Corning(GLW) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Corning Incorporated's unaudited consolidated financial statements for the periods ended June 30, 2024, and 2023, including statements of income, comprehensive (loss) income, balance sheets, cash flows, and changes in shareholders' equity, along with detailed notes on significant accounting policies, revenue, income taxes, debt, and segment information Consolidated Statements of Income Consolidated Statements of Income (Unaudited; in millions, except per share amounts) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $3,251 | $3,243 | $6,226 | $6,421 | | Cost of sales | $2,302 | $2,230 | $4,284 | $4,405 | | Gross margin | $949 | $1,013 | $1,942 | $2,016 | | Operating income | $186 | $279 | $440 | $576 | | Income before income taxes | $172 | $409 | $468 | $637 | | Net income attributable to Corning Incorporated | $104 | $281 | $313 | $457 | | Basic EPS | $0.12 | $0.33 | $0.37 | $0.54 | | Diluted EPS | $0.12 | $0.33 | $0.36 | $0.53 | Consolidated Statements of Comprehensive (Loss) Income Consolidated Statements of Comprehensive (Loss) Income (Unaudited; in millions) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $122 | $303 | $347 | $494 | | Foreign currency translation adjustments and other | $(222) | $(318) | $(552) | $(402) | | Other comprehensive loss, net of tax | $(217) | $(302) | $(544) | $(369) | | Comprehensive (loss) income attributable to Corning Incorporated | $(113) | $(21) | $(231) | $88 | Consolidated Balance Sheets Consolidated Balance Sheets (Unaudited; in millions) | Metric | June 30, 2024 | December 31, 2023 | | :----------------------------------- | :------------ | :---------------- | | Total Assets | $27,179 | $28,500 | | Total Liabilities | $16,252 | $16,632 | | Total Corning Incorporated shareholders' equity | $10,585 | $11,551 | | Total Equity | $10,927 | $11,868 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Unaudited; in millions) | Metric | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $617 | $570 | | Net cash used in investing activities | $(338) | $(515) | | Net cash used in financing activities | $(612) | $(164) | | Net decrease in cash and cash equivalents | $(360) | $(133) | | Cash and cash equivalents at end of period | $1,419 | $1,538 | Consolidated Statements of Changes in Shareholders' Equity - Corning's total equity decreased from $11,868 million as of December 31, 2023, to $10,927 million as of June 30, 2024, primarily due to other comprehensive loss and common dividends paid, partially offset by net income and shares issued to benefit plans[19] Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies - The consolidated financial statements are unaudited and prepared in conformity with GAAP, including normal recurring adjustments. Management makes estimates and assumptions that affect reported amounts, and results for interim periods are not necessarily indicative of full-year results[23][24] - Non-controlling interest represents amounts attributable to minority shareholders of Hemlock Semiconductor Group (HSG) and other less-than-wholly-owned consolidated subsidiaries[25] Note 2. Restructuring, Impairment and Other Charges and Credits - For the three and six months ended June 30, 2024, Corning recorded $138 million and $129 million, respectively, in restructuring, impairment, and other charges, primarily from asset write-offs related to a display manufacturing plant closure[26] - No material restructuring, impairment, and other charges were recorded for the three and six months ended June 30, 2023[27] Note 3. Revenue Revenue by Product Category (in millions) | Product Category | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Telecommunication products | $1,113 | $1,066 | $2,043 | $2,191 | | Display products | $704 | $725 | $1,336 | $1,334 | | Specialty glass products | $497 | $420 | $947 | $824 | | Environmental substrate and filter products | $404 | $433 | $831 | $840 | | Life science products | $237 | $222 | $462 | $469 | | Polycrystalline silicon products | $199 | $258 | $415 | $535 | | All other products | $97 | $119 | $192 | $228 | | Total revenue | $3,251 | $3,243 | $6,226 | $6,421 | - Corning held approximately $1.2 billion in non-refundable customer deposits as of June 30, 2024, and December 31, 2023, securing rights to products under long-term supply agreements[30] - Deferred revenue was approximately $790 million as of June 30, 2024, primarily related to non-refundable consideration from HSG customers under long-term supply agreements[33] Note 4. Income Taxes Provision for Income Taxes and Effective Tax Rate (in millions, except percentages) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $(50) | $(106) | $(121) | $(143) | | Effective tax rate | 29.1% | 25.9% | 25.9% | 22.4% | - The effective tax rate for Q2 2024 and H1 2024 differed from the U.S. statutory rate of 21% primarily due to pre-tax losses with no corresponding tax benefit, largely from asset write-offs related to a display manufacturing plant closure[37] - Corning Precision Materials has a non-current receivable of $256 million as of June 30, 2024, for disputed tax amounts deposited with the South Korean government, with management believing it will prevail in the appeals process[39] Note 5. Earnings Per Common Share Earnings Per Common Share (in millions, except per share amounts) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Corning Incorporated | $104 | $281 | $313 | $457 | | Basic earnings per common share | $0.12 | $0.33 | $0.37 | $0.54 | | Diluted earnings per common share | $0.12 | $0.33 | $0.36 | $0.53 | | Weighted-average common shares outstanding – basic | 853 | 848 | 853 | 846 | | Weighted-average common shares outstanding – diluted | 864 | 859 | 865 | 859 | Note 6. Inventories Inventories (in millions) | Category | June 30, 2024 | December 31, 2023 | | :------------------------ | :------------ | :---------------- | | Finished goods | $1,303 | $1,242 | | Work in process | $546 | $551 | | Raw materials and accessories | $426 | $445 | | Supplies and packing materials | $407 | $428 | | Total Inventories | $2,682 | $2,666 | Note 7. Other Liabilities Other Liabilities (in millions) | Category | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | Current liabilities: | | | | Wages and employee benefits | $569 | $609 | | Derivative instruments | $179 | $66 | | Dividend payable | $261 | $21 | | Deferred revenue | $193 | $181 | | Customer deposits | $178 | $148 | | Other accrued liabilities | $2,684 | $2,533 | | Non-current liabilities: | | | | Defined benefit pension plan liabilities | $724 | $721 | | Derivative instruments | $156 | $31 | | Deferred revenue | $597 | $679 | | Customer deposits | $986 | $1,083 | | Other liabilities | $4,458 | $4,709 | Note 8. Debt - The fair value of long-term debt was $6.5 billion as of June 30, 2024, compared to a carrying value of $6.9 billion[43] - In Q2 2024, Corning entered into a ¥23 billion ($215 million) fixed-rate, three-year cross-currency swap contract to economically hedge unrealized foreign exchange gains on Japanese yen-denominated debt[44] - In May 2023, the Company issued €300 million 3.875% Notes due 2026 and €550 million 4.125% Notes due 2031, raising approximately $918 million for general corporate purposes, with the euro-denominated debt designated as net investment hedges[45] Note 9. Employee Retirement Plans Total Pension and Postretirement Benefit Expense (Income) (in millions) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total pension benefit expense (income) | $28 | $30 | $50 | $54 | | Total postretirement benefit expense (income) | $(3) | $0 | $(4) | $1 | Note 10. Leases - Corning entered into a synthetic Facility Lease for a solar manufacturing facility in Hemlock, Michigan, with an estimated construction cost of $835 million, expected to commence in late 2025 with undiscounted lease payments of approximately $1.1 billion[47][48] - An Equipment Lease for the facility's equipment was also entered into, with an estimated cost of $365 million and undiscounted lease payments of approximately $446 million, also commencing in late 2025[49][50] Note 11. Commitments and Contingencies - Corning settled Dow Corning Chapter 11 related matters in January 2024 for an immaterial amount[54] - A potential liability for Dow Corning environmental matters is probable, with the reserved amount being immaterial as of June 30, 2024[55] - Corning accrued approximately $83 million as of June 30, 2024, for estimated undiscounted liability for environmental cleanup and related litigation across 19 hazardous waste sites[56] Note 12. Financial Instruments Summary of Derivative Financial Instruments (in millions) | Metric | Notional amount (June 30, 2024) | Fair value asset (June 30, 2024) | Fair value liability (June 30, 2024) | Notional amount (Dec 31, 2023) | Fair value asset (Dec 31, 2023) | Fair value liability (Dec 31, 2023) | | :------------------------------------------ | :------------------------------ | :------------------------------- | :--------------------------------- | :----------------------------- | :------------------------------ | :--------------------------------- | | Derivatives designated as hedging instruments | $721 | $179 | $(19) | $241 | $287 | $0 | | Derivatives not designated as hedging instruments | $7,616 | $428 | $(316) | $7,030 | $324 | $(97) | | Total derivatives | $8,337 | $607 | $(335) | $7,271 | $631 | $(97) | - Corning's euro-denominated debt of €850 million ($903 million carrying value) is designated as a net investment hedge against investments in European subsidiaries, recognized as a foreign currency gain of $8 million and $30 million in other comprehensive loss for the three and six months ended June 30, 2024, respectively[59][67] - The company entered into a ¥23 billion ($215 million) cross-currency swap contract in Q2 2024 to lock in unrealized foreign exchange gains on Japanese yen-denominated debt, initially recorded as a $68 million receipt and a derivative liability of $75 million as of June 30, 2024[66] Note 13. Shareholders' Equity - Corning declared a quarterly dividend of $0.28 per share of common stock on June 26, 2024, payable on September 27, 2024[69] - The company repurchased 3 million common shares for $105.4 million during the three and six months ended June 30, 2024, under the Share Repurchase Agreement (SRA) with Samsung Display Co., Ltd. (SDC)[72] - Approximately $3.2 billion remains available under the 2019 common stock repurchase authorization, which has no expiration date[71] Note 14. Share-Based Compensation - Total share-based compensation expense was $66 million and $126 million for the three and six months ended June 30, 2024, respectively, an increase from $59 million and $111 million in the prior year periods[75] Changes in Non-Vested Time-Based Restricted Stock and Restricted Stock Units (six months ended June 30, 2024) | Metric | Number of shares (in thousands) | Weighted average grant-date fair value | | :------------------------------------------ | :------------------------------ | :------------------------------------- | | Non-vested shares and share units as of Dec 31, 2023 | 13,321 | $33.89 | | Granted | 1,364 | $32.84 | | Vested | (4,047) | $36.11 | | Forfeited | (316) | $34.56 | | Non-vested shares and share units as of Jun 30, 2024 | 10,322 | $32.86 | Changes in Non-Vested Performance-Based Restricted Stock Units (six months ended June 30, 2024) | Metric | Number of shares (in thousands) | Weighted average grant-date fair value | | :------------------------------------------ | :------------------------------ | :------------------------------------- | | Non-vested share units as of Dec 31, 2023 | 2,026 | $38.89 | | Granted | 1,647 | $32.70 | | Vested | (1,122) | $41.70 | | Performance adjustments | 916 | $32.84 | | Forfeited | (56) | $33.10 | | Non-vested share units as of Jun 30, 2024 | 3,411 | $33.61 | Note 15. Reportable Segments - Corning has five reportable segments: Optical Communications, Display Technologies, Specialty Materials, Environmental Technologies, and Life Sciences, plus 'Hemlock and Emerging Growth Businesses' for other operations[79] - The company uses constant-currency reporting for all segments to exclude the impact of currency fluctuations (Japanese yen, South Korean won, Chinese yuan, New Taiwan dollar, euro, and Mexican peso) on segment results, aligning with hedging instrument rates[80][81][82] Segment Net Sales (in millions) | Segment | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Optical Communications | $1,113 | $1,066 | $2,043 | $2,191 | | Display Technologies | $1,014 | $928 | $1,886 | $1,691 | | Specialty Materials | $501 | $423 | $955 | $829 | | Environmental Technologies | $431 | $457 | $886 | $888 | | Life Sciences | $249 | $231 | $485 | $487 | | Hemlock and Emerging Growth Businesses | $296 | $377 | $607 | $763 | | Total Segment Net Sales | $3,604 | $3,482 | $6,862 | $6,849 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Corning's financial condition and operational results, highlighting the 'Springboard' plan for growth, a detailed analysis of consolidated and segment-level performance, and a reconciliation of non-GAAP core performance measures Overview - Corning is a leader in glass science, ceramic science, and optical physics, applying capabilities to create category-defining products and drive profitable growth in markets like optical communications, mobile consumer electronics, display, automotive, solar, semiconductor, and life sciences[93] - The 'Springboard' plan aims to add over $3 billion in annualized core sales with strong incremental profit and cash flow in the next three years, driven by cyclical factors and secular trends[94][97] - Key growth drivers include generative AI in Optical Communications, larger screens in Display, tripling automotive glass sales by 2026, new U.S. EPA regulations for gasoline particulate filters, and leveraging the Inflation Reduction Act for the U.S. solar supply chain[98] - Corning expects Q1 2024 to be the lowest quarter for the year and forecasts core net sales of approximately $3.7 billion for Q3 2024[97][100] Results of Operations Selected Highlights from Operations (in millions, except per share amounts) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | % change (24 vs 23) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | % change (24 vs 23) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Net sales | $3,251 | $3,243 | — | $6,226 | $6,421 | (3)% | | Gross margin | $949 | $1,013 | (6)% | $1,942 | $2,016 | (4)% | | Gross margin % | 29% | 31% | | 31% | 31% | | | Selling, general and administrative expenses | $471 | $440 | 7% | $922 | $861 | 7% | | Research, development and engineering expenses | $262 | $263 | — | $520 | $517 | 1% | | Translated earnings contract gain, net | $27 | $116 | (77)% | $66 | $108 | (39)% | | Income before income taxes | $172 | $409 | (58)% | $468 | $637 | (27)% | | Net income attributable to Corning Incorporated | $104 | $281 | (63)% | $313 | $457 | (32)% | | Diluted EPS | $0.12 | $0.33 | (64)% | $0.36 | $0.53 | (32)% | Net sales - Net sales for the three months ended June 30, 2024, were up slightly year-over-year, driven by increases in specialty glass products ($77 million) and telecommunication products ($47 million), offset by decreases in polycrystalline silicon ($59 million), environmental substrate and filter ($29 million), and display products ($21 million)[102] - For the six months ended June 30, 2024, net sales decreased by $195 million (3%) year-over-year, primarily due to declines in telecommunication products ($148 million) and polycrystalline silicon products ($120 million), partially offset by specialty glass products ($123 million)[103] Cost of sales / Gross margin - Gross margin decreased by $64 million (6%) and 2 percentage points for the three months ended June 30, 2024, primarily due to a $62 million increase in restructuring and asset write-off charges[105] - For the six months ended June 30, 2024, gross margin decreased by $74 million (4%) but remained consistent as a percentage of sales[106] Selling, general and administrative expenses - Selling, general and administrative expenses increased by $31 million (7%) for the three months ended June 30, 2024, and by $61 million (7%) for the six months ended June 30, 2024, with the latter increasing as a percentage of sales due to lower overall sales[108] Research, development and engineering expenses - Research, development, and engineering expenses remained relatively flat for both the three and six months ended June 30, 2024, compared to the same periods in 2023[109] Translated earnings contract gain, net Translated Earnings Contract Gain, Net (in millions) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Realized gain, net (pre-tax) | $48 | $71 | $111 | $138 | | Unrealized (loss) gain, net (pre-tax) | $(21) | $45 | $(45) | $(30) | | Total translated earnings contract gain, net (pre-tax) | $27 | $116 | $66 | $108 | - The decrease in translated earnings contract gain for Q2 2024 was primarily due to unrealized losses from South Korean won and New Taiwan dollar-denominated hedges, partially offset by Japanese yen gains[114] - For H1 2024, the decrease was mainly due to unrealized losses from South Korean won, New Taiwan dollar, and Chinese yuan-denominated hedges, partially offset by Japanese yen gains[115] Income before income taxes - Income before income taxes decreased by $237 million for the three months and $169 million for the six months ended June 30, 2024, primarily due to lower translated earnings contract gains and a decline in gross margin[117] Provision for Income Taxes - The effective tax rate for Q2 and H1 2024 increased compared to 2023, primarily due to pre-tax losses with no corresponding tax benefit (asset write-offs from a display manufacturing plant closure) and a reduction in foreign derived intangible income benefits[118][120] Net income attributable to Corning Incorporated Net Income Attributable to Corning Incorporated and EPS (in millions, except per share amounts) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Corning Incorporated | $104 | $281 | $313 | $457 | | Basic earnings per common share | $0.12 | $0.33 | $0.37 | $0.54 | | Diluted earnings per common share | $0.12 | $0.33 | $0.36 | $0.53 | Comprehensive (loss) income attributable to Corning Incorporated - Comprehensive loss attributable to Corning Incorporated was $113 million for Q2 2024, compared to a loss of $21 million in Q2 2023, driven by a $96 million decrease in net losses on foreign currency translation adjustments, primarily from Japanese yen and Chinese yuan gains, offset by Korean won and euro losses[122] - For H1 2024, comprehensive loss was $231 million, compared to income of $88 million in H1 2023, due to a $150 million increase in net losses on foreign currency translation adjustments, mainly from Japanese yen, euro, and Korean won losses, partially offset by Chinese yuan gains[123] Segment Analysis Segment Net Sales Segment Net Sales (in millions) | Segment | Three months ended June 30, 2024 | Three months ended June 30, 2023 | % change (24 vs 23) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | % change (24 vs 23) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Optical Communications | $1,113 | $1,066 | 4% | $2,043 | $2,191 | (7)% | | Display Technologies | $1,014 | $928 | 9% | $1,886 | $1,691 | 12% | | Specialty Materials | $501 | $423 | 18% | $955 | $829 | 15% | | Environmental Technologies | $431 | $457 | (6)% | $886 | $888 | — | | Life Sciences | $249 | $231 | 8% | $485 | $487 | — | | Hemlock and Emerging Growth Businesses | $296 | $377 | (21)% | $607 | $763 | (20)% | - Optical Communications net sales increased 4% in Q2 2024 due to AI-related connectivity solutions demand, but decreased 7% in H1 2024 due to lower carrier demand and inventory drawdowns[127] - Display Technologies net sales increased 9% in Q2 2024 and 12% in H1 2024, driven by higher sales volume from increased panel maker utilization and pricing actions[128] - Specialty Materials net sales increased 18% in Q2 2024 and 15% in H1 2024, reflecting strong demand for premium glass for mobile devices and semiconductor-related products[129] - Hemlock and Emerging Growth Businesses net sales decreased 21% in Q2 2024 and 20% in H1 2024, primarily due to lower pricing for solar-grade polysilicon and reduced sales in Pharmaceutical Technologies post-COVID volume commitments[132] Segment Net Income Segment Net Income (in millions) | Segment | Three months ended June 30, 2024 | Three months ended June 30, 2023 | % change (24 vs 23) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | % change (24 vs 23) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Optical Communications | $143 | $140 | 2% | $243 | $299 | (19)% | | Display Technologies | $258 | $208 | 24% | $459 | $368 | 25% | | Specialty Materials | $63 | $33 | 91% | $107 | $72 | 49% | | Environmental Technologies | $97 | $107 | (9)% | $202 | $189 | 7% | | Life Sciences | $17 | $11 | 55% | $30 | $20 | 50% | | Hemlock and Emerging Growth Businesses | $(23) | $26 | * | $(33) | $42 | * | | Total Segment Net Income | $555 | $525 | 6% | $1,008 | $990 | 2% | - Display Technologies net income increased 24% in Q2 2024 and 25% in H1 2024, driven by increased sales volume[135] - Specialty Materials net income increased 91% in Q2 2024 and 49% in H1 2024, due to higher sales and manufacturing improvements[136] - Hemlock and Emerging Growth Businesses experienced a decrease in net income, primarily due to lower sales in HSG and Pharmaceutical Technologies[139] Core Performance Measures - Corning uses non-GAAP core performance measures (core net sales, core net income, core EPS) to evaluate financial performance by excluding items like foreign currency translation impacts, acquisition costs, restructuring charges, and pension mark-to-market adjustments, which do not reflect ongoing operations[141][144] Core Performance Measures (in millions, except per share amounts) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | % change (24 vs 23) | Six months ended June 30, 2024 | Six months ended June 30, 2023 | % change (24 vs 23) | | :-------------------- | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Core net sales | $3,604 | $3,482 | 4% | $6,862 | $6,849 | — | | Core net income | $407 | $388 | 5% | $737 | $738 | — | | Core earnings per share | $0.47 | $0.45 | 4% | $0.85 | $0.86 | (1)% | Core Net Sales - Core net sales increased by $122 million (4%) to $3.6 billion for Q2 2024, driven by Display ($86 million), Specialty Materials ($78 million), and Optical Communications ($47 million), partially offset by Hemlock and Emerging Growth Businesses ($81 million)[146] - For H1 2024, core net sales increased by $13 million to $6.9 billion, primarily from Display ($195 million) and Specialty Materials ($126 million), offset by Hemlock and Emerging Growth Businesses ($156 million) and Optical Communications ($148 million)[147] Core Net Income - Core net income increased by $19 million (5%) to $407 million for Q2 2024, mainly due to higher segment net income in Display ($50 million) and Specialty Materials ($30 million), partially offset by Hemlock and Emerging Growth Businesses ($49 million)[148] - For H1 2024, core net income slightly decreased by $1 million to $737 million, primarily due to lower segment net income in Optical Communications ($56 million) and Hemlock and Emerging Growth Businesses ($75 million), offset by Display Technologies ($91 million) and Specialty Materials ($35 million)[149] Core Earnings per Share - Core earnings per share increased to $0.47 for Q2 2024, up from $0.45 in Q2 2023, reflecting changes in core net income[150][151] - Core earnings per share decreased to $0.85 for H1 2024, down from $0.86 in H1 2023, also reflecting changes in core net income[150][151] Reconciliation of Non-GAAP Measures - Corning provides reconciliations of non-GAAP core financial measures (core net sales, core net income, core EPS) to their most directly comparable GAAP measures, adjusting for items like constant-currency effects, translation gains/losses on debt, translated earnings contracts, acquisition costs, discrete tax items, restructuring charges, pension mark-to-market adjustments, and gains/losses on investments and asset sales[152][153][158][164][166] Items Adjusted from GAAP Measures - Constant-currency adjustments are applied to all segments to remove foreign currency volatility, using internally derived long-term management estimates for rates like ¥107, ₩1,175, ¥6.7, NT$31, €0.81, and MX$20[164][165] - Adjustments include translation gains/losses on Japanese yen-denominated debt (net of cross-currency swap impact), realized and unrealized gains/losses from translated earnings contracts, acquisition-related costs (intangible amortization, inventory adjustments), discrete tax items, restructuring/impairment charges, pension mark-to-market adjustments, and gains/losses on investments and asset sales[166] Liquidity and Capital Resources - Corning's financial condition and liquidity are strong, with major funding sources including operating cash flow, existing cash balances, and debt issuances, believing it has sufficient liquidity for foreseeable obligations[167][168] Key Balance Sheet Data Key Balance Sheet Data (in millions) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :---------------- | | Working capital | $2,595 | $2,893 | | Current ratio | 1.6:1 | 1.7:1 | | Trade accounts receivable, net of doubtful accounts | $1,721 | $1,572 | | Days sales outstanding | 48 | 47 | | Inventories | $2,682 | $2,666 | | Inventory turns | 3.2 | 3.2 | | Days payable outstanding | 55 | 52 | | Long-term debt | $6,908 | $7,206 | | Total debt | $7,284 | $7,526 | | Total debt to total capital | 40% | 39% | - Corning accelerated the collection of $380 million and $389 million of accounts receivable during Q1 and Q2 2024, respectively, through accounts receivable management programs[172] Cash Flows Summary of Cash Flow Data (in millions) | Metric | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $617 | $570 | | Net cash used in investing activities | $(338) | $(515) | | Net cash used in financing activities | $(612) | $(164) | - Net cash provided by operating activities increased by $47 million for H1 2024, driven by working capital improvements[174] - Net cash used in investing activities improved by $177 million for H1 2024, primarily due to lower capital expenditures ($276 million)[175] - Net cash used in financing activities increased by $448 million for H1 2024, mainly due to the absence of $918 million in euro bond proceeds from 2023 and $507 million in preferred stock redemption payments in 2023, along with $105 million in common stock repurchases in 2024[176] Sources of Liquidity Cash and Available Credit Capacity (in millions) | Metric | June 30, 2024 | | :-------------------------------- | :------------ | | Cash and cash equivalents | $1,419 | | U.S. dollar revolving credit facility | $1,500 | | Chinese yuan facilities | $150 | - As of June 30, 2024, approximately 48% of consolidated cash and cash equivalents were held outside the U.S., with no current plans to repatriate indefinitely reinvested foreign earnings[178][179] - Corning has a $1.5 billion commercial paper program and a $1.5 billion Revolving Credit Agreement, with no outstanding amounts under either facility as of June 30, 2024, and is in compliance with all debt covenants (leverage ratio of 40% vs. maximum 60%)[181][182][183] Uses of Cash - Corning repurchased 3 million common shares for $105.4 million in H1 2024 under the SRA, with approximately $3.2 billion remaining under the 2019 share repurchase authorization[191][192] - A quarterly dividend of $0.28 per share was declared on June 26, 2024, payable September 27, 2024[193] - Capital expenditures were $0.5 billion for H1 2024, with full-year 2024 capital expenditures expected to be lower than 2023[194] - The company has $376 million of long-term debt due within one year as of June 30, 2024[195] - Corning's global pension plans were 81% funded as of December 31, 2023, with $11 million in cash contributions anticipated for international pension plans in 2024[196][197] Environment - Information regarding environmental matters is detailed in Note 11 (Commitments and Contingencies) of the financial statements[204] Critical Accounting Estimates - There were no material changes in Corning's critical accounting estimates or assumptions since the Company's Annual Report on Form 10-K for the year ended December 31, 2023[205] Forward-Looking Statements - The report contains forward-looking statements about future operating performance, market share, revenue/earnings growth, new product commercialization, capital expenditures, and cost-reduction initiatives[206] - Actual results could differ materially from forecasts due to various risks, including global economic trends, market volatility, supply chain disruptions, competition, intellectual property protection, product demand, and regulatory changes[207][208] Item 3. Quantitative and Qualitative Disclosures About Market Risk Corning is exposed to foreign currency exchange rate movements, which impact financial instruments, transactions, and the conversion of foreign subsidiary net assets and income - Corning's exposure to exchange rates affects financial instruments and transactions denominated in foreign currencies, impacting earnings, and the conversion of net assets and net income of foreign subsidiaries with non-U.S. dollar functional currencies[209][212] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of Corning's disclosure controls and procedures as of June 30, 2024, concluding they were effective - Corning's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2024[210] - There were no material changes in Corning's internal control over financial reporting during the period covered by the report[211] PART II – OTHER INFORMATION Item 1. Legal Proceedings Corning is involved in various lawsuits and claims arising in the normal course of business, as summarized in Note 11 of the financial statements - Corning is a defendant in various lawsuits and claims, but management believes the likelihood of a material adverse effect on financial position, liquidity, or results of operations is remote[214] Item 1A. Risk Factors Readers should carefully consider the risk factors discussed in Corning's 2023 Form 10-K, as these could materially impact the company's business, financial condition, or future results - Key risk factors that could materially impact Corning's business, financial condition, or future results are detailed in the 2023 Form 10-K[215] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the purchases of common stock during the second quarter of 2024, including shares related to employee benefit plans and repurchases under the 2019 Repurchase Program Issuer Purchases of Equity Securities (Q2 2024) | Period | Total number of shares purchased (1) | Average price paid per share (2) | Number of shares purchased as part of publicly announced programs | Approximate dollar value of shares that may be purchased under the publicly announced programs | | :---------------- | :--------------------------------- | :------------------------------- | :------------------------------------------------ | :---------------------------------------------------------------- | | April 1-30, 2024 | 580,940 | $31.42 | | | | May 1-31, 2024 | 2,836 | $37.11 | | | | Shares repurchased (3) | 3,000,000 | $35.14 | 3,000,000 | | | June 1-30, 2024 | 198,480 | $37.49 | | | | Total | 3,782,256 | $34.69 | 3,000,000 | $3,195,661,103 | - The total shares purchased include shares related to the vesting of employee restricted stock units, performance stock units, restricted stock, exercise of stock options, and 3 million shares repurchased under the 2019 Repurchase Program[217] Item 5. Other Information During the second quarter of 2024, no Section 16 reporting persons adopted, modified, or terminated any Rule 10b5-1(c) trading arrangements for the purchase or sale of Corning's securities - No Section 16 reporting persons adopted, modified, or terminated Rule 10b5-1(c) trading arrangements during Q2 2024[219] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, XBRL documents, and the cover page interactive data file - Exhibits include CEO and CFO certifications (31.1, 31.2), Certification Pursuant to 18 U.S.C. Section 1350 (32), and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[221] Signatures The report is duly signed on behalf of Corning Incorporated by Stefan Becker, Senior Vice President and Corporate Controller, on August 2, 2024 - The report was signed by Stefan Becker, Senior Vice President and Corporate Controller, on August 2, 2024[223]