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    2020 Proxy Statement & Annual Report 2019


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    Financial Highlights: In millions, except per share amounts As reported — GAAP Core performance* 2019 2018 2017 2019 2018 2017 Net sales $11,503 $11,290 $10,116 $11,656 $11,398 $10,258 Net income (loss) attributable $960 $1,066 $(497) $1,578 $1,673 $1,634 to Corning Incorporated Diluted earnings (loss) per common share $1.07 $1.13 $(0.66) $1.76 $1.78 $1.60 attributable to Corning Incorporated * Core performance measures are non-GAAP financial measures. The reconciliation between these non-GAAP measures and their most directly comparable GAAP measure is provided on pages 22 through 25 of our Annual Report, as well as on the Company’s website. Core performance measures are adjusted to exclude the impact of changes in foreign exchange rates, as well as other items that do not reflect ongoing operations of the Company. 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 contract used to mitigate the impact of changes in currency exchange rates on our earnings and cash flows.


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    To Our Shareholders: In 2019, Corning fulfilled its commitment to you, our shareholders, as we marked the successful completion of our Strategy and Capital Allocation Framework. Over the last four years, we delivered strong shareholder returns while building you a stronger, more resilient company. The path wasn’t always smooth. But this is Corning – we do what we say we’re going to do. Challenges arise, and when they do, we’re honest about the problems, straightforward in our analyses, and resolute in our actions to stay on track. As a company that has operated during three centuries, Corning is no stranger to holding the course through tough times, and we enter our new Strategy & Growth Framework with the same resolve. We’re realistic about our current environment. We have a tremendous set of opportunities before us. We have a powerful strategy. And the structural steel is in place to ensure the company is stronger than any challenges we face. Each business and function within our organization has a clear understanding of what we are working toward to reach our sales and profitability growth goals over the next four years. We are a company that has been innovating to solve tough technology challenges and improve the lives of people all around the world for 169 years. We are confident that our capabilities and industry relationships will create additional value for you as we move forward.


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    2019 January February March April Introduced the Announced a Recognized as a top global Launched Amplify screen industry’s first quarterly dividend of supplier by Daimler AG for protectors through a AutoGrade™ Corning $0.20 per share, an strategic partnership on collaboration with OtterBox Gorilla Glass solutions 11% increase emissions control innovation Received our sixth consecutive ENERGY STAR® Partner of the Year award 2019 Financial Performance the passive optical market, executed by making careful program which declined. choices, controlling spending, and Before I delve into our strategy, I’d increasing operational efficiencies, like to share Corning’s financial We entered 2019 with strong our profitability declined along results from last year. Our core sales momentum following two years with factory utilization due to were $11.7 billion, up 2% from 2018, of solid growth, and that growth decreased volume. driven by growth in Environmental continued in the first half of the Technologies, Specialty Materials, year. In the second half, we felt the We expect to return to sales and profit and Life Sciences. Core earnings per impact of challenging global growth in the second half barring share were $1.76. During 2019, we market conditions, particularly any external disruptions that could set new four-year targets for growth in Display Technologies and severely affect our ability to conduct and capital allocation, we increased Optical Communications. normal business operations. In Display, our dividend, and we demonstrated we see indicators that the supply our ability to generate significant In Display Technologies, we chain correction has ended, and we operating cash flow even with experienced a temporary supply chain expect to resume volume growth in market performance below our adjustment. Set makers purchased 2020, with the majority reflected in expectations. Strong capital panels more conservatively, which the second half. We also plan to start stewardship is a cornerstone of our drove panel maker utilization production at our next Gen 10.5 plants, management approach. reductions in the second half. As panel which will support faster-than-market makers purchased less glass, our growth as they ramp. In Optical, we Once again, we outperformed our volume declined accordingly. expect year-over-year growth in the underlying markets in each business second half, driven by projects for 5G, segment. We grew Environmental In Optical Communications, after fiber-to-the-home, and hyperscale Technologies sales 16% against a sales increased 13% year over year in data center deployments. As volumes backdrop of declining car sales. We the first half, they declined 16% in the in both businesses increase, so will grew Specialty Materials sales 8% back half. Changes in spending by our factory utilization, improving the while smartphone units were down. two large customers accounted profitability of the corporation. In Life Sciences, we exceeded industry for a significant portion of the growth rates on the strength of new year-over-year decline. bioprocess and advanced cell culture Framework Execution and Results products. In Display Technologies, our We acted quickly to mitigate lower- glass volume grew at a mid-single The successful completion of our than-expected second-half demand in digit rate even though TV unit four-year Strategy and Capital both Display Technologies and sales were down. And, in Optical Allocation Framework represented Optical Communications. While Communications, we outperformed a major milestone for the company. everyone in the company relentlessly


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    May June July August Opened a gasoline particulate Established the 2020- Opened a manufacturing Astra Glass chosen for filter manufacturing facility 2023 Strategy & Growth facility in Hefei, China, for Chengdu CEC Panda in Hefei, China Framework the industry’s first large-part Display’s Oxide-LCD line AutoGrade™ Glass solutions Introduced Corning® Astra™ Glass at SID’s Display Week September Announced Apple’s additional $250 million investment from its Advanced We met or exceeded the strategic goals across the auto ecosystem with Manufacturing Fund we set in 2015 while returning more than industry leaders, including Visteon $12.5 billion to shareholders during the Corporation, LG Electronics, BOE, four-year period, including increasing and GAC. dividends per share by 67%. October • In Optical Communications, we Received FDA approval continued to transform the way the of Corning Valor® Glass We also made significant progress in world connects by enabling 5G and for use as a primary each of our Market-Access Platforms, hyperscale data center solutions package for a marketed with continued strong progress in the drug product with industry leaders – exemplified final year of the plan despite second-half by collaborations with Intel, Verizon, Established a headwinds. In 2019, we made commercial CenturyLink, and Altice Portugal. co-innovation and regulatory progress on Corning partnership with Verizon We also earned global recognition Valor® Glass, a breakthrough glass for to create the 5G factory for products such as RocketRibbon™ of the future the life sciences industry. We opened a extreme density cable, which dedicated factory for our burgeoning enables up to 30% faster installation Announced a 5G automotive glass business and grew in-building network in hyperscale data centers. our order book significantly. We also collaboration with Intel advanced several compelling • In Mobile Consumer Electronics, innovations in Corning® Gorilla® Glass we increased Corning content and Optical Communications. on – and in – mobile devices with Amplify screen protectors, decorative November Overall, we advanced our strategic backs, and durable solutions for Celebrated 25 billion position in each of our markets and square feet sold of wearables. Gorilla Glass has now continued technology investments Corning® EAGLE XG® been used on more than 7 billion Glass substrates focused on high-impact inventions: devices worldwide thanks to the expanded adoption of Gorilla Glass 6 • In Automotive, accelerating gasoline particulate filter (GPF) adoption and advanced glass innovations December for smartphones, wearables, and drove more than $250 million in Exceeded $1 billion in other devices. We extended our 2019 sales in our Life 2019 sales. We delivered the industry leadership with next- Sciences segment industry’s first AutoGrade™ Gorilla generation cover glass solutions and Glass for 2D and 3D interiors along deepened customer commitments, with our proprietary Corning® including an additional $250 million ColdForm™ Technology. We also investment from Apple’s Advanced commercialized these inventions


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    Manufacturing Fund to support Corning’s processes, and reward shareholders. We plan to invest between $10 equipment, and materials integral to the delivery of billion and $12 billion with a focus on organic growth. And next-generation consumer devices. we intend to return $8 billion to $10 billion to shareholders through a combination of dividend increases and • In Life Sciences Vessels, we signed commercial opportunistic share repurchases. agreements with three major pharmaceutical companies, building on the announcement that a Under our new Framework, from 2020 to 2023, we seek to leading pharmaceutical manufacturer received FDA increase annual sales by $3 billion to $4 billion and improve approval of Valor Glass for use as a primary package for profitability, driven primarily by our strategy to create – a marketed drug product. We also exceeded $1 billion and sell into – new product categories that enhance our in sales in our Life Sciences segment as adoption of our customers’ offerings. That provides a path to growth – industry-leading bioprocess and advanced cell culture even in challenging markets. We’re not just counting on products continued, driving our organic growth. everybody buying more stuff; we’re putting more Corning into the products people already buy. • In Display, we created richer entertainment experiences through display glass innovation, Our technology and commercial progress reinforce our including the launch of Corning® Astra™ Glass, position for growth and market momentum. We are excited which was selected by Chengdu CEC Panda Display by the breadth and depth of the opportunities we have Technology Co. for use in the growing oxide display created in each of our markets. Here is a closer look at the market. We continued our leadership in Gen 10.5, Market-Access Platform opportunities that support our increasing output at our first Gen 10.5 plant to support four-year 6% to 8% sales growth CAGR target: the market shift to large-size TVs. • In Automotive, we remain on track to double sales Our businesses in each of these markets have the by the end of 2023. In emissions control, regulations potential to contribute to double-digit earnings growth continue to increase our opportunity per car, and our in the coming years, which means we have many horses GPF technology positions us as the industry leader. pulling the wagon. In auto glass, designers increasingly rely on interior glass as a point of differentiation. Our proprietary technology uniquely meets their needs. We also see Looking Ahead: Strategy & Growth Framework upside in glass components for head-up displays and autonomous vehicles. Successfully ramping our new As I noted earlier, Corning has successfully managed across Hefei factories is key to our success. multiple business cycles during our 169-year history, and this cycle will be no different. We expect 2020 to be, in • In Optical Communications, our technologies will many ways, the mirror image of 2019 – with challenging play a key role in both 5G and hyperscale data center market and customer dynamics in the first half and an deployments. Our new suite of products for 5G and expected return to growth in the second half as both preconnectorized solutions for data centers will play Display Technologies and Optical Communications a vital role in the acceleration of these key industry improve and strong growth continues in Environmental trends. We are also making adjustments to how we Technologies, Specialty Materials, and Life Sciences. As this run the business, with operational improvements happens, we expect the company to return to growing sales in product development and delivery, inventory and profitability. management, and overall accountability. We will continue to align production output and working Looking to the longer term, we expect to drive significant capital to current customer demand. That type of focus organic growth and create additional value for shareholders and improvement takes hard work, but I’m encouraged under our new Strategy & Growth Framework. Specifically, by the team’s dedication and progress. from 2020 to 2023, we expect to deliver 6% to 8% • In Mobile Consumer Electronics, our sales continue on compound annual sales growth and 12% to 15% compound a path to doubling, driven by Gorilla Glass performance annual earnings growth. We also expect to expand innovations that push the state-of-the-art forward. operating margin and return on invested capital. We’ll Acceptance of our DX and DX+ durable covers for continue to use our cash to grow, extend our leadership,


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    smartwatches is outstanding, and innovations for glass over the last 35 years. It’s how we’re extending 50 foldables are making progress. We believe that 5G years of automotive leadership to keep winning in the could stimulate smartphone unit growth and also newest category of emissions control. It’s also why top increase the number of phones with our glass on the pharmaceutical and biotech companies are turning front and the back. to Corning for their production and protection needs. And it’s why we’re able to utilize 50 years of Optical • In Life Sciences Vessels, our leadership continues to Communications expertise to transform the way the world drive growth at more than twice the industry rate. We connects. Today, few competitors can match our expertise are leaders in products for cell-based medicine, which in any of our core capabilities, and when we combine is one of the most promising and fastest growing life capabilities, we become truly formidable. sciences segments. Additionally, Valor Glass provides a new standard for drug packaging. We have not only maintained our competitive advantage • In Display, we expect to see further stabilization over decades—we’ve increased it. And we will continue as panel maker utilization increases, TV screen size to do so during the next four years. We have never continues to increase, and our new Gen 10.5 plants been satisfied with what is currently possible. We have come online. never been attracted to what is easiest. We have never substituted short-term returns for long-term value, which For investors, it’s important to note that the majority of gives us the focus and intensity to persevere through capital necessary to deliver on our Strategy & Growth challenging times. Framework goals has already been deployed. And our technology and commercial progress position us to capture We are all deeply committed to the success of this the significant opportunities we see. institution and to working every day to maintain the trust of shareholders. We are grateful for your partnership on our journey to bring life-changing innovations and products Closing Thoughts to the world. Our sustained investments in technology and people, and our ability to create some of the most consequential Sincerely, material innovations in history, are what make Corning a leader in the markets we serve. It’s why our cover glass has been featured on more than 7 billion mobile devices worldwide since the launch of Gorilla Glass. It’s why we’ve Wendell P. Weeks steadily increased our competitive advantage in display Chairman, Chief Executive Officer, and President Strategy &Growth Focus Portfolio and Utilize Financial Strength: F R A M E W O R K Grow • Sales CAGR of 6%-8% Leadership Priorities 2020 through 2023 • EPS CAGR of 12%-15% • Invest $10B-$12B Increase Returns • Increase operating margin and ROIC • Deliver $8B-$10B to shareholders, including ≥10% annual dividend increases


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    Sustainability: Innovating for Good with our Actions and Products Innovating for Good means we are committed to making the world a better place with our actions and our products. By doing this, we are helping to create a sustainable future for the company and our people, the communities in which we operate, and the planet we all share. Protecting the Environment We’re committed to using less energy, water, and natural resources at every step of our operations. Last year, five more projects went online for a total of 15 solar-energy initiatives at Corning facilities around the globe. These efforts earned us our sixth consecutive ENERGY STAR® Partner of the Year award from the U.S. Environmental Protection Agency. Improving Communities & Economies Last year, we gave approximately $50 million to support nonprofits and help boost the economies in which we operate. We supported educational programs, such as Corning Glass Class in Mainland China and the Future Innovators Program in Taiwan, that help prepare students for promising futures. Our employees continued to donate their time and efforts to help improve the quality of life in our communities around the world. Valuing Diversity & Inclusion In 2019, we achieved 100% pay equity for men and women in Mainland China and Taiwan and made significant progress in other locations outside the U.S., where we achieved pay equity in 2017. Last year, Corning was named to the “Best-of-the-Best” Corporations for Inclusion list by the National LGBT Chamber of Commerce, earned a score of 100 on the Disability Equality Index for the second year in a row, and was recognized as a “Best Place to Work” by the American Association of People with Disabilities and Disability:IN. Transforming Lives with our Products For more than four decades, our clean-air products have been removing harsh gases and particulate matter from the exhaust of cars and trucks. Gorilla Glass for Automotive improves safety and fuel efficiency. Corning® EAGLE XG® Slim Glass for displays is produced with no added heavy metals. Our lab products support important medical research and our pharmaceutical packaging enhances the storage and delivery of medicines essential to public health. Optical fiber and cable connects communities because being connected is no longer a privilege, but a necessity.


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    Annual Report 2019


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    Corning Incorporated 2019 Annual Report Index Business Description.................................................................................................................................................. 1 Risk Factors.................................................................................................................................................................. 7 Legal Proceedings....................................................................................................................................................... 11 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...................................................................................................................... 12 Selected Financial Data (Unaudited) ...................................................................................................................... 13 Quarterly Operating Results..................................................................................................................................... 14 Management’s Discussion and Analysis of Financial Condition and Results of Operations.......................... 15 Quantitative and Qualitative Disclosures About Market Risks .......................................................................... 35 Management’s Annual Report on Internal Control over Financial Reporting .................................................. 36 Report of Independent Registered Public Accounting Firm ................................................................................ 37 Consolidated Statements of Income (Loss) ............................................................................................................ 39 Consolidated Statements of Comprehensive Income .......................................................................................... 40 Consolidated Balance Sheets ................................................................................................................................... 41 Consolidated Statements of Cash Flows ................................................................................................................ 42 Consolidated Statements of Changes in Shareholders’ Equity ........................................................................... 43 Notes to Consolidated Financial Statements ........................................................................................................ 44 1. Summary of Significant Accounting Policies ........................................................................................................................................... 44 2. Revenue .......................................................................................................................................................................................................... 49 3. Inventories, Net of Inventory Reserves...................................................................................................................................................... 50 4. Leases ............................................................................................................................................................................................................. 50 5. Income Taxes ................................................................................................................................................................................................. 51 6. Investments ................................................................................................................................................................................................... 54 7. Acquisitions ................................................................................................................................................................................................... 56 8. Property, Plant and Equipment, Net of Accumulated Depreciation ..................................................................................................... 57 9. Goodwill and Other Intangible Assets ...................................................................................................................................................... 57 10. Other Assets and Other Liabilities ............................................................................................................................................................. 58 11. Debt ................................................................................................................................................................................................................ 60 12. Employee Retirement Plans ........................................................................................................................................................................ 61 13. Commitments, Contingencies and Guarantees ....................................................................................................................................... 67 CORNING 2019 ANNUAL REPORT 14. Hedging Activities ........................................................................................................................................................................................ 69 15. Fair Value Measurements ............................................................................................................................................................................ 71 16. Shareholders’ Equity .................................................................................................................................................................................... 72 17. Earnings (Loss) Per Common Share ............................................................................................................................................................ 75 18. Reportable Segments................................................................................................................................................................................... 76 Valuation and Qualifying Accounts......................................................................................................................... 80


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    Corning Incorporated and its consolidated subsidiaries are hereinafter sometimes referred to as the “Company,” the “Registrant,” “Corning,” or “we.” This report contains forward-looking statements that involve a number of risks and uncertainties. These statements relate to our future plans, objectives, expectations and estimates and may contain words such as “believes,”“expects,”“anticipates,”“estimates,”“forecasts,” or similar expressions. Our actual results could differ materially from what is expressed or forecasted in our forward-looking statements. Some of the factors that could contribute to these differences include those discussed under “Forward-Looking Statements,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. Business Description General Corning traces its origins to a glass business established in 1851. The We are recognized for providing product innovations that enable our present corporation was incorporated in the State of New York in customers to produce larger, lighter, thinner and higher-resolution December 1936. The Company’s name was changed from Corning Glass displays. Some of the product innovations we have launched over the Works to Corning Incorporated on April 28, 1989. past ten years utilizing our world-class processes and capabilities include the following: Corning Incorporated is a leading innovator in materials science. For more than 165 years, Corning has combined its unparalleled expertise in glass • Corning® EAGLE XG® Slim Glass, a line of thin glass substrates which science, ceramic science, and optical physics with deep manufacturing enables lighter-weight portable devices and thinner televisions and engineering capabilities to develop category-defining products and monitors; that transform industries and enhance people’s lives. We succeed through sustained investment in research and development, a unique • Corning IRIS™ Glass, a light-guide plate solution which enables combination of material and process innovation, and deep, trust-based televisions and monitors to be less the 5-mm thick; relationships with customers who are global leaders in their industries. • The family of Corning LOTUS™ Glass, high-performance display glass Corning’s capabilities are versatile and synergistic, allowing the developed to enable cutting-edge technologies, OLEDs and next company to evolve to meet changing market needs, while also helping generation LCDs. These substrate glasses provide industry-leading our customers capture new opportunities in dynamic industries. Today, levels of low total pitch variation, resulting in brighter, more energy- Corning’s markets include optical communications, mobile consumer efficient displays with higher resolutions for consumers and better electronics, display technology, automotive emissions control and glass yields for panel makers; products and life sciences vessels. Corning’s industry-leading products • The world’s first Gen 10 and Gen 10.5 glass substrates in support of include damage-resistant cover glass for mobile devices; precision improved efficiency in manufacturing large-sized televisions; and glass for advanced displays; optical fiber, wireless technologies, and connectivity solutions for state-of-the-art communications networks; • Astra Glass™, an optimized glass solution to meet the emerging needs trusted products to accelerate drug discovery and delivery; and clean-air for future high-resolution displays. These substrate glasses enable technologies for cars and trucks. higher-resolution oxide displays for consumers. Corning operates in five reportable segments: Display Technologies, Corning has display glass manufacturing operations in South Korea, Optical Communications, Environmental Technologies, Specialty Japan, Taiwan and China, and services all its glass customers in all Materials and Life Sciences, and manufactures products at 116 plants in regions directly, utilizing its manufacturing facilities throughout Asia. 15 countries. Patent protection and proprietary trade secrets are important to the Display Technologies segment’s operations. Refer to the material under the heading “Patents and Trademarks” for information relating to Display Technologies Segment patents and trademarks. Corning’s Display Technologies segment manufactures glass substrates The Display Technologies segment represented 28% of Corning’s for high-performance displays, including organic light-emitting diode CORNING 2019 ANNUAL REPORT segment net sales in 2019. (“OLEDs”) and liquid crystal displays (“LCDs”) that are used primarily in televisions, notebook computers and flat panel desktop monitors. This segment develops, manufactures and supplies high quality Optical Communications Segment glass substrates using technology expertise and a proprietary fusion manufacturing process, which Corning invented and is the cornerstone Corning invented the world’s first low-loss optical fiber in 1970. Since of the Company’s technology leadership in the display glass industry. that milestone, we have continued to pioneer optical fiber, cable and Our highly automated process yields glass substrates with a pristine connectivity solutions. As global bandwidth demand driven by video surface and excellent thermal and dimensional stability and uniformity usage grows exponentially, telecommunications networks continue – essential attributes in the production of large, high-performance to migrate from copper to optical-based systems that can deliver the display panels. Corning’s fusion process is scalable and we believe it is required cost-effective bandwidth-carrying capacity. Our experience the most cost-effective process in producing large size substrates. puts us in a unique position to design and deliver optical solutions that reach every edge of the communications network. 1


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    Business Description This segment is classified into two main product groupings – carrier range of tight-buffered, loose tube and ribbon cable designs with flame- network and enterprise network. The carrier network group consists retardant versions available for indoor and indoor/outdoor applications primarily of products and solutions for optical-based communications that meet local building code requirements. infrastructure for services such as video, data and voice communications. The enterprise network group consists primarily of optical-based Corning’s hardware and equipment for enterprise network applications communication networks sold to businesses, governments and include cable assemblies, fiber-optic hardware, fiber-optic connectors, individuals for their own use. optical components and couplers, closures and other accessories. These products may be sold as individual components or as part of Our carrier network product portfolio encompasses an array of optical integrated optical connectivity solutions designed for various network fiber products, including Vascade® submarine optical fibers for use in applications, including hyperscale data centers. Examples of enterprise submarine networks; LEAF® optical fiber for long-haul, regional and network solutions include the Pretium EDGE® platform, which provides metropolitan networks; SMF-28® ULL fiber for more scalable long- high-density pre-connectorized solutions for data center applications, haul and regional networks; SMF-28e+™ single-mode optical fiber and continues to evolve with recent updates for upgrading to 40/100G that provides additional transmission wavelengths in metropolitan applications and port tap modules for network monitoring; the and access networks; ClearCurve® ultra-bendable single-mode fiber previously mentioned ONE Wireless platform, which spans both carrier for use in multiple-dwelling units and fiber-to-the-home applications; and enterprise network applications; and our recently introduced optical and Corning® SMF-28® Ultra Fiber, designed for high performance connectivity solutions to support customer initiatives. across the range of long-haul, metro, access, fiber-to-the-home network applications, combining the benefits of industry-leading attenuation During 2018, Corning acquired substantially all of the 3M Company’s and improved macrobend performance in one fiber. A portion of our (3M) Communication Markets Division (“CMD”) for $841 million. This optical fiber is sold directly to end users and third-party cablers globally. transaction served to augment its Optical Communications segment’s Corning’s remaining fiber production is cabled internally and sold to end global market access and expand its broad portfolio of high-bandwidth users as either bulk cable or as part of an integrated optical solution. optical connectors, assemblies, hardware, and accessories for carrier Corning’s cable products support various outdoor, indoor/outdoor and networks, enterprise LAN and data center solutions. indoor applications and include a broad range of loose tube, ribbon and Our optical fiber manufacturing facilities are in North Carolina, China drop cable designs with flame-retardant versions available for indoor and India. Cabling operations are in North Carolina, Poland and smaller and indoor/outdoor use including 5G networks. regional locations. Our manufacturing operations for hardware and In addition to optical fiber and cable, our carrier network product equipment products are in Texas, Arizona, Mexico, Brazil, Denmark, portfolio also includes hardware and equipment products, including Germany, Poland, Israel, Australia and China. cable assemblies, fiber-optic hardware, fiber-optic connectors, optical Patent protection is important to the segment’s operations. The components and couplers, closures, network interface devices, and segment has an extensive portfolio of patents relating to its products, other accessories. These products may be sold as individual components technologies and manufacturing processes. The segment licenses certain or as part of integrated optical connectivity solutions designed for of its patents to third parties and generates revenue from these licenses, various carrier network applications. Examples of these solutions although the royalty income is not currently material to this segment’s include our FlexNAPTM terminal distribution system, which provides operating results. Corning is licensed to use certain patents owned by pre-connectorized distribution and drop cable assemblies for cost- others, which are considered important to the segment’s operations. effectively deploying fiber-to-the-home (“FTTH”) and 5G networks; and Refer to the material under the heading “Patents and Trademarks” for the CentrixTM platform, which provides a high-density fiber management information relating to the Company’s patents and trademarks. system with industry-leading density and innovative jumper routing that can be deployed in a wide variety of carrier switching centers. The Optical Communications segment represented 35% of Corning’s segment net sales in 2019. To keep pace with surging demand for mobile bandwidth, Corning has a full complement of operator-grade distributed antenna systems (“DAS”), including the recently developed Optical Network Evolution wireless Specialty Materials Segment platform. The ONE™ Wireless Platform (“ONE”) is the first all-optical converged cellular and Wi-Fi® solution built on an all-optical backbone The Specialty Materials segment manufactures products that with modular service support. It provides virtually unlimited bandwidth, provide more than 150 material formulations for glass, glass ceramics and meets all wireless service needs of large-scale enterprises at a lower and fluoride crystals to meet demand for unique customer needs. cost than the typical DAS solution. Consequently, this segment operates in a wide variety of commercial and industrial markets including display optics and components, In addition to our optical-based portfolio, Corning’s carrier network semiconductor optics components, aerospace and defense, astronomy, portfolio also contains select copper-based products including subscriber ophthalmic products, telecommunications components and cover glass demarcation, connection and protection devices, xDSL (different optimized for display devices. variations of digital subscriber lines) passive solutions and outside plant enclosures. In addition, Corning offers coaxial RF interconnects Our cover glass, known as Corning® Gorilla® Glass, is a thin sheet glass CORNING 2019 ANNUAL REPORT for the cable television industry as well as microwave applications for designed specifically to function as a cover glass for display devices such GPS, radars, satellites, manned and unmanned military vehicles, wireless as mobile phones, tablets, smartwatches and notebook PCs. Elegant and applications and telecommunications systems. lightweight, Corning® Gorilla® Glass is durable enough to resist many real-world events that commonly cause glass failure, while maintaining Our enterprise network portfolio also includes optical fiber products, optical clarity, touch sensitivity, and damage resistance, enabling including ClearCurve® ultra-bendable multimode fiber for private and exciting new applications in technology and design. In 2018, Corning hyperscale data centers and other enterprise network applications; unveiled its latest Corning® Gorilla® Glass innovation, Corning® Gorilla® InfiniCor® fibers for local area networks; and more recently ClearCurve® Glass 6, which is designed to be stronger than previous formulas and VSDN® ultra-bendable optical fiber designed to support emerging provide further protection against breakage. Corning® Gorilla® Glass 6 high-speed interconnects between computers and other consumer survives higher drop heights and more repeated drops than Corning® electronics devices. The remainder of Corning’s fiber production is Gorilla® Glass 5. cabled internally and sold to end users as either bulk cable or as part of an integrated optical solution. Corning’s cable products include a broad Corning® Gorilla® Glass is manufactured in Kentucky, South Korea and Taiwan. 2


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    Business Description Semiconductor optics manufactured by Corning include high- Life Sciences Segment performance optical material products, optical-based metrology instruments and optical assemblies for applications in the global As a leading developer, manufacturer and global supplier of laboratory semiconductor industry. Corning’s semiconductor optics products are products for over 100 years, Corning’s Life Sciences segment works manufactured in New York. with researchers and drug manufacturers seeking to drive innovation, increase efficiencies, reduce costs and compress timelines. Using Other specialty glass products include glass lens and window unique expertise in the fields of materials science, polymer surface components and assemblies made in New York, New Hampshire and science, cell culture and cell biology, the segment provides innovative France, and sourced from China. solutions that improve productivity and enable breakthrough research Patent protection is important to the segment’s operations. The segment for traditional small molecule, or chemical, drugs and for emerging cell has a growing portfolio of patents relating to its products, technologies and gene therapies. and manufacturing processes. Brand recognition and loyalty, through Life Sciences products include consumables, such as plastic vessels, well-known trademarks, are important to the segment. Refer to the specialty surfaces, cell culture media and serum, as well as general material under the heading “Patents and Trademarks” for information labware and equipment. These products are used for drug discovery relating to the Company’s patents and trademarks. research and development, compound screening and toxicology testing, The Specialty Materials segment represented 14% of Corning’s segment advanced cell culture research, genomics and mass production of cells net sales in 2019. for clinical trials and bioproduction. Corning sells life sciences products under these primary brands: Corning, Falcon, Pyrex and Axygen. The products are marketed globally, primarily Environmental Technologies Segment through distributors, to pharmaceutical and biotechnology companies, Corning’s Environmental Technologies segment manufactures contract manufacturing organizations, academic institutions, hospitals, ceramic substrates and filter products for emissions control in mobile government entities, and other facilities. Corning manufactures these applications around the world. In the early 1970s, Corning developed an products in California, Illinois, Maine, Massachusetts, New York, North economical, high-performance cellular ceramic substrate that is now Carolina, Utah, Virginia, China, France, Mexico and Poland. the standard for catalytic converters in vehicles worldwide. As global Patent protection is important to the segment’s operations. The emissions control regulations tighten, Corning has continued to develop segment has a growing portfolio of patents relating to its products, more effective and durable ceramic substrate and filter products for technologies and manufacturing processes. Brand recognition and gasoline and diesel applications, most recently launching gasoline loyalty, through well-known trademarks, are important to the segment. particulate filters. Corning manufactures substrate and filter products Refer to the material under the heading “Patents and Trademarks” for in New York, Virginia, China, Germany and South Africa. Corning sells more information. its ceramic substrate and filter products worldwide to catalyzers and manufacturers of emission control systems who then sell to automotive The Life Sciences segment represented 9% of Corning’s segment net and diesel vehicle or engine manufacturers. Although most sales sales in 2019. are made to the emission control systems manufacturers, the use of Corning substrates and filters is generally required by the specifications of the automotive and diesel vehicle or engine manufacturers. All Other Patent protection is important to the segment’s operations. The All other segments that do not meet the quantitative threshold for segment has an extensive portfolio of patents relating to its products, separate reporting have been grouped as “All Other.” This group is technologies and manufacturing processes. Corning is licensed to use primarily comprised of the results of the pharmaceutical technologies certain patents owned by others, which are also considered important business, auto glass, new product lines and development projects, as to the segment’s operations. Refer to the material under the heading well as certain corporate investments. “Patents and Trademarks” for information relating to the Company’s The All Other segment represented 2% of Corning’s segment net sales patents and trademarks. in 2019. The Environmental Technologies segment represented 12% of Corning’s Additional explanation regarding Corning and its five reportable segment net sales in 2019. segments, as well as financial information about geographic areas, is presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 18 (Reportable Segments) to the consolidated financial statements. Corporate Investments CORNING 2019 ANNUAL REPORT Hemlock Semiconductor Operations LLC which are recorded as equity Hemlock Semiconductor Group (“HSG”) method investments of Corning and are affiliated companies of HSG. In 2016, Corning realigned its ownership interest in Dow Corning, HSG manufactures polysilicon products for the semiconductor and exchanging its 50% interest in the joint venture between Corning solar industries. HSG’s solar business primarily serves the solar power and Dow Chemical for a newly formed company that holds a 49.9% panel industry. interest in Hemlock Semiconductor LLC and a 40.25% interest in 3


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    Business Description In prior years, HSG’s solar and semiconductor customers entered into Due to the adverse changes above, the carrying values of HSG’s solar long-term “take or pay” contracts which included up-front cash payments business inventories were also affected resulting in an inventory write- to secure capacity. During the last few years, and more significantly down of $257 million for the year. Corning’s pre-tax share of the provision in 2019, the solar power panel industry experienced significant over- was $105 million. capacity in the market, resulting in declining sales volumes and market prices. As a result, HSG’s solar business experienced lower market HSG adopted the new revenue standard on January 1, 2019 and the penetration, overall price declines, and settled contracts with customers timing of HSG’s revenue recognition for certain remaining performance that had committed volume and fixed pricing above the current market obligations measured at January 1, 2019 was deferred for recognition. price. While these settlements positively impacted HSG’s cash flow in This deferral reduced the carrying amount of Corning’s investment in 2019, they reduced expectations for future sales in HSG’s solar business. HSG by $239 million. During the fourth quarter, a significant number of the performance obligations were satisfied and $434 million was Due to the adverse change in HSG’s solar business, HSG was required recognized into HSG’s net income. Corning’s share of the equity earnings to assess the recoverability of its long-lived assets in the fourth quarter. was $208 million. Based on this assessment, HSG determined that the carrying values of HSG’s solar asset group significantly exceeded its fair values. HSG In addition, HSG settled certain revenue contracts in the fourth quarter, engaged a third-party appraiser to assist in determining the fair value resulting in settlement gains of $383 million in net income. Corning’s of the assets within in the solar asset group based on the highest and share of the settlement gains was $185 million. best use of the asset group. As a result of the fair value determination, Additional information about corporate investments is presented in HSG recognized a pre-tax asset impairment charge of $916 million Note 6 (Investments) to the consolidated financial statements. for the year ended December 31, 2019. Corning’s share of the pre-tax impairment was $369 million. Competition Corning competes with many large and varied manufacturers, both domestic and foreign. Some of these competitors are larger than Corning, Specialty Materials Segment and some have broader product lines. Corning strives to maintain and Corning has deep capabilities in materials science, optical design, improve its market position through technology and product innovation. shaping, coating, finishing, metrology and system assembly. We continue For the foreseeable future, Corning believes its competitive advantage to address the emerging needs of the consumer electronics industry lies in its commitment to research and development, reliability of supply, with the development of chemically strengthened glass. Corning® product quality and technical specification of its products. There is no Gorilla® Glass is a thin-sheet glass that is better able to survive events assurance that Corning will be able to maintain or improve its market that most commonly cause glass failure. Its advanced composition position or competitive advantage. allows a deeper layer of chemical strengthening than is possible with most other chemically strengthened glasses, making it both durable and damage resistant. Our products and capabilities in this segment Display Technologies Segment position the Company to meet the needs of a broad array of markets including display, semiconductor, aerospace, defense, astronomy, vision Corning is the largest worldwide producer of glass substrates for high- care, industrial, commercial, and telecommunications. For this segment, performance display glass. The environment for high-performance Schott, Asahi Glass Co. Ltd., Nippon Electric Glass Co. Ltd. and Heraeus are display glass substrate products is very competitive and Corning believes the main competitors. it has maintained its competitive advantages by investing in new products, continually improving its proprietary fusion manufacturing process and providing a consistent and reliable supply of high quality products. Our process allows us to deliver glass that is larger, thinner Environmental Technologies Segment and lighter, with exceptional surface quality and without heavy metals. Corning believes it maintains a strong position in the worldwide market Asahi Glass Co. Ltd. and Nippon Electric Glass Co. Ltd. are Corning’s for automotive ceramic substrate and filter products, as well as in the principal competitors in display glass substrates. heavy-duty and light-duty diesel vehicle markets. The Company believes its competitive advantage in automotive ceramic substrate products for catalytic converters and filter products for particulate emissions Optical Communications Segment in exhaust systems is based on an advantaged product portfolio, collaborative engineering design services, customer service and support, Corning believes it maintains a leadership position in the segment’s strategic global presence and continued product innovation. Corning’s principal product groups, which include carrier and enterprise CORNING 2019 ANNUAL REPORT Environmental Technologies products face principal competition from networks. The competitive landscape includes industry consolidation, NGK Insulators, Ltd. and Ibiden Co. Ltd. price pressure and competition for the innovation of new products. These competitive conditions are likely to persist. Corning believes its large-scale manufacturing experience, fiber process, technology leadership and intellectual property provide cost advantages relative Life Sciences Segment to several of its competitors. The primary competing producers of the Corning seeks to maintain a competitive advantage by emphasizing Optical Communications segment are CommScope and Prysmian Group. product quality, global distribution, supply chain efficiency, a broad product line and superior product attributes. Our principal competitors include Thermo Fisher Scientific, Inc., Greiner Group AG, Eppendorf AG, Starstedt AG and Danaher Corporation. Corning also faces increasing competition from large distributors that have pursued backward integration or introduced private label products. 4


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    Business Description Raw Materials Corning’s manufacturing processes and products require access to Certain key materials and proprietary equipment used in the uninterrupted power sources, significant quantities of industrial water, manufacturing of products are currently sole-sourced or available only certain precious metals and various batch materials. Availability of from a limited number of suppliers. To minimize this risk, Corning closely resources (ores, minerals, polymers, helium and processed chemicals) monitors raw materials and equipment with limited availability or sole- required in manufacturing operations, appear to be adequate. From time sourced suppliers. However, any future difficulty in obtaining sufficient to time, Corning’s suppliers may experience capacity limitations in their and timely delivery of components and/or raw materials could result in own operations, or may eliminate certain product lines. Corning believes lost sales due to delays or reductions in product shipments, or reductions it has adequate programs to ensure a reliable supply of raw and batch in Corning’s gross margins. materials as well as precious metals. For many of its materials, Corning has alternate suppliers that would allow operations to continue without interruption in the event of specific materials shortages. Patents and Trademarks Inventions by members of Corning’s research and engineering staff • Optical Communications: patents relating to (i) multimode and continue to be important to the Company’s growth. Patents have single mode optical fiber products including low-loss optical fiber, been granted on many of these inventions in the United States and large effective area optical fiber, and other high data rate optical other countries. Some of these patents have been licensed to other fiber, and processes and equipment for manufacturing optical fiber, manufacturers. Many of our earlier patents have now expired, but including methods for making optical fiber preforms and methods Corning continues to seek and obtain patents protecting its innovations. for drawing, cooling and winding optical fiber; (ii) optical fiber ribbons In 2019, Corning was granted about 550 patents in the U.S. and over 1,575 and methods for making such ribbon, indoor and outdoor fiber-optic patents in countries outside the U.S. cable products and methods for making and installing optical fiber cable; (iii) optical fiber connectors and factory-terminated assemblies, Each business segment possesses a patent portfolio that provides hardware, termination and storage and associated methods of certain competitive advantages in protecting Corning’s innovations. manufacture; and (iv) optical fiber and hybrid fiber-coax wireless Corning has historically enforced, and will continue to enforce, its communication systems. intellectual property rights. At the end of 2019, Corning and its wholly- owned subsidiaries owned over 12,500 unexpired patents in various • Environmental Technologies: patents relating to cellular ceramic countries of which over 4,600 were U.S. patents. Between 2020 and honeycomb products, together with ceramic batch and binder 2022, approximately 9% of these patents will expire, while at the same system compositions, honeycomb extrusion and firing processes, and time Corning intends to seek patents protecting its newer innovations. honeycomb extrusion dies and equipment for the high-volume, low- Worldwide, Corning has about 10,600 patent applications in process, cost manufacture of such products. with about 2,300 in process in the U.S. Corning believes that its patent portfolio will continue to provide a competitive advantage in protecting • Specialty Materials: patents relating to protective cover glass the Company’s innovation, although Corning’s competitors in each of its materials and coatings, ophthalmic glasses and polarizing dyes, businesses are actively seeking patent protection as well. and semiconductor/microlithography optics and blanks, metrology instrumentation and laser/precision optics, glass polarizers, specialty While each of our reportable segments has numerous patents in fiber, and refractories. various countries, no one patent is considered material to any of these segments. Important U.S.-issued patents in our reportable segments • Life Sciences: patents relating to methods and apparatus for the include the following: manufacture and use of scientific laboratory equipment including multiwell plates and cell culture products, equipment and processes • Display Technologies: patents relating to glass compositions and for cell and gene therapy research and bioproduction. methods for the use and manufacture of glass substrates for display applications. Products reported in All Other include development projects, new product lines, and other businesses or investments that do not meet the threshold for separate reporting. Approximate number of patents granted to our reportable segments are as follows: Important CORNING 2019 ANNUAL REPORT Number of patents expiring patents between 2020 worldwide U.S. patents and 2022 Display Technologies 1,650 290 9 Optical Communications 4,750 2,180 35 Environmental Technologies 1,150 380 13 Specialty Materials 1,800 660 5 Life Sciences 640 190 1 Many of the Company’s patents are used in operations or are licensed for Corning’s principal trademarks include the following: Axygen, Corning, use by others, and Corning is licensed to use patents owned by others. Celcor, CellSTACK, ClearCurve, DuraTrap, Eagle XG, Edge8, Gorilla®, HPFS, Corning has entered into cross-licensing arrangements with some major HYPERStack, Leaf, Pyrex, Steuben, Falcon, SMF-28e, UniCam, Valor, Willow competitors, but the scope of such licenses has been limited to specific and RocketRibbon. product areas or technologies. 5


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    Business Description Protection of the Environment Corning has an extensive program to ensure that its facilities comply Corning’s 2019 consolidated operating results were charged with with state, federal and foreign pollution-control regulations. This approximately $74 million for depreciation, maintenance, waste disposal program has resulted in capital and operating expenditures each year. and other operating expenses associated with pollution control. To maintain compliance with such regulations, capital expenditures for pollution control in operations were approximately $13.8 million in 2019 and are estimated to be $16.6 million in 2020. Employees At December 31, 2019, Corning had approximately 49,500 full-time employees. From time to time, Corning also retains consultants, independent contractors, temporary and part-time workers. Executive Officers James P. Clappin Executive Vice President, Corning Glass Technologies Clark S. Kinlin Executive Vice President, Corning Optical Communications Mr. Clappin joined Corning in 1980 as a process engineer. He transitioned Mr. Kinlin joined Corning in 1981 in the Specialty Materials division. From to GTE Corporation in 1983 and returned to Corning in 1988. He held a 1985 to 1995 he worked in the Optical Fiber division. In 1995, he joined variety of manufacturing management roles in the consumer products Corning Consumer Products. In 2000, Mr. Kinlin was named president, division, transferring to the display glass business in 1994. He was Corning International Corporation and, in 2003, he was appointed as appointed as general manager of Corning Display Technologies (CDT) in general manager for Greater China. From April 2007 to March 2008, 2002, and was president of CDT from September 2005 to July 2010. He he was chief operating officer, Corning Cable Systems, (now Corning was appointed president, Corning Glass Technologies, in 2010. He was Optical Communications) with responsibility for global sales, marketing, appointed to his present position in 2017. Age 62. and operations. He was named president and chief executive officer of Corning Cable Systems in April 2008. He was appointed executive vice Martin J. Curran Executive Vice President and Innovation Officer president in 2012. Age 60. Mr. Curran joined Corning in 1984 and has held a variety of roles in Lawrence D. McRae Vice Chairman and Corporate Development Officer finance, manufacturing, and marketing. He has served as senior vice president, general manager for Corning Cable Systems Hardware and Mr. McRae joined Corning in 1985 and has held a broad range of leadership Equipment Operations in the Americas, responsible for operations in positions in various finance, sales, marketing, and general management Hickory, North Carolina; Keller, Texas; Reynosa, Mexico; Shanghai, China; across Corning’s businesses. He was appointed vice president Corporate and the Dominican Republic. He has also served as senior vice president Development in 2000, senior vice president Corporate Development and general manager for Corning Optical Fiber. Mr. Curran was appointed in 2003, senior vice president Strategy and Corporate Development in as Corning’s first innovation officer in August 2012. Age 61. 2005, and executive vice president Strategy and Corporate Development in 2010. Mr. McRae has served on Corning’s management committee Jeffrey W. Evenson Executive Vice President and Chief Strategy Officer since 2002 and was named vice chairman in 2015. Age 61. Dr. Evenson joined Corning in 2011 as senior vice president and operations David L. Morse Executive Vice President and Chief Technology Officer chief of staff. In 2015, he was named Chief Strategy Officer. He oversees corporate strategy, corporate communications, and advanced analytics. Dr. Morse joined Corning in 1976 as a composition scientist in glass Prior to joining Corning, Dr. Evenson was a senior vice president with research. In 1985, he was named senior research associate, manager Sanford C. Bernstein, where he served as a senior analyst. Before that, of consumer products development in 1987 and director of materials Dr. Evenson was a partner at McKinsey & Company, where he led research in 1990. He served in a variety of technology leadership technology and market assessment for early-stage technologies. He was positions in organic materials and telecommunications before joining appointed executive vice president in 2018. Age 54. corporate research in 2001. Prior to his current role, he served as senior vice president and director, Corporate Research. Dr. Morse was appointed Robert P. France Senior Vice President, Human Resources to his current position in 2012. He is a member of the National Academy CORNING 2019 ANNUAL REPORT Mr. France joined Corning in 2000 as a commercial Human Resources of Engineering. Age 67. manager for Optical Fiber. He moved to Display Technologies in 2004 Anne Mullins Senior Vice President & Chief Digital & Information Officer as the division Human Resources manager. He was Human Resources director for Corning Glass Technologies and Asia from 2004 to 2016. From Ms. Mullins joined Corning as senior vice president and chief digital 2016 to 2018, Mr. France was Human Resources senior vice president for & information officer in August 2019. In this role, she is responsible Corning Optical Communications, responsible for leading all aspects of for leading the strategic direction of Corning’s global information the Human Resources function across several businesses and had HR technology function and evolving the company’s digital footprint. Generalist responsibility for the Corning China organization. In 2018 he Prior to joining Corning, Ms. Mullins served as chief information officer was appointed as vice president, Human Resources and was appointed for Lockheed Martin and previously served as Lockheed Martin’s chief senior vice president, Human Resources in 2019. Age 54. information security officer. Age 57. 6


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    Risk Factors Eric S. Musser Executive Vice President, Corning Technologies and R. Tony Tripeny Executive Vice President and Chief Financial Officer International Mr. Tripeny joined Corning Cable Systems in 1985 as the corporate Mr. Musser joined Corning in 1986 and served in a variety of accounting manager and became the Keller, Texas facility’s plant manufacturing and general management roles in Corning’s optical controller in 1989. In 1993, he was appointed equipment division communications businesses. In 2005, he was named vice president and controller and, in 1996, corporate controller. Mr. Tripeny was appointed general manager of Optical Fiber. Mr. Musser served as general manager, chief financial officer of Corning Cable Systems in July 2000 and, in 2003, Corning Greater China 2007-2012 and president of Corning International he took on the additional role of group controller, Telecommunications. 2012-2014. He was appointed executive vice president in 2014. Age 60. He was appointed division vice president, operations controller in August 2004, vice president, corporate controller in October 2005, and Edward A. Schlesinger Senior Vice President and Corporate Controller senior vice president and principal accounting officer in April 2009. Mr. Mr. Schlesinger joined Corning in 2013 as senior vice president and Tripeny was then appointed as Corning’s senior vice president and chief chief financial officer of Corning Optical Communications. He was financial officer in September 2015. He was appointed executive vice elected vice president and corporate controller in September 2015 and president in 2018. Age 60. principal accounting officer in December 2015. He was named senior Wendell P. Weeks Chairman, Chief Executive Officer and President vice president in February 2019. Prior to joining Corning, Mr. Schlesinger served as Vice President, Finance and Sector Chief Financial Officer for Mr. Weeks joined Corning in 1983 in the finance group. He has held a the Climate Solutions Sector for Ingersoll Rand. Mr. Schlesinger has a variety of financial, business development, commercial, and general financial career that spans more than 20 years garnering extensive management roles. In 1993 he was named general manager of external expertise in technical accounting, financial management and reporting. development in Corning’s telecommunications business. He was named Age 52. vice president and general manager of the Optical Fiber business in 1996 and president, Corning Optical Communications in 2001. Mr. Weeks has Lewis A. Steverson Executive Vice President and General Counsel been a member of Corning’s Board of Directors since December 2000. He Mr. Steverson joined Corning in 2013 as senior vice president and became Corning’s president and chief operating officer in 2002. He was general counsel. Prior to joining Corning, Mr. Steverson served as senior named chief executive officer in April 2005 and chairman of the board in vice president, general counsel, and corporate secretary of Motorola April 2007. He added the title of president in 2010. Mr. Weeks is a director Solutions, Inc. During his 18 years with Motorola, he held a variety of law of Merck & Co. Inc. and Amazon.com, Inc. Age 60. leadership roles across the company’s numerous business units. Prior to Motorola, Mr. Steverson was in private practice at the law firm of Arnold & Porter. He was appointed executive vice president in 2018. Age 56. Document Availability A copy of Corning’s 2019 Annual Report on Form 10-K filed with other filings are available as soon as reasonably practicable after such the Securities and Exchange Commission is available upon written material is electronically filed or furnished to the SEC, and can be request to Corporate Secretary, Corning Incorporated, One Riverfront accessed electronically free of charge at www.SEC.gov, or through the Plaza, Corning, NY 14831. The Annual Report on Form 10-K, quarterly Investor Relations page on Corning’s website at www.corning.com. The reports on Form 10-Q, current reports on Form 8-K, and amendments information contained on the Company’s website is not included in, or pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 and incorporated by reference into, this Annual Report on Form 10-K. Risk Factors We operate in rapidly changing economic, political, and technological As a global company, we face many risks which could adversely impact environments that present numerous risks. Our operations and financial our operations and financial results results are subject to risks and uncertainties, including those described below, that could adversely affect our business, financial condition, We are a global company and derive a substantial portion of our CORNING 2019 ANNUAL REPORT results of operations, cash flows, our ability to successfully execute our revenues from, and have significant operations, outside of the United Strategy & Growth framework and the trading price of our common States. Our international operations include manufacturing, assembly, stock or debt. The following discussion identifies the most significant sales, research and development, customer support, and shared factors that may adversely affect our business, operations, financial administrative service centers. Additionally, we rely on a global supply position or future financial performance. This information should be chain for key components and capabilities that are central to our ability read in conjunction with our MD&A and the consolidated financial to invent, make and sell products. statements and related notes incorporated by reference into this report. The following discussion of risks is not all inclusive but is designed to highlight what we believe are important factors to consider, as these factors could cause our future results to differ from those in our forward- looking statements and from historical trends. 7


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    Risk Factors Compliance with laws and regulations increases our costs. We are • Political unrest, confiscation or expropriation of assets by foreign subject to both U.S. laws and the local laws where we operate which, governments, terrorism and the potential for other hostilities; among other things, include data privacy requirements, employment and labor laws, tax laws, anti-competition regulations, prohibitions • Difficulty in protecting intellectual property, sensitive commercial and on payments to governmental officials, import and trade restrictions operations data, and information technology systems; and export requirements. Non-compliance or violations could result • Differing legal systems, including protection and treatment of in fines, criminal sanctions against us, our officers or employees, and intellectual property and patents; prohibitions on the conduct of our business. Such violations could result in prohibitions on our ability to offer our products and services in one • Complex, changing or competing tax regimes; or more countries and could also materially damage our reputation, • Difficulty in collecting obligations owed to us; our brand, our international expansion efforts, our ability to attract and retain employees, our business and operating results. Our success • Natural disasters such as floods, earthquakes, tsunamis and depends, in part, on our ability to anticipate and manage these risks. windstorms; and We are also subject to a variety of other risks in managing a global • Potential loss of utilities or other disruption affecting manufacturing. organization, including those related to: Corning’s Display Technologies segment generates a significant amount • The economic and political conditions in each country or region and of the Company’s profits and cash flow. Any significant decrease in among countries; display glass pricing or market share could have a material and negative impact on our financial results • Complex regulatory requirements affecting international trade and investment, including anti-dumping laws, export controls, the Foreign Corning’s ability to generate profits and operating cash flow depends Corrupt Practices Act and local laws prohibiting improper payments. largely on the profitability of our display glass business, which is subject Our operations may be adversely affected by changes in the substance to continuous pricing pressure due to industry competition, potential or enforcement of these regulatory requirements, and by actual or over-capacity, and development of new technologies. If we are not able alleged violations of them; to achieve proportionate reductions in costs and increases in volume to offset ongoing pricing pressure it could have a material adverse impact • Fluctuations in currency exchange rates, convertibility of currencies and on our financial results. restrictions involving the movement of funds between jurisdictions and countries; Because we have a concentrated customer base in each of our businesses, our sales could be negatively impacted by the actions or • Governmental protectionist policies and sovereign and political risks insolvency of one or more key customers, as well as our ability to retain that may adversely affect Corning’s profitability and assets; these customers • Tariffs, trade duties and other trade barriers including anti- A relatively small number of end customers accounted for a high dumping duties; percentage of net sales in each of our reportable segments. Mergers and • Geographical concentration of our factories and operations, and consolidations between customers could result in further concentration regional shifts in our customer base; of Corning’s customer base. Further concentration, or the loss or insolvency of a key customer, could result in a substantial loss of sales • Periodic health epidemic concerns; and reduction in anticipated in cash flows. The following table details the number of combined customers of our segments that accounted for a large percentage of segment net sales: Number of % of total combined segment net sales end customers in 2019 Display Technologies 4 72% Optical Communications 2 21% Specialty Materials 3 59% Environmental Technologies 3 74% Life Sciences 2 41% Business disruptions could affect our operating results We have been closely monitoring the outbreak of the coronavirus that originated in Wuhan, China. We have operations in Wuhan and other A major earthquake, weather event, fire or other catastrophic event that areas of China. We have taken steps to protect our employees and CORNING 2019 ANNUAL REPORT results in the destruction or disruption of any of our critical facilities, operations. The coronavirus may impact the global economy, our ability, or our suppliers’ or customers’ facilities, could severely affect our ability as well as the ability of our customers and suppliers, to manufacture to conduct normal business operations and, as a result, our financial products and may reduce demand in our markets which could result results could be materially and adversely affected. For example, certain in an impact to our financial results. We are taking steps to mitigate manufacturing sites require high quality, continuous, and uninterrupted potential financial impacts, including supplying customers from other power and access to industrial water. Unplanned outages could have regions when appropriate. Currently, it is not possible for us to determine a material negative impact on our operations and ability to supply the financial impact of the coronavirus, if any. our customers. 8


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    Risk Factors Additionally, a significant amount of the specialized manufacturing Information technology dependency and cyber security vulnerabilities capacity for our reportable segments is concentrated in single-site could lead to reduced revenue, liability claims, or competitive harm locations. Due to the specialized nature of the assets, in the event such a location experiences disruption, it may not be possible to find The Company is dependent on information technology systems and replacement capacity quickly or substitute production from other infrastructure, including cloud-based services, (“IT systems”) to conduct facilities. Accordingly, disruption at a single-site manufacturing its business. Our IT systems may be vulnerable to disruptions from operation could significantly impact Corning’s ability to supply its human error, outdated applications, computer viruses, natural disasters, customers and could produce a near-term severe impact on our unauthorized access, cyber-attack and other similar disruptions. We individual businesses and the Company as a whole. have measures and defenses in place against such events, but we may not be able to prevent, immediately detect, or remediate all instances Geopolitical events, as well as other events outside of Corning’s control, of such events. Any significant disruption, breakdown, intrusion, could cause a disruption to our manufacturing operations and adversely interruption or corruption of these systems or data breaches could cause impact our customers, resulting in a negative impact to Corning’s net the loss of data or intellectual property, equipment damage, downtime, sales, net income, asset values and liquidity and/or safety related issues and could have a material adverse effect on our business. A material security breach or disruption of our A natural disaster, epidemic, labor strike, war and social or political IT systems could result in theft, unauthorized use, or publication of our unrest in regions where we operate could adversely affect Corning’s intellectual property and/or confidential business information, harm our ability to supply our customers and impact the value of our assets. Such competitive position, disrupt our manufacturing, reduce the value of our events may also impact our customers’ facilities and reduce our sales investment in research and development and other strategic initiatives, to such customers. For example, a sizeable portion of Corning’s glass impair our ability to access vendors, suppliers and cloud-based services, manufacturing capacity is in South Korea and we generate a significant or otherwise adversely affect our business. portion of our sales through two South Korean customers. Deterioration of the geopolitical climate in such a region could cause a disruption to Additionally, we believe that utilities and other operators of critical our manufacturing operations and adversely impact our customers, infrastructure that serve our facilities face heightened security risks, resulting in a negative impact to Corning’s net sales, net income, asset including cyber-attack. In the event of such an attack, disruption in values and liquidity. service from our utility providers could disrupt our manufacturing operations which rely on a continuous source of power (electrical, Given the geographical concentration of certain of our plants, the gas, etc.). highly engineered nature of our facilities and the globally dispersed talent required to run these facilities, any event that adversely affects or We may not earn a positive return from our research, development and restricts movement into or out of a specific geographic area where we, engineering investments our suppliers, or our customers have a presence, could adversely impact our results. Developing our products through our innovation model of research and development is expensive and often involves a long investment We may experience difficulties in enforcing our intellectual property cycle. We make significant expenditures and investments in research, rights, which could result in loss of market share, and we may be subject development and engineering that may not earn an economic return. to claims of infringement of the intellectual property rights of others If our investments do not provide a pipeline of products or technologies that our customers demand or lower our manufacturing costs, it could We rely on patent and trade secret laws, copyright, trademark, negatively impact our revenues and operating margins both near- and confidentiality procedures, controls and contractual commitments long-term. to protect our intellectual property rights. Despite our efforts, these protections may be limited and we may encounter difficulties in We have significant exposure to foreign currency movements protecting our intellectual property rights or obtaining rights to additional intellectual property necessary to permit us to continue or A large portion of our sales, profit and cash flows are transacted in expand our businesses. We cannot provide assurance that the patents non-U.S. dollar currencies and we expect that we will continue to that we hold or may obtain will provide meaningful protection against experience fluctuations in the U.S. dollar value of these activities if it our competitors. Changes in or enforcement of laws concerning is not possible or cost effective to hedge our currency exposures or intellectual property may affect our ability to prevent or address should we elect not to hedge certain currency exposures. Alternatively, the misappropriation of, or the unauthorized use of, our intellectual we may experience gains or losses if the underlying exposure which we property, potentially resulting in loss of market share. Litigation may have hedged increases or decreases significantly and we are unable to be necessary to enforce our intellectual property rights. Litigation is reverse, unwind, or terminate the hedges concurrent with changes in inherently uncertain and outcomes are unpredictable. If we cannot the underlying notional exposure. protect our intellectual property rights against unauthorized copying or Our ultimate realized loss or gain with respect to currency fluctuations use, or other misappropriation, we may not remain competitive. will generally depend on the size and type of cross-currency exposures The intellectual property rights of others could inhibit our ability to that we have, the exchange rates associated with these exposures and changes in those rates, whether we have entered into foreign currency CORNING 2019 ANNUAL REPORT introduce new products. Other companies hold patents on technologies used in our industries and are aggressively seeking to expand, enforce contracts to offset these exposures and other factors. and license their patent portfolios. We periodically receive notices from, Our hedge portfolio may reduce our ability to respond to price moves or have lawsuits filed against us by third parties claiming infringement, by our Display Technologies segment competitors. Foreign currency misappropriation or other misuse of their intellectual property rights movements may impact our competitive cost position relative to our and/or breach of our agreements with them. These third parties often largest, Japan-based competitors in the Display Technologies segment. include entities that do not have the capabilities to design, manufacture, The profitability of customers may also be impacted as they typically or distribute products or that acquire intellectual property like patents purchase from us in Japanese yen and sell in various currencies. for the sole purpose of monetizing their acquired intellectual property through asserting claims of infringement and misuse. Such claims These factors, which are variable and generally outside of our control, of infringement or misappropriation may result in loss of revenue, could materially impact our results of operations, anticipated future substantial costs, or lead to monetary damages or injunctive relief results, financial position and cash flows. against us. 9


  • Page 20

    Risk Factors We may have significant exposure to counterparties of our related We are subject to strict environmental regulations and regulatory derivatives portfolio changes that could result in fines or restrictions that interrupt our operations We maintain a significant portfolio of over the counter derivatives to hedge our projected currency exposure to the Japanese yen, new Taiwan Some of our manufacturing processes generate chemical waste, waste dollar, South Korean won, Chinese yuan and euro. We are exposed to water, other industrial waste or greenhouse gases, and we are subject to potential losses in the event of non-performance by our counterparties numerous laws and regulations relating to the use, storage, discharge to these derivative contracts. Any failure of a counterparty to pay on such and disposal of such substances. We have installed anti-pollution a contract when due could materially impact our results of operations, equipment for the treatment of chemical waste and waste water at financial position, and cash flows. our facilities. We have taken steps to control the amount of greenhouse gases created by our manufacturing operations. However, we cannot If we are unable to obtain certain specialized equipment, raw and batch provide assurance that environmental claims will not be brought materials or natural resources required in our products or processes, our against us or that government regulators will not take steps to adopt business will suffer more stringent environmental standards. Our ability to meet customer demand depends, in part, on our ability to Any failure on our part to comply with any present or future obtain timely and adequate delivery of equipment, parts, components environmental regulations could result in the assessment of damages or and raw materials from our suppliers. We may experience shortages imposition of fines against us, or the suspension/cessation of production that could adversely affect our operations. Certain manufacturing or operations. In addition, environmental regulations could require us to equipment, components and raw materials are available only from acquire costly equipment, incur other significant compliance expenses single or limited sources, and we may not be able to find alternate or limit or restrict production or operations and thus materially and sources in a timely manner. A reduction, interruption or delay of supply, negatively affect our financial condition and results of operations. or a significant increase in the price for supplies, such as manufacturing equipment, precious metals, raw materials, utilities including energy and Changes in regulations and the regulatory environment in the U.S. and industrial water, could have a material adverse effect on our businesses. other countries, such as those resulting from the regulation and impact of global warming and CO2 abatement, may affect our businesses and We use specialized raw materials from single-source suppliers (e.g., their results in adverse ways by, among other things, substantially specific mines or quarries) and natural resources (e.g., helium) in certain increasing manufacturing costs, limiting availability of scarce resources, products and processes. If a supplier is unable to provide the required especially energy, or requiring limitations on production and sale of our raw materials or the natural resource is in scarce supply or not readily products or those of our customers. available, we may be unable to change our product composition or manufacturing process to prevent disruption to our business. Current or future litigation or regulatory investigations may harm our financial condition or results of operations We may have additional tax liabilities As a global technology and manufacturing company, we are engaged We are subject to income taxes in the U.S. and many foreign in various litigation and regulatory matters. Litigation and regulatory jurisdictions, and are commonly audited by various tax authorities. proceedings may be uncertain, and adverse rulings could occur, resulting There are many transactions and calculations where the ultimate tax in significant liabilities, penalties or damages. Any such substantial legal treatment is uncertain. Significant judgment is required in determining liability or regulatory action could have a material adverse effect on our our worldwide provision for income taxes. Although we believe our tax business, financial condition, cash flows and reputation. estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical Our global operations are subject to extensive trade and anti-corruption income tax provisions and accruals. The results of an audit or litigation laws and regulations could have a material effect on our financial statements in the period or periods for which that determination is made. Due to the international scope of our operations, we are subject to a complex system of import- and export-related laws and regulations, The 2017 Tax Act significantly impacted how U.S. global corporations including U.S. regulations issued by Customs and Border Protection, the are taxed. Significant guidance has been issued with the intention of Bureau of Industry and Security, the Office of Anti-boycott Compliance, clarifying the new tax provisions. To date, some of the regulations had the Directorate of Defense Trade Controls and the Office of Foreign been finalized and clarified but a considerable amount of this guidance Assets Control, as well as the counterparts of these agencies in other is still in the form of proposed regulations. Due to volume and complexity countries. Any alleged or actual violation by an employee or the of both of final and proposed regulations, we continue to evaluate any Company may subject us to government scrutiny, investigation and civil development and impact of the 2017 Tax Act that could have a material and criminal penalties, and may limit our ability to import or export our adverse impact on our tax expense and cash flow. In addition to the 2017 products or to provide services outside the United States. We cannot Tax Act, other foreign countries and international organizations such predict the nature, scope or effect of future regulatory requirements to as Organisation for Economic Co-operation and Development (“OECD”) which our operations might be subject or the way existing laws might may have law changes and issue new international tax standards that be administered or interpreted. CORNING 2019 ANNUAL REPORT may also impact our taxes. In addition, the U.S. Foreign Corrupt Practices Act and similar foreign anti- Our innovation model depends on our ability to attract and retain corruption laws generally prohibit companies and their intermediaries specialized experts in our core technologies from making improper payments or providing anything of value to improperly influence foreign government officials for the purpose Our innovation model requires us to employ highly specialized experts of obtaining or retaining business, or obtaining an unfair advantage. in glass science, ceramic science, and optical physics to conduct our Recent years have seen a substantial increase in the global enforcement research and development and engineer our products and design of anti-corruption laws. Our continued operation and expansion outside our manufacturing facilities. The loss of the services of any member the United States, including in developing countries, could increase the of our key research and development or engineering team without risk of alleged violations. Violations of these laws may result in severe adequate replacement, or the inability to attract new qualified criminal or civil sanctions, could disrupt our business, and result in an personnel, could have a material adverse effect on our operations and adverse effect on our reputation, business and results of operations or financial performance. financial condition. 10


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    Legal Proceedings Moreover, several of our key customers are domiciled in areas of the the demand for our products and services, impact the competitive world with laws, rules and business practices that may notably differ position of our products or prevent us (including our equity affiliates/ from those in the United States, and we face the reputational and legal joint ventures) from being able to sell and/or manufacture products risk that our related partners may violate applicable laws, rules and in certain countries. The implementation of more restrictive trade business practices. policies, such as higher tariffs or new barriers to entry, in countries in which we sell large quantities of products and services could negatively International trade policies may negatively impact our ability to sell and impact our business, results of operations and financial condition. manufacture our products outside of the U.S. For example, a government’s adoption of “buy national” policies or Government policies on international trade and investment such retaliation by another government against such policies could have a as import quotas, tariffs, and capital controls, whether adopted by negative impact on our results of operations. These policies also affect individual governments or addressed by regional trade blocs, can affect our equity companies. Legal Proceedings Corning is a defendant in various lawsuits and is subject to various cleanup unless the Agency agrees otherwise. It is Corning’s policy to claims that arise in the normal course of business, the most significant accrue for its estimated liability related to Superfund sites and other of which are summarized in Note 13 (Commitments, Contingencies and environmental liabilities related to property owned by Corning based Guarantees) to the consolidated financial statements. In the opinion on expert analysis and continual monitoring by both internal and of management, the likelihood that the ultimate disposition of these external consultants. At December 31, 2019 and 2018, Corning had matters will have a material adverse effect on Corning’s consolidated accrued approximately $41 million (undiscounted) and $30 million financial position, liquidity, or results of operations, is remote. (undiscounted), respectively, for the estimated liability for environmental cleanup and related litigation. Based upon the information developed Environmental Litigation. Corning has been named by the Environmental to date, management believes that the accrued reserve is a reasonable Protection Agency (the Agency) under the Superfund Act, or by state estimate of the Company’s liability and that the risk of an additional loss governments under similar state laws, as a potentially responsible in an amount materially higher than that accrued is remote. party for 15 active hazardous waste sites. Under the Superfund Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally liable for the cost of CORNING 2019 ANNUAL REPORT 11


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    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Corning Incorporated common stock is listed on the New York Stock Exchange. In addition, it is traded on the Boston, Midwest and Philadelphia stock exchanges. Common stock options are traded on the Chicago Board Options Exchange. The ticker symbol for Corning Incorporated is “GLW”. As of December 31, 2019, there were approximately 12,400 registered holders of common stock and approximately 496,000 beneficial shareholders. Performance Graph The following graph illustrates the cumulative total shareholder return over the last five years of Corning’s common stock, the S&P 500 and the S&P Communications Equipment Companies. The graph includes the capital-weighted-performance results of those companies in the communications equipment company classification that are also included in the S&P 500. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG CORNING INCORPORATED, S&P 500 AND S&P COMMUNICATIONS EQUIPMENT (Fiscal Years Ended December 31) $200 Indexed to 100 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2014 2015 2016 2017 2018 2019 Corning Incorporated S&P Communications Equipment S&P 500 (b) Not applicable. (c) The following table provides information about our purchases of our common stock during the fiscal fourth quarter of 2019: Issuer Purchases of Equity Securities Number of shares purchased as Approximate dollar value of shares that Number of shares Average price paid part of publicly announced may yet be purchased under the plans Period purchased(1) per share plans or programs or programs CORNING 2019 ANNUAL REPORT October 1-31, 2019 4,920,237 $ 29.07 4,881,900 November 1-30, 2019 1,349,462 $ 29.68 1,347,400 December 1-31, 2019 1,427,861 $ 28.34 1,410,800 Total 7,697,560 $ 29.04 7,640,100 $ 5,423,181,765 (1) This column reflects the following transactions during the fourth quarter of 2019: (i) the deemed surrender to us of 11,430 shares of common stock to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units; (ii) the deemed surrender to us of 45,929 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees; (iii) the deemed surrender to us of 101 shares of common stock to pay the exercise price and to satisfy tax withholding obligations in connection with the exercise of employee stock options; and (iv) the purchase of 7,640,100 shares of common stock under the 2018 and 2019 Repurchase Programs. 12


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    Selected Financial Data (Unaudited) Years ended December 31, (In millions, except per share amounts and number of employees) 2019 2018 2017 2016 2015 Results of operations Net sales $ 11,503 $ 11,290 $ 10,116 $ 9,390 $ 9,111 Research, development and engineering expenses $ 1,031 $ 993 $ 864 $ 736 $ 745 Equity in earnings of affiliated companies $ 17 $ 390 $ 361 $ 284 $ 299 Net income (loss) attributable to Corning Incorporated(1)(2) $ 960 $ 1,066 $ (497) $ 3,695 $ 1,339 Earnings (loss) per common share attributable to Corning Incorporated: Basic earnings (loss) per common share $ 1.11 $ 1.19 $ (0.66) $ 3.53 $ 1.02 Diluted earnings (loss) per common share $ 1.07 $ 1.13 $ (0.66) $ 3.23 $ 1.00 Cash dividends declared per common share $ 0.80 $ 0.72 $ 0.62 $ 0.54 $ 0.36 Shares used in computing per share amounts: Basic 776 816 895 1,020 1,219 Diluted 899 941 895 1,144 1,343 Financial position Working capital $ 3,942 $ 3,723 $ 5,618 $ 6,297 $ 5,455 Total assets $ 28,898 $ 27,505 $ 27,494 $ 27,899 $ 28,527 Long-term debt(3) $ 7,729 $ 5,994 $ 4,749 $ 3,646 $ 3,890 Total Corning Incorporated shareholders’ equity $ 12,907 $ 13,792 $ 15,698 $ 17,893 $ 18,788 Selected data Capital expenditures $ 1,978 $ 2,242 $ 1,804 $ 1,130 $ 1,250 Depreciation and amortization $ 1,503 $ 1,293 $ 1,158 $ 1,195 $ 1,184 Number of employees 49,500 51,500 46,200 40,700 35,700 (1) Year ended December 31, 2017 includes the impact of the 2017 Tax Act, including a provisional toll charge ($1.1 billion) and provisional remeasurement of deferred tax balances due to the reduction in Corning’s tax rate ($347 million). (2) Year ended December 31, 2016 includes a $2.7 billion non-taxable gain on the strategic realignment of our ownership interest in Dow Corning. (3) Refer to Note 11 (Debt) to the consolidated financial statements for additional information. Reference should be made to the notes to the consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations. CORNING 2019 ANNUAL REPORT 13


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    Quarterly Operating Results (unaudited) (In millions, except per share amounts) 2019 First quarter Second quarter Third quarter Fourth quarter Total year Net sales $ 2,812 $ 2,940 $ 2,934 $ 2,817 $ 11,503 Gross margin $ 1,099 $ 1,065 $ 1,017 $ 854 $ 4,035 Equity in (losses) earnings of affiliated companies $ 25 $ 33 $ 23 $ (64) $ 17 (Provision) benefit for income taxes $ (76) $ (124) $ (71) $ 15 $ (256) Net income attributable to Corning Incorporated $ 499 $ 92 $ 337 $ 32 $ 960 Basic earnings per common share $ 0.61 $ 0.09 $ 0.40 $ 0.01 $ 1.11 Diluted earnings per common share $ 0.55 $ 0.09 $ 0.38 $ 0.01 $ 1.07 2018 First quarter Second quarter Third quarter Fourth quarter Total year Net sales $ 2,500 $ 2,747 $ 3,008 $ 3,035 $ 11,290 Gross margin $ 955 $ 1,072 $ 1,232 $ 1,202 $ 4,461 Equity in earnings of affiliated companies $ 39 $ 31 $ 32 $ 288 $ 390 Provision for income taxes $ (124) $ (126) $ (133) $ (54) $ (437) Net (loss) income attributable to Corning Incorporated $ (589) $ 738 $ 625 $ 292 $ 1,066 Basic (loss) earnings per common share $ (0.72) $ 0.87 $ 0.75 $ 0.34 $ 1.19 Diluted (loss) earnings per common share $ (0.72) $ 0.78 $ 0.67 $ 0.32 $ 1.13 CORNING 2019 ANNUAL REPORT 14


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations For discussion of 2018 results year-over-year comparison with 2017 results refer to "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Organization of Information Management’s Discussion and Analysis provides a historical and prospective narrative on the Company’s financial condition and results of operations. This discussion includes the following sections: • Overview • Environment • Results of Operations • Critical Accounting Estimates • Core Performance Measures • New Accounting Standards • Reportable Segments • Forward-Looking Statements • Liquidity and Capital Resources Overview For the year ended December 31, 2019, we generated net income Strategy and Capital Allocation Framework of $960 million, or $1.07 per share, compared to a net income of and recently introduced Strategy & $1,066 million, or $1.13 per share, for 2018. When compared to 2018, the $106 million decrease in net income was primarily due to the following Growth Framework items (amounts presented after tax): On June 14, 2019, Corning introduced its 2020-2023 Strategy & Growth • Lower equity earnings in affiliated companies of $284 million when Framework. From 2020 to 2023, the company plans to invest $10 billion to compared to the prior period, primarily driven by asset impairments $12 billion for growth and to return $8 billion to $10 billion to shareholders. and an inventory provision, partially offset by the deferred revenue In October 2015, Corning announced a strategy and capital allocation recognition associated with adoption of the new revenue standard, as framework (the “Framework”) that reflects the Company’s financial and well as one-time settlement gains from revenue contracts; operational strengths, as well as its ongoing commitment to increasing • Higher costs of $238 million, primarily driven by accelerated shareholder value. The Framework outlined our leadership priorities depreciation and asset write-offs for our Display Technologies and and articulated the opportunities we saw across our businesses. We Optical Communications segments; and designed the Framework to create significant value for shareholders by focusing our portfolio and leveraging our financial strength. Under • Lower segment net income of $83 million primarily driven by lower sales the Framework, we targeted generating $26 billion to $30 billion of in our Display Technologies and Optical Communications segments. cash through 2019, returning more than $12.5 billion to shareholders and investing $10 billion to extend our leadership positions and deliver Partially offsetting these events were the following items: growth. As of June 30, 2019, Corning met its goal of returning more • Translated earnings contract gains in the current period were than $12.5 billion to shareholders. As of December 31, 2019, Corning had $287 million higher than prior year losses; invested almost $11 billion for growth and extended leadership. • Costs related to litigation, regulatory and other legal matters were Corning’s Frameworks outline the company’s leadership priorities. With $109 million lower, primarily driven by the absence of a $103 million the completed Strategy and Capital Allocation Framework and new charge related to legal matters recorded in 2018, including a ruling in Strategy & Growth Framework, Corning plans to focus its portfolio an intellectual property lawsuit and developments in civil litigation; and utilize its financial strength. Our probability of success increases CORNING 2019 ANNUAL REPORT as we invest in our world-class capabilities. Corning is concentrating • A positive impact of $44 million resulting from a lower mark-to-market approximately 80% of its research, development and engineering loss for our defined benefit pension plans; and investment along with capital spending on a cohesive set of three core • The positive impact of $42 million in tax adjustments primarily relating technologies, four manufacturing and engineering platforms, and five to the absence of a $172 million IRS audit settlement, or approximately market-access platforms. This strategy allows us to quickly apply our $40 million of taxes payable after the utilization of tax attributes, talents and repurpose our assets across the company, as needed, to recorded in the first quarter of 2018, netted against changes in tax capture high-return opportunities. reserves, changes in foreign valuation allowances and changes in the estimate of 2018 tax expense due to new tax reform guidance. 2019 Results Net sales in the year ended December 31, 2019 were $11.5 billion, an increase of $213 million, or 2%, when compared to the year ended December 31, 2018, driven by increased sales in the Specialty Materials, Environmental Technologies and Life Sciences segments offset by decreased sales in the Display Technologies and Optical Communications segments. 15


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Diluted earnings per share decreased by $0.06 per share, or 5%, when manufacture products and may reduce demand in our markets which compared to 2018, driven by the decrease in net income described above, could result in an impact to our financial results. We are taking steps partially offset by the repurchase of 31.0 million shares of common stock to mitigate potential financial impacts, including supplying customers over the last twelve months. from other regions when appropriate. Currently, it is not possible for us to determine the financial impact of the coronavirus, if any. Our 2020 The translation impact of fluctuations in foreign currency exchange corporate outlook, outlined above, does not include any potential impact rates, including the impact of hedges realized in the current year, for the coronavirus. negatively impacted Corning’s net income by approximately $44 million in the year ended December 31, 2019, when compared to the same period We believe 2020 will be another year of growth in several segments in 2018. and continued investment in innovations, consistent with our Strategy & Growth Framework. Corning expects its display glass volume to grow by a mid-single digit percentage, similar to the mid-single 2020 Corporate Outlook digit percentage growth expected in the display glass market. The company expects glass price declines to remain moderate, down a mid- We have been closely monitoring the outbreak of the coronavirus single digit percentage for the full year. The company expects Optical that originated in Wuhan, China. We have operations in Wuhan and Communications full-year sales to decline by 5% to 10%. We expect mid- other areas of China. We have taken steps to protect our employees single digit percentage sales growth in our Environmental Technologies and operations. The coronavirus may impact the global economy, and Life Sciences segments. We expect high-single digit percentage our ability, as well as the ability of our customers and suppliers, to sales growth in the Specialty Materials segment. Results of Operations Selected highlights from our operations follow (in millions): % change 2019 2018 2017 19 vs. 18 18 vs. 17 Net sales $ 11,503 $ 11,290 $ 10,116 2 12 Gross margin $ 4,035 $ 4,461 $ 4,020 (10) 11 (gross margin %) 35% 40% 40% Selling, general and administrative expenses $ 1,585 $ 1,799 $ 1,473 (12) 22 (as a % of net sales) 14% 16% 15% Research, development and engineering expenses $ 1,031 $ 993 $ 864 4 15 (as a % of net sales) 9% 9% 9% Equity in earnings of affiliated companies $ 17 $ 390 $ 361 (96) 8 (as a % of net sales) 3% 4% Translated earnings contract gain (loss), net $ 248 $ (93) $ (121) * 23 (as a % of net sales) 2% (1)% (1)% Income before income taxes $ 1,216 $ 1,503 $ 1,657 (19) (9) (as a % of net sales) 11% 13% 16% Provision for income taxes $ (256) $ (437) $ (2,154) 41 80 (as a % of net sales) (2)% (4)% (21)% Net income (loss) attributable to Corning Incorporated $ 960 $ 1,066 $ (497) (10) * (as a % of net sales) 8% 9% (5)% CORNING 2019 ANNUAL REPORT * Percent change not meaningful. 16


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Segment Net Sales The following table presents segment net sales by reportable segment (in millions): % % Years ended December 31, change change 2019 2018 2017 19 vs. 18 18 vs. 17 Display Technologies $ 3,254 $ 3,276 $ 3,137 (1)% 4% Optical Communications 4,064 4,192 3,545 (3)% 18% Specialty Materials 1,594 1,479 1,403 8% 5% Environmental Technologies 1,499 1,289 1,106 16% 17% Life Sciences 1,015 946 879 7% 8% All Other 230 216 188 6% 15% Net sales of reportable segments and All Other $ 11,656 $ 11,398 $ 10,258 2% 11% Constant-currency adjustment (153) (108) (142) (42)% 24% Consolidated net sales $ 11,503 $ 11,290 $ 10,116 2% 12% Gross Margin For the year ended December 31, 2019, segment net sales increased by $258 million, or 2%, when compared to the same period in 2018. The In the year ended December 31, 2019, gross margin dollars decreased primary sales drivers by segment were as follows: by $426 million, or 10%, and gross margin as a percentage of net sales declined by 5% when compared to the same period last year. • Net sales in the Display Technologies segment decreased by $22 million, Negative impacts to gross margin were primarily driven by accelerated with glass volume up a mid-single digit percentage and low-single depreciation, asset write-offs and lower sales in our Display Technologies digit percentage display glass price declines; the combination of and Optical Communications segments during 2019. As volume declined finished goods volume, unfinished glass sold to our equity affiliates in the second half of 2019, factory utilization was less efficient and and a low-single-digit percentage price decline resulted in a one negatively impacted gross margin. percent sales decline; Movements in foreign exchange rates had a $33 million positive impact • Optical Communications net sales decreased $128 million, primarily on Corning’s consolidated gross margin in the year ended December 31, due to lower sales in carrier products, down $199 million, partially 2019, when compared to the same period in 2018. offset by an increase of $71 million in enterprise network sales; • Specialty Materials segment net sales increased by $115 million, primarily driven by strong demand for Gorilla® Glass; Selling, General and Administrative Expenses • Net sales for Environmental Technologies increased $210 million, When compared to the year ended December 31, 2018, selling, general primarily driven by sales growth of gasoline particulate filters; and and administrative expenses decreased by $214 million, or 12%, in the year ended December 31, 2019. Selling, general and administrative • Life Sciences net sales increased by $69 million, as sales volume expenses decreased by 2% as a percentage of sales. The decrease was continued to outpace market growth. primarily driven by the following items: Movements in foreign exchange rates negatively impacted Corning’s • The absence of a $132 million charge related to legal matters in 2018, consolidated net sales by $45 million in the year ended December 31, including a ruling in an intellectual property lawsuit and developments 2019, when compared to the same period in 2018. in civil litigation matters; and In 2019, sales in international markets accounted for 68% of total • Reduced variable compensation expenses of $85 million. net sales. Cost of Sales Research, Development and Engineering Expenses The types of expenses included in the cost of sales line item are: raw materials consumption, including direct and indirect materials; salaries, For the year ended December 31, 2019, research, development and CORNING 2019 ANNUAL REPORT wages and benefits; depreciation and amortization; production utilities; engineering expenses increased by $38 million, or 4%, when compared production-related purchasing; warehousing (including receiving and to the same period in prior year, driven by higher costs associated with inspection); repairs and maintenance; inter-location inventory transfer new product launches and our emerging businesses. As a percentage costs; production and warehousing facility property insurance; rent for of sales, these expenses were consistent when compared to the same production facilities; and other production overhead. period in the previous year. 17


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Equity in Earnings of Affiliated Companies The following provides a summary of equity earnings (losses) of affiliated companies (in millions): Years ended December 31, 2019 2018 2017 Hemlock Semiconductor Group $ 27 $ 388 $ 352 All other (10) 2 9 Total equity earnings $ 17 $ 390 $ 361 In 2016, Corning realigned its ownership interest in Dow Corning, Due to the adverse changes above, the carrying values of HSG’s solar exchanging its 50% interest in the joint venture between Corning business inventories were also affected resulting in an inventory write- and Dow Chemical for a newly formed company that holds a 49.9% down of $257 million for the year. Corning’s pre-tax share of the provision interest in Hemlock Semiconductor LLC and a 40.25% interest in was $105 million. Hemlock Semiconductor Operations LLC which are recorded as equity method investments of Corning and are affiliated companies of HSG. HSG adopted the new revenue standard on January 1, 2019 and the HSG manufactures polysilicon products for the semiconductor and timing of HSG’s revenue recognition for certain remaining performance solar industries. HSG’s solar business primarily serves the solar power obligations measured at January 1, 2019 was deferred for recognition. panel industry. This deferral reduced the carrying amount of Corning’s investment in HSG by $239 million. During the fourth quarter, a significant number In prior years, HSG’s solar and semiconductor customers entered into of the performance obligations were satisfied and $434 million was long-term “take or pay” contracts which included up-front cash payments recognized into HSG’s net income. Corning’s share of the equity earnings to secure capacity. During the last few years, and more significantly was $208 million. in 2019, the solar power panel industry experienced significant over- capacity in the market, resulting in declining sales volumes and market In addition, HSG settled certain revenue contracts in the fourth quarter, prices. As a result, HSG’s solar business experienced lower market resulting in settlement gains of $383 million in net income. Corning’s penetration, overall price declines, and settled contracts with customers share of the settlement gains was $185 million. that had committed volume and fixed pricing above the current market Additional information about corporate investments is presented in price. While these settlements positively impacted HSG’s cash flow in Note 6 (Investments) to the consolidated financial statements. 2019, they reduced expectations for future sales in HSG’s solar business. Due to the adverse change in HSG’s solar business, HSG was required to assess the recoverability of its long-lived assets in the fourth quarter. Translated earnings contracts Based on this assessment, HSG determined that the carrying values Included in the line item translated earnings contract gain (loss), net, of HSG’s solar asset group significantly exceeded its fair values. HSG is the impact of foreign currency hedges which hedge our translation engaged a third-party appraiser to assist in determining the fair value exposure arising from movements in the Japanese yen, South Korean of the assets within in the solar asset group based on the highest and won, new Taiwan dollar, euro, Chinese yuan and British pound and its best use of the asset group. As a result of the fair value determination, impact on our net income (loss). HSG recognized a pre-tax asset impairment charge of $916 million for the year ended December 31, 2019. Corning’s share of the pre-tax impairment was $369 million. The following table provides detailed information on the impact of our translated earnings contracts gains and losses for the years ended December 31, 2019, 2018 and 2017: Income (loss) Net before income Loss before Net Income before Net tax (loss) tax loss tax Income (in millions) 2019 2018 2019 vs. 2018 Hedges related to translated earnings: Realized gain, net $ 18 $ 14 $ 97 $ 78 $ (79) $ (64) Unrealized gain (loss) 230 179 (190) (189) 420 368 CORNING 2019 ANNUAL REPORT Total translated earnings contract gain (loss), net $ 248 $ 193 $ (93) $ (111) $ 341 $ 304 2018 2017 2018 vs. 2017 Hedges related to translated earnings: Realized gain, net $ 97 $ 78 $ 270 $ 169 $ (173) $ (91) Unrealized loss (190) (189) (391) (247) 201 58 Total translated earnings contract loss, net $ (93) $ (111) $ (121) $ (78) $ 28 $ (33) 18


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations The gross notional value outstanding on our translated earnings contracts and foreign currency cash flow hedges were as follows (in billions): Years ended December 31, 2019 2018 2017 Japanese yen-denominated translated earnings contracts $ 10.2 $ 11.6 $ 13.0 South Korean won-denominated translated earnings contracts 0.4 0.1 0.8 Euro-denominated translated earnings contracts 1.3 1.2 0.3 Other translated earnings contracts 0.3 0.7 0.2 Total gross notional value outstanding for translated earnings contracts 12.2 13.6 14.3 Japanese yen-denominated foreign currency cash flow hedges 1.5 Other foreign currency cash flow hedges 0.6 0.4 0.3 Total gross notional value for foreign currency cash flow hedges 2.1 0.4 0.3 Total gross notional value outstanding $ 14.3 $ 14.0 $ 14.6 Income Before Income Taxes The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current year, negatively impacted Corning’s income before income taxes by $39 million in the year ended December 31, 2019, when compared to the same period in 2018. Provision for Income Taxes Our provision for income taxes and the related effective income tax rates were as follows (dollars in millions): Years ended December 31, 2019 2018 2017 Provision for income taxes $ (256) $ (437) $ (2,154) Effective tax rate 21.1% 29.1% 130.0% For the year ended December 31, 2019, the effective income tax rate • An $82 million benefit from the release of a valuation allowance on differed from the U.S. statutory rate of 21% primarily due to the following: deferred tax assets that are now considered realizable. • Additional net provision of $102 million from changes to our tax reserves; Generally, Corning will indefinitely reinvest the foreign earnings of: (1) any of its subsidiaries located in jurisdictions where Corning lacks the ability • A net benefit of $45 million due to releases of foreign valuation to repatriate its earnings, (2) any of its subsidiaries where Corning’s allowances on foreign deferred tax assets that are now considered intention is to reinvest those earnings in operations, (3) legal entities for realizable; and which Corning holds a non-controlling interest, (4) any subsidiaries with • Additional net benefit, including a change in estimate from prior year, an accumulated deficit in earnings and profits, (5) any subsidiaries which from the 2017 Tax Act attributable to foreign intangible income (FDII) have a positive earnings and profits balance but for which the entity lacks deduction of $103 million offset by taxes for global intangible low-taxed sufficient local statutory earnings or stock basis from which to make a income (GILTI) of $15 million. distribution, and (6) future distribution would trigger a significant federal income inclusion to the U.S. shareholder. For the year ended December 31, 2018, the effective income tax rate differed from the U.S. statutory rate of 21% primarily due to the following: During 2019, the Company distributed approximately $424 million from foreign subsidiaries to their respective U.S. parent companies. As of • Additional taxes of $55 million related primarily to the global intangible December 31, 2019, Corning has approximately $2.5 billion of indefinitely low-taxed income (“GILTI”) provisions of the 2017 Tax Act; and reinvested foreign earnings. It remains impracticable to calculate the • Incremental tax expense of $172 million related to a preliminary tax cost of repatriating our unremitted earnings which are considered CORNING 2019 ANNUAL REPORT agreement with the IRS for the income tax audit of years 2013 and 2014. indefinitely reinvested. These items were partially offset by the following: Refer to Note 5 (Income Taxes) to the consolidated financial statements for further details regarding income tax matters. • A benefit of $35 million related to the finalization of the one-time toll charge recorded in 2017; and 19


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Net Income (Loss) Attributable to Corning Incorporated As a result of the items discussed above, net income (loss) and per share data was as follows (in millions, except per share amounts): Years ended December 31, 2019 2018 2017 Net income (loss) attributable to Corning Incorporated $ 960 $ 1,066 $ (497) Net income (loss) attributable to Corning Incorporated used in basic earnings per common share calculation (Note 17) $ 862 $ 968 $ (595) Net income (loss) attributable to Corning Incorporated used in diluted earnings (loss) per common share calculation (Note 17) $ 960 $ 1,066 $ (595) Basic earnings (loss) per common share $ 1.11 $ 1.19 $ (0.66) Diluted earnings (loss) per common share $ 1.07 $ 1.13 $ (0.66) Weighted-average common shares outstanding - basic 776 816 895 Weighted-average common shares outstanding - diluted 899 941 895 Comprehensive Income Years ended December 31, (In millions) 2019 2018 2017 Net income (loss) attributable to Corning Incorporated $ 960 $ 1,066 $ (497) Foreign currency translation adjustments and other (143) (185) 746 Net unrealized gains (losses) on investments 1 (1) 14 Unamortized (losses) gains and prior service (costs) credits for postretirement benefit plans (64) 19 30 Net unrealized gains (losses) on designated hedges 45 (1) 44 Other comprehensive (loss) income, net of tax (Note 16) (161) (168) 834 Comprehensive income attributable to Corning Incorporated $ 799 $ 898 $ 337 2019 vs. 2018 These losses were partially offset by the following: For the year ended December 31, 2019, comprehensive income decreased • A decrease in the loss on foreign currency translation adjustments in by $99 million, when compared to the same period in 2018, primarily due the amount of $42 million, most significantly impacted by the Chinese to the following: yuan, South Korean won and Japanese yen; and • A decrease in net income of $106 million; and • The impact of a change to net unrealized gains on designated hedges of $46 million. • An $83 million increase in unamortized actuarial losses for post- retirement benefit plans, $53 million of which was related to the Refer to Note 12 (Employee Retirement Plans) and Note 16 (Shareholders’ adoption of the new standard for reclassification of stranded tax Equity) to the consolidated financial statements for additional details. effects in AOCI with the remainder of the impact driven by decreases in the discount rates used to value our post-retirement obligations. Core Performance Measures In managing the Company and assessing our financial performance, yuan and new Taiwan dollar currencies. Effective January 1, 2019, Corning CORNING 2019 ANNUAL REPORT we adjust certain measures provided by our consolidated financial also began using constant-currency reporting for our Environmental statements to exclude specific items to report core performance Technologies and Life Sciences segments for the euro, Japanese yen measures. These items include gains and losses on our translated and Chinese yuan. The Company believes that the use of constant- earnings contracts, acquisition-related costs, certain discrete tax items currency reporting allows investors to understand our results without and other tax-related adjustments, restructuring, impairment, and other the volatility of currency fluctuations and reflects the underlying charges or credits, certain litigation-related expenses, pension mark-to- economics of the translated earnings contracts used to mitigate the market adjustments and other items which do not reflect on-going impact of changes in currency exchange rates on our earnings and cash operating results of the Company or our equity affiliates. Corning utilizes flows. Corning also believes that reporting core performance measures constant-currency reporting for our Display Technologies and Specialty provides investors greater transparency to the information used by our Materials segments for the Japanese yen, South Korean won, Chinese management team to make financial and operational decisions. 20


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Core performance measures are not prepared in accordance with that do not reflect ongoing operations, nor does it forecast items that Generally Accepted Accounting Principles in the United States (“GAAP”). have not yet occurred or are out of the Company’s control. As a result, We believe investors should consider these non-GAAP measures in the Company is unable to provide outlook information on a GAAP basis. evaluating our results as they are more indicative of our core operating performance and how management evaluates our operational results Effective July 1, 2019, we replaced the term “Core Earnings” with “Core Net and trends. These measures are not, and should not be viewed as a Income”. The terms are interchangeable and the underlying calculations substitute for, GAAP reporting measures. With respect to the Company’s remain the same. outlook for future periods, it is not possible to provide reconciliations for For a reconciliation of non-GAAP performance measures to their most these non-GAAP measures because the Company does not forecast the directly comparable GAAP financial measure, please see “Reconciliation movement of foreign currencies against the U.S. dollar, or other items of Non-GAAP Measures”. Results of Operations – Core Performance Measures Selected highlights from our continuing operations, excluding certain items, follow (in millions): Years ended December 31, % change 2019 2018 2017 19 vs. 18 18 vs. 17 Core net sales $ 11,656 $ 11,398 $ 10,258 2% 11% Core equity in earnings of affiliated companies $ 237 $ 241 $ 211 (2)% 14% Core net income $ 1,578 $ 1,673 $ 1,634 (6)% 2% Core Net Sales Core net sales are consistent with net sales by reportable segment. The following table presents segment net sales by reportable segment (in millions): Years ended December 31, % change 2019 2018 2017 19 vs. 18 18 vs. 17 Display Technologies $ 3,254 $ 3,276 $ 3,137 (1)% 4% Optical Communications 4,064 4,192 3,545 (3)% 18% Specialty Materials 1,594 1,479 1,403 8% 5% Environmental Technologies 1,499 1,289 1,106 16% 17% Life Sciences 1,015 946 879 7% 8% All Other 230 216 188 6% 15% Total segment net sales* $ 11,656 $ 11,398 $ 10,258 2% 11% * Segment net sales and variances are discussed in detail in the Reportable Segments section of our MD&A. Core Equity in Earnings of Affiliated Companies The following provides a summary of core equity in earnings of affiliated companies (in millions): Years ended December 31, % change 2019 2018 2017 19 vs. 18 18 vs. 17 Hemlock Semiconductor Group $ 229 $ 236 $ 201 (3)% 17% All other 8 5 10 60% (50)% CORNING 2019 ANNUAL REPORT Total core equity earnings $ 237 $ 241 $ 211 (2)% 14% 21


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Core Net Income Partially offsetting these decreases in core net income were the following: • An increase in the Environmental Technologies segment of $55 million 2019 vs. 2018 resulting from earnings growth driven by increased sales of gas In the year ended December 31, 2019, we generated core net income of particulate filters; and $1,578 million or $1.76 per share, compared to core net income generated • An increase of $33 million in the Life Sciences segment resulting from in the year ended December 31, 2018 of $1,673 million, or $1.78 per higher volumes outpacing the underlying market. share. The decrease in core net income of $95 million was driven by the following items: Core earnings per share decreased in the year ended December 31, 2019 to $1.76 per share, driven by the decrease in core net income and partially • A decrease in the Optical Communications segment of $103 million offset by the repurchase of 31.0 million shares of common stock over the primarily driven by decreases in volume; last twelve months. • A decrease in the Display Technologies segment of $49 million Included in core net income for the years ended December 31, 2019, 2018 primarily driven by decreases in volume and glass shipments during and 2017, is net periodic pension expense in the amount of $84 million, the second half of 2019, resulting in lower factory utilization and $52 million and $49 million, which excludes the annual pension mark-to- negatively impacting profitability; and market adjustments. • A decrease of $11 million in the Specialty Materials segment, largely Refer to Note 12 (Employee Retirement Plans) to the consolidated driven by the absence of customer support for new product financial statements for additional information. development costs for the launch of new product innovations in 2019. 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): 2019 2018 2017 Core net income attributable to Corning Incorporated $ 1,578 $ 1,673 $ 1,634 Less: Series A convertible preferred stock dividend 98 98 98 Core net income available to common stockholders - basic 1,480 1,575 1,536 Add: Series A convertible preferred stock dividend 98 98 98 Core net income available to common stockholders - diluted $ 1,578 $ 1,673 $ 1,634 Weighted-average common shares outstanding - basic 776 816 895 Effect of dilutive securities: Stock options and other dilutive securities 8 10 11 Series A convertible preferred stock 115 115 115 Weighted-average common shares outstanding - diluted 899 941 1,021 Core basic earnings per common share $ 1.91 $ 1.93 $ 1.72 Core diluted earnings per common share $ 1.76 $ 1.78 $ 1.60 Reconciliation of Non-GAAP Measures We utilize certain financial measures and key performance indicators amounts, that are excluded from the comparable measure as calculated that are not calculated in accordance with GAAP to assess our financial and presented in accordance with GAAP in the consolidated statements and operating performance. A non-GAAP financial measure is defined of income (loss) or statement of cash flows. as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect Core net sales, core equity in earnings of affiliated companies and core net of excluding amounts, that are included in the comparable measure income are non-GAAP financial measures utilized by our management calculated and presented in accordance with GAAP in the consolidated to analyze financial performance without the impact of items that are CORNING 2019 ANNUAL REPORT statements of income (loss) or statement of cash flows, or (ii) includes driven by general economic conditions and events that do not reflect amounts, or is subject to adjustments that have the effect of including the underlying fundamentals and trends in the Company’s operations. 22


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    Management’s Discussion and Analysis of Financial Condition and Results of 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): Year ended December 31, 2019 Equity Income before Net Effective Earnings per Net Sales earnings income taxes income tax rate(a) share As reported $ 11,503 $ 17 $ 1,216 $ 960 21.1% $ 1.07 Constant-currency adjustment(1) 153 1 115 115 0.13 Translation loss on Japanese yen-denominated debt(2) 3 2 0.00 Translated earnings contract gain, net(3) (245) (190) (0.21) Acquisition-related costs(4) 130 99 0.11 Discrete tax items and other tax-related adjustments(5) 37 0.04 Litigation, regulatory and other legal matters(6) (17) (13) (0.01) Restructuring, impairment and other charges(7) 6 439 334 0.37 Equity in losses of affiliated companies(8) 213 213 165 0.18 (10) Pension mark-to-market adjustment 95 69 0.08 Core performance measures $ 11,656 $ 237 $ 1,949 $ 1,578 19.0% $ 1.76 Year ended December 31, 2018 Equity Income before Net Effective Earnings Net sales earnings income taxes income tax rate(a) per share As reported $ 11,290 $ 390 $ 1,503 $ 1,066 29.1% $ 1.13 Constant-currency adjustment(1) 108 2 156 127 0.13 Translation loss on Japanese yen-denominated debt(2) 18 15 0.02 Translated earnings contract loss, net(3) 73 97 0.10 Acquisition-related costs(4) 132 103 0.11 Discrete tax items and other tax-related adjustments(5) 79 0.08 Litigation, regulatory and other legal matters(6) 124 96 0.10 Restructuring, impairment and other charges(7) 130 96 0.10 Equity in earnings of affiliated companies(8) (151) (151) (119) (0.13) Pension mark-to-market adjustment(10) 145 113 0.12 Core performance measures $ 11,398 $ 241 $ 2,130 $ 1,673 21.5% $ 1.78 (a) Based upon statutory tax rates in the specific jurisdiction for each event. See “Items Excluded from GAAP Measures” below for the descriptions of the footnoted reconciling items. CORNING 2019 ANNUAL REPORT 23


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Year ended December 31, 2017 Equity Income before Net (loss) Effective (Loss) earnings Net sales earnings income taxes income tax rate(a) per share As reported $ 10,116 $ 361 $ 1,657 $ (497) 130.0% $ (0.66) (1) Constant-currency adjustment 142 2 168 138 0.15 Translation gain on Japanese yen-denominated debt(2) (14) (9) (0.01) (3) Translated earnings contract loss, net 125 78 0.09 Acquisition-related costs(4) 84 59 0.07 Discrete tax items and other tax-related adjustments(5) 127 0.14 Litigation, regulatory and other legal matters(6) (12) (9) (0.01) Restructuring, impairment and other charges(7) 72 62 0.07 Equity in earnings of affiliated companies(8) (152) (152) (97) (0.11) (9) Adjustments related to acquisitions 10 13 0.01 Pension mark-to-market adjustment(10) 22 14 0.02 Adjustments resulting from the 2017 Tax Act(11) 1,755 1.96 Core performance measures $ 10,258 $ 211 $ 1,960 $ 1,634 16.6% $ 1.60 (a) Based upon statutory tax rates in the specific jurisdiction for each event. See “Items Excluded from GAAP Measures” below for the descriptions of the footnoted reconciling items. Items which we exclude from GAAP measures to arrive at core performance measures are as follows: (1) Constant-currency adjustment: 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. Beginning January 1, 2019, as our Environmental Technologies and Life Science segments sales and net income are impacted by the euro, Chinese yuan and Japanese yen, these segments will also be presented on a constant-currency basis. We have not recast the prior periods for these two segments as the impact of fluctuations in these currencies are not material for prior periods. 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 (gain) loss on Japanese yen-denominated debt: We have excluded the gain or loss on the translation of our yen-denominated debt to U.S. dollars. (3) Translated earnings contract (gain) loss: We have excluded the impact of the realized and unrealized gains and losses of our Japanese yen, South Korean won, Chinese yuan and new Taiwan dollar-denominated foreign currency hedges related to translated earnings, as well as the unrealized gains and losses of our euro and British pound-denominated foreign currency hedges related to translated earnings. (4) Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs. CORNING 2019 ANNUAL REPORT (5) Discrete tax items and other tax-related adjustments: For 2019, 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. For 2018, this amount primarily relates to the preliminary IRS audit settlement offset by changes in judgment about the realizability of certain deferred tax assets. For 2017, this amount represents the removal of discrete adjustments (e.g., changes in tax law, other than those of the 2017 Tax Act which are set forth separately, and changes in judgment about the realizability of certain deferred tax assets) as well as other non-operational tax-related adjustments. (6) Litigation, regulatory and other legal matters: Includes amounts that reflect developments in commercial litigation, intellectual property disputes, adjustments to our estimated liability for environmental-related items and other legal matters. (7) 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. 24


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (8) Equity in (earnings) losses of affiliated companies: These adjustments relate to costs not related to continuing operations of our affiliated companies, such as restructuring, impairment and other charges and settlements, or modifications, under “take-or-pay” contracts. (9) Adjustments related to acquisitions: Includes fair value adjustments to the Corning Precision Materials (“CPM”) indemnity asset related to contingent consideration, post-combination expenses and other acquisition and disposal adjustments. (10) Pension mark-to-market adjustment: Defined benefit pension mark-to-market gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates. (11) Adjustments resulting from the 2017 Tax Act: Includes a provisional amount related to the one-time mandatory tax on unrepatriated foreign earnings, a provisional amount related to the remeasurement of U.S. deferred tax assets and liabilities, changes in valuation allowances resulting from the 2017 Tax Act, and adjustments for the elimination of excess foreign tax credit planning. Reportable Segments Our reportable segments are as follows: We prepared the financial results for our reportable segments on a basis consistent with our internal disaggregation of financial information to • Display Technologies – manufactures glass substrates for flat panel assist in making internal operating decisions. We use a segment tax rate liquid crystal displays and other high-performance display panels. of 21% when presenting segment information. The impact of changes in • Optical Communications – manufactures carrier network and enterprise the Japanese yen, euro, South Korean won, Chinese yuan and new Taiwan network components for the telecommunications industry. dollar are excluded from segment sales and segment net income for the Display Technologies, Specialty Materials, Environmental Technologies • Specialty Materials – manufactures products that provide more than and Life Science segments. Certain corporate income and expenses are 150 material formulations for glass, glass ceramics and fluoride crystals included in the unallocated amounts in the reconciliation of reportable to meet demand for unique customer needs. segment net income to consolidated net income. These include items • Environmental Technologies – manufactures ceramic substrates and that are not used by our CODM in evaluating the results of, or in allocating filters for automotive and diesel applications. resources to, our segments and include the following items: the impact of our translated earnings contracts; acquisition-related costs; discrete • Life Sciences – manufactures glass and plastic labware, equipment, tax items and other tax-related adjustments; certain litigation, regulatory media, serum and reagents enabling workflow solutions for drug and other legal matters; restructuring, impairment and other charges or discovery and bioproduction. credits; adjustments relating to acquisitions; and other non-recurring non-operational items. Although we exclude these amounts from All other segments that do not meet the quantitative threshold for segment results, they are included in reported consolidated results. separate reporting have been grouped as “All Other.” This group is primarily comprised of the results of pharmaceutical technologies, auto We included the earnings of equity affiliates that are closely associated glass, new product lines and development projects, as well as certain with our reportable segments in the respective segment’s net income. We corporate investments. have allocated certain common expenses among reportable segments differently than we would for stand-alone financial information. Segment net income may not be consistent with measures used by other companies. Display Technologies The following table provides net sales and net income for the Display Technologies segment: Years ended December 31, % change % change 2019 2018 2017 19 vs. 18 18 vs. 17 Segment net sales $ 3,254 $ 3,276 $ 3,137 (1%) 4% Segment net income $ 786 $ 835 $ 888 (6%) (6%) 2019 vs. 2018 Outlook: Net sales in the Display Technologies segment decreased by $22 million, or 1%, for the year ended December 31, 2019, when compared to the prior For full-year 2020, Corning expects its display glass volume to grow by CORNING 2019 ANNUAL REPORT year. Corning’s glass volume increased by a mid-single digit percentage, a mid-single digit percentage, similar to the mid-single digit percentage higher than the overall market, driven by increased Gen 10.5 output growth expected in the display glass market. The company expects during the year. The combination of finished goods volume, unfinished display glass price declines to remain moderate, down a mid-single glass sold to our equity affiliates and a low-single-digit percentage price percentage for the full year. decline resulted in a one percent sales decline. Net income in the Display Technologies segment decreased by $49 million in the year ended December 31, 2019, driven by the decrease in sales outlined above. Display Technologies shipped more glass in the first half of 2019 than in the latter half. Due to lower glass volumes in the second half of 2019, factory utilization declined impacting profitability. 25


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Optical Communications The following table provides net sales and net income for the Optical Communications segment: Years ended December 31, % change % change 2019 2018 2017 19 vs. 18 18 vs. 17 Segment net sales $ 4,064 $ 4,192 $ 3,545 (3%) 18% Segment net income $ 489 $ 592 $ 469 (17%) 26% 2019 vs. 2018 Movements in foreign currency exchange rates did not materially Net sales declined by $128 million, or 3%, in the year ended December impact net income in this segment in the year ended December 31, 2019 31, 2019, when compared to the same period in 2018, primarily due to when compared to the same period in 2018. lower sales in carrier products, down $199 million, partially offset by an increase of $71 million in enterprise network sales. Sales were lower Outlook: than expected due to weakness in the optical market, highlighted by capital spending reductions at two of our significant customers in the Full-year 2020 Optical Communications sales are expected to decrease latter half of 2019. by five to ten percent on a year-over-year basis. Net income in the year ended December 31, 2019 decreased by $103 million, or 17%. Lower sales volumes in the latter half of 2019 drove less efficient factory utilization negatively impacting profitability. Specialty Materials The following table provides net sales and net income for the Specialty Materials segment: Years ended December 31, % change % change 2019 2018 2017 19 vs. 18 18 vs. 17 Segment net sales $ 1,594 $ 1,479 $ 1,403 8% 5% Segment net income $ 302 $ 313 $ 301 (4%) 4% 2019 vs. 2018 Outlook: Net sales in the Specialty Materials segment increased by $115 million, or 8%, in the year ended December 31, 2019, when compared to the same The company expects high-single digit percentage growth for the period in 2019, primarily driven by strong demand for Gorilla® Glass. Specialty Materials segment on a year-over-year basis for full-year 2020. Net income in the year ended December 31, 2019 decreased by $11 million, or 4%, when compared to the same period in 2018. The decrease was primarily related to the absence of customer support for new product development costs for the launch of new product innovations in 2019. Environmental Technologies The following table provides net sales and net income for the Environmental Technologies segment: Years ended December 31, % change % change 2019 2018 2017 19 vs. 18 18 vs. 17 Segment net sales $ 1,499 $ 1,289 $ 1,106 16% 17% Segment net income $ 263 $ 208 $ 165 26% 26% CORNING 2019 ANNUAL REPORT 2019 vs. 2018 Outlook: Net sales increased $210 million, or 16% in the year ended December 31, 2019, primarily driven sales growth of gasoline particulate filters. We expect mid-single digit sales growth on a year-over-year basis in our Environmental Technologies segment for full-year 2020. Net income in the year ended December 31, 2019 increased by $55 million, or 26%, driven by the sales increase outlined above and strong operational performance and successful ramping of additional gasoline particulate filter capacity in China. 26


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Life Sciences The following table provides net sales and net income for the Life Sciences segment: Years ended December 31, % change % change 2019 2018 2017 19 vs. 18 18 vs. 17 Segment net sales $ 1,015 $ 946 $ 879 7% 8% Segment net income $ 150 $ 117 $ 95 28% 23% 2019 vs. 2018 Outlook: Net sales in the Life Sciences segment increased by $69 million, or 7%, in the year ended December 31, 2019, when compared to the same period For full-year 2020, sales are expected to grow by a mid-single-digit in 2018, driven by strong performance across all product categories and percentage on a year-over-year basis. sales that continued to outpace market growth. Net income increased by $33 million, or 28%, in the year ended December 31, 2019, driven by the reasons outlined above and improved manufacturing efficiencies. All Other All other segments that do not meet the quantitative threshold for separate reporting have been grouped as “All Other.” This group is primarily comprised of the results of the pharmaceutical technologies business, auto glass, new product lines and development projects, as well as certain corporate investments. The following table provides net sales and net loss for All Other (in millions): Years ended December 31, % change % change 2019 2018 2017 19 vs. 18 18 vs. 17 Segment net sales $ 230 $ 216 $ 188 6% 15% Segment net loss $ (289) $ (281) $ (259) (3%) (8%) 2019 vs. 2018 Net sales of this segment increased by $14 million, or 6%, in the year ended December 31, 2019, respectively, when compared to the same period in 2018, driven by an increase in sales in our emerging businesses. The increase in the net loss of $8 million, a decline of 3%, reflects increased spending on our development projects when compared to 2018. Liquidity and Capital Resources Financing and Capital Structure The following items discuss Corning’s financing and changes in capital In the fourth quarter of 2019, Corning issued two U.S. dollar-denominated structure during 2019 and 2018: debt securities (the “Notes”), as follows: • $400 million 3.90% senior unsecured notes with a maturity of 2019 30 years; and In the third quarter of 2019, Corning issued two Japanese • $1.1 billion 5.45% senior unsecured notes with a maturity of 60 years. yen-denominated debt securities (the “Notes”), as follows: The net proceeds, after deducting offering expenses, were approximately CORNING 2019 ANNUAL REPORT • ¥31.3 billion 1.153% senior unsecured notes with a maturity of $1.5 billion and will be used for general corporate purposes. We can 12 years; and redeem these notes at any time, subject to certain terms and conditions. • ¥5.9 billion 1.513% senior unsecured notes with a maturity of 20 years. In the fourth quarter of 2019, Corning redeemed $300 million of 4.25% notes due in 2020, paying a premium of $4.7 million by exercising The proceeds from the Notes were received in Japanese yen and converted our make-whole call. The bond redemption resulted in an $8.4 million to U.S. dollars on the date of issuance. The net proceeds received in U.S. loss during the same quarter. dollars, after deducting offering expenses, were approximately $349 million and will be used for general corporate purposes. Payments of principal and interest on the Notes will be in Japanese yen, or should yen be unavailable due to circumstances beyond Corning’s control, a U.S. dollar equivalent. 27


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Common Stock Dividends On February 6, 2018, Corning’s Board of Directors declared a 16.1% increase share of preferred stock, subject to certain anti-dilution provisions. As of in the Company’s quarterly common stock dividend, which increased December 31, 2019, the preferred stock has not been converted, and none the quarterly dividend from $0.155 to $0.18 per share of common stock, of the anti-dilution provisions have been triggered. beginning with the dividend to be paid in the first quarter of 2018. On February 6, 2019, Corning’s Board of Directors declared an 11.1% increase in the Company’s quarterly common stock dividend, which Customer Deposits increased the quarterly dividend from $0.18 to $0.20 per share of common As of December 31, 2019 and 2018, Corning had customer deposits stock, beginning with the dividend paid in the first quarter of 2019. of approximately $1.0 billion. The majority of these represent non- refundable cash deposits for customers to secure rights to an amount On February 5, 2020, Corning’s Board of Directors declared an 10.0% of glass produced by Corning under long-term supply agreements. The increase in the Company’s quarterly common stock dividend, which duration of these long-term supply agreements ranges up to ten years. increased the quarterly dividend from $0.20 to $0.22 per share of As glass is shipped to customers, Corning will recognize revenue and common stock, beginning with the dividend paid in the first quarter of issue credit memoranda to reduce the amount of the customer deposit 2020. This increase marks the ninth dividend increase since October 2011. liability, which are applied against customer receivables resulting from the sale of glass. Credit memoranda of $37 million were issued in 2019; no such memoranda were issued in 2018. Fixed Rate Cumulative Convertible Preferred Stock, Series A Corning has 2,300 outstanding shares of Fixed Rate Cumulative Capital Spending Convertible Preferred Stock, Series A. The preferred stock is convertible Capital spending totaled $1,978 million in 2019, a decrease of at the option of the holder and the Company upon certain events, at $264 million when compared to 2018, primarily driven by lower a conversion rate of 50,000 shares of Corning’s common stock per one spending in the Optical Communications and Display Technologies segments. We expect our 2020 capital expenditures to be approximately $1.5 billion. Cash Flows Summary of cash flow data (in millions): Years ended December 31, 2019 2018 2017 Net cash provided by operating activities $ 2,031 $ 2,919 $ 2,004 Net cash used in investing activities $ (1,891) $ (2,887) $ (1,710) Net cash used in financing activities $ (47) $ (1,995) $ (1,624) 2019 vs. 2018 Defined Benefit Pension Plans Net cash provided by operating activities decreased by $888 million in We have defined benefit pension plans covering certain domestic and the year ended December 31, 2019, when compared to the same period international employees. Our largest single pension plan is Corning’s last year, primarily driven by a decrease in customer deposits received U.S. qualified plan. At December 31, 2019, this plan accounted for 76% of $558 million and net unfavorable movements in working capital of of our consolidated defined benefit pension plans’ projected benefit $352 million. obligation and 86% of the related plans’ assets. In the year ended December 31, 2019, net cash used in investing activities In 2019, we made no voluntary contributions to our domestic defined decreased by $996 million, primarily driven by lower acquisition and benefit pension plan and cash contributions of $2 million to our capital expenditures of $842 million and $264 million, respectively, international pension plans. During 2020, we anticipate making cash partially offset by the absence of cash received of $196 million for a contributions of $85 million to our U.S. qualified pension plan and contingent consideration asset, when compared to the prior year. $54 million to our international pension plans. CORNING 2019 ANNUAL REPORT Net cash used in financing activities decreased by $1,948 million in the Refer to Note 12 (Employee Retirement Plans) to the consolidated year ended December 31, 2019, when compared to the same period financial statements for additional information. last year. The primary drivers were lower share repurchases, down $1,287 million, lower debt repayments, down $329 million and increased borrowing, up $346 million. 28


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Key Balance Sheet Data Balance sheet and working capital measures are provided in the following table (in millions): December 31, 2019 2018 Working capital $ 3,942 $ 3,723 Current ratio 2.1:1 2.1:1 Trade accounts receivable, net of allowances $ 1,836 $ 1,940 Days sales outstanding 59 58 Inventories $ 2,320 $ 2,037 Inventory turns 3.3 3.6 Days payable outstanding(1) 48 55 Long-term debt $ 7,729 $ 5,994 Total debt to total capital 37% 30% (1) Includes trade payables only. Management Assessment of Liquidity Other We ended the fourth quarter of 2019 with approximately $2.4 billion of We complete comprehensive reviews of our significant customers cash and cash equivalents. Our cash and cash equivalents are held in and their creditworthiness by analyzing their financial strength various locations throughout the world and are generally unrestricted. at least annually or more frequently for customers where we have We utilize a variety of strategies to ensure that our worldwide cash is identified a measure of increased risk. We closely monitor payments available in the locations in which it is needed. At December 31, 2019, and developments which may signal possible customer credit issues. approximately 51% of the consolidated amount was held outside of the From time to time, we factor accounts receivable. During 2019, Corning United States. participated in customer-initiated payment programs which resulted in accelerated collections of $143 million in accounts receivable. We To manage interest rate exposure, the Company, from time to time, currently have not identified any potential material impact on our enters into interest rate swap agreements. As of December 31, 2019, liquidity resulting from customer credit issues. there are no interest rate swaps outstanding. Our major source of funding for 2020 and beyond will be our operating Our Revolving Credit Agreement provides a committed $1.5 billion cash flow, our existing balances of cash and cash equivalents and unsecured multi-currency line of credit and expires August 15, 2023. proceeds from any issuances of debt. We believe we have sufficient At December 31, 2019, there were no outstanding amounts under the liquidity to fund operations, acquisitions, capital expenditures, scheduled Revolving Credit Agreement. debt repayments, dividend payments and share repurchase programs. Corning also has a commercial paper program pursuant to which we Our Revolving Credit Agreement includes affirmative and negative may issue short-term, unsecured commercial paper notes up to a covenants with which we must comply, including a leverage (debt maximum aggregate principal amount outstanding at any one time to capital ratio) financial covenant. The required leverage ratio is a of $1.5 billion. Under this program, the Company may issue the paper maximum of 60%. At December 31, 2019, our leverage using this measure from time to time and will use the proceeds for general corporate was approximately 37%. As of December 31, 2019, we were in compliance purposes. The Company’s Revolving Credit Agreement is available to with this financial covenant. support obligations under the commercial paper program, if needed. At December 31, 2019, Corning did not have outstanding commercial paper. 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 Share Repurchases instruments contain a cross default provision, whereby an uncured default exceeding a specified amount on one debt obligation of the During 2018, Corning repurchased 74.8 million shares for approximately Company, also would be considered a default under the terms of another $2.2 billion through open market repurchases under the 2016 and 2018 debt instrument. As of December 31, 2019, we were in compliance with Repurchase Programs. CORNING 2019 ANNUAL REPORT all such provisions. During the year ended December 31, 2019, the Company Management is not aware of any known trends or any known demands, repurchased 31.0 million shares of common stock on the open commitments, events or uncertainties that will result in or that are market for approximately $0.9 billion as part of its 2018 and 2019 reasonably likely to result in a material decrease in our liquidity. In Repurchase Programs. addition, other than items discussed, there are no known material Refer to Note 16 (Shareholders’ Equity) to the consolidated financial trends, favorable or unfavorable, in our capital resources and no expected statements for additional information. material changes in the mix and relative cost of such resources. 29


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Translated Earnings Contracts Off Balance Sheet Arrangements Corning has hedged a significant portion of its projected yen Off balance sheet arrangements are transactions, agreements, or other exposure for the period 2019 through 2023, with average rate forwards contractual arrangements with an unconsolidated entity for which and options. In the years ended December 31, 2019 and 2018, we Corning has an obligation to the entity that is not recorded in our recorded pre-tax net gains of $201 million and pre-tax net losses of consolidated financial statements. $96 million, respectively, related to changes in the fair value of these instruments. Included in these amounts are realized losses of $7 million Corning’s off balance sheet arrangements include guarantee and and realized gains of $64 million, respectively. The gross notional value indemnity contracts. At the time a guarantee is issued, the Company outstanding for these instruments which hedge our exposure to the is required to recognize a liability for the fair value or market value Japanese yen at December 31, 2019 and 2018, was $10.2 billion and of the obligation it assumes. In the normal course of our business, $11.6 billion, respectively. we do not routinely provide significant third-party guarantees. Generally, third-party guarantees provided by Corning are limited We have entered into average rate forwards to hedge our translation to certain financial guarantees, including stand-by letters of credit exposure resulting from movements in the South Korean won and its and performance bonds, and the incurrence of contingent liabilities impact on our net income. In the years ended December 31, 2019 and in the form of purchase price adjustments related to attainment of 2018, we recorded a pre-tax net gain of $6 million and a pre-tax net loss milestones. These guarantees have various terms, and none of these of $26 million, respectively, related to changes in the fair value of these guarantees are individually significant. instruments. Included in these amounts is a realized loss of $1 million and a realized gain of $46 million, respectively. These instruments had a Refer to Note 13 (Commitments, Contingencies and Guarantees) to the gross notional value outstanding at December 31, 2019 and 2018, of $0.4 consolidated financial statements for additional information. and $0.1 billion, respectively. For variable interest entities, we assess the terms of our interest in We have entered into a portfolio of average rate forwards to hedge each entity to determine if we are the primary beneficiary. The primary against our euro translation exposure. In the years ended December 31, beneficiary of a variable interest entity is the party that absorbs a 2019 and 2018, we recorded pre-tax gains of $37 million and $43 million, majority of the entity’s expected losses, receives a majority of its expected respectively. Included in these amounts are realized gains of $29 million residual returns, or both, as a result of holding variable interests, which and realized losses of $14 million, respectively. At December 31, 2019 are the ownership, contractual, or other pecuniary interests in an entity and 2018, the euro-denominated average rate instruments had a gross that change with changes in the fair value of the entity’s net assets notional amount of $1.3 billion and $1.2 billion, respectively. excluding variable interests. These derivative instruments are not designated as accounting hedges, Corning has identified ten entities that qualify as a variable interest and changes in fair value are recorded in earnings in the translated entity and are not consolidated. These entities are not considered to be earnings contract gain (loss), net line of the consolidated statements of significant to Corning’s consolidated financial statements. income (loss). Corning does not have retained interests in assets transferred to an unconsolidated entity that serve as credit, liquidity or market risk support to that entity. CORNING 2019 ANNUAL REPORT 30


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Contractual Obligations The amounts of our obligations follow (in millions): Amount of commitment and contingency expiration per period 5 years and Total Less than 1 year 1 to 3 years 3 to 5 years thereafter Performance bonds and guarantees $ 163 $ 30 $ 4 $ 1 $ 128 Stand-by letters of credit(1) 43 31 8 3 1 Subtotal of commitment expirations per period $ 206 $ 61 $ 12 $ 4 $ 129 Purchase obligations(2) $ 554 $ 190 $ 199 $ 75 $ 90 Capital expenditure obligations(3) 592 592 Total debt(4) 7,195 437 588 6,170 Finance leases and financing obligations 600 11 30 160 399 (5) Interest on long-term debt 8,948 298 583 543 7,524 Imputed interest on finance leases and financing obligations 296 27 53 43 173 Operating Lease Obligations 755 98 153 116 388 Uncertain tax positions(6) 58 (6) Subtotal of contractual obligation payments due by period $ 18,998 $ 1,216 $ 1,455 $ 1,525 $ 14,744 Total commitments and contingencies(6) $ 19,204 $ 1,277 $ 1,467 $ 1,529 $ 14,873 (1) At December 31, 2019, we had stand-by letters of credit commitments of $82 million; $39 million was included in other accrued liabilities on our consolidated balance sheets. (2) Purchase obligations are enforceable and legally binding obligations which primarily consist of raw material and energy-related take-or-pay contracts. (3) Capital expenditure obligations primarily reflect amounts associated with our capital expansion activities. (4) Total debt above is stated at maturity value and excludes interest rate swap gains or losses and bond discounts. (5) The estimate of interest payments assumes interest is paid through the date of maturity or expiration of the related debt, based upon stated rates in the respective debt instruments. (6) At December 31, 2019, $58 million was included on our consolidated balance sheets related to uncertain tax positions. We believe a significant majority of these guarantees and contingent liabilities will expire without being funded. Environment Refer to Item 3. Legal Proceedings or Note 13 (Commitments, Contingencies and Guarantees) to the consolidated financial statements for information. Critical Accounting Estimates The preparation of financial statements requires us to make estimates Manufacturing equipment includes certain components of production and assumptions that affect amounts reported therein. The estimates equipment that are constructed of precious metals, primarily platinum that required us to make difficult, subjective or complex judgments, and rhodium. These metals are not depreciated because they have including future projections of performance and relevant discount rates, very low physical losses and are repeatedly reclaimed and reused in are set forth below. our manufacturing process over a very long useful life. Precious metals CORNING 2019 ANNUAL REPORT are reviewed for impairment as part of our assessment of long-lived assets. This review considers all the Company’s precious metals that Impairment of assets held for use are either in place in the production process; in reclamation, fabrication, or refinement in anticipation of re-use; or awaiting use to support We are required to assess the recoverability of the carrying value of increased capacity. Precious metals are only acquired to support our long-lived assets when an indicator of impairment has been identified. operations and are not held for trading or other non-manufacturing We review our long-lived assets in each quarter to assess whether related purposes. impairment indicators are present. We must exercise judgment in assessing whether an event of impairment has occurred. 31


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Examples of events or circumstances that may be indicative of Income taxes impairments include, but are not limited to: We are required to exercise judgment about our future results in • A significant decrease in the market price of an asset; assessing the realizability of our deferred tax assets. Inherent in this • A significant change in the extent or manner in which a long-lived estimation process is the requirement for us to estimate future book and asset is being used or in its physical condition; taxable income and possible tax planning strategies. These estimates require us to exercise judgment about our future results, the prudence • A significant adverse change in legal factors or in the business climate and feasibility of possible tax planning strategies, and the economic that could affect the value of the asset, including an adverse action or environments in which we do business. It is possible that actual results assessment by a regulator; will differ from assumptions and require adjustments to allowances. • An accumulation of costs significantly in excess of the amount Corning accounts for uncertain tax positions in accordance with ASC originally expected for the acquisition or construction of an asset; Topic 740, Income Taxes, which requires that companies only record tax benefits for technical positions that are believed to have a greater than • A current-period operating or cash flow loss combined with a history 50% likelihood of being sustained on their technical merits and then of operating or cash flow losses or a projection or forecast that only to the extent of the amount of tax benefit that is greater than 50% demonstrates continuing losses associated with the use of an asset; and likely of being realized upon settlement. In estimating these amounts, • A current expectation that, more likely than not, an asset will be sold we must exercise judgment around factors such as the weighting of the or otherwise disposed of significantly before the end of its previously tax law in our favor, the willingness of a tax authority to aggressively estimated useful life. pursue a particular position, or alternatively, consider a negotiated compromise, and our willingness to dispute a tax authorities’ assertion For purposes of recognition and measurement of an impairment loss, a to the level of appeal we believe is required to sustain our position. As long-lived asset or assets is grouped with other assets and liabilities at the a result, it is possible that our estimate of the benefits we will realize lowest level for which identifiable cash flows are largely independent of for uncertain tax positions may change when we become aware of new the cash flows of other assets and liabilities. We must exercise judgment information affecting these judgments and estimates. in assessing the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Our assessment is performed at the reportable segment level. For the majority of our reportable segments, we concluded that locations or businesses Fair value measures within these segments which share production along the supply chain As required, Corning uses two kinds of inputs to determine the fair value must be combined to appropriately identify cash flows that are largely of assets and liabilities: observable and unobservable. Observable inputs independent of the cash flows of other assets and liabilities. are based on market data or independent sources, while unobservable inputs are based on the Company’s own market assumptions. Once For long-lived assets, when impairment indicators are present, we inputs have been characterized, we prioritize the inputs used to compare estimated undiscounted future cash flows, including the measure fair value into one of three broad levels. Characterization of eventual disposition of the asset group at market value, to the assets’ fair value inputs is required for those accounting pronouncements that carrying value to determine if the asset group is recoverable. This prescribe or permit fair value measurement. In addition, observable assessment requires the exercise of judgment in assessing the future market data must be used when available and the highest-and-best- use of and projected value to be derived from the assets to be held and use measure should be applied to non-financial assets. Corning’s major used. Assessments also consider changes in asset utilization, including categories of financial assets and liabilities required to be measured at the temporary idling of capacity and the expected timing for placing fair value are short-term and long-term investments, certain pension this capacity back into production. asset investments and derivatives. These categories use observable For an asset group that fails the test of recoverability, the estimated fair inputs only and are measured using a market approach based on quoted value of long-lived assets is determined using an “income approach” prices in markets considered active or in markets in which there are that starts with the forecast of all the expected future net cash flows few transactions. including the eventual disposition at market value of long-lived assets, Derivative assets and liabilities may include interest rate swaps and forward and considers the fair market value of all precious metals, if applicable. exchange contracts that are measured using observable quoted prices for We assess the recoverability of the carrying value of long-lived assets at similar assets and liabilities. Included in our forward exchange contracts are the lowest level for which identifiable cash flows are largely independent foreign currency hedges that hedge our cash flow and translation exposure of the cash flows of other assets and liabilities. If there is an impairment, resulting from movements in the Japanese yen, South Korean won, euro, a loss is recorded to reflect the difference between the assets’ fair new Taiwan dollar, Chinese yuan and British pound. Changes in the fair value value and carrying value. Our estimates are based upon our historical of contracts designated as cash flow hedges are recorded in accumulated experience, our commercial relationships, and available external other comprehensive income in shareholders’ equity and reclassified into information about future trends. We believe fair value assessments income when the underlying hedged item impacts earnings. For contracts are most sensitive to market growth and the corresponding impact on CORNING 2019 ANNUAL REPORT that are not designated as accounting hedges, changes in fair value are volume and selling prices and that these are also more subjective than recorded in earnings in the translated earnings contract gain (loss), net manufacturing cost and other assumptions. The Company believes its line of the consolidated statements of income (loss). In arriving at the fair current assumptions and estimates are reasonable and appropriate. value of Corning’s derivative assets and liabilities, we have considered the At December 31, 2019 and 2018, the carrying value of precious metals appropriate valuation and risk criteria, including such factors as credit risk was lower than the fair market value by $849 million and higher than of the relevant party to the transaction. Amounts related to credit risk are the fair market value by $719 million, respectively. The majority of these not material. precious metals are utilized by the Display Technologies and Specialty Refer to Note 15 (Fair Value Measurements) to the consolidated financial Materials segments. Corning believes these precious metal assets statements for additional information. to be recoverable due to the significant positive cash flow in both segments. The potential for impairment exists in the future if negative events significantly decrease the cash flow of these segments. Such events include, but are not limited to, a significant decrease in demand for products or a significant decrease in profitability in our Display Technologies or Specialty Materials segments. 32


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations Probability of litigation outcomes return on plan assets, rate of compensation increase for employees and health care trend rates. The cost of providing plan benefits depends We are required to make judgments about future events that are on demographic assumptions including retirements, mortality, inherently uncertain. In making determinations of likely outcomes turnover and plan participation. While management believes that the of litigation matters, we consider the evaluation of legal counsel assumptions used are appropriate, differences in actual experience or knowledgeable about each matter, case law, and other case-specific changes in assumptions may affect Corning’s employee pension and issues. See Part II – Item 3. Legal Proceedings for a discussion of Corning’s other postretirement obligations, and current and future expense. material litigation matters. Costs for our defined benefit pension plans consist of two elements: 1) on-going costs recognized quarterly, which are comprised of service and interest costs, expected return on plan assets and amortization of Other possible liabilities prior service costs; and 2) mark-to-market gains and losses outside of the We are required to make judgments about future events that are corridor, where the corridor is equal to 10% of the greater of the benefit inherently uncertain. In making determinations of likely outcomes of obligation or the market-related value of plan assets at the beginning of certain matters, including certain tax planning and environmental the year, which are recognized annually in the fourth quarter of each year. matters, these judgments require us to consider events and actions that These gains and losses result from changes in actuarial assumptions are outside our control in determining whether probable or possible and the differences between actual and expected return on plan assets. liabilities require accrual or disclosure. It is possible that actual results Any interim remeasurements triggered by a curtailment, settlement or will differ from assumptions and require adjustments to accruals. significant plan changes, as well as any true-up to the annual valuation, are recognized as a mark-to-market adjustment in the quarter in which such event occurs. Pension and other postretirement employee Costs for our OPEB plans consist of on-going costs recognized quarterly, benefits (OPEB) and are comprised of service and interest costs, amortization of prior service costs and amortization of actuarial gains and losses. We recognize Corning offers employee retirement plans consisting of defined benefit the actuarial gains and losses resulting from changes in actuarial pension plans covering certain domestic and international employees assumptions as a component of accumulated other comprehensive and postretirement plans that provide health care and life insurance income in shareholders’ equity on an annual basis and amortize them benefits for eligible retirees and dependents. The costs and obligations into our operating results over the average remaining service period of related to these benefits reflect the Company’s assumptions related employees expected to receive benefits under the plans, to the extent to general economic conditions (particularly interest rates), expected such gains and losses are outside of the corridor. The following table presents our actual and expected return on assets, as well as the corresponding percentages: December 31, (In millions) 2019 2018 2017 Actual return on plan assets – Domestic plans $ 576 $ (202) $ 393 Expected return on plan assets – Domestic plans 161 178 163 Actual return on plan assets – International plans 39 1 18 Expected return on plan assets – International plans 10 11 11 Weighted-average actual and expected return on assets: Actual return on plan assets – Domestic plans 21.89% (6.83)% 14.92% Expected return on plan assets – Domestic plans 6.00% 6.00% 6.00% Actual return on plan assets – International plans 7.99% (0.06)% 3.93% Expected return on plan assets – International plans 2.01% 2.13% 3.97% As of December 31, 2019, the Projected Benefit Obligation (PBO) for U.S. pension plans was $3.9 billion. CORNING 2019 ANNUAL REPORT 33


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations The following information illustrates the sensitivity to a change in certain assumptions for U.S. pension plans: Effect on 2020 Effect on Change in assumption pre-tax pension expense December 31, 2019 PBO 25 basis point decrease in each spot rate - 3 million + 110 million 25 basis point increase in each spot rate + 2 million - 105 million 25 basis point decrease in expected return on assets + 8 million 25 basis point increase in expected return on assets - 8 million The above sensitivities reflect the impact of changing one assumption In addition, at December 31, 2019, a 25 basis point decrease in each spot at a time. Note that economic factors and conditions often affect rate would decrease shareholders’ equity by $133 million before tax, and multiple assumptions simultaneously and the effects of changes in key a 25 basis point increase in each spot rate would increase shareholders’ assumptions are not necessarily linear. These changes in assumptions equity by $127 million. In addition, the impact of greater than a 25 basis would have no effect on Corning’s funding requirements. point decrease in each spot rate would not be proportional to the first 25 basis point decrease in each spot rate. The following table illustrates the sensitivity to a change in each spot rate assumption related to Corning’s U.S. OPEB plans: Effect on 2020 Effect on Change in assumption pre-tax OPEB expense December 31, 2019 APBO* 25 basis point decrease in each spot rate - 0 million + 23 million 25 basis point increase in each spot rate + 0 million - 22 million * Accumulated Postretirement Benefit Obligation (APBO). The above sensitivities reflect the impact of changing one assumption amortization method or an input method using incurred and forecasted at a time. Note that economic factors and conditions often affect expense to predict revenue recognition patterns which follows multiple assumptions simultaneously and the effects of changes in key satisfaction of the performance obligation. assumptions are not necessarily linear. On January 1, 2018, we adopted the new revenue standard and applied the modified retrospective method of accounting to those contracts which were not completed as of January 1, 2018. Results for reporting Revenue recognition periods beginning after January 1, 2018 are presented under Topic The Company recognizes revenue when all performance obligations 606, while prior period amounts are not adjusted and continue to be under the terms of a contract with our customer are satisfied, and reported in accordance with our historic accounting under ASC Topic 605 control of the product has been transferred to the customer. If customer “Revenue Recognition”. Because the impact of adopting the standard on acceptance clauses are present and it cannot be objectively determined Corning’s financial statements was immaterial, we have not made an that control has been transferred, revenue is only recorded when adjustment to opening retained earnings. customer acceptance is received and all performance obligations have One of Corning’s equity affiliates adopted the new revenue standard on been satisfied. Sales of goods typically do not include multiple product January 1, 2019. The impact of adopting the new standard to Corning’s and/or service elements. Corning also has contractual arrangements financial statements was a net reduction of $186 million to 2019 with certain customers in which we recognize revenue over time. beginning retained earnings. Timing of revenue recognition for certain The performance obligations under these contracts generally require open performance obligations as measured at January 1, 2019 under the services to be performed over time, resulting in either a straight-line new standard was approximately $239 million with offsetting deferred tax impacts of $53 million. New Accounting Standards Refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements. CORNING 2019 ANNUAL REPORT 34


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    Quantitative and Qualitative Disclosures About Market Risks We operate and conduct business in many foreign countries and as a are denominated in Japanese yen. When these revenues are translated result are exposed to movements in foreign currency exchange rates. back to U.S. dollars, the Company is exposed to foreign exchange rate Our exposure to exchange rates has the following effects: movements in the Japanese yen. To protect translated earnings against movements in the Japanese yen, the Company has entered into a series • Exchange rate movements on financial instruments and transactions of average rate forwards and other derivative instruments. denominated in foreign currencies that impact earnings; and We use a sensitivity analysis to assess the market risk associated with • Exchange rate movements upon conversion of net assets and net our foreign currency exposures. Market risk is defined as the potential income of foreign subsidiaries for which the functional currency is not change in fair value of assets and liabilities resulting from an adverse the U.S. dollar, which impact our net equity. movement in foreign currency exchange rates. At December 31, 2019, Our most significant foreign currency exposures relate to the with respect to open foreign exchange forward and option contracts, Japanese yen, South Korean won, new Taiwan dollar, Chinese yuan, and and foreign denominated debt with values exposed to exchange rate the euro. We seek to mitigate the impact of exchange rate movements movements, a 10% adverse movement in quoted foreign currency in our income statement by using over-the-counter (OTC) derivative exchange rates could result in a loss in fair value of these instruments instruments including foreign exchange forward and option contracts. of $1.3 billion compared to $1.1 billion at December 31, 2018. Specific to In general, these hedges expire coincident with the timing of the the Japanese yen, a 10% adverse movement in quoted yen exchange underlying foreign currency commitments and transactions. rates could result in a loss in fair value of these instruments of $1.0 billion at December 31, 2019 and 2018. The Company expects that these We are exposed to potential losses in the event of non-performance hypothetical losses from a 10% adverse movement in quoted foreign by our counterparties to these derivative contracts. However, we currency exchange rates on the derivative financial instruments should minimize this risk by maintaining a diverse group of highly-rated largely offset gains on the assets, liabilities and future transactions major financial institutions as our counterparties. We do not expect to being hedged. record any losses as a result of such counterparty default. Neither we nor our counterparties are required to post collateral for these financial instruments. Interest Rate Risk Management Our cash flow hedging activities utilize OTC foreign exchange forward To manage interest rate exposure, the Company, from time to time, contracts to reduce the risk that movements in exchange rates will enters into interest rate derivatives agreements. In the second quarter adversely affect the net cash flows resulting from the sale of products of 2018, the Company entered into Treasury rate lock agreements with to foreign customers and purchases from foreign suppliers. We also notional amounts of $300 million to hedge against the variability in use OTC foreign exchange forward and option contracts that are not cash flows due to changes in the benchmark interest rate related to an designated as hedged instruments. These contracts are used to offset anticipated debt issuance. The instruments were designated as cash economic currency risks. The undesignated hedges limit exposures to flow hedges, and were settled with $16 million received on October 31, foreign functional currency fluctuations related to certain subsidiaries’ 2018 concurrent with the debt issuance. As of December 31, 2019, there monetary assets, monetary liabilities and net earnings in foreign were no interest rate derivatives agreements outstanding. currencies. A significant portion of the Company’s non-U.S. revenues CORNING 2019 ANNUAL REPORT 35


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    Management’s Annual Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate of Corning’s assets that could have a material effect on the financial internal control over financial reporting for Corning. statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, Corning’s internal control over financial reporting is a process designed projections of any evaluation of effectiveness to future periods are to provide reasonable assurance regarding the reliability of financial subject to the risk that controls may become inadequate because of reporting and the preparation of financial statements for external changes in conditions, or that the degree of compliance with the policies purposes in accordance with accounting principles generally accepted and procedures may deteriorate. in the United States of America. Corning’s internal control over financial reporting includes those policies and procedures that (i) pertain to Management conducted an evaluation of the effectiveness of the the maintenance of records that, in reasonable detail, accurately and Company’s internal control over financial reporting based on the fairly reflect the transactions and dispositions of Corning’s assets; framework in Internal Control – Integrated Framework (2013) issued (ii) provide reasonable assurance that transactions are recorded as by the Committee of Sponsoring Organizations of the Treadway necessary to permit preparation of financial statements in accordance Commission. Based on this evaluation, management concluded that the with accounting principles generally accepted in the United States of Company’s internal control over financial reporting was effective as of America, and that Corning’s receipts and expenditures are being made December 31, 2019. The effectiveness of the Company’s internal control only in accordance with authorizations of Corning’s management and over financial reporting as of December 31, 2019 has been audited by directors; and (iii) provide reasonable assurance regarding prevention PricewaterhouseCoopers LLP, an independent registered accounting or timely detection of unauthorized acquisition, use, or disposition firm, as stated in their report and is included herein. Wendell P. Weeks R. Tony Tripeny Chairman, Chief Executive Officer and President Executive Vice President and Chief Financial Officer CORNING 2019 ANNUAL REPORT 36


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    Report of Independent Registered Public Accounting Firm Our audits of the consolidated financial statements included PricewaterhouseCoopers LLP performing procedures to assess the risks of material misstatement To the Board of Directors and Shareholders of Corning Incorporated: of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such Opinions on the Financial Statements and Internal Control over procedures included examining, on a test basis, evidence regarding Financial Reporting the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used We have audited the accompanying consolidated balance sheets of and significant estimates made by management, as well as evaluating Corning Incorporated and its subsidiaries as of December 31, 2019 the overall presentation of the consolidated financial statements. Our and 2018, and the related consolidated statements of income (loss), audit of internal control over financial reporting included obtaining an comprehensive income, changes in shareholders’ equity and cash understanding of internal control over financial reporting, assessing flows for each of the three years in the period ended December 31, the risk that a material weakness exists, and testing and evaluating 2019, including the related notes and schedule of valuation and the design and operating effectiveness of internal control based on the qualifying accounts for each of the three years in the period ended assessed risk. Our audits also included performing such other procedures December 31, 2019 listed in the accompanying index (collectively as we considered necessary in the circumstances. We believe that our referred to as the “consolidated financial statements”). We also have audits provide a reasonable basis for our opinions. audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Definition and Limitations of Internal Control over Integrated Framework (2013) issued by the Committee of Sponsoring Financial Reporting Organizations of the Treadway Commission (COSO). A company’s internal control over financial reporting is a process In our opinion, the consolidated financial statements referred to designed to provide reasonable assurance regarding the reliability of above present fairly, in all material respects, the financial position of financial reporting and the preparation of financial statements for the Company as of December 31, 2019 and 2018, and the results of its external purposes in accordance with generally accepted accounting operations and its cash flows for each of the three years in the period principles. A company’s internal control over financial reporting includes ended December 31, 2019 in conformity with accounting principles those policies and procedures that (i) pertain to the maintenance generally accepted in the United States of America. Also, in our opinion, of records that, in reasonable detail, accurately and fairly reflect the the Company maintained, in all material respects, effective internal transactions and dispositions of the assets of the company; (ii) provide control over financial reporting as of December 31, 2019, based on criteria reasonable assurance that transactions are recorded as necessary to established in Internal Control - Integrated Framework (2013) issued by permit preparation of financial statements in accordance with generally the COSO. accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of Basis for Opinions management and directors of the company; and (iii) provide reasonable The Company’s management is responsible for these consolidated assurance regarding prevention or timely detection of unauthorized financial statements, for maintaining effective internal control over acquisition, use, or disposition of the company’s assets that could have a financial reporting, and for its assessment of the effectiveness of material effect on the financial statements. internal control over financial reporting, included in Management’s Because of its inherent limitations, internal control over financial Annual Report on Internal Control Over Financial Reporting appearing reporting may not prevent or detect misstatements. Also, projections of under Item 9A. Our responsibility is to express opinions on the any evaluation of effectiveness to future periods are subject to the risk Company’s consolidated financial statements and on the Company’s that controls may become inadequate because of changes in conditions, internal control over financial reporting based on our audits. We are a or that the degree of compliance with the policies or procedures public accounting firm registered with the Public Company Accounting may deteriorate. Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. Critical Audit Matters federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements CORNING 2019 ANNUAL REPORT We conducted our audits in accordance with the standards of the that were communicated or required to be communicated to the audit PCAOB. Those standards require that we plan and perform the audits to committee and that (i) relate to accounts or disclosures that are material obtain reasonable assurance about whether the consolidated financial to the consolidated financial statements and (ii) involved our especially statements are free of material misstatement, whether due to error or challenging, subjective, or complex judgments. The communication fraud, and whether effective internal control over financial reporting of critical audit matters does not alter in any way our opinion on the was maintained in all material respects. consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 37


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    Report of Independent Registered Public Accounting Firm Income Taxes - Receivables for South Korean Tax Disputes Impairment at the Equity Method Investee, Hemlock As described in Notes 1, 5, and 10 to the consolidated financial statements, Semiconductor Group - The Long-lived Asset Impairment of the in evaluating the tax benefits associated with the Company’s various Solar Power Panel Asset Group (“Solar Group”) tax filing positions, management records a tax benefit for uncertain As described in Notes 1 and 6 to the consolidated financial statements, tax positions using the highest cumulative tax benefit that is more the Company’s equity method investments are reviewed for impairment likely than not to be realized. Adjustments are made to the liability on a periodic basis or if an event occurs or circumstances change that for unrecognized tax benefits in the period in which management indicate the carrying amount may be impaired. This assessment is based determines the issue is effectively settled with the tax authorities, the on a review of the equity investments’ performance and a review of statute of limitations expires for the return containing the tax position indicators of impairment to determine if there is evidence of a loss in or when new information becomes available. The Company is currently value of an equity investment. Hemlock Semiconductor LLC and Hemlock appealing certain South Korean tax assessments and tax refund claims Semiconductor Operations LLC, of which the Company has 49.9% for tax years 2010 through 2018. The Company is required to deposit the and 40.25% ownerships respectively, are recorded as equity method disputed tax amounts with the South Korean government as a condition investments and are affiliated companies of Hemlock Semiconductor of its appeal of any tax assessments. Management believes that it is Group (HSG). Due to the adverse change in HSG’s solar business, HSG more likely than not that these tax positions will prevail in the appeal was required to assess the recoverability of its long-lived assets in the process and as a result, management recorded a non-current receivable fourth quarter. Based on this assessment, HSG determined that the of $415 million as of December 31, 2019 for the amount on deposit carrying values of HSG’s Solar Group significantly exceeded its fair value. with the South Korean government. In the fourth quarter of 2019, HSG engaged a third-party appraiser to assist in determining the fair the Company received a refund of $38 million from the South Korean value of the assets within the Solar Group based on the highest and government related to tax years 2006 through 2009. As of December 31, best use of the asset group. As a result of the fair value determination, 2019, management has also recorded a current receivable of $33 million HSG recognized pre-tax asset impairment charges of $916 million for for an amount refunded in January 2020 related to the same issue for the year ended December 31, 2019. The Company’s share of the pre-tax the tax year 2015. impairment was $369 million. The principal considerations for our determination that performing The principal considerations for our determination that performing procedures relating to the receivables for South Korean tax disputes is a procedures relating to HSG’s long-lived asset impairment of the Solar critical audit matter are there was significant judgment by management Group is a critical audit matter are there was a high degree of auditor when applying the more likely than not recognition criteria to the judgment, subjectivity, and effort in performing procedures and Company’s uncertain tax positions based on the application of the tax evaluating audit evidence relating to (i) management’s assessment of law. This in turn led to a high degree of auditor judgment, subjectivity, the impairment at HSG, and (ii) the determination of the asset groups and effort in performing procedures and evaluating audit evidence and the fair value of the assets within HSG’s Solar Group, including the relating to management’s assumption that the Company will prevail assumptions related to the highest and best use of the assets. In addition, in the appeal of any tax assessments. In addition, the audit effort the audit effort involved the use of professionals with specialized skill involved the use of professionals with specialized skill and knowledge and knowledge to assist in performing these procedures and evaluating to assist in performing these procedures and evaluating the audit the audit evidence obtained. evidence obtained. Addressing the matter involved performing procedures and evaluating Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing consolidated financial statements. These procedures included testing the effectiveness of controls relating to the equity method investment the effectiveness of controls relating to uncertain tax positions, accounting, including controls over management’s recording of the including management’s assessment of the South Korean tax Company’s share of the pre-tax impairment at HSG’s Solar Group. These disputes. These procedures also included, among others, obtaining procedures also included, among others, (i) evaluating management’s management’s assessment and evidence supporting the more- assessment of the impairment at HSG and the Company’s share of likely-than-not tax position on the South Korean tax disputes and the pre-tax impairment, and (ii) testing HSG’s process for determining evaluating the reasonableness of the likelihood that the tax positions the fair value of the long-lived assets within HSG’s Solar Group. will ultimately be sustained upon examination by the South Korean Testing the fair value of these long-lived assets included determining tax authorities and through the appeal process. Professionals with the appropriateness of the asset groups and reasonableness of the specialized skill and knowledge were used to assist in evaluating assumptions related to the determination of the fair value of the long- management’s assessment and supporting evidence, including lived assets in the Solar Group based on their highest and best use. application of the tax law. Professionals with specialized skill and knowledge were used to assist in evaluating the assumptions related to the highest and best use of the long-lived assets and evaluating the consistency of the assumptions with evidence obtained in other areas of the audit. CORNING 2019 ANNUAL REPORT New York, New York February 14, 2020 We have served as the Company’s auditor since 1944. 38


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    Consolidated Statements of Income (Loss) Corning Incorporated and Subsidiary Companies Years ended December 31, (In millions, except per share amounts) 2019 2018 2017 Net sales $ 11,503 $ 11,290 $ 10,116 Cost of sales 7,468 6,829 6,096 Gross margin 4,035 4,461 4,020 Operating expenses: Selling, general and administrative expenses 1,585 1,799 1,473 Research, development and engineering expenses 1,031 993 864 Amortization of purchased intangibles 113 94 75 Operating income 1,306 1,575 1,608 Equity in earnings of affiliated companies (Note 6) 17 390 361 Interest income 21 38 45 Interest expense (221) (191) (155) Translated earnings contract gain (loss), net 248 (93) (121) Other expense, net (155) (216) (81) Income before income taxes 1,216 1,503 1,657 Provision for income taxes (Note 5) (256) (437) (2,154) Net income (loss) attributable to Corning Incorporated $ 960 $ 1,066 $ (497) Earnings (loss) per common share attributable to Corning Incorporated: Basic (Note 17) $ 1.11 $ 1.19 $ (0.66) Diluted (Note 17) $ 1.07 $ 1.13 $ (0.66) The accompanying notes are an integral part of these consolidated financial statements. CORNING 2019 ANNUAL REPORT 39


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    Consolidated Statements of Comprehensive Income Corning Incorporated and Subsidiary Companies Years ended December 31, (In millions) 2019 2018 2017 Net income (loss) attributable to Corning Incorporated $ 960 $ 1,066 $ (497) Foreign currency translation adjustments and other (143) (185) 746 Net unrealized gains (losses) on investments 1 (1) 14 Unamortized (losses) gains and prior service (costs) credits for postretirement benefit plans (64) 19 30 Net unrealized gains (losses) on designated hedges 45 (1) 44 Other comprehensive (loss) income, net of tax (Note 16) (161) (168) 834 Comprehensive income attributable to Corning Incorporated $ 799 $ 898 $ 337 The accompanying notes are an integral part of these consolidated financial statements. CORNING 2019 ANNUAL REPORT 40

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