Note 12 - Financial Instruments

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

12. Financial Instruments

The following table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis (in millions):

	September 30, 2024							December 31, 2023
	Notional amount		Fair value asset (1)		Fair value liability (1)			Notional amount		Fair value asset (1)		Fair value liability (1)
Derivatives designated as hedging instruments (2):
Foreign exchange and precious metals lease contracts (3)	$	864	$	136	$	(46	)	$	241	$	287
Derivatives not designated as hedging instruments:
Foreign exchange contracts		2,247		64		(23	)		1,988		20	$	(17	)
Translated earnings contracts (4)		8,660		506		(105	)		5,042		324		(80	)
Cross currency swap contracts		215				(64	)
Total derivatives	$	11,986	$	706	$	(238	)	$	7,271	$	631	$	(97	)
Current			$	446	$	(102	)			$	501	$	(66	)
Non-current				260		(136	)				130		(31	)
Total derivatives			$	706	$	(238	)			$	631	$	(97	)

(1)	All of the Company’s derivative contracts are measured at fair value and are classified as Level 2 within the fair value hierarchy. Derivative assets are presented in other current assets or other assets in the consolidated balance sheets. Derivative liabilities are presented in other current liabilities or other liabilities in the consolidated balance sheets.
(2)	The amounts above do not include €850 million of euro-denominated debt ($943 million carrying value as of September 30, 2024), which is a non-derivative financial instrument designated as a net investment hedge.
(3)	As of  September 30, 2024 and December 31, 2023, derivatives designated as hedging instruments include foreign exchange cash flow hedges with total notional amounts of $864 million and $241 million, respectively, and fair value hedges of leased precious metals with total notional amounts of 13,762 troy ounces and 20,160 troy ounces, respectively. Fair value assets include designated derivatives pertaining to precious metals lease contracts in the amounts of $121 million and $229 million as of  September 30, 2024 and December 31, 2023, respectively.
(4)	The Company has deferred payments associated with its purchased option contracts that are classified as non-derivative liabilities and will be settled by the end of the option contract term. As of  September 30, 2024, the Company has $141 million and $237 million recorded in other accrued liabilities and other liabilities, respectively, in the consolidated balance sheets.

The following table summarizes the total gross notional values for translated earnings contracts (in millions):

	September 30,		December 31,
	2024		2023
Average rate forward contracts:
Chinese yuan-denominated	$	697	$	684
Japanese yen-denominated		334		463
South Korean won-denominated		1,151		1,609
New Taiwan dollar-denominated		377		198
Euro-denominated		1,247
Mexican peso-denominated		104
Option contracts:
Japanese yen-denominated		4,565		2,088
Euro-denominated		185
Total notional amount for translated earnings contracts	$	8,660	$	5,042

The following tables summarize the effect in the consolidated statements of (loss) income relating to Corning’s derivative financial instruments (in millions). The accumulated derivative gain (loss) included in accumulated other comprehensive loss on the consolidated balance sheets as of September 30, 2024 and December 31, 2023 is $41 million and $(54) million, respectively.

	Three months ended September 30,
						Location of gain (loss)
	(Loss) gain recognized					reclassified from	Gain (loss) reclassified
	in other comprehensive					accumulated	from accumulated
	income (loss) (OCI)					OCI into income	OCI into income
	2024			2023		effective (ineffective)	2024		2023
Derivative hedging relationships for cash flow and fair value hedges:
Foreign exchange contracts and other	$	(68	)	$	28	Cost of sales	$	15	$	14
						Other (loss) income, net				(1	)
Total cash flow and fair value hedges	$	(68	)	$	28		$	15	$	13

	Nine months ended September 30,
						Location of gain (loss)
	(Loss) gain recognized					reclassified from	Gain (loss) reclassified
	in other comprehensive					accumulated	from accumulated
	income (loss) (OCI)					OCI into income	OCI into income
	2024			2023		effective (ineffective)	2024			2023
Derivative hedging relationships for cash flow and fair value hedges:
Foreign exchange contracts and other	$	(59	)	$	102	Cost of sales	$	36		$	32
						Other (loss) income, net		(1	)		(3	)
Total cash flow and fair value hedges	$	(59	)	$	102		$	35		$	29

	Gain (loss) recognized in income
	Three months ended						Nine months ended
	September 30,						September 30,
Undesignated derivatives	2024			2023			2024			2023		Location of gain (loss) recognized in income
Foreign exchange contracts	$	42		$	(5	)	$	7		$	23	Other (loss) income, net
Translated earnings contracts		(157	)		20			(91	)		128	Translated earnings contract (loss) gain, net
Cross currency swap contracts		10						3				Other (loss) income, net
Total undesignated	$	(105	)	$	15		$	(81	)	$	151

Cross Currency Swap Contracts

Since inception of the Company’s Japanese yen-denominated debt, the Japanese yen has weakened and the US dollar value of these liabilities has decreased, generating unrealized foreign exchange gains that have been recognized over time in the consolidated statements of (loss) income. In the second quarter of 2024, to economically lock in unrealized foreign exchange gains, the Company entered into a ¥23 billion, or $215 million, fixed rate, three-year cross currency swap contract relating to a portion of the Company’s Japanese yen-denominated debt due in 2027. At inception of this instrument, Corning received a net $68 million from the counterparty, representing an exchange of the notional amounts at a fixed foreign exchange rate of Japanese yen to US dollar and was initially recorded as a derivative liability. As of  September 30, 2024, the fair value of this derivative liability is $64 million.

Net Investment Hedges

In May 2023, the Company designated the full amount of its euro-denominated 2026 Notes and 2031 Notes with a total notional amount of €850 million, which are non-derivative financial instruments, as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. As of September 30, 2024, the net investment hedges are deemed to be effective. During the three and nine months ended September 30, 2024, foreign currency losses of $39 million and $9 million, respectively, associated with these net investment hedges were recognized in other comprehensive income (loss). During the three and nine months ended September 30, 2023, foreign currency gains of $29 million and $36 million, respectively, associated with these net investment hedges were recognized in other comprehensive income (loss).

Leased Precious Metals Contracts

The carrying amount of the leased precious metals pool, which is included within property, plant and equipment, net of accumulated depreciation in the consolidated balance sheets, is $65 million and $90 million as of  September 30, 2024 and December 31, 2023, respectively. The carrying amount of the leased precious metals pool includes cumulative fair value loss of $129 million and $239 million as of  September 30, 2024 and December 31, 2023, respectively. These losses are offset by changes in the fair value of hedges.