3. Commitments, Contingencies and Guarantees

Pittsburgh Corning Corporation and Asbestos Litigation.

Corning and PPG Industries, Inc. (“PPG”) each owned 50% of the capital stock of Pittsburgh Corning Corporation (“PCC”). On April 16, 2000, PCC filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Western District of Pennsylvania. At the time PCC filed for bankruptcy protection, there were approximately 11,800 claims pending against Corning in state court lawsuits alleging various theories of liability based on exposure to PCC’s asbestos products and typically requesting monetary damages in excess of one million dollars per claim. On April 27, 2016, the Modified Third Amended Plan of Reorganization for Pittsburgh Corning Corporation (the “Plan”) became effective.

As required by the Plan, Corning contributed its equity interests in PCC and Pittsburgh Corning Europe N.V. (“PCE”), a Belgian corporation, on April 27, 2016 and June 9, 2016, respectively, and recognized a gain of $56 million in the selling, general and administrative expenses line of the Company’s Consolidated Statements of Income for the difference between the fair value of the asbestos litigation liability and carrying value of the investment. Corning must also contribute $290 million in a fixed series of payments. Corning has the option to use its common stock rather than cash to make these payments, but the liability is fixed by dollar value and not the number of shares. Assuming certain conditions are met, the Plan requires Corning to make: (1) one payment of $70 million on June 9, 2017; and (2) five additional payments of $35 million, $50 million, $35 million, $50 million, and $50 million, respectively, on each of the five subsequent anniversaries of the first payment, the final payment of which is subject to reduction based on the application of credits under certain circumstances.

Non-PCC Asbestos Litigation

In addition to the claims against Corning related to its ownership interest in PCC, at the time PCC filed for bankruptcy, Corning was a defendant in other cases alleging injuries from asbestos related to its Corhart business and seeking similar amounts of monetary damages per case (the “non-PCC asbestos claims”). The Bankruptcy Court then granted a preliminary injunction (the “Stay”), which suspended all asbestos cases against PCC, PPG and Corning – including these non-PCC asbestos claims. Approximately 9,700 such non-PCC asbestos claims (with approximately 37,300 claimants) may still be pending. The Stay will be lifted on August 25, 2016. The non-PCC asbestos claims against Corning have been covered, in part, by insurance without material impact to Corning to date. As of June 30, 2016, Corning had received approximately $19 million in insurance payments for non-PCC asbestos claims that were subject to the Stay. When the Stay is lifted, the non-PCC asbestos claims will be allowed to proceed against Corning. Corning believes that the $150 million reserve for estimated asbestos litigation liabilities that was established in prior periods continues to be reasonable. The liability for non-PCC asbestos claims was estimated based upon industry data for asbestos claims since Corning does not have recent claim history due to the Stay issued by the Bankruptcy Court. The estimated liability represents the undiscounted projection of claims and related legal fees over the next 20 years. The amount may need to be adjusted in future periods as more data becomes available; however, we cannot estimate any lesser or greater liabilities at this time.

Total Estimated Liability for the Amended PCC Plan and the Non-PCC Asbestos Claims

The liability for the Amended PCC Plan and the non-PCC asbestos claims was estimated to be $440 million at June 30, 2016, compared with an estimate of liability of $678 million at December 31, 2015. The decline in the liability is due to the contribution of the equity interests of PCC and PCE in the total amount of $238 million, as required by the Plan. The $440 million liability is comprised of $290 million for the fixed series of payments for the remaining PCC asbestos liability, and $150 million for the non-PCC asbestos claims, all referenced in the preceding paragraphs. At June 30, 2016, $370 million of the obligation, consisting of the $220 million for the fixed series of payments due in the years 2018 through 2022 and $150 million for the non-PCC asbestos claims, is classified as a non-current liability. The amount of the obligation related to the fixed payment of $70 million due in the second quarter of 2017 is classified as a current liability because the contribution of those assets is expected to be made within the next twelve months.

The amount of the asbestos litigation liability for the periods ended June 30, 2016 and December 31, 2015 is as follows (in millions):

	Amended PCC Plan				Non-PCC		Total Asbestos Litigation Liability
	Equity Interests		Fixed Series of Payments		Non-PCC		Total Asbestos Litigation Liability
Fair Value of Asbestos Litigation Liability as of Dec. 31, 2015	$	238	$	290	$	150	$	678

Less: Contribution of PCC & PCE Equity Interests - Carrying Value		182		-		-		182
Gain on Contribution of Equity Interests		56		-		-		56
Asbestos Litigation Liability as of June 30, 2016	$	-	$	290	$	150	$	440

Non-PCC Asbestos Claims Insurance Litigation

Several of Corning’s insurers have commenced litigation in state courts for a declaration of the rights and obligations of the parties under insurance policies, including rights that may be affected by the potential resolutions described above. Corning has resolved these issues with a majority of its relevant insurers, and is vigorously contesting these cases with the remaining relevant insurers. Management is unable to predict the outcome of the litigation with these remaining insurers.

Other Commitments and Contingencies

We are required, at the time a guarantee is issued, to recognize a liability for the fair value or market value of the obligation it assumes. In the normal course of our business, we do not routinely provide significant third-party guarantees. Generally, any third party guarantees provided by Corning are limited to certain financial guarantees including stand-by letters of credit and performance bonds, and the incurrence of contingent liabilities in the form of purchase price adjustments related to attainment of milestones. When provided, these guarantees have various terms, and none of these guarantees are individually significant.

As of June 30, 2016 and December 31, 2015, contingent guarantees totaled a notional value of $190 million and $184 million, respectively. We believe a significant majority of these contingent guarantees will expire without being funded. We also were contingently liable for purchase obligations of $220 million at June 30, 2016 and December 31, 2015.

Product warranty liability accruals were considered insignificant at June 30, 2016 and December 31, 2015.

Corning is a defendant in various lawsuits, including environmental, product-related suits, and is subject to various claims that arise in the normal course of business. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on Corning’s consolidated financial position, liquidity, or results of operations, is remote. Other than certain asbestos related claims, there are no other material loss contingencies related to litigation.

Corning has been named by the Environmental Protection Agency (“the Agency”) under the Superfund Act, or by state governments under similar state laws, as a potentially responsible party for 17 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 cleanup unless the Agency agrees otherwise. It is Corning’s policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants. At June 30, 2016 and December 31, 2015, Corning had accrued approximately $47 million (undiscounted) and $37 million (undiscounted), respectively, for the estimated liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.

The ability of certain subsidiaries and affiliated companies to transfer funds is limited by provisions of foreign government regulations, affiliate agreements and certain loan agreements. At June 30, 2016, the amount of equity subject to such restrictions for consolidated subsidiaries and affiliated companies was not significant. While this amount is legally restricted, it does not result in operational difficulties since we have generally permitted subsidiaries to retain a majority of equity to support their growth programs.