Note 13 - Share-based Compensation

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

13. Share-Based Compensation

Corning maintains long-term incentive plans (the “Plans”) for key employees and non-employee members of its Board of Directors. The Plans allow Corning to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards or a combination of awards (collectively, share-based awards). At June 30, 2022, there were approximately 33 million unissued common shares available for future grants authorized under the Plans.

Share-based compensation cost is allocated to the cost of sales, selling, general and administrative, and research, development and engineering expense lines in the consolidated statements of income.

The Company measures and recognizes compensation cost for all share-based payment awards made to employees and directors based on estimated fair values.

Total share-based compensation cost was $51 million and $93 million, respectively, for the three and six months ended June 30, 2022 and $44 million and $78 million, respectively, for the three and six months ended June 30, 2021. The income tax benefit realized from share-based compensation was $10 million and $14 million, respectively, for the three and six months ended June 30, 2022, and $21 million and $28 million, respectively, for the three and six months ended June 30, 2021.

Stock Options

Corning’s stock option plans provide non-qualified and incentive stock options to purchase authorized but unissued common shares, or treasury shares, at the market price on the grant date and generally become exercisable in installments from one year to five years from the grant date. The maximum term of non-qualified and incentive stock options is 10 years from the grant date. An award is considered vested when the employee’s retention of the award is no longer contingent on providing subsequent service (the “non-substantive vesting period approach”).

The following table summarizes information regarding stock options outstanding, including the related transactions under the stock option plans, for the six months ended June 30, 2022:

						Weighted-
						average
				Weighted-		remaining		Aggregate
	Number			average		contractual		intrinsic
	of shares			exercise		term		value
	(in thousands)			price		(in years)		(in thousands)
Options outstanding as of December 31, 2021		11,904		$	22.31
Exercised		(1,422	)		19.42
Forfeited and expired		(159	)		18.22
Options outstanding as of June 30, 2022		10,323			22.77		6.29	$	93,772
Options expected to vest as of June 30, 2022		10,287			22.78		6.28		93,346
Options exercisable as of June 30, 2022		8,483			23.45		5.94		71,945

Corning uses a multiple-point Black-Scholes valuation model to estimate the fair value of stock option grants. Corning utilizes a blended approach for calculating the volatility assumption used in the multiple-point Black-Scholes valuation model defined as the weighted average of the short-term implied volatility, the most recent volatility for the period equal to the expected term, and the most recent 15-year historical volatility. The expected term is the period the options are expected to be outstanding and is calculated using a combination of historical exercise experience adjusted to reflect the current vesting period of options being valued, and partial life cycles of outstanding options. The risk-free rates used in the multiple-point Black-Scholes valuation model are the implied rates for a zero-coupon U.S. Treasury bond with a term equal to the option’s expected term. Ranges used reflect results from separate groups of employees exhibiting different exercise behavior.

There have been no stock options granted for the six months ended June 30, 2022 or June 30, 2021. 

Incentive Stock Plans

The Corning Incentive Stock Plans permit restricted stock and restricted stock unit grants, either determined by specific performance goals or issued directly, in most instances, subject to the possibility of forfeiture and without cash consideration. Restricted stock and restricted stock units under the Incentive Stock Plans are granted at the closing market price on the grant date, contingently vest over a period of generally one year to ten years and is aligned to the contractual terms. The fair value is based on the grant date closing price of the Company’s stock.

Time-Based Restricted Stock and Restricted Stock Units

Time-based restricted stock and restricted stock units are issued by the Company on a discretionary basis and are payable in shares of the Company’s common stock upon vesting. The fair value for awards that receive dividends on the underlying shares while unvested or dividends accumulated and paid upon vesting is based on the closing market price of the Company’s stock on the grant date. Awards that do not receive dividends on the underlying shares while unvested or dividends accumulated and paid upon vesting fair value is calculated by reducing the closing market price of the Company’s stock on the grant date by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, discounted at the appropriate risk-free interest rate. Compensation cost is recognized over the requisite vesting period and adjusted for actual forfeitures before vesting.

The following table summarizes the Company’s non-vested time-based restricted stock and restricted stock units and changes which occurred during the  six months ended June 30, 2022:

				Weighted
	Number			average
	of shares			grant-date
	(in thousands)			fair value
Non-vested shares and share units at December 31, 2021		10,594		$	25.83
Granted		4,090			34.24
Vested		(3,067	)		24.42
Forfeited		(200	)		27.99
Non-vested shares and share units at June 30, 2022		11,417		$	29.19

Performance-Based Restricted Stock Units

Performance-based restricted stock units are earned upon the achievement of certain targets and are payable in shares of the Company’s common stock upon vesting, typically over a three year period. The fair value is based on the closing market price of the Company’s stock on the grant date and assumes that the target payout level will be achieved. Compensation cost is recognized over the requisite vesting period and adjusted for actual forfeitures before vesting. During the performance period, compensation cost may be adjusted based on changes in the expected outcome of the performance-related target.

The following table summarizes the Company’s non-vested performance-based restricted stock units and changes which occurred during the six months ended June 30, 2022:

				Weighted
	Number			average
	of shares			grant-date
	(in thousands)			fair value
Non-vested share units at December 31, 2021		3,684		$	34.17
Granted		1,761			40.76
Vested		(130	)		31.86
Performance adjustments		366			34.46
Forfeited		(62	)		32.72
Non-vested share units at June 30, 2022		5,619		$	36.27