Corning Incorporated : Q1-2020 Financial Statement & Exhibits (Includes non-GAAP Reconciliations)

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(Unaudited; in millions, except per share amounts)

	Three Months Ended
		March 31,
Net sales	2020			2019
$	2,391	$	2,812
Cost of sales		1,830			1,713
Gross margin		561			1,099
Operating expenses:
Selling, general and administrative expenses		395			401
Research, development and engineering expenses		261			249
Amortization of purchased intangibles		26			29
Operating (loss) income		(121)			420
Equity in earnings of affiliated companies		14			25
Interest income		6			7
Interest expense		(64)			(52)
Translated earnings contract gain, net		68			184
Other expense, net		(11)			(9)
(Loss) income before income taxes		(108)			575
Benefit (provision) for income taxes		12			(76)
Net (loss) income attributable to Corning Incorporated	$	(96)	$	499
(Loss) earnings per common share attributable to
Corning Incorporated:
Basic	$	(0.16)	$	0.61
Diluted	$	(0.16)		$	0.55

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share and per share amounts)

		March 31,				December 31,
Assets		2020				2019
Current assets:
Cash and cash equivalents	$	2,025	$	2,434
Trade accounts receivable, net of doubtful accounts and allowances		1,708				1,836
Inventories, net of inventory reserves		2,347				2,320
Other current assets		866				873
Total current assets		6,946				7,463
Investments		320				334
Property, plant and equipment, net of accumulated depreciation		14,932				15,337
Goodwill, net		1,918				1,935
Other intangible assets, net		1,149				1,185
Deferred income taxes		1,181				1,157
Other assets		1,413				1,487
Total Assets	$	27,859	$	28,898
Liabilities and Equity
Current liabilities:
Current portion of long-term debt and short-term borrowings	$	12	$	11
Accounts payable		1,250				1,587
Other accrued liabilities		1,929				1,923
Total current liabilities		3,191				3,521
Long-term debt		7,815				7,729
Postretirement benefits other than pensions		671				671
Other liabilities		3,895				3,980
Total liabilities		15,572				15,901
Commitments, contingencies and guarantees
Shareholders' equity:
Convertible preferred stock, Series A - Par value $100 per share;
Shares authorized 3,100; Shares issued: 2,300		2,300				2,300
Common stock - Par value $0.50 per share; Shares authorized 3.8 billion;
Shares issued: 1,719 million and 1,718 million		859				859
Additional paid-in capital - common stock		14,340				14,323
Retained earnings		16,114				16,408
Treasury stock, at cost; Shares held: 960 million and 956 million		(19,918)				(19,812)
Accumulated other comprehensive loss		(1,497)				(1,171)
Total Corning Incorporated shareholders' equity		12,198				12,907
Noncontrolling interests		89				90
Total equity		12,287				12,997
Total Liabilities and Equity	$	27,859			$	28,898

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

		Three Months Ended
			March 31,
		2020			2019
Cash Flows from Operating Activities:
Net (loss) income	$	(96)		$	499
Adjustments to reconcile net (loss) income to net cash provided by (used in)
operating activities:
Depreciation		356			306
Amortization of purchased intangibles		26			29
Loss on disposal of assets		60
Severance charges		77
Equity in earnings of affiliated companies		(14)			(25)
Deferred tax benefit		(40)			(40)
Customer deposits and incentives		125			2
Translated earnings contract gain		(68)			(184)
Unrealized translation losses on transactions		33			8
Tax assessment refunds		101
Severance payments		(75)
Changes in certain working capital items:
Trade accounts receivable		43			(36)
Inventories		(67)			(159)
Other current assets		(10)			(97)
Accounts payable and other current liabilities		(207)			(299)
Other, net		4			(33)
Net cash provided by (used in) operating activities		248			(29)
Cash Flows from Investing Activities:
Capital expenditures		(545)			(524)
Realized gains on translated earnings contracts		11			20
Other, net		(5)			21
Net cash used in investing activities		(539)			(483)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt, net		200
Repurchases of common stock for treasury		(105)			(257)
Dividends paid		(192)			(181)
Other, net		3			45
Net cash used in financing activities		(94)			(393)
Effect of exchange rates on cash		(24)			6
Net decrease in cash and cash equivalents		(409)			(899)
Cash and cash equivalents at beginning of period		2,434			2,355
Cash and cash equivalents at end of period		$	2,025		$	1,456

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

(Unaudited)

GAAP (Loss) Earnings per Common Share

The following table sets forth the computation of basic and diluted (loss) earnings per common share (in millions, except per share amounts):

		Three Months Ended
		March 31,
		2020		2019
Net (loss) income attributable to Corning Incorporated	$	(96)	$	499
Less: Series A convertible preferred stock dividend		24		24
Net (loss) income available to common stockholders - basic		(120)		475
Add: Series A convertible preferred stock dividend				24
Net (loss) income available to common stockholders - diluted	$	(120)	$	499
Weighted-average common shares outstanding - basic		760		784
Effect of dilutive securities:
Stock options and other dilutive securities				9
Series A convertible preferred stock				115
Weighted-average common shares outstanding - diluted		760		908
Basic (loss) earnings per common share	$	(0.16)	$	0.61
Diluted (loss) earnings per common share	$	(0.16)	$	0.55

Core Earnings per Common Share

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

	Three months ended
		March 31,
	2020		2019
Core net income attributable to Corning Incorporated	$	177	$	365
Less: Series A convertible preferred stock dividend		24		24
Core net income available to common stockholders - basic		153		341
Add: Series A convertible preferred stock dividend		24		24
Core net income available to common stockholders - diluted	$	177	$	365
Weighted-average common shares outstanding - basic		760		784
Effect of dilutive securities:
Stock options and other dilutive securities		6		9
Series A convertible preferred stock		115		115
Weighted-average common shares outstanding - diluted		881		908
Core basic earnings per common share	$	0.20	$	0.43
Core diluted earnings per common share	$	0.20	$	0.40

© 2020 Corning Incorporated. All Rights Reserved.

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Use of Non-GAAP Financial Measures

CORE PERFORMANCE MEASURES

In managing the Company and assessing our financial performance, we adjust certain measures provided by our consolidated financial statements to exclude specific items to report core performance measures. These items include gains and losses on our translated earnings contracts, acquisition-related costs, certain discrete tax items and other tax- related adjustments, restructuring, impairment, and other charges or credits, certain litigation-related expenses, pension mark-to-market adjustments and other items which do not reflect on-going operating results of the Company or our equity affiliates. Corning utilizes constant-currency reporting for our Display Technologies, Environmental Technologies, Specialty Materials and Life Sciences segments for the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and the euro. The Company believes that the use of constant-currency reporting allows investors to understand our results without the volatility of currency fluctuations and reflects the underlying economics of the translated earnings contracts used to mitigate the impact of changes in currency exchange rates on our earnings and cash flows. Corning also believes that reporting core performance measures provides investors greater transparency to the information used by our management team to make financial and operational decisions.

Core performance measures are not prepared in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). We believe investors should consider these non-GAAP measures in evaluating our results as they are more indicative of our core operating performance and how management evaluates our operational results and trends. These measures are not, and should not be viewed as a substitute for, GAAP reporting measures. With respect to the Company's outlook for future periods, it is not possible to provide reconciliations for these non-GAAP measures because the Company 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 the Company's control. As a result, the Company 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".

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended March 31, 2020

(Unaudited; amounts in millions, except per share amounts)

				Three Months Ended March 31, 2020
					(Loss) income			Effective
		Net		Equity	before income		Net (loss)	tax		Per
		sales		earnings		taxes		income	rate (a)		share
As reported - GAAP	$	2,391	$	14	$	(108)	$	(96)	11.1%	$	(0.16)
Constant-currency adjustment (1)		33				19		(22)			(0.03)
Translation loss on Japanese
yen-denominated debt (2)						14		11			0.01
Translated earnings contract gain (3)						(58)		(45)			(0.06)
Acquisition-related costs (4)						28		21			0.03
Discrete tax items and other tax-related
adjustments (5)								37			0.05
Restructuring, impairment and other
charges and credits (6)						225		166			0.22
Cumulative adjustment related to customer
contract (7)		105				105		105			0.14
Core performance measures	$	2,529	$	14	$	225	$	177	21.3%	$	0.20

1. Based upon statutory tax rates in the specific jurisdiction for each event.

See Reconciliation of Non-GAAP Financial Measures, "Items which we exclude from GAAP measures to arrive at Core Performance measures" for the descriptions of the footnoted reconciling items.

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended March 31, 2019

(Unaudited; amounts in millions, except per share amounts)

				Three Months Ended March 31, 2019
						Income			Effective
		Net		Equity	before income		Net	tax		Per
		sales		earnings		taxes		income	rate (a)		share
As reported - GAAP	$	2,812	$	25	$	575	$	499	13.2%	$	0.55
Constant-currency adjustment (1)		38		1		37		31			0.03
Translation gain on Japanese
yen-denominated debt (2)						(15)		(11)			(0.01)
Translated earnings contract gain (3)						(184)		(144)			(0.16)
Acquisition-related costs (4)						37		28			0.03
Discrete tax items and other tax-related
adjustments (5)								(43)			(0.05)
Restructuring, impairment and other
charges and credits (6)						7		5			0.01
Core performance measures	$	2,850	$	26	$	457	$	365	20.1%	$	0.40

1. Based upon statutory tax rates in the specific jurisdiction for each event.

See Reconciliation of Non-GAAP Financial Measures, "Items which we exclude from GAAP measures to arrive at Core Performance measures" for the descriptions of the footnoted reconciling items.

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended March 31, 2020 and 2019

(Unaudited; amounts in millions)

			Three Months Ended						Three Months Ended
			March 31, 2020						March 31, 2019
				Selling,		Research,				Selling,		Research,
				general		development				general		development
			Gross	and		and			Gross	and		and
		Gross	margin	admin.		engineering		Gross	margin	admin.		engineering
		Margin	%	expenses		expenses		Margin	%	expenses		expenses
As reported	$	561	23% $	395	$	261		$	1,099	39% $	401	$	249
Constant-currency adjustment (1)		21		1					36		1
Translated earnings contract gain (3)		(4)
Acquisition-related costs (4)				(1)					4		(4)		(1)
Restructuring, impairment and other
charges and credits (6)		161		(48)		(13)
Cumulative adjustment related to customer
contract (7)		105
Core performance measures	$	844	33% $	347	$	248		$	1,139	40% $	398	$	248

See Reconciliation of Non-GAAP Financial Measures, "Items which we exclude from GAAP measures to arrive at Core Performance measures" for the descriptions of the footnoted reconciling items.

© 2020 Corning Incorporated. All Rights Reserved.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended March 31, 2020 and 2019

(Unaudited; amounts in millions)

		Three Months		Three Months
		Ended		Ended
		March 31,		March 31,
		2020		2019
Cash flows from operating activities	$	248	$	(29)
Realized gains on translated earnings contracts		11		20
Translation losses on cash balances		(33)		(8)
Severance payments		75
Adjusted cash flows from operating activities	$	301	$	(17)

© 2020 Corning Incorporated. All Rights Reserved.

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Items which we exclude from GAAP measures to arrive at core performance measures are as follows:

(1)	Constant-currencyadjustment: Because a significant portion of segment revenues and expenses are
	denominated in currencies other than the U.S. dollar, management believes it is important to understand the
	impact on core net income of translating these currencies into U.S. dollars. Our Display Technologies segment
	sales and net income are primarily denominated in Japanese yen, but also impacted by the South Korean won,
	Chinese yuan, and new Taiwan dollar. Environmental Technologies and Life Science segments sales and net
	income are impacted by the euro, Chinese yuan and Japanese yen. Presenting results on a constant-currency
	basis mitigates the translation impact and allows management to evaluate performance period over period,
	analyze underlying trends in our businesses, and establish operational goals and forecasts. We establish
	constant-currency rates based on internally derived management estimates which are closely aligned with the
	currencies we have hedged.
	Constant-currency rates are as follows:
	Currency	Japanese yen	Korean won	Chinese yuan	New Taiwan dollar	Euro
	Rate	¥107	₩1,175	¥6.7	NT$31	€.81
(2)	Translation loss (gain) on Japanese yen-denominateddebt: We have excluded the gain or loss on the translation
	of our yen-denominated debt to U.S. dollars.
(3)	Translated earnings contract gain: We have excluded the impact of the realized and unrealized gains and losses
	of our Japanese yen, South Korean won, Chinese yuan, euro and new Taiwan dollar-denominated foreign
	currency hedges related to translated earnings, as well as the unrealized gains and losses of our British pound-
	denominated foreign currency hedges related to translated earnings.
(4)	Acquisition-relatedcosts: These expenses include intangible amortization, inventory valuation adjustments and
	external acquisition-related deal costs.
(5)	Discrete tax items and other tax-relatedadjustments: These include discrete period tax items such as changes in
	tax law, the impact of tax audits, changes in judgement about the realizability of certain deferred tax assets and
	other tax-related adjustments.
(6)	Restructuring, impairment and other charges or credits: This amount includes restructuring, impairment and
	other charges or credits, as well as other expenses, primarily accelerated depreciation and asset write-offs, which
	are not related to continuing operations and are not classified as restructuring expense.
(7)	Cumulative adjustment related to customer contract: The negative impact of a cumulative adjustment to reduce
	revenue in the amount of $105 million. The adjustment was associated with a previously recorded commercial
	benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that is exiting the
	LCD panel manufacturing business.

© 2020 Corning Incorporated. All Rights Reserved.

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