Corning(GLW) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents Corning's unaudited consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements This section presents Corning's unaudited consolidated financial statements, offering a foundational view of financial performance and position Consolidated Statements of Income This section presents Corning's consolidated statements of income, detailing key revenue and profitability metrics | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $3,862 | $3,251 | $7,314 | $6,226 | | Gross margin | $1,392 | $949 | $2,606 | $1,942 | | Operating income | $573 | $186 | $1,018 | $440 | | Net income attributable to Corning Incorporated | $469 | $104 | $626 | $313 | | Diluted EPS | $0.54 | $0.12 | $0.72 | $0.36 | Consolidated Statements of Comprehensive Income (Loss) This section outlines Corning's consolidated statements of comprehensive income (loss), detailing net income and other comprehensive items | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $500 | $122 | $685 | $347 | | Other comprehensive income (loss), net of tax | $426 | $(217) | $609 | $(544) | | Comprehensive income (loss) attributable to Corning Incorporated | $895 | $(113) | $1,235 | $(231) | Consolidated Balance Sheets This section presents Corning's consolidated balance sheets, detailing assets, liabilities, and equity at specific reporting dates | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Total Assets | $28,745 | $27,735 | | Total Liabilities | $17,200 | $16,665 | | Total Equity | $11,545 | $11,070 | - Total Assets increased by $1,010 million (3.6%) from December 31, 2024, to June 30, 2025, primarily driven by increases in property, plant and equipment, and inventories[15] - Total Liabilities increased by $535 million (3.2%) over the same period, with current portion of long-term debt and accounts payable seeing notable increases[15] Consolidated Statements of Cash Flows This section presents Corning's consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities | Metric (in millions) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $859 | $617 | | Net cash used in investing activities | $(466) | $(338) | | Net cash used in financing activities | $(696) | $(612) | | Net decrease in cash and cash equivalents | $(277) | $(360) | | Cash and cash equivalents at end of period | $1,491 | $1,419 | - Net cash provided by operating activities increased by $242 million (39.2%) for the six months ended June 30, 2025, compared to the same period in 2024[17] - Net cash used in investing activities increased by $128 million (37.9%) for the six months ended June 30, 2025, primarily due to higher capital expenditures and lower realized gains on translated earnings contracts[17] Consolidated Statements of Changes in Shareholders' Equity This section presents Corning's consolidated statements of changes in shareholders' equity, detailing movements in equity components | Metric (in millions) | Balance as of Dec 31, 2024 | Balance as of June 30, 2025 | | :------------------- | :------------------------- | :-------------------------- | | Total Corning Incorporated shareholders' equity | $10,686 | $11,116 | | Non-controlling interest | $384 | $429 | | Total equity | $11,070 | $11,545 | - Total Corning Incorporated shareholders' equity increased by $430 million from December 31, 2024, to June 30, 2025, driven by net income and other comprehensive income, partially offset by common dividends and treasury stock purchases[20] Notes to Consolidated Financial Statements This section provides detailed notes to Corning's consolidated financial statements, offering additional context and disclosures 1. Summary of Significant Accounting Policies This section outlines Corning's significant accounting policies, including GAAP conformity and management's estimates - The consolidated financial statements are prepared in conformity with GAAP and include wholly-owned subsidiaries and entities where Corning is the primary beneficiary. Management makes estimates and assumptions that affect reported amounts[24][25] - Certain prior year amounts have been reclassified to conform to current year presentation, including segment disclosures, with no impact on financial results[28] 2. Restructuring, Impairment and Other Charges and Credits This section details restructuring, impairment, and other charges and credits, including asset write-offs from plant closures - No material restructuring, impairment, and other charges or credits were recorded for the three and six months ended June 30, 2025[29] - For the three and six months ended June 30, 2024, the Company recorded $138 million and $129 million, respectively, in such charges, primarily due to asset write-offs from a display manufacturing plant closure[30] 3. Revenue This section provides a detailed breakdown of Corning's revenue by product category and related deferred revenue | Product Category (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Optical communications products | $1,566 | $1,113 | $2,921 | $2,043 | | Display products | $725 | $704 | $1,429 | $1,336 | | Specialty materials products | $542 | $497 | $1,037 | $947 | | Automotive products | $457 | $452 | $883 | $915 | | Life sciences products | $246 | $237 | $474 | $462 | | Polycrystalline silicon products | $223 | $199 | $429 | $415 | | All other products | $103 | $49 | $141 | $108 | | Total revenue | $3,862 | $3,251 | $7,314 | $6,226 | - Customer deposits were approximately $1.1 billion as of June 30, 2025, mostly non-refundable and securing rights to products under long-term supply agreements[32] - Deferred revenue was approximately $763 million as of June 30, 2025, primarily from HSG's long-term supply agreements[35] 4. Income Taxes This section details Corning's income tax provision and effective tax rates, including impacts from foreign income and new legislation | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $(84) | $(50) | $(139) | $(121) | | Effective tax rate | 14.4% | 29.1% | 16.9% | 25.9% | - The effective tax rate for Q2 2025 was 14.4%, lower than the U.S. statutory rate of 21%, mainly due to foreign derived intangible income, share-based compensation adjustments, and non-taxable items[38] - The Company is evaluating the potential impact of the newly enacted One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements, which includes tax law changes like 100% bonus depreciation and immediate R&D expensing[41] 5. Earnings Per Common Share This section presents Corning's basic and diluted earnings per common share, reflecting net income attributable to the company | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Corning Incorporated | $469 | $104 | $626 | $313 | | Basic EPS | $0.55 | $0.12 | $0.73 | $0.37 | | Diluted EPS | $0.54 | $0.12 | $0.72 | $0.36 | - Diluted EPS significantly increased to $0.54 for the three months ended June 30, 2025, from $0.12 in the prior year, reflecting higher net income[42] 6. Acquisition This section details Corning's acquisition of a U.S. solar module manufacturing facility and related goodwill - In April 2025, Corning acquired a U.S. solar module manufacturing facility for $278 million, including $17 million cash, $111 million in notes payable, and $150 million in contingent consideration[44] - The acquisition resulted in $98 million of goodwill, reflecting expected synergies and expanded market opportunities from vertical integration into solar module business[46] 7. Inventories This section provides a breakdown of Corning's inventories by category and highlights changes over the period | Inventory Category (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Finished goods | $1,479 | $1,323 | | Work in process | $550 | $547 | | Raw materials and accessories | $564 | $413 | | Supplies and packing materials | $491 | $441 | | Total Inventories | $3,084 | $2,724 | - Total inventories increased by $360 million (13.2%) from December 31, 2024, to June 30, 2025, primarily driven by increases in finished goods and raw materials[48] 8. Other Liabilities This section details Corning's current and non-current other liabilities, explaining key changes and contributing factors | Liability Category (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Total Other Accrued Liabilities (Current) | $2,758 | $3,121 | | Total Other Liabilities (Non-current) | $4,709 | $4,525 | - Current other accrued liabilities decreased by $363 million, mainly due to lower wages and employee benefits and derivative instruments, partially offset by higher dividend payable[49] - Non-current other liabilities increased by $184 million, primarily driven by higher defined benefit pension plan liabilities and long-term operating leases, and the addition of contingent consideration[49] 9. Debt This section outlines Corning's debt structure, including fair value, repayments, new borrowings, and credit facilities - The fair value of long-term debt was $6.3 billion as of June 30, 2025, compared to a carrying value of $6.7 billion[50] - During the six months ended June 30, 2025, the Company repaid $209 million of Chinese yuan-denominated loans and incurred $285 million in new borrowings under similar facilities[52] - A new $1.5 billion unsecured multi-currency line of credit was entered into on July 28, 2025, replacing the existing credit agreement and expiring in July 2030[53] 10. Employee Retirement Plans This section details Corning's pension and postretirement benefit expenses for the reporting periods | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total pension benefit expense (income) | $25 | $28 | $47 | $50 | | Total postretirement benefit expense (income) | $(5) | $(3) | $(8) | $(4) | 11. Leases This section describes Corning's lease agreements, including new production equipment leases and amendments to existing facilities - Corning entered into a new lease for production equipment in Q1 2025, valued at approximately $261 million (undiscounted), expected to commence late 2026 with a 16-year term[58] - An existing equipment lease for a solar manufacturing facility was amended in May 2025, increasing the estimated purchase and installation cost to $586 million, with estimated undiscounted lease payments of approximately $680 million[59][60] 12. Commitments and Contingencies This section addresses Corning's legal commitments and contingencies, including lawsuits and environmental cleanup liabilities - Corning is a defendant in various lawsuits and subject to claims in the normal course of business, with management believing the ultimate disposition will not materially adversely affect financial position, liquidity, or results of operations[61] - The Company has accrued approximately $92 million as of June 30, 2025, for estimated undiscounted liability for environmental cleanup and related litigation[63] 13. Financial Instruments This section details Corning's use of financial instruments, including derivatives for managing foreign exchange and interest rate risks | Derivative Type (in millions) | Notional Amount (June 30, 2025) | Fair Value Asset (June 30, 2025) | Fair Value Liability (June 30, 2025) | | :---------------------------- | :------------------------------ | :------------------------------- | :----------------------------------- | | Total derivatives | $17,897 | $861 | $(436) | - The total gross notional amount for translated earnings contracts increased to $12,331 million as of June 30, 2025, from $9,817 million as of December 31, 2024[69] - Corning uses cross currency swap contracts to economically lock in unrealized foreign exchange gains on Japanese yen-denominated debt, receiving $24 million in net payments during the six months ended June 30, 2025[74] 14. Shareholders' Equity This section details Corning's shareholders' equity, including dividends, share repurchases, and comprehensive income adjustments - Corning's Board of Directors declared quarterly dividends of $0.28 per share for Q1 and Q2 2025, with the Q2 dividend payable in September 2025[80] - Approximately $3.0 billion remains available under the Company's 2019 share repurchase authorization as of June 30, 2025[84] - The change in accumulated other comprehensive loss for the three and six months ended June 30, 2025, was primarily related to foreign currency translation adjustments, resulting in a gain of $391 million and $552 million, respectively[86] 15. Share-Based Compensation This section details Corning's share-based compensation expense and the status of outstanding stock options | Metric (in millions) | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :------------------- | :------------------------------- | :----------------------------- | | Total share-based compensation expense | $63 | $117 | | Income tax benefit | $9 | $17 | - As of June 30, 2025, 3.7 million stock options were outstanding, vested, and exercisable, with a weighted-average exercise price of $24.36 and an aggregate intrinsic value of $104 million[90] 16. Reportable Segments This section outlines Corning's reportable segments, including recent reorganizations and financial performance by segment - As of January 1, 2025, Corning reorganized its segments, combining Automotive Glass Solutions and Environmental Technologies into the new Automotive segment, and renaming Display Technologies to Display[91] | Segment Net Sales (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Optical Communications | $1,566 | $1,113 | $2,921 | $2,043 | | Display | $898 | $1,014 | $1,803 | $1,886 | | Specialty Materials | $545 | $501 | $1,046 | $955 | | Automotive | $460 | $479 | $900 | $970 | | Life Sciences | $250 | $249 | $484 | $485 | | Hemlock and Emerging Growth Businesses | $326 | $248 | $570 | $523 | | Segment Net Income (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Optical Communications | $247 | $143 | $448 | $243 | | Display | $243 | $258 | $486 | $459 | | Specialty Materials | $81 | $63 | $155 | $107 | | Automotive | $79 | $71 | $147 | $149 | | Life Sciences | $18 | $17 | $31 | $30 | | Hemlock and Emerging Growth Businesses | $(10) | $3 | $(26) | $20 | 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, results of operations, liquidity, and capital resources - Corning expects core net sales of approximately $4.2 billion for the third quarter of 2025[111] OVERVIEW This section provides an overview of Corning's business, highlighting its core expertise and diverse market applications - Corning leverages expertise in glass science, ceramic science, and optical physics to develop category-defining products across diverse markets including optical communications, mobile consumer electronics, display, automotive, solar, semiconductor, and life sciences[109][110] RESULTS OF OPERATIONS This section analyzes Corning's financial results, focusing on net sales, gross margin, and operating income trends | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | % change (25 vs 24) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | % change (25 vs 24) | | :------------------- | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Net sales | $3,862 | $3,251 | 19% | $7,314 | $6,226 | 17% | | Gross margin | $1,392 | $949 | 47% | $2,606 | $1,942 | 34% | | Gross margin % | 36% | 29% | 7 pp | 36% | 31% | 5 pp | | Operating income | $573 | $186 | 208% | $1,018 | $440 | 131% | | Income before income taxes | $584 | $172 | 240% | $824 | $468 | 76% | - Net sales increased by 19% for the three months and 17% for the six months ended June 30, 2025, primarily driven by strong growth in optical communication products[114][115] - Gross margin percentage improved by 7 percentage points (QoQ) and 5 percentage points (YoY) due to management actions like price increases, productivity improvements, and inventory normalization[117][118] SEGMENT ANALYSIS This section provides a detailed analysis of Corning's financial performance across its various reportable segments - Optical Communications segment net sales increased by 41% (QoQ) and 43% (YoY), driven by strong demand for Generative AI products in Enterprise and datacenter interconnects/fiber-to-the-home in Carrier business[136][137] - Display segment net sales decreased by 11% (QoQ) and 4% (YoY) due to lower sales volume from reduced panel maker utilization, partially offset by pricing actions[136][138] - Hemlock and Emerging Growth Businesses saw increased sales due to higher demand in HSG and Pharmaceutical Technologies, but net income decreased due to temporarily higher costs for new solar product ramp-up[142][150] CORE PERFORMANCE MEASURES This section presents Corning's core performance measures, excluding non-recurring items and foreign exchange volatility for clearer insights - Core performance measures exclude non-recurring items, foreign exchange volatility, and items unrelated to continuing operations to provide a clearer view of core operating performance[151][153] | Core Metric (in millions, except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | % change (25 vs 24) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | % change (25 vs 24) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Core net sales | $4,045 | $3,604 | 12% | $7,724 | $6,862 | 13% | | Core net income | $523 | $407 | 29% | $990 | $737 | 34% | | Core earnings per share | $0.60 | $0.47 | 28% | $1.14 | $0.85 | 34% | - Core net sales increased by 12% (QoQ) and 13% (YoY), primarily driven by Optical Communications and Specialty Materials[157][158] LIQUIDITY AND CAPITAL RESOURCES This section discusses Corning's financial liquidity and capital resources, including cash flow, debt, and capital expenditures - Corning maintains a strong financial condition and liquidity, with major funding sources including operating cash flow, existing cash balances, and potential debt issuances[177][178] | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Working capital | $2,721 | $3,073 | | Current ratio | 1.5:1 | 1.6:1 | | Total debt | $7,500 | $7,211 | | Total debt to total capital | 39% | 39% | - Net cash provided by operating activities improved to $859 million for the six months ended June 30, 2025, compared to $617 million in the prior year, driven by higher net income[183] - Capital expenditures for the six months ended June 30, 2025, were $516 million, with full-year 2025 capital expenditures expected to be approximately $1.3 billion[203] ENVIRONMENT This section refers to environmental matters discussed in the notes to the consolidated financial statements - Information regarding environmental matters is referenced to Note 12 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements[209] CRITICAL ACCOUNTING ESTIMATES This section confirms no material changes in Corning's critical accounting estimates since the last Annual Report on Form 10-K - There were no material changes in the Company's critical accounting estimates or assumptions since the most recent Annual Report on Form 10-K[210] FORWARD-LOOKING STATEMENTS This section highlights forward-looking statements in the report and potential risks that could cause actual results to differ - The report contains forward-looking statements regarding future events, operating performance, market share, growth rates, innovation, capital expenditures, and cost-reduction initiatives[212] - Actual results could differ materially from forecasts due to various risks and uncertainties, including global economic trends, market volatility, supply chain disruptions, competition, and regulatory changes[213][214] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses Corning's exposure to market risks, primarily foreign currency exchange rate movements - Corning is exposed to foreign currency exchange rate movements that impact earnings from financial instruments and transactions, and affect the conversion of net assets and income of foreign subsidiaries[215][218] Item 4. Controls and Procedures This section confirms the effectiveness of Corning's disclosure controls and procedures and reports no material changes in internal control - Corning's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[216] - There were no material changes in Corning's internal control over financial reporting during the period covered by the report[217] PART II – OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings and risk factors Item 1. Legal Proceedings This section states Corning is involved in various lawsuits and claims, not expected to materially affect financial position or operations - Corning is a defendant in various lawsuits and claims, but management believes the ultimate disposition will not materially adversely affect the company's financial position, liquidity, or results of operations[220] Item 1A. Risk Factors This section directs readers to the 2024 Form 10-K for a comprehensive discussion of risk factors impacting Corning's business - Readers should consider risk factors discussed in Corning's 2024 Form 10-K, as these could materially impact the Company's business, financial condition, or future results[221] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock purchases by the issuer during Q2 2025, including shares for employee awards and repurchases | Period | Total number of shares purchased | Average price paid per share | | :--------------- | :------------------------------- | :--------------------------- | | April 1-30, 2025 | 837,482 | $42.14 | | May 1-31, 2025 | 273,565 | $48.04 | | June 1-30, 2025 | 521,596 | $50.53 | | Total | 1,632,643 | $45.81 | - The total number of shares purchased includes 671,297 shares under the 2019 Repurchase Program, alongside shares related to employee stock awards and options[222] Item 5. Other Information This section states no Section 16 reporting persons adopted, modified, or terminated Rule 10b5-1(c) trading arrangements during Q2 2025 - No Section 16 reporting persons adopted, modified, or terminated any Rule 10b5-1(c) trading arrangements during the three months ended June 30, 2025[224] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The exhibits include certifications from the CEO and CFO (31.1, 31.2, 32) and various Inline XBRL taxonomy documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[225] Signatures This section contains the signature of Corning Incorporated's authorized representative, confirming the report's due submission - The report was signed by Stefan Becker, Senior Vice President and Corporate Controller, on behalf of Corning Incorporated on August 1, 2025[227]