due to lower sales, as outlined above.

CORE PERFORMANCE MEASURES

In managing the Company and assessing our financial performance, we adjust certain measures included in our consolidated financial statements to exclude specific items to arrive at our core performance measures. These items include the impact of translating the Japanese yen-denominated debt, the impact of the translated earnings contracts, acquisition-related costs, certain discrete tax items and other tax-related adjustments, restructuring, impairment and other charges and credits, certain litigation, regulatory and other legal matters, pension mark-to-market adjustments and other items which do not reflect the ongoing operating results of the Company.

In addition, because a significant portion of our revenues and expenses are denominated in currencies other than the U.S. dollar, management believes it is important to understand the impact on sales and net income of translating these currencies into U.S. dollars. Therefore, management utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact from the Japanese yen, South Korean won, Chinese yuan, New Taiwan dollar and euro, as applicable to the segment. In addition, effective January 1, 2024, the Company began utilizing constant-currency reporting for the Optical Communications segment to exclude the impact from the Mexican peso on segment results. Prior periods were not recast as the impact was not material. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment.

The constant-currency rates established for our core performance measures are internally derived long-term management estimates, which are closely aligned with our hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt. For details of the rates used, please see the footnotes to the “Reconciliation of Non-GAAP Measures” section. We believe that the use of constant-currency reporting allows management to understand our results without the volatility of currency fluctuations, analyze underlying trends in the businesses and establish operational goals and forecasts.

Core performance measures are not prepared in accordance with GAAP. We provide investors with these non-GAAP measures to evaluate our results as we believe they are indicative of our core operating performance and provide greater transparency to how management evaluates our results and trends and makes financial and operational decisions. These measures are not, and should not be viewed as a substitute for, GAAP reporting measures. With respect to the outlook for future periods, it is not possible to provide reconciliations for these non-GAAP measures because management does not forecast the movement of foreign currencies against the U.S. dollar, or other items that do not reflect ongoing operations, nor does it forecast items that have not yet occurred or are out of management’s control. As a result, management is unable to provide outlook information on a GAAP basis.

For a reconciliation of non-GAAP performance measures to their most directly comparable GAAP financial measure, please see “Reconciliation of Non-GAAP Measures.”

Results of Operations – Core Performance Measures

The following table presents selected highlights from our operations, excluding certain items (in millions, except per share amounts):

Core Net Sales

For the three months ended September 30, 2024, we generated core net sales of $3.7 billion compared to $3.5 billion for the same period in 2023. The increase in core net sales of $274 million was primarily driven by increased segment sales of $328 million in Optical Communications and $43 million in Display Technologies, partially offset by decreased segment sales of $67 million in Environmental Technologies and $29 million in Hemlock and Emerging Growth Businesses. Net sales by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.

For the nine months ended September 30, 2024, we generated core net sales of $10.6 billion compared to $10.3 billion for the same period in 2023. The increase in core net sales of $287 million was primarily driven by increased segment sales of $238 million in Display Technologies, $180 million in Optical Communications and $111 million in Specialty Materials, partially offset by decreased segment sales of $185 million in Hemlock and Emerging Growth Businesses and $69 million in Environmental Technologies. Net sales by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.

Core Net Income

For the three months ended September 30, 2024, we generated core net income of $465 million compared to $386 million for the same period in 2023. The increase of $79 million was primarily due to higher segment net income of $84 million in Optical Communications and $43 million in Display Technologies, partially offset by lower segment net income of $24 million in Environmental Technologies. Net income by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.

For the nine months ended September 30, 2024, we generated core net income of $1.2 billion compared to $1.1 billion for the same period in 2023. The increase of $78 million was primarily due to higher segment net income of $134 million in Display Technologies, $35 million in Specialty Materials and $28 million in Optical Communications, offset by lower segment net income of $79 million in Hemlock and Emerging Growth Businesses. Net income by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.

Core Earnings per Share

Core earnings per share increased for the three months ended September 30, 2024 to $0.54 per share, primarily as a result of the changes in core net income, outlined above.

Core earnings per share increased for the nine months ended September 30, 2024 to $1.38 per share, primarily as a result of the changes in core net income, outlined above.

The following table sets forth the computation of core earnings per share (in millions, except per share amounts):

Reconciliation of Non-GAAP Measures

We utilize certain financial measures and key performance indicators that are not calculated in accordance with GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the consolidated statements of (loss) income or statements of cash flows, or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure as calculated and presented in accordance with GAAP in the consolidated statements of (loss) income or statements of cash flows.

Core net sales, core net income and core earnings per share are non-GAAP financial measures utilized by our management to analyze financial performance without the impact of items that are driven by general economic conditions and events that do not reflect the underlying fundamentals and trends in our operations.

The following tables reconcile our non-GAAP financial measures to their most directly comparable GAAP financial measure (amounts in millions, except percentages and per share amounts):

(a) Based upon statutory tax rates in the specific jurisdiction for each event.

(b) The calculation of the effective tax rate for GAAP and Core excludes net income attributable to non-controlling interest of approximately $22 million and $23 million, respectively.

Three months ended September 30, 2023

(a) Based upon statutory tax rates in the specific jurisdiction for each event.

(b) The calculation of the effective tax rate for GAAP and Core excludes net income attributable to non-controlling interest of approximately $18 million and $19 million, respectively.

See “Items Adjusted from GAAP Measures” for the descriptions of the footnoted reconciling items.

Nine months ended September 30, 2024

(a) Based upon statutory tax rates in the specific jurisdiction for each event.

(b) The calculation of the effective tax rate for GAAP and Core excludes net income attributable to non-controlling interest of approximately $56 million and $61 million, respectively.

Nine months ended September 30, 2023

(a) Based upon statutory tax rates in the specific jurisdiction for each event.

(b) The calculation of the effective tax rate for GAAP and Core excludes net income attributable to non-controlling interest of approximately $55 million and $63 million, respectively.

See “Items Adjusted from GAAP Measures” for the descriptions of the footnoted reconciling items.

Items Adjusted from GAAP Measures

Items adjusted from GAAP measures to arrive at core performance measures are as follows:

LIQUIDITY AND CAPITAL RESOURCES

Our financial condition and liquidity are strong. We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in a material decrease in our liquidity. In addition, other than items discussed, there are no known material trends, favorable or unfavorable, in our capital resources and no expected material changes in the mix of such resources.

Our major sources of funding for 2024 and beyond will be our operating cash flow, our existing balances of cash and cash equivalents and proceeds from any issuances of debt. We believe we have sufficient liquidity to fund operations and meet our obligations for the foreseeable future. Such obligations may include requirements for acquisitions, capital expenditures, debt repayments, dividend payments and share repurchases. We will continue to generate cash from operations and maintain access to our revolving credit facilities and commercial paper programs as discussed in more detail below.

Key Balance Sheet Data

We fund our working capital with cash from operations and, periodically, short-term and long-term borrowings. In addition, from time to time, we receive upfront cash from customers relating to long-term supply agreements, as well as cash incentives from government entities generally for capital expansion and related expenses.

The following table presents balance sheet and working capital measures (in millions):

(1) Includes trade payables only.

We perform comprehensive reviews of our significant customers and their creditworthiness by analyzing their financial strength at least annually or more frequently for customers where we have identified a measure of increased risk. We closely monitor payments and developments to identify potential customer credit issues. We are not aware of any customer credit issues that could have a material impact on our liquidity.

We participate in accounts receivable management programs, including factoring arrangements to sell certain accounts receivable to third-party financial institutions or accelerate collections through our customer’s supply chain financing arrangements. Sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows. By utilizing these types of programs, we have accelerated the collection of $380 million, $389 million and $267 million of accounts receivable during the three months ended March 31, 2024, June 30, 2024 and September 30, 2024, respectively. We believe these accounts receivable would have been collected during the normal course of business in the following quarter.

Cash Flows

The following table presents a summary of cash flow data (in millions):

Net cash provided by operating activities for the nine months ended September 30, 2024 slightly improved by $24 million when compared to the same period in the prior year.

Net cash used in investing activities for the nine months ended September 30, 2024 improved by $233 million when compared to the same period last year, primarily driven by lower capital expenditures of $400 million, partially offset by $67 million in proceeds from the sale of equipment in the prior period and $31 million less realized gains on our translated earnings contracts.

Net cash used in financing activities for the nine months ended September 30, 2024 increased by $424 million when compared to the same period last year, primarily driven by the $918 million in proceeds from the issuance of euro-denominated notes in 2023, partially offset by $507 million in payments for the redemption of preferred stock in 2023 and $135 million in purchases of common stock in 2024 compared to no repurchases in 2023.

Sources of Liquidity

As of September 30, 2024, our cash and cash equivalents and available credit capacity included (in millions):

Cash and Cash Equivalents

As of September 30, 2024, we had $1.6 billion of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world and are generally unrestricted. We utilize a variety of strategies to ensure that our worldwide cash is available in the locations in which it is needed. As of September 30, 2024, approximately 51% of the consolidated cash and cash equivalents were held outside the U.S.

As of December 31, 2023, Corning had approximately $1.4 billion of indefinitely reinvested foreign earnings. If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes. We do not foresee a need to repatriate any earnings for which we asserted permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not permanently reinvested.

Debt Facilities and Other Sources of Liquidity

We have a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes up to a maximum aggregate principal amount outstanding at any one time of $1.5 billion. Under this program, we may issue commercial paper from time to time and will use the proceeds for general corporate purposes. As of September 30, 2024, we did not have outstanding commercial paper.

Our $1.5 billion Revolving Credit Agreement is available to support obligations under the commercial paper program and for general corporate purposes, if needed. As of September 30, 2024, there were no amounts outstanding under this facility.

Our Revolving Credit Agreement includes affirmative and negative covenants with which we must comply, including a leverage (debt to capital ratio) financial covenant. The required leverage ratio is a maximum of 60%. As of September 30, 2024, our leverage using this measure was approximately 39%. As of September 30, 2024, we were in compliance.

Our debt instruments contain customary event of default provisions, which allow the lenders the option of accelerating all obligations upon the occurrence of certain events. In addition, some of our debt instruments contain a cross default provision, whereby an uncured default exceeding a specified amount on one debt obligation, also would be considered a default under the terms of another debt instrument. As of September 30, 2024, we were in compliance with all such provisions.

We have access to certain Chinese yuan-denominated unsecured variable rate loan facilities, whose proceeds are used for capital investment and general corporate purposes. As of September 30, 2024, borrowings totaled $340 million and these facilities had variable interest rates ranging from 2.8% to 3.9% and maturities ranging from 2025 to 2032. As of September 30, 2024, Corning had 229 million Chinese yuan of unused capacity, equivalent to approximately $33 million.

As a well-known seasoned issuer, we filed an automatic shelf registration with the SEC on December 1, 2023. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred stock, depositary shares and warrants.

On May 15, 2023, the Company issued €300 million 3.875% Notes due 2026 (“2026 Notes”) and €550 million 4.125% Notes due 2031 (“2031 Notes”). The proceeds from the 2026 Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of issuance. The net proceeds received were approximately $918 million and will be used for general corporate purposes. As of September 30, 2024, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $943 million.

Uses of Cash

Share Repurchase Agreement

Pursuant to the Share Repurchase Agreement (“SRA”) with Samsung Display Co., Ltd. (“SDC”), 22 million of the common shares SDC holds can be offered to be sold to Corning in specified tranches from time to time in calendar years 2024 through 2027. Corning may, at its sole discretion, elect to repurchase such common shares. If Corning elects not to repurchase the common shares and SDC sells the common shares on the open market, Corning will be required to pay SDC a make-whole payment, subject to a 5% cap of the repurchase proceeds that otherwise would have been paid by Corning. As of September 30, 2024 and December 31, 2023, the fair value of the liability associated with this option, measured using Level 2 inputs, was not material.

Refer to Note 14 (Shareholders’ Equity) in the notes to the consolidated financial statements within the 2023 Form 10-K for additional information.

Share Repurchases

In 2019, the Board authorized the repurchase of up to $5.0 billion of common stock (“2019 Authorization”). As of September 30, 2024, approximately $3.2 billion remains available under our 2019 Authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

During the three and nine months ended September 30, 2024, the Company repurchased 0.8 million shares and 3.8 million shares, respectively, for approximately $30 million and $135.4 million, respectively. No shares were repurchased under our 2019 Authorization during the three and nine months ended September 30, 2023.

Common Stock Dividends

On October 2, 2024, Corning’s Board of Directors declared a quarterly dividend of $0.28 per share of common stock. The dividend will be payable on December 13, 2024. The Board’s decision to declare and pay future dividends will depend on our income and liquidity position, among other factors. We expect to declare quarterly dividends and fund payments with cash from operations.

Capital Expenditures

Capital expenditures were $0.7 billion for the nine months ended September 30, 2024. We expect our 2024 full year capital expenditures to be lower than 2023.

Current Maturities of Short and Long-Term Debt

As of September 30, 2024, we had $335 million of long-term debt that is due in less than one year.

Refer to Note 10 (Debt) in the notes to the consolidated financial statements within the 2023 Form 10-K for additional information, including a summary of our debt maturities by year.

Defined Benefit Pension Plans

Our global pension plans, including our unfunded and non-qualified plans, were 81% funded as of December 31, 2023. Our largest single pension plan is our U.S. qualified plan, which accounted for 77% of our consolidated defined benefit pension plans’ projected benefit obligation, was 92% funded as of December 31, 2023. The funded status of our pension plans is dependent upon multiple factors including actuarial assumptions, interest rates at year-end, prior investment returns and contributions made to the plans.

During 2024, the Company anticipates making cash contributions of $11 million to its international pension plans.

Commitments, Contingencies and Guarantees

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

The Facility Lease will commence upon completion of construction of the Facility, which is expected to be in the later part of 2025, and has a lease term of five years with options to renew the lease or purchase the facility. The Facility Lease is expected to be classified as a finance lease and the amount of right-of-use asset and lease liability will be determined and recorded upon lease commencement. The estimated undiscounted lease payments, inclusive of a residual value guarantee, are approximately $1.1 billion, of which $24 million, $92 million, $88 million and $85 million is to be paid in 2025, 2026, 2027 and 2028, respectively, and $767 million is to be paid thereafter.

In conjunction with the Facility Lease, Corning entered into an equipment lease (“Equipment Lease”) on June 17, 2024, with an estimated purchase and installation cost of $365 million, for the equipment to be installed and operated within the Facility. The Company is the procurement and installation agent on behalf of the lessor.

The Equipment Lease will commence upon completion of the equipment installation, which is expected to be in the later part of 2025, and has a lease term of five years with obligations to purchase the equipment at lease maturity. The Equipment Lease is expected to be classified as a finance lease and the amount of right-of-use asset and lease liability will be determined and recorded upon lease commencement. The estimated undiscounted lease payments are approximately $434 million, of which $24 million, $95 million, $90 million and $85 million is to be paid in 2025, 2026, 2027 and 2028, respectively, and $140 million is to be paid thereafter.

The transaction agreements for both the Facility Lease and Equipment Lease contain covenants that are consistent with our Revolving Credit Agreement as disclosed in the 2023 Form 10-K.

Other than the above matters, there were no material changes outside the ordinary course of business in the obligations disclosed in the 2023 Form 10-K under the caption “Commitments, Contingencies and Guarantees.”

Off Balance Sheet Arrangements

There were no material changes outside the ordinary course of business in off balance sheet arrangements as disclosed in the 2023 Form 10-K under the caption “Off Balance Sheet Arrangements.”

ENVIRONMENT

Refer to Item 1. Legal Proceedings or Note 11 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements for information.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. This requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The estimates that are considered by management to be the most critical to the understanding of the consolidated financial statements as they require significant judgments that could materially impact our results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Since the date of the Company’s most recent Annual Report, there were no material changes in the Company’s critical accounting estimates or assumptions.

Disclosure Controls and Procedures

Under the supervision of and with the participation of Corning’s management, including the chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of September 30, 2024, the end of the period covered by this report. Based on that evaluation, we have concluded that the Company’s disclosure controls and procedures were effective as of that date. Corning’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by Corning in the reports that it files or submits under the Exchange Act is accumulated and communicated to Corning’s management, including Corning’s principal executive and principal financial officers, or other persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

An evaluation of internal controls over financial reporting was performed to determine whether any changes have occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting. The chief executive officer and chief financial officer concluded that there was no change in Corning’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II

Item 1. Legal Proceedings

Corning is a defendant in various lawsuits and is subject to various claims that arise in the normal course of business, the most significant of which are summarized in Note 11 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations, is remote.

Item 1A. Risk Factors

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in Corning’s 2023 Form 10-K, which could materially impact the Company’s business, financial condition or future results. Risks disclosed in the 2023 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact Corning’s business, financial condition or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

This table provides information about purchases of common stock during the third quarter of 2024:

Issuer Purchases of Equity Securities

(1) This column reflects: (i) 388,906 shares of common stock related to the vesting of employee restricted stock units; (iii) 45,702 shares of common stock related to the vesting of employee restricted stock; (ii) 6,387 shares of common stock related to the vesting of employee performance stock units; (iv) 207 shares of common stock related to the exercise of employee stock options and payment of the exercise price; and (v) the purchase of 755,911 shares of common stock under the 2019 Repurchase Program.

(2) Represents the stock price at the time of surrender.

Item 5. Other Information

During the three months ended September 30, 2024, none of our Section 16 reporting persons adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement.

Item 6. Exhibits

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