Note 14 - Shareholders' Equity

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

14. Shareholders’ Equity

Fixed Rate Cumulative Convertible Preferred Stock, Series A

As of December 31, 2020, Corning had 2,300 outstanding shares of 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 SDC.  On April 5, 2021, Corning and SDC executed the SRA. 

Pursuant to the SRA, on the Initial Closing Date, the Preferred Stock was fully converted.  As a result, the 115 million Common Share equivalent resulting from the conversion of the Preferred Stock was prospectively removed from the calculation of diluted earnings per share.

Immediately following the conversion, Corning repurchased and retired 35 million of the Common Shares held by SDC for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid on the Initial Closing Date. Subsequent payments of approximately $507 million will be paid on each of the first and second anniversaries of the Initial Closing Date.

● The 35 million Common Shares repurchased by Corning were excluded from the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share starting on the Initial Closing Date.

● The Shares repurchased were accounted for as a redemption of Preferred Stock. The excess of the $1.5 billion consideration paid over the carrying value of the Preferred Stock reduced the net income available to common shareholders by $803 million.

The remaining 80 million Common Shares were accounted for as a conversion of Preferred Stock and resulted in an increase of common stock and additional paid-in-capital based on the carrying value of the Preferred Stock and were included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share.

Pursuant to the SRA, with respect to the 80 million Common Shares outstanding held by SDC:

● SDC has the option to sell an additional 22 million Common Shares to Corning in specified tranches from time to time in calendar years 2024 through 2027.  Corning may, at its sole discretion, elect to repurchase such Common Shares. If Corning elects not to repurchase the Common Shares and SDC sells the Common Shares on the open market, Corning will be required to pay SDC a make-whole payment, subject to a 5% cap of the repurchase proceeds that otherwise would have been paid by Corning. As of September 30, 2021, the fair value of the option was $17 million when measured using significant other observable inputs.

● The remaining 58 million shares of Common Shares are subject to a seven-year lock-up period expiring in 2027.

Refer to Note 13 (Fair Value Measurements) to the consolidated financial statements for additional information.

Share Repurchases

On April 26, 2018, Corning’s Board of Directors approved a $2 billion share repurchase program with no expiration date (the “2018 Repurchase Program”). On July 17, 2019, Corning’s Board of Directors authorized $5 billion in share repurchases with no expiration date (the “2019 Repurchase Program”).

For the three and nine months ended September 30, 2021, the Company repurchased 629 thousand and 668 thousand shares of common stock on the open market for approximately $24 million and $25 million, respectively, as part of its 2019 Repurchase Program.

During the three months ended June 30, 2021, the Company repurchased 35 million shares of common stock, under the 2018 and 2019 Repurchase Programs, for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid on the Initial Closing Date. Subsequent payments of approximately $507 million will be paid on each of the first and second anniversaries of the Initial Closing Date.  These shares were repurchased immediately following the conversion of preferred shares, as discussed above.

The Company made no share repurchases for the three months ended September 30, 2020.  For the nine months ended September 30, 2020, the Company repurchased 4.1 million shares of common stock on the open market for approximately $105 million, as part of its 2018 Repurchase Program.

Accumulated Other Comprehensive Loss

In the three and nine months ended September 30, 2021 and 2020, the change in accumulated other comprehensive loss was primarily related to the foreign currency translation adjustment.

A summary of changes in the foreign currency translation adjustment component of accumulated other comprehensive loss is as follows (in millions) ⁽¹⁾:

	Three months ended						Nine months ended
	September 30,						September 30,
	2021			2020			2021			2020
Beginning balance	$	(652	)	$	(1,064	)	$	(329	)	$	(857	)
Other comprehensive (loss) income (2)		(185	)		274			(501	)		75
Equity method affiliates (3)		(7	)		9			(14	)		1
Net current-period other comprehensive (loss) income		(192	)		283			(515	)		76
Ending balance	$	(844	)	$	(781	)	$	(844	)	$	(781	)

⁽¹⁾ All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive loss.

⁽²⁾ For the three and nine months ended September 30, 2021, amounts are net of tax benefit of $31 million and $42 million, respectively. For the three and nine months ended September 30, 2020, amounts are net of tax expense of $21 million and $10 million, respectively. 

⁽³⁾ Tax effects are not significant.