CORNING INC /NY [GLW] Filings

10-Q 1 glw20220930_10q.htm FORM 10-Q glw20220930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number: 1-3247

CORNING INCORPORATED

(Exact name of registrant as specified in its charter)

	New York		16-0393470
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	One Riverfront Plaza, Corning, New York		14831
	(Address of principal executive offices)		(Zip Code)

607-974-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.50 par value per share		GLW		New York Stock Exchange (NYSE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Yes

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Class		Outstanding as of October 21, 2022
	Corning’s Common Stock, $0.50 par value per share		845,811,376 shares

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INDEX

PART I – FINANCIAL INFORMATION
	Page
Item 1. Financial Statements

Consolidated Statements of Income	3

Consolidated Statements of Comprehensive (Loss) Income	4

Consolidated Balance Sheets	5

Consolidated Statements of Cash Flows	6

Consolidated Statements of Changes in Shareholders’ Equity	7

Notes to Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk	41

Item 4. Controls and Procedures	41

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	42

Item 1A. Risk Factors	42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 6. Exhibits	44

Signatures	45

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in millions, except per share amounts)

	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
Net sales	$	3,488		$	3,615		$	10,783		$	10,406
Cost of sales		2,426			2,294			7,192			6,614

Gross margin		1,062			1,321			3,591			3,792

Operating expenses:
Selling, general and administrative expenses		461			486			1,381			1,351
Research, development and engineering expenses		278			251			766			715
Amortization of purchased intangibles		31			32			92			97

Operating income		292			552			1,352			1,629

Interest income		3			3			9			8
Interest expense		(73	)		(72	)		(216	)		(227	)
Translated earnings contract (loss) gain, net (Note 11)		(68	)		(13	)		257			262
Other income, net		106			23			391			169

Income before income taxes		260			493			1,793			1,841
Provision for income taxes (Note 4)		(34	)		(109	)		(380	)		(402	)

Net income		226			384			1,413			1,439

Net income attributable to non-controlling interests		(18	)		(13	)		(61	)		(20	)

Net income attributable to Corning Incorporated	$	208		$	371		$	1,352		$	1,419

Earnings per common share available to common shareholders:
Basic (Note 5)	$	0.25		$	0.44		$	1.60		$	0.72
Diluted (Note 5)	$	0.24		$	0.43		$	1.58		$	0.71

Reconciliation of net income attributable to Corning Incorporated versus net income available to common shareholders:

Net income attributable to Corning Incorporated	$	208		$	371		$	1,352		$	1,419

Series A convertible preferred stock dividend											(24	)
Excess consideration paid for redemption of preferred shares ⁽¹⁾											(803	)

Net income available to common shareholders	$	208		$	371		$	1,352		$	592

(1)	Refer to Note 5 (Earnings per Common Share) and Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.

The accompanying notes are an integral part of these consolidated financial statements.

‎

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited; in millions)

	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
Net income	$	226		$	384		$	1,413		$	1,439

Foreign currency translation adjustments and other		(685	)		(192	)		(1,535	)		(515	)
Unamortized gains (losses) and prior service credits (costs) for postretirement benefit plans		3						(49	)		(1	)
Net unrealized losses on designated hedges		(15	)		(15	)		(32	)		(3	)
Other comprehensive loss, net of tax		(697	)		(207	)		(1,616	)		(519	)

Comprehensive (loss) income		(471	)		177			(203	)		920

Comprehensive income attributable to non-controlling interests		(18	)		(13	)		(61	)		(20	)

Comprehensive (loss) income attributable to Corning Incorporated	$	(489	)	$	164		$	(264	)	$	900

The accompanying notes are an integral part of these consolidated financial statements.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

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

	September 30,			December 31,
	2022			2021
Assets

Current assets:
Cash and cash equivalents	$	1,630		$	2,148
Trade accounts receivable, net of doubtful accounts - $39 and $42		1,620			2,004
Inventories, net (Note 6)		2,951			2,481
Other current assets		1,603			1,026
Total current assets		7,804			7,659

Property, plant and equipment, net of accumulated depreciation - $13,348 and $13,969		14,645			15,804
Goodwill, net		2,368			2,421
Other intangible assets, net		1,049			1,148
Deferred income taxes (Note 4)		998			1,066
Other assets		1,871			2,056

Total Assets	$	28,735		$	30,154

Liabilities and Equity

Current liabilities:
Current portion of long-term debt and short-term borrowings (Note 8)	$	208		$	55
Accounts payable		1,808			1,612
Other accrued liabilities (Note 7 and Note 10)		3,151			3,139
Total current liabilities		5,167			4,806

Long-term debt (Note 8)		6,525			6,989
Postretirement benefits other than pensions (Note 9)		585			622
Other liabilities (Note 7 and Note 10)		4,910			5,192
Total liabilities		17,187			17,609

Commitments and contingencies (Note 10)
Shareholders’ equity (Note 13):
Common stock – Par value $0.50 per share; Shares authorized 3.8 billion; Shares issued: 1.8 billion and 1.8 billion		910			907
Additional paid-in capital – common stock		16,649			16,475
Retained earnings		17,044			16,389
Treasury stock, at cost; Shares held: 977 million and 970 million		(20,528	)		(20,263	)
Accumulated other comprehensive loss		(2,791	)		(1,175	)
Total Corning Incorporated shareholders’ equity		11,284			12,333
Non-controlling interests		264			212
Total equity		11,548			12,545

Total Liabilities and Equity	$	28,735		$	30,154

The accompanying notes are an integral part of these consolidated financial statements.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

	Nine months ended
	September 30,
	2022			2021
Cash Flows from Operating Activities:
Net income	$	1,413		$	1,439
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,014			1,005
Amortization of purchased intangibles		92			97
Loss on disposal of assets		110			8
Gain on sale of business		(53	)		(54	)
Share-based compensation expense		145			117
Translation gain on Japanese yen-denominated debt		(321	)		(127	)
Deferred tax provision		58			68
Translated earnings contract gain		(257	)		(262	)
Unrealized translation losses on transactions		140			65
Changes in assets and liabilities:
Trade accounts receivable		161			(146	)
Inventories		(637	)		(72	)
Other current assets		(5	)		(210	)
Accounts payable and other current liabilities		25			471
Customer deposits and government incentives		144			62
Deferred income		(15	)		(92	)
Other, net		(16	)		20
Net cash provided by operating activities		1,998			2,389

Cash Flows from Investing Activities:
Capital expenditures		(1,201	)		(1,014	)
Proceeds from sale of business		77			102
Investment in and proceeds from unconsolidated entities, net		(10	)		87
Realized gains on translated earnings contract		209			30
Other, net		(44	)		(8	)
Net cash used in investing activities		(969	)		(803	)

Cash Flows from Financing Activities:
Repayments of short-term borrowings		(87	)		(144	)
Repayments of long-term debt					(716	)
Proceeds from issuance of short-term debt		70
Proceeds from issuance of long-term debt		37			19
Payment for redemption of preferred stock		(507	)		(507	)
Payments of employee withholding tax on stock awards		(44	)		(57	)
Proceeds from exercise of stock options		35			91
Purchases of common stock for treasury		(221	)		(22	)
Dividends paid		(696	)		(659	)
Other, net		(17	)		5
Net cash used in financing activities		(1,430	)		(1,990	)
Effect of exchange rates on cash		(117	)		(56	)
Net decrease in cash and cash equivalents		(518	)		(460	)
Cash and cash equivalents at beginning of period		2,148			2,672
Cash and cash equivalents at end of period	$	1,630		$	2,212

The accompanying notes are an integral part of these consolidated financial statements.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited; in millions, except per share amounts)

	Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interests			Total
Balance, December 31, 2021	$	907	$	16,475	$	16,389		$	(20,263	)	$	(1,175	)	$	12,333		$	212		$	12,545
Net income						581									581			22			603
Other comprehensive loss												(187	)		(187	)					(187	)
Purchase of common stock for treasury									(151	)					(151	)					(151	)
Shares issued to benefit plans and for option exercises		1		56											57						57
Common dividends ($0.27 per share)						(233	)								(233	)					(233	)
Other, net (1)									(5	)					(5	)					(5	)
Balance, March 31, 2022	$	908	$	16,531	$	16,737		$	(20,419	)	$	(1,362	)	$	12,395		$	234		$	12,629
Net income						563									563			21			584
Other comprehensive loss												(732	)		(732	)		(2	)		(734	)
Purchase of common stock for treasury									(53	)					(53	)					(53	)
Shares issued to benefit plans and for option exercises		2		59											61						61
Common dividends ($0.54 per share)						(463	)								(463	)					(463	)
Other, net (1)									(37	)					(37	)		(5	)		(42	)
Balance, June 30, 2022	$	910	$	16,590	$	16,837		$	(20,509	)	$	(2,094	)	$	11,734		$	248		$	11,982
Net income						208									208			18			226
Other comprehensive loss												(697	)		(697	)		(2	)		(699	)
Purchase of common stock for treasury									(17	)					(17	)					(17	)
Shares issued to benefit plans and for option exercises				59											59						59
Other, net (1)						(1	)		(2	)					(3	)					(3	)
Balance, September 30, 2022	$	910	$	16,649	$	17,044		$	(20,528	)	$	(2,791	)	$	11,284		$	264		$	11,548

	Convertible preferred stock			Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interests			Total
Balance, December 31, 2020	$	2,300		$	863	$	14,642	$	16,120		$	(19,928	)	$	(740	)	$	13,257		$	191		$	13,448
Net income									599									599			2			601
Other comprehensive loss															(352	)		(352	)		(1	)		(353	)
Shares issued to benefit plans and for option exercises					1		80											81						81
Common dividends ($0.24 per share)									(187	)								(187	)					(187	)
Preferred dividends ($10,625 per share)									(24	)								(24	)					(24	)
Other, net (1)									1			(6	)					(5	)		(3	)		(8	)
Balance, March 31, 2021	$	2,300		$	864	$	14,722	$	16,509		$	(19,934	)	$	(1,092	)	$	13,369		$	189		$	13,558
Net income									449									449			5			454
Other comprehensive income															40			40			1			41
Redemption of preferred stock (2)		(700	)						(803	)								(1,503	)					(1,503	)
Conversion of preferred stock to common stock (3)		(1,600	)		40		1,560											—						—
Purchase of common stock for treasury												(1	)					(1	)					(1	)
Shares issued to benefit plans and for option exercises					3		70											73						73
Common dividends ($0.48 per share)									(416	)								(416	)					(416	)
Other, net (1)												(51	)					(51	)		(13	)		(64	)
Balance, June 30, 2021	$	—		$	907	$	16,352	$	15,739		$	(19,986	)	$	(1,052	)	$	11,960		$	182		$	12,142
Net income									371									371			13			384
Other comprehensive loss															(207	)		(207	)		(1	)		(208	)
Purchase of common stock for treasury												(24	)					(24	)					(24	)
Shares issued to benefit plans and for option exercises							46											46						46
Other, net (1)												(1	)					(1	)		16			15
Balance, September 30, 2021	$	—		$	907	$	16,398	$	16,110		$	(20,011	)	$	(1,259	)	$	12,145		$	210		$	12,355

(1)	Treasury stock includes the deemed surrender to the Company of common stock to satisfy employee tax withholding obligations.
(2)	Refer to Note 5 (Earnings per Common Share) and Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.
(3)	Refer to Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.

The accompanying notes are an integral part of these consolidated financial statements.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation

In these notes, the terms “Corning,” “Company,” “we,” “us,” or “our” mean Corning Incorporated and its subsidiary companies.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information and in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. These interim consolidated financial statements should be read in conjunction with Corning’s consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).

The unaudited consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. The non-controlling interests as recorded in the consolidated financial statements represent amounts attributable to the minority shareholders of Hemlock Semiconductor Group (“Hemlock”) and other less-than-wholly-owned consolidated subsidiaries.

Certain prior year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no material impact on the results of operations, financial position, or changes in shareholders’ equity.

New Accounting Standards

In November 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-10 Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, effective for financial statements issued for annual periods beginning after December 15, 2021. ASU 2021-10 requires business entities to disclose information in the notes to the financial statements about certain types of government assistance. The annual disclosure requirements apply to transactions with a government that are accounted for by analogizing to either a grant model or a contribution model. We plan to adopt ASU 2020-10 when we issue our annual financial statements. We do not expect it to have a material impact on our financial position or results of operations.

2. Restructuring, Impairment, and Other Charges and Credits

During the three and nine months ended September 30, 2022, we recorded $138 million and $217 million, respectively, in accelerated depreciation, asset write-offs and other related charges, of which $125 million and $193 million, respectively, were reflected in cost of sales in the consolidated statements of income. The activity primarily related to capacity optimization of an emerging growth business.

There were no material restructuring, impairment and other charges and credits for the three and nine months ended September 30, 2021.

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3. Revenue

Revenue Disaggregation Table

The following table shows revenues by major product categories, similar to the Company’s reportable segment disclosure. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty of revenue recognition and cash flows are substantially similar. Commercial markets and selling channels are also similar. Except for an inconsequential amount of revenue for Telecommunications products, product category revenues are recognized at the point in time when control transfers to the customer.

Revenues by product category were as follows (in millions):

	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021

Telecommunication products	$	1,317	$	1,131	$	3,828	$	3,143

Display products		558		936		2,223		2,758

Specialty glass products		516		556		1,494		1,490

Environmental substrate and filter products		393		382		1,130		1,233

Life science products		297		304		908		917

Polycrystalline silicon and all other products		407		306		1,200		865
Total net sales	$	3,488	$	3,615	$	10,783	$	10,406
Impact of constant currency reporting ⁽¹⁾		178		24		389
Net sales of reportable segments and Hemlock and Emerging Growth Businesses	$	3,666	$	3,639	$	11,172	$	10,406

⁽¹⁾	This amount represents the impact of foreign currency adjustments primarily in the Display Technologies segment. Refer to Note 15 (Reportable Segments) for additional information.

Contract Assets and Liabilities

Contract assets, such as incremental costs to obtain or fulfill contracts, are an insignificant component of Corning’s revenue recognition process. Most of Corning’s fulfillment costs as a manufacturer of products are classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types. Other contract fulfillment costs are immaterial due to the nature of the products and their respective manufacturing processes.

Contract liabilities include customer deposits, deferred revenue and other advance payments. Customer deposits are predominately related to Display products and deferred revenue is predominately related to Hemlock. Other advance payments are not significant to operations and are classified as part of other accrued liabilities in the consolidated financial statements.

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Customer Deposits

As of September 30, 2022 and December 31, 2021, Corning had customer deposits of approximately $1.3 billion. Most of these customer deposits were non-refundable and allowed customers to secure rights to products produced by Corning under long-term supply agreements. The duration of these long-term supply agreements ranges up to 10 years. As products are shipped to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability.

Customer deposits used were $24 million and $155 million for the three and nine months ended September 30, 2022, respectively, and $59 million and $182 million for the three and nine months ended September 30, 2021, respectively. As of September 30, 2022 and December 31, 2021, $1.1 billion were classified as other long-term liabilities. The remaining $166 million and $223 million as of September 30, 2022 and December 31, 2021, respectively, were classified as other accrued liabilities.

Deferred Revenue

As of September 30, 2022 and December 31, 2021, Corning had deferred revenue of approximately $902 million and $912 million, respectively. The deferred revenue was primarily related to the performance obligations of non-refundable consideration previously received by Hemlock from its customers under long-term supply agreements. The deferred revenue is tracked on a per-customer contract-unit basis. As customers take delivery of the committed volumes under the terms of the contract, a per-unit amount of deferred revenue is recognized when control of the promised goods is transferred to the customer based upon the units shipped.

As of September 30, 2022 and December 31, 2021, $732 million and $764 million, respectively, were classified as other long-term liabilities and $170 million and $148 million, respectively, were classified as other accrued liabilities.

4. Income Taxes

The provision for income taxes and the related effective income tax rates were as follows (in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021
Provision for income taxes	$	(34	)	$	(109	)	$	(380	)	$	(402	)
Effective tax rate		13.1	%		22.1	%		21.2	%		21.8	%

For the three months ended September 30, 2022, the effective income tax rate differed from the United States (“U.S.”) statutory rate of 21%, primarily due to the net impact of changes in tax legislation and changes in estimates based on the final 2021 U.S. Federal Income Tax Return, partially offset by changes in tax reserves. For the nine months ended September 30, 2022, the effective income tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings and changes in tax reserves, partially offset by the net impact of changes in tax legislation, changes in estimates based on the final 2021 U.S. Federal Income Tax Return and adjustments related to share-based compensation.

For the three months ended September 30, 2021, the effective income tax rate differed from the U.S. statutory rate of 21%, primarily due to non-deductible expenses for tax purposes, foreign rate differential, and tax reform items. For the nine months ended September 30, 2021, the effective income tax rate differed from the U.S. statutory rate of 21% primarily due to an adjustment to the permanently reinvested foreign income position, excess tax benefit related to share-based compensation payments, foreign rate differential, and tax reform items related to The Tax Cuts and Jobs Act of 2017.

Corning Precision Materials is currently appealing certain tax assessments and tax refund claims in South Korea for tax years 2010 through 2018. The Company was required to deposit the disputed amounts with the South Korean government as a condition of its appeal of any tax assessments. Corning believes that it is more likely than not the Company will prevail in the appeals process. As of September 30, 2022 and December 31, 2021, non-current receivables of $322 million and $350 million, respectively, were recorded related to these appeals.

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5. Earnings per Common Share

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

	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income attributable to Corning Incorporated	$	208	$	371	$	1,352	$	1,419
Less: Series A convertible preferred stock dividend								24
Less: Excess consideration paid for redemption of preferred shares								803
Net income available to common shareholders – basic		208		371		1,352		592
Net income available to common shareholders – diluted	$	208	$	371	$	1,352	$	592

Weighted-average common shares outstanding – basic		843		852		843		821
Effect of dilutive securities:
Employee stock options and other dilutive securities		12		14		14		16
Weighted-average common shares outstanding – diluted		855		866		857		837
Basic earnings per common share	$	0.25	$	0.44	$	1.60	$	0.72
Diluted earnings per common share	$	0.24	$	0.43	$	1.58	$	0.71

Anti-dilutive potential shares excluded from diluted earnings per common share:
Series A convertible preferred stock ⁽¹⁾								41
Employee stock options and awards		3				2
Total		3		—		2		41

⁽¹⁾	For the nine months ended September 30, 2021, the Preferred Stock was anti-dilutive; therefore, it was excluded from the calculation of diluted earnings per share.

Fixed Rate Cumulative Convertible Preferred Stock, Series A

As of December 31, 2020, Corning had 2,300 outstanding shares of Fixed Rate Cumulative Convertible Preferred Stock, Series A (the “Preferred Stock”). On January 16, 2021, the Preferred Stock became convertible into 115 million common shares, in whole or in part, at the option of the holder, Samsung Display Co., Ltd. (“SDC”). On April 5, 2021, Corning and SDC executed the Share Repurchase Agreement (“SRA”).

Pursuant to the SRA, on April 8, 2021, the Preferred Stock was fully converted into 115 million common shares. The preferred shares were removed from the calculation of diluted earnings per share. The Company repurchased 35 million of the converted common shares pursuant to the SRA and excluded them from the weighted average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share. The redemption of these common shares resulted in a reduction of retained earnings of $803 million which reduced the net income available to common shareholders. The remaining 80 million common shares are outstanding and are included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share.

Refer to Note 13 (Shareholders’ Equity) to the consolidated financial statements for more information.

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6. Inventories, Net

Inventories, net were as follows (in millions):

	September 30,		December 31,
	2022		2021
Finished goods	$	1,394	$	1,215
Work in process		507		358
Raw materials and accessories		571		427
Supplies and packing materials		479		481
Total inventories, net	$	2,951	$	2,481

7. Other Liabilities

Other liabilities were as follows (in millions):

	September 30,		December 31,
	2022		2021
Current liabilities:
Wages and employee benefits	$	595	$	824
Income taxes		99		196
Derivative instruments (Note 11)		494		144
Deferred revenue (Note 3)		170		148
Customer deposits (Note 3)		166		223
Share repurchase liability (Note 13)		504		506
Short-term operating leases		97		94
Other current liabilities		1,026		1,004
Other accrued liabilities	$	3,151	$	3,139

Non-current liabilities:
Defined benefit pension plan liabilities	$	698	$	707
Derivative instruments (Note 11)		238		49
Deferred revenue (Note 3)		732		764
Customer deposits (Note 3)		1,115		1,072
Share repurchase liability (Note 13)		18		517
Deferred tax liabilities		136		258
Long-term operating leases		648		691
Other non-current liabilities		1,325		1,134
Other liabilities	$	4,910	$	5,192

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8. Debt

Based on borrowing rates currently available to us for loans with similar terms and maturities, the fair value of long-term debt was $5.9 billion and $8.3 billion at September 30, 2022 and December 31, 2021, respectively, compared to recorded book values of $6.5 billion and $7.0 billion at September 30, 2022 and December 31, 2021, respectively. The Company measures the fair value of its long-term debt using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

Debt Issuances and Redemptions

In the second quarter of 2022, Corning amended and restated its existing revolving credit agreement, which provides a committed $1.5 billion unsecured multi-currency line of credit, primarily to extend the term to 2027. Additionally, Corning amended and restated its 25 billion Japanese yen liquidity facility, equivalent to approximately $173 million, primarily to extend the term to 2025. As of September 30, 2022 and December 31, 2021, there were no outstanding amounts under either the amended and restated or the existing facilities.

In the second quarter of 2021, Corning redeemed $375 million of 2.9% debentures due in 2022, paying a premium of $10 million by exercising our make-whole call. The bond redemption resulted in an $11 million loss during the same quarter. In the third quarter of 2021, Corning redeemed $250 million of 3.7% debentures due in 2023, paying a premium of $19 million by exercising our make-whole call. The bond redemption resulted in a $20 million loss during the same quarter.

Corning had no outstanding commercial paper as of September 30, 2022 and December 31, 2021.

9. Employee Retirement Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company’s funding policy is to contribute, over time, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During the nine months ended September 30, 2022, contributions to our international pension plans were not material. The Company does not expect to make additional contributions in the fourth quarter of 2022.

The following table summarizes the components of net periodic benefit expense for Corning’s defined benefit pension and postretirement health care and life insurance plans (in millions):

Pension benefits

Postretirement benefits

Three months ended

Nine months ended

Three months ended

Nine months ended

September 30,

2022

2021

2022

2021

2022

2021

2022