<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>corning10k.txt
<DESCRIPTION>CORNING INCORPORATED 2002 FORM 10-K
<TEXT>


                                  United States
                                 Securities and
                               Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-K

--------------------------------------------------------------------------------

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                   For the Fiscal Year ended December 31, 2002
                          Commission file number 1-3247


                              Corning Incorporated
                     One Riverfront Plaza, Corning, NY 14831
                                  607-974-9000

                                    New York
                            (State of incorporation)

                                   16-0393470
                      (I.R.S. employer identification no.)


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

         Title of each class           Name of each exchange on which registered

 Common Stock, $0.50 par value, with            New York Stock Exchange
attached Preferred Share Purchase Right            SWX Swiss Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

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 and (2) has been subject to such filing requirements for
the past 90 days.   Yes   X            No
                        -----             -----

Indicate by check if  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined by Exchange Act Rule 12b-2).   Yes   X     No
                                           -----      -----

As of June 30, 2002, shares held by  non-affiliates of Corning  Incorporated had
an aggregate  market value of  approximately  $3.4 billion.  Shares of Corning's
common stock outstanding as of February 5, 2003, were 1,198,688,205.

                       Documents Incorporated by Reference

Portions of the Registrant's definitive Proxy Statement dated March 3, 2003, and
filed for the Registrant's  2003 Annual Meeting of Shareholders are incorporated
into Part III, as specifically set forth in Part III.


<PAGE>


                                     PART I

Corning Incorporated and its consolidated  subsidiaries is hereinafter sometimes
referred to as the "the Company," "the Registrant," "Corning," or "we."

This report contains  forward-looking  statements that involve a number of risks
and  uncertainties.  These  statements  relate to our future plans,  objectives,
expectations and estimates and may contain words such as "believes,"  "expects,"
"anticipates,"  "estimates,"  "forecasts,"  or similar  expressions.  Our actual
results  could differ  materially  from what is expressed or  forecasted  in our
forward-looking  statements.  Some of the factors that could contribute to these
differences  include those discussed under  "Forward-Looking  Statements," "Risk
Factors,"  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations," and elsewhere in this report.

Item 1.  Business
-----------------

General

Corning traces its origins to a glass business  established in 1851. The present
corporation was  incorporated in the State of New York in December 1936, and its
name was changed from Corning Glass Works to Corning  Incorporated  on April 28,
1989.

Corning  is a  global,  technology-based  corporation,  which  operates  in  two
reportable business segments: Telecommunications and Technologies.

Telecommunications Segment

The  Telecommunications  Segment  produces  optical  fiber  and  cable,  optical
hardware and equipment  and photonic  modules and  components  for the worldwide
telecommunications  industry. Within Corning's optical fiber and cable business,
Corning  invented the first  low-loss  optical  fiber more than 30 years ago and
offers a range of optical  fiber  technology  products  and  enhancements  for a
variety of applications, including premises, access, metropolitan, long-haul and
submarine  networks.  Corning makes and sells Infinicor(R) fibers for local area
networks,  data centers and central  offices;  SMF-28(R) and SMF-28e(TM)  single
mode  optical   fiber,   providing   additional   transmission   wavelengths  in
metropolitan and access networks; LEAF(R) optical fiber for long-haul,  regional
and metropolitan  networks;  and Vascade(R)  submarine optical fibers for use in
undersea networks.  Corning has two large optical fiber manufacturing facilities
in North  Carolina,  as well as a  controlling  interest in  Shanghai  COF Fiber
Optics Co. Ltd. in China,  purchased from Lucent Technologies in September 2002.
As a result of lowered demand for optical fiber, in 2002 Corning  mothballed its
optical fiber  manufacturing  facility in Concord,  NC and  transferred  certain
capabilities to its Wilmington,  NC facility.  Corning believes that the Concord
facility can be returned to productive  capacity  within six to nine months of a
decision to reopen.

Some of Corning's  optical  fiber is  transferred  to  subsidiaries  such as CCS
Holdings, Inc. (Corning Cable Systems),  Corning Cable Systems Verwaltungs GmbH,
Norddeutsche  Seekabelwerke  GmbH & Co., KG (NSW) and Beijing CCS Optical  Fiber
Cable Co., Ltd. or equity  ventures  such as Aberdare  Fiber Optic Cables (Pty.)
Ltd. in South Africa,  Advanced Cable Systems Corporation in Japan,  Chengdu CCS
Optical  Fiber Cable Co. in China,  Leader Optic Fiber Cable Sdn Bhd in Malaysia
and PT Communication  Cable Systems in Indonesia.  The transferred optical fiber
is cabled prior to being sold. The remaining  fiber  production is sold directly
to end  users or  third  party  cablers  around  the  world.  Corning's  cabling
operations include large facilities in North Carolina and in Germany and smaller
regional locations or equity affiliates.

Corning's hardware and equipment products include cable assemblies,  fiber optic
hardware,  fiber optic  connectors,  optical  components  and  couplers,  splice
equipment,  test  equipment  and  accessories  for  optical  connectivity.   For
broadband access,  Corning's products include connection and protection devices,
digital subscriber lines, closures, subscriber demarcation points, outside plant
enclosures,  metal  enclosures and shelters,  plastic  pedestals and copper data
communication  products.  For the cable  television  industry,  products include
coaxial  connectors and associated tools.  Corning has manufacturing  operations
for  hardware and  equipment  products in North  Carolina and Texas,  as well as
Europe,  Mexico  and the  Caribbean.  Corning  Gilbert  Inc.  has  manufacturing
operations for coaxial  connectors and associated  assembly tools in Arizona and
Denmark.

Corning's photonic  technologies  products include erbium doped fiber amplifiers
(EDFAs), Raman amplifier modules and pumps, and semiconductor optical amplifiers
for  long-haul,  metropolitan  and access  markets and  dispersion  compensation
devices for long-haul and  metropolitan  networks.  These photonic  technologies
products maintain and control light signals in optical fiber  telecommunications
systems. These products are made primarily by Corning in New York and by Corning
Photonic Technologies Inc. and other subsidiaries in Massachusetts.


<PAGE>


Corning's controls and connectors products include high performance  oscillators
and  crystals  for  use  in  various  telecommunication  applications.   Corning
manufactures these products in Pennsylvania, Kansas, Canada, China and Germany.

The  Telecommunications  Segment represented  approximately 52% of total Corning
sales during 2002.

Technologies Segment

The  Technologies   Segment   manufactures   specialized  products  with  unique
properties for customer applications  utilizing glass, glass ceramic and polymer
technologies.  Businesses  within this segment  include liquid  crystal  display
glass for flat panel displays,  environmental  products,  life science products,
glass panels and funnels for televisions and cathode ray products, semiconductor
materials, optical and technical products.

Corning's  display  technologies  business  manufactures  glass  substrates  for
displays, which are used in notebook computers,  flat panel desktop monitors and
other electronic products.  Corning's  facilities in Kentucky,  Japan and Taiwan
and its Samsung Corning  Precision Glass Co., Ltd. equity venture in South Korea
develop,   manufacture  and  supply  high  quality  glass   substrates  using  a
proprietary fusion forming  technology and know-how.  These glass substrates are
sold in Japan,  Korea and  Taiwan to  manufacturers  of liquid  crystal  display
panels.

Corning's  environmental products include ceramic technologies and solutions for
emissions and pollution control in mobile and stationary applications around the
world,  including  automotive  and  diesel  substrate  and filter  products.  As
regulations and laws on emission controls standards have tightened over time and
additional countries have instituted  requirements related to clean air, Corning
has continued to develop more  efficient  emission-control  catalytic  converter
substrates with higher density and greater  surface area for improved  emissions
controls.  Corning  manufactures  these products in New York,  Virginia,  China,
Germany and South  Africa.  Cormetech  Inc., an equity  venture with  Mitsubishi
Heavy Industries Ltd. of Japan,  manufactures  ceramic  environmental  substrate
products at its North Carolina and Tennessee facilities for use in power plants.
Corning is investing in new substrate  technologies  for diesel emission control
devices,  with a new  production  facility  under  construction  in New  York to
produce  such  products  for diesel  vehicles  in  Europe,  Japan and the United
States.

Life sciences  laboratory products include microplate  products,  coated slides,
filter  plates for genomics  sample  preparation,  plastic cell culture  dishes,
flasks,  cryogenic vials,  roller bottles,  mass cell culture  products,  liquid
handling instruments,  Pyrex(R) glass beakers, pipettors,  serological pipettes,
centrifuge tubes and laboratory filtration products.  Corning manufactures these
products  in Maine,  New York,  England and Mexico and  markets  them  worldwide
primarily through large distributors to government entities,  pharmaceutical and
biotechnology companies, hospitals, universities and other laboratories.

Corning's  conventional  glass  television  business  includes a 51% partnership
interest in Corning  Asahi  Video,  a producer  of glass  panels and funnels for
cathode ray television tubes in  Pennsylvania.  Corning also owns a 50% interest
in Samsung  Corning  Corporation,  a producer  of glass  panels and  funnels for
cathode ray tubes for  televisions  and computer  monitors,  with  manufacturing
facilities in Japan, Taiwan, Korea and Europe.

Semiconductor materials manufactured by Corning include high-performance optical
materials,  optical-based  metrology  instruments  and  technical  solutions for
applications in the global semiconductor  industry.  Corning's high purity fused
silica (HPFS(R)) materials  applications include projection and illuminator lens
blanks  used  in  microlithography,   spacecraft  windows  and  optics  used  in
high-energy laser fusion systems. Corning's ultra low expansion glass is used in
manufacturing  integrated  circuits  and  mirror  blanks  for use in  space  and
ground-based  systems.  Corning  also makes  fluoride  crystals  and  fabricates
optical  components,   including  calcium  fluoride,   for  customers  who  make
projection  and  illuminator  lens systems used in scanner and stepper  systems.
Corning's  semiconductor  materials are manufactured in New York,  Massachusetts
and South Carolina.

Other specialty  materials made by Corning include  ophthalmic glass and plastic
products,   technical  products,  such  as  polarizing  glass,  glass  for  high
temperature  applications  and  machinable  glass  ceramic for high  temperature
applications. These products are made in New York, Virginia, England and France.
Corning's  Eurokera and Keraglass equity ventures with Saint Gobain Vitrage S.A.
of France  manufacture  smooth  cooktop  glass/ceramic  in  France  and in South
Carolina.

The Technologies Segment represented approximately 48% of Corning's sales during
2002.

Corning and its  subsidiaries  manufacture and process  products at more than 70
plants in 19 countries.


<PAGE>


Additional   discussion  of  Corning  and  its  two  segments  is  discussed  in
Management's  Discussion  and Analysis of Financial  Condition  under  Operating
Review  and  Note  22  (Operating   Segments)  to  the  Consolidated   Financial
Statements.

Corporate Investments

Corning and The Dow Chemical  Company each own half of Dow Corning  Corporation,
an equity  company in  Michigan  that  manufactures  silicones.  Dow  Corning is
expected to emerge  from its  Chapter 11  bankruptcy  proceedings  during  2004.
Additional  discussion  about  this  company  appears  in the Legal  Proceedings
section.

Corning and PPG Industries Inc. each own half of Pittsburgh Corning Corporation,
an  equity  company  in  Pennsylvania  that  manufactures   glass  products  for
architectural  and industrial uses.  Pittsburgh  Corning  Corporation  filed for
Chapter 11 bankruptcy  reorganization in April 2000. Additional discussion about
Pittsburgh Corning appears in the Legal Proceedings  section.  Corning also owns
half of Pittsburgh Corning Europe N.V., a Belgian corporation, that manufactures
glass products for industrial uses primarily in Europe.

Competition

Corning  competes  across  all of its  product  lines with many large and varied
manufacturers,  both domestic and foreign.  Some of these competitors are larger
than Corning, and some have broader product lines.

Telecommunications Segment

Competition  within the  telecommunications  industry is intense  among  several
significant companies.  Corning is a leading, or one of the leading, competitors
in the segment's  principal product lines. Price and new product innovations are
significant  competitive factors. The current downturn in the telecommunications
industry,  particularly in Europe and North America, has changed the competitive
landscape  by  increasing  competition  based upon  pricing.  These  competitive
conditions may persist.

Corning  is  the  largest  producer  of  optical  fiber  and  cable,  but  faces
significant  competition  due to excess  capacity  in the  market  place,  price
pressure and new product  innovations.  Corning  obtained the first  significant
optical  fiber  patents and believes its large scale  manufacturing  experience,
fiber process, technology leadership and intellectual property assets yield cost
advantages  relative  to  several  of its  competitors.  The  primary  competing
producers  of optical  fiber are  Furukawa  OFS,  Fujikura,  Sumitomo,  Alcatel,
Pirelli and Draka.  Furukawa OFS is Corning's  largest  competitor.  For optical
fiber cable, Corning's primary competitors are Furukawa, OFS, Pirelli,  Alcatel,
Alcoa Fujikura and Sumitomo.

For  hardware  and  equipment,   significant  competitors  are  3M,  Molex,  ADC
Communications,  Marconi, Avaya, PPC, Thomas and Betts, CDI, Andrews Corporation
and Rosenberger.  For photonic technologies  products, the largest competitor is
JDS  Uniphase  and  other  competitors  include  Furukawa,   Sumitomo,   Bookham
Technologies plc, Alcatel Optronics and TriQuint Semiconductor.

Technologies Segment

Corning's  principal  products  face  competition  from a variety  of  materials
manufacturers,  some of which  manufacture  similar products made from materials
other than glass and ceramics. Among other things, innovation,  product quality,
performance and service are key competitive elements.

Corning is the largest  worldwide  producer of advanced  liquid crystal  display
glass substrates and that market position  remained  relatively  stable over the
past year.  Corning  believes it has  competitive  advantages in liquid  crystal
display glass substrates by investing in new technologies, offering a consistent
source of reliable supply, using its proprietary fusion manufacturing process at
facilities in Kentucky,  Japan and Korea and delivering thinner,  lighter weight
and larger size products.  Asahi Glass,  Nippon Electric Glass and NH Techno are
Corning's  principal  competitors in the display glass substrates  business.  In
addition, new entrants are seeking to expand their presence in this business.

In the worldwide automotive ceramic substrates  business,  Corning has a leading
market position that has remained  relatively stable over the past year. Corning
believes  its  competitive   advantage  in  automotive  ceramic  substrates  for
catalytic   converters  is  based  upon  global  presence,   customer   service,
engineering  design  services and product  innovation.  Corning's  environmental
technologies  business  faces its  principal  competition  from  NGK,  Denso and
Emitec.


<PAGE>


Corning is a leading supplier of glass and plastic science laboratory  products,
with a growing glass market  presence in North  America and a relatively  stable
laboratory  plastic  market  presence  during  the past year.  Corning  seeks to
maintain  competitive  advantages  relative to its  competitors  by  emphasizing
product quality,  product availability,  supply chain efficiency, a wide product
line and superior product attributes. For laboratory products, Schott Glaswerke,
Kavalier,  Kimble  and  Becton  Dickinson  & Co.  are  the  principal  worldwide
competitors.

Corning  Asahi  Video  Products  Company  is  the  second  largest  producer  of
conventional television glass in North America. Its market position has declined
as the market shifted from conventional  cathode ray tubes to flat panel cathode
ray tubes and other technologies, and as additional competition has emerged from
tube suppliers based in China.  Samsung Corning Corporation is the third largest
worldwide producer of cathode ray tube glass for conventional  televisions.  Its
relative  competitive  position has remained stable over the past year.  Samsung
Corning  Corporation  and Corning Asahi Video Products  Company seek to maintain
their competitive advantage through customer support,  logistics expertise and a
lower cost manufacturing  structure.  For conventional  television glass, Nippon
Electric  Glass,  Techneglas,  as well as various  Asian  manufacturers  are the
competitors.

Corning  is a  leading  supplier  of  materials  for  lithography  optics in the
semiconductor  industry  and that market  position  remained  relatively  stable
during the past year.  Corning  seeks to compete by providing  superior  optical
quality,  and a local Corning presence  supporting its customers.  For Corning's
materials for  semiconductor  stepper  lenses and  ophthalmic  products,  Schott
Glaswerke is the main competitor.

Corning  strives  to  maintain  its  position  through  technology  and  product
innovation.  For the future,  Corning believes its competitive advantage lies in
its  commitment to research and  development,  its  financial  resources and its
commitment  to  quality.  There is no  assurance  that  Corning  will be able to
maintain its market position or competitive advantage.

Raw Materials

Corning's  production  of  specialty  glasses  and  related  materials  requires
significant quantities of energy and batch materials.

Although energy shortages have not been a problem recently, Corning has achieved
flexibility  through  important  engineering  changes to take  advantage  of the
lowest-cost energy source in most significant processes. Specifically, Corning's
principal manufacturing processes can now be operated with natural gas, propane,
oil or electricity, or a combination of these energy sources.

As  to  resources  (ores,   minerals,   and  processed  chemicals)  required  in
manufacturing  operations,   availability  appears  to  be  adequate.  Corning's
suppliers  from time to time may  experience  capacity  limitations in their own
operations,  or may  eliminate  certain  product  lines;  nevertheless,  Corning
believes it has adequate programs to ensure a reliable supply of batch chemicals
and raw materials. For many products, Corning has alternative glass compositions
that would allow  operations to continue  without  interruption  in the event of
specific materials shortages.

Certain key optical  components  used in the  manufacturing  of products  within
Corning's Telecommunications Segment are currently available only from a limited
number of sources.  Any future  difficulty  in obtaining  sufficient  and timely
delivery  of  components  could  result  in  delays  or  reductions  in  product
shipments, or reduce Corning's gross margins.

Patents and Trademarks

Inventions by members of Corning's research and engineering staff have been, and
continue to be, important to the Company's growth.  Patents have been granted on
many of these inventions in the United States and other countries. Some of these
patents have been licensed to other  manufacturers,  including  Corning's equity
investees.  Many of the earlier patents have now expired,  but Corning continues
to seek and obtain patents  protecting its newer  innovations.  In 2002, Corning
was  granted  over 350  patents  in the United  States  and over 600  patents in
countries outside the United States.

Each  business  segment   possesses  its  own  patent  portfolio  that  provides
competitive   advantage  in  protecting  Corning's   innovations.   Corning  has
historically  enforced,  and will continue to enforce, its intellectual property
rights.  At the end of 2002,  Corning  and its  subsidiaries  owned  over  5,000
patents in various  countries  of which over 1,900 were United  States  patents.
Between 2003 and 2005,  approximately 5% of these patents will expire,  while at
the same time Corning intends to seek patents  protecting its newer innovations.
Worldwide,  Corning has over 5,000 patent applications in process, with over 750
in process in the U.S. As a result,  Corning  believes that its patent portfolio
will  continue  to  provide a  competitive  advantage  in  protecting  Corning's
innovation,  although  Corning's  competitors  in  each  of its  businesses  are
actively seeking patent protection as well.


<PAGE>


The  Telecommunications  Segment had over 3,500 patents in various  countries of
which over 900 were United States patents.  Although no one patent is considered
material to this business  segment,  and new patents are  frequently  granted to
Corning,  some of the important issued U.S. patents in this segment include: (i)
patents  relating to optical fiber products  including  dispersion  compensating
fiber, low loss optical fiber and high data rate optical fiber and processes and
equipment for  manufacturing  optical fiber including methods for making optical
fiber preforms and methods for drawing,  cooling and winding optical fiber; (ii)
patents  relating to  packaging  of lasers,  and designs for optical  switch and
amplifier products;  (iii) patents relating to optical fiber ribbons and methods
for making such  ribbon,  fiber optic cable  designs and methods for  installing
optical fiber cable;  and (iv) patents  relating to optical fiber connectors and
associated  methods of manufacture.  While  particular  U.S.  patents related to
methods  of making one type of optical  fiber  preform  and one type of low loss
optical fiber will expire between 2003 and 2005,  there is no group of important
Telecommunications Segment patents set to expire between 2003 and 2005.

The  Technologies  Segment had over 1,400 patents in various  countries of which
over 740 were  United  States  patents.  Although  no one  patent is  considered
material to this business  segment,  and new patents are  frequently  granted to
Corning,  some of the important issued U.S. patents in this segment include: (i)
patents relating to cellular ceramic honeycomb  products,  together with ceramic
batch and binder system compositions,  honeycomb extrusion and firing processes,
and  honeycomb  extrusion  dies  and  equipment  for the  high-volume,  low-cost
manufacture of such products;  (ii) patents  relating to glass  compositions and
methods  for  the  use  and   manufacture   of  flat  panel  glass  for  display
applications;  (iii) patents  relating to  UV-absorbing  copper halide  glasses,
polymer  lens matrix  material  for use as  ophthalmic  lens and dyes for use in
polymer  ophthalmic  lenses;  (iv) patents  relating to glasses and  glass-based
products  including  fused silica and calcium  fluoride glass for use in optical
lithography/stepper  lens and photomask  blanks,  collimating and tapered lensed
fiber, and gradient  index/grin  lenses; and (v) patents relating to methods and
apparatus  for  the  manufacture  and  use of  scientific  laboratory  equipment
including  nucleic acid arrays,  multiwell  plates,  and cell culture  products.
While a particular  U.S.  patent  related to the process of mixing and extruding
certain  ceramic  materials will expire in 2004,  there is no group of important
Technologies Segment patents set to expire between 2003 and 2005.

Many of these  patents are used in Corning's  operations or are licensed for use
by others,  and Corning is licensed to use patents owned by others.  The company
has entered into cross licensing  arrangements with some major competitors,  but
the  scope of such  licenses  has been  limited  to  specific  product  areas or
technologies.

Most of Corning's products are marketed under the following trademarks: Corning,
Celcor, Eagle 2000, Eagle APT, HPFS, LEAF, Pyrex, SMF-28, Steuben and Vycor.

Protection of the Environment

Corning  has a program to ensure  that its  facilities  are in  compliance  with
state, federal and foreign pollution-control  regulations. This program resulted
in capital and operating expenditures during the past several years. In order to
maintain  compliance with such regulations,  capital  expenditures for pollution
control in continuing  operations were  approximately $6 million in 2002 and are
estimated to be $11 million in 2003.

Corning's 2002 operating  results from  continuing  operations were charged with
approximately  $33 million for  depreciation,  maintenance,  waste  disposal and
other operating  expenses  associated with pollution  control.  Corning believes
that its compliance program will not place it at a competitive disadvantage.

Risk factors

Set forth below and elsewhere in this Annual Report,  and in other  documents we
file with the SEC, are some of the principal risks and uncertainties  that could
cause our actual business results to differ materially from any  forward-looking
statements or other  projections  contained in this Annual Report.  In addition,
future  results  could be  materially  affected by general  industry  and market
conditions,  general  U.S.  and  non-U.S.  economic  and  political  conditions,
including a global economic slowdown,  fluctuation of interest rates or currency
exchange rates, terrorism,  political unrest or international conflicts, natural
disasters  or other  disruptions  of expected  economic  conditions.  These risk
factors should be considered in addition to our cautionary  comments  concerning
forward-looking  statements  in this  Report,  including  statements  related to
markets for our  products  and trends in our  business  that involve a number of
risks  and  uncertainties.   Our  separate  statement  labeled   Forward-Looking
Statements should be considered in addition to the statements below.


<PAGE>


Our  sales  could be  negatively  impacted  if one or more of our key  customers
substantially reduce orders for our products

     Our customer base is relatively  concentrated with less than 10 significant
customers  accounting for a high  percentage  (greater than 50%) of net sales in
most of our businesses.  However,  no individual customer accounts for more than
10% of consolidated sales.

     Over recent periods, most of our major customers in the  Telecommunications
Segment  have  reduced  their  purchases  of our  products  and  have  expressed
uncertainty  as to their  future  requirements.  As a  result,  our  sales  have
declined and it is difficult to predict future sales accurately.  The conditions
contributing to this difficulty include:

     .    the prolonged downturn in the telecommunications industry;
     .    uncertainty   regarding  the  capital  spending  plans  of  the  major
          telecommunications  carriers, upon which our customers and, ultimately
          we, depend for sales;
     .    the telecommunications carriers' current limited access to the capital
          required for expansion; and
     .    general market and economic uncertainty.

     While we have responded to the depressed market by reducing excess capacity
and cutting  costs,  we cannot  assure you that our plans will be  successful in
mitigating the adverse effects of a prolonged downturn.  The current downturn in
the telecommunications  industry may be more severe and prolonged than expected.
If our net sales continue to decline, our ability to meet financial expectations
for future periods may be impaired.

     In  our  Technologies  Segment,  several  of  our  businesses  also  have a
concentrated   customer  base.  These  businesses   include   Corning's  display
technologies,  environmental products, and semiconductor materials. If we lose a
significant  customer in any of these businesses,  our sales could be negatively
impacted. In the conventional video components business,  one major customer has
already exited this market and demand from another key customer is uncertain. As
discussed in Item 7, under  Impairment of Long-Lived  Assets Other Than Goodwill
and Note 6 to the  Consolidated  Financial  Statements,  the  loss of sales  may
require us to record additional impairment charges or exit this business.

If we do not  successfully  adjust  our  manufacturing  volumes  and fixed  cost
structure,  or achieve  manufacturing  yields or sufficient product reliability,
our operating results could suffer

     In the economic and industry downturn for our  Telecommunications  Segment,
we have responded to the softer market by cutting costs, including the reduction
of our  manufacturing  volumes.  We have continued to execute our  restructuring
plans in 2002 and into 2003. We have closed two fiber  facilities and mothballed
another and closed several  factories that made  photonics,  cabling or hardware
and  equipment.   We  announced  plans  in  2002  to  reduce  our  workforce  by
approximately  7,100 positions by early 2003. Although we expect to complete our
planned restructuring and facility consolidation  activities, we may not achieve
all of the cost  reductions  that we  anticipate.  We cannot assure you that our
plans will be successful in mitigating  the adverse  effects of a softer market,
nor can we  assure  you that  additional  adjustments  and  charges  will not be
necessary to respond to further market changes.

     The  manufacturing  of our  products  involves  highly  complex and precise
processes, requiring production in highly controlled and clean environments. Any
changes  in  our  manufacturing  processes  or  those  of  our  suppliers  could
significantly reduce our manufacturing  yields and product reliability.  In some
cases, existing  manufacturing may be insufficient to achieve the volume or cost
targets of our customers.  We will need to develop new  manufacturing  processes
and techniques to achieve targeted volume and cost levels.  While we continue to
fund projects to improve our manufacturing  techniques and processes, we may not
achieve cost levels in our manufacturing  activities that will fully satisfy our
customers.

We have incurred, and may in the future incur,  restructuring and other charges,
the amounts of which are difficult to predict accurately

     The  telecommunications  industry was  severely  hampered in 2002 by excess
manufacturing capacity,  increased intensity of competition and growing pressure
in price and profits. These negative trends are expected to continue in 2003. In
2002,  we  recorded  charges  for  restructuring,  impairment  of assets and the
write-off  of cost  based  investments.  Management  is  considering  additional
actions and  strategic  options for its photonic  technologies  business.  It is
possible  that  additional  impairments,  restructuring  charges  and  inventory
write-downs will result from these actions.

     Our  ability to  forecast  our  customers'  needs for our  products  in the
current  economic  and  industry  environment  is  limited.  Our results in 2002
included  significant charges for impairment of long-lived assets,  primarily in
the  conventional  television  glass and photonic  technologies  businesses.  If
adverse  trends  continue in these  businesses,  it is possible that  additional
charges may be taken.


<PAGE>


     Corning  may record  additional  charges for  restructuring  or other asset
impairments if additional  actions become necessary to respond to align costs to
a reduced level of demand.

     In the  event we incur  continued  operating  losses,  we may be  unable to
recognize  future  deferred tax assets and may be required to make an assessment
of our ability to realize the deferred tax assets already recorded.

If the  markets for our  products  do not  develop and expand as we  anticipate,
demand for our products may decline further,  which would negatively  impact our
results of operations and financial performance

     The  markets  for  our  products  are  characterized  by  rapidly  changing
technologies,   evolving   industry   standards   and   frequent   new   product
introductions.  Our success is expected to depend,  in substantial  part, on the
timely and successful introduction of new products, upgrades of current products
to comply with emerging industry standards,  our ability to acquire technologies
needed to remain  competitive and our ability to address competing  technologies
and products. In addition, the following factors related to our products and the
markets for them, if not achieved,  could have an adverse  impact on our results
of operations and financial performance:

     .    our ability to introduce leading products such as optical fiber, glass
          for flat panel displays, and environmental substrate products that can
          command competitive prices in the marketplace;
     .    our ability to maintain  or achieve a favorable  mix of sales  between
          premium and non-premium products;
     .    our ability to  continue  to develop new product  lines to address our
          customers'  diverse needs within the several market  segments in which
          we participate.  This requires a high level of innovation,  as well as
          the accurate anticipation of technological and market trends; or
     .    our  ability  to  create  the   infrastructure   required  to  support
          anticipated growth in certain businesses.

Corning's  reduced  investment in research,  development and  engineering  could
limit our ability to develop new products for the future.

We face pricing pressures in each of our leading businesses that could adversely
affect our results of operations and financial performance

     We periodically face pricing pressures in each of our leading businesses as
a result of intense  competition,  emerging new technologies,  or over-capacity.
While we will work toward reducing our costs to respond to the pricing pressures
that may  continue,  we may not be able to achieve  proportionate  reductions in
costs.  As a result  of  overcapacity  and the  current  economic  and  industry
downturn in the Telecommunications Segment, pricing pressures increased in 2002,
particularly  in our optical  fiber and cable  business.  Pricing  pressures are
expected to continue in 2003. Pricing pressure has also increased in our display
glass business as the  manufacturers  of desktop displays strive to reduce their
costs.

We have  incurred,  and may in the future incur,  goodwill and other  intangible
asset impairment charges

     Acquisitions  recorded as purchases for accounting  purposes have resulted,
and in the future may  result,  in the  recognition  of  significant  amounts of
goodwill and other  purchased  intangibles.  The  potential  impairment of these
assets could reduce our net income and shareholders' equity.

     In June 2001, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142 pursuant to which goodwill will no
longer be amortized,  but will be subject to impairment tests at least annually.
SFAS No. 142 was effective for us on January 1, 2002.

     Management  completed the impairment test in the fourth quarter of 2002 and
recorded  required  goodwill  impairment  charges  totaling $400 million for the
Telecommunications  Segment.  While we believe the estimates and judgments about
future cash flows in the Telecommunications Segment are reasonable, no assurance
can be given that the  businesses in this segment will  stabilize and recover as
projected.  We cannot provide assurance that future impairment  charges will not
be required if the telecommunications  industry does not recover as projected by
management in its expected cash flow estimates.


<PAGE>


We may be limited in our ability to obtain  additional  capital on  commercially
reasonable terms

     Although we believe  existing cash,  short-term  investments  and borrowing
capacity,  collectively,  provide adequate  resources to fund ongoing  operating
requirements,  we may be  required  to  seek  additional  financing  to  compete
effectively in our markets.  Our public debt ratings affect our ability to raise
capital and the cost of such capital.  In July 2002, Fitch downgraded our senior
unsecured  long-term debt rating from BBB- to BB;  Standard & Poor's  downgraded
our senior unsecured  long-term debt rating from BBB- to BB+ and short-term debt
credit rating from A-3 to B; and Moody's reduced our senior unsecured  long-term
debt rating from Baa3 to Ba2 and  short-term  debt credit rating from Prime-3 to
Not Prime. All of the rating agencies have maintained  negative outlooks.  These
and any further  downgrades  may  increase  our  borrowing  costs and affect our
ability to access the debt  capital  markets.  In  addition,  the pricing of our
common stock may limit our ability to access the equity capital  markets without
a significant dilution to current shareholders.
     As a result of our lower  debt  ratings,  we may face  difficulties  in our
business.  For  example,  we may  face  increasing  requirements  to  post  cash
collateral  for  performance  bonds  and some  customers  may  seek  alternative
suppliers.
     We are subject  under our  revolving  credit  facility  to a covenant  that
requires us to maintain a ratio of total debt to capital,  as defined  under the
credit  facility,  of not greater  than 0.60 to 1.00.  Our total debt to capital
ratio was 0.47 at December 31, 2002. This covenant may also limit our ability to
borrow  additional  funds.  Further declines in our  Telecommunications  Segment
could  cause   impairments  of  goodwill,   tangible  or  intangible  assets  or
restructuring charges related to our overall business. Additional impairments or
charges  could  materially  increase  our total debt to capital  ratio which may
reduce the amounts we are able to borrow under the revolving credit facility.

If  our  products  or  components   purchased  from  our  suppliers   experience
performance issues, our business will suffer

     Our  business   depends  on  the   production  of  excellent   products  of
consistently  high  quality.  To this end, our  products,  including  components
purchased  from  our  suppliers,  are  tested  for  quality  both  by us and our
customers.  Nevertheless,  our  products are highly  complex and our  customers'
testing  procedures  are limited to  evaluating  our  products  under likely and
foreseeable failure scenarios. For various reasons (including, among others, the
occurrence of performance problems  unforeseeable in testing),  our products and
components  purchased  from our  suppliers  may  fail to  perform  as  expected.
Performance  issues could result from faulty design or problems in manufacturing
or testing.  We have experienced such performance  issues in the past and remain
exposed  to  such  performance  issues.  In some  cases,  product  redesigns  or
additional  capital  equipment may be required to correct a defect. In addition,
any significant or systemic  product failure could result in customer  relations
problems and harm the future sales of our products.

Interruptions  of  supplies  from our key  suppliers  may affect our  results of
operations and financial performance

     Interruptions  of supplies from our key suppliers could disrupt  production
or impact our ability to increase production and sales. We do not have long-term
or volume purchase agreements with every supplier,  and may have limited options
for alternative supply if these suppliers fail, for any reason,  including their
business  failure  or  financial   difficulties,   to  continue  the  supply  of
components.

We face intense competition in most of our businesses

     We  expect  that  we  will  face  additional   competition   from  existing
competitors  and from a number of companies that may enter our markets.  Because
some of the markets in which we compete have been historically  characterized by
rapid growth and are  characterized by rapid technology  changes,  smaller niche
and start-up  companies may become our principal  competitors in the future.  We
must invest in research and development,  expand our engineering,  manufacturing
and marketing capabilities, and continue to improve customer service and support
in order to remain competitive.  While we expect to undertake the investment and
effort in each of these areas, we are reducing our expenditure levels and cannot
assure you that we will be able to maintain or improve our competitive position.
In particular,  the net losses in our  Telecommunications  Segment may constrain
our  ability  to  invest  as much as we would  like in each of these  areas.  In
addition,  while some of our competitors are similarly  experiencing the effects
of  this  market  turmoil,   they  may  have  greater  financial,   engineering,
manufacturing, marketing or other support resources.


<PAGE>


We may experience difficulties in enforcing our intellectual property rights and
we may be subject to claims of infringement of the intellectual  property rights
of others

     We may encounter  difficulties  in  protecting  our  intellectual  property
rights or obtaining  rights to  additional  intellectual  property  necessary to
permit us to continue or expand our  businesses.  We cannot  assure you that the
patents that we hold or may obtain will provide  meaningful  protection  against
our  competitors  or  competitive  technologies.  Litigation may be necessary to
enforce our intellectual  property  rights,  to protect our trade secrets and to
determine  the  validity  and scope of our  proprietary  rights.  Litigation  is
inherently  uncertain and the outcome is often  unpredictable.  Other  companies
hold patents on technologies used in our industries and are aggressively seeking
to expand, enforce and license their patent portfolios.
     The  intellectual  property  rights of others could  inhibit our ability to
introduce new products.  We are, and may in the future be,  subject to claims of
intellectual  property infringement or misappropriation and we cannot assure you
as to the outcome of such claims. Litigation or claims against us could force us
to cease selling or using any of our products that  incorporate the intellectual
property  that is the  subject  of such  claims,  obtain a license  from a third
party,  or redesign or rename our products.  These actions,  if possible,  could
result in substantial costs or loss of revenue.

Current or future  litigation  may harm our  financial  condition  or results of
operations

     Pending,   threatened   or  future   litigation   is  subject  to  inherent
uncertainties. Our financial condition or results of operations may be adversely
affected by unfavorable outcomes, expenses and costs exceeding amounts estimated
or  insured.  In  particular,  we have been  named as a  defendant  in  numerous
lawsuits  against  Pittsburgh  Corning  Corporation and several other defendants
involving  claims  alleging  personal  injury  from  exposure  to  asbestos.  As
described  in  Legal  Proceedings  in  our  reports  filed  with  the  SEC,  our
negotiations  with the  representatives  of  asbestos  claimants  have failed to
produce a settlement to date and it currently  appears more likely than not that
we will litigate these cases. Alternatively, in the event that we reach a global
settlement through the Pittsburgh Corning Corporation  bankruptcy  process,  the
outcome may be material  to the  results of  operations  for the period in which
such costs, if any, are recognized. Management expects that any after-tax charge
resulting from Corning's  contributions  as part of a possible  settlement could
approximate  $125  million to $175  million  and will  depend upon the timing of
contributions  and  relative  participation,  if  any,  of  insurance  carriers.
Management  cannot provide  assurances that the ultimate outcome of a settlement
would be within this range.

We face risks related to our international operations and sales

     We have customers located outside the United States, as well as significant
non-United States operations,  including  manufacturing and sales. We have large
manufacturing   operations  in  the  Asian-Pacific   region,   including  equity
investments  in  companies  operating in South  Korea,  and several  significant
customers  are  located  in  this  region.  As  a  result  of  these  and  other
international operations, we face a number of risks, including:

     .    difficulty of effectively managing our diverse global operations;
     .    change in regulatory requirements;
     .    tariffs and other trade barriers;
     .    political and economic instability in foreign markets; and
     .    fluctuations  in foreign  currencies  which may make our products less
          competitive  in countries in which local  currencies  decline in value
          relative to the dollar.

If we fail to retain and attract key  personnel,  our results of operations  and
financial performance may suffer

     Our future  success will be determined in part by our ability to retain and
attract key scientific and technical personnel for our research, development and
engineering efforts. Our business also depends on the continued contributions of
our  executive  officers  and  other  key  management.  We may also find it more
difficult to retain or attract qualified  employees due to our uncertain outlook
and  reductions   affecting   compensation,   benefits,   and  employee   equity
participation  programs.  While  we  believe  that we have  been  successful  in
retaining  and  attracting  key  personnel,  we cannot  assure  you that we will
continue to be successful in the future.

If the  financial  condition of our customers  declines,  our credit risks could
increase

     In 2002, certain of our customers  experienced  financial  difficulties and
several  filed  with  the  courts  seeking   protection   under   bankruptcy  or
reorganization  laws.  We have  experienced,  and in the future may  experience,
losses as a result of our inability to collect our accounts receivable,  as well
as the loss of such customer's  ongoing business.  If our customers fail to meet
their  payment  obligations  to us, we could  experience  reduced cash flows and
losses in excess of amounts  reserved.  As of December  31,  2002,  reserves for
trade receivables totaled approximately $59 million.


<PAGE>


We may not have adequate insurance coverage for claims against us

     We face the risk of loss resulting from, and adverse  publicity  associated
with, product liability, securities, fiduciary liability, intellectual property,
contractual,  warranty, fraud and other lawsuits, whether or not such claims are
valid. In addition,  our product liability,  fiduciary,  directors and officers,
property and comprehensive  general  liability  insurance may not be adequate to
cover such claims or may not be available to the extent we expect. Our insurance
costs have increased  substantially and may increase further. We may not be able
to get  adequate  insurance  coverage  in the  future  at  acceptable  costs.  A
successful  claim that  exceeds or is not  covered  by our policy  limits  could
require us to pay substantial  sums. Some of the carriers in our historic excess
insurance program are not rated, or may have lower ratings,  and may not be able
to respond if we should have claims reaching into excess layers. In addition, we
may not be able to  insure  against  certain  risks  or  obtain  some  types  of
insurance, such as terrorism insurance.

Other

Additional  information  in  response  to Item I is found in Note 22  (Operating
Segments)  to  the  Consolidated  Financial  Statements  and  Item  6.  Selected
Financial Data.

Internet Access

Copies of Corning's Annual Report on Form 10-K,  Quarterly Reports on Form 10-Q,
Current  Reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section  13(a) or 15(d) of the  Securities  Exchange Act of 1934 are
available free of charge through Corning's website  (www.corning.com) as soon as
reasonably  practicable after Corning electronically files the material with, or
furnishes it to, the Securities and Exchange Commission.


<PAGE>


Item 2.  Properties
-------------------

Corning operates more than 70 manufacturing plants and processing facilities, of
which  approximately  half  are  located  in the  United  States.  Corning  owns
substantially all of its executive and corporate buildings, which are located in
Corning,  NY.  Corning  also owns  substantially  all of its  manufacturing  and
research  and  development  facilities  and  more  than  half of its  sales  and
administrative facilities.

During the last five  years,  Corning has  invested  $5.2  billion in  property,
construction,  expansion,  and modernization for continuing  operations.  Of the
$316  million  spent in 2002,  $83 million was spent on  facilities  outside the
United States.  Due to the downturn in the  telecommunications  industry many of
the facilities and  expansions  were not completed,  have been abandoned or were
written-off. See Note 5 to the Consolidated Financial Statements.

Manufacturing, sales and administrative, and research and development facilities
at  consolidated  locations have an aggregate  floor space of  approximately  20
million square feet. Distribution of this total area is:

--------------------------------------------------------------------------------
(million square feet)             Total             Domestic          Foreign
--------------------------------------------------------------------------------

Manufacturing                      15                   9               6
Sales and administrative            3                   1               2
Research and development            2                   2
--------------------------------------------------------------------------------

                                   20                  12               8
--------------------------------------------------------------------------------

Some  facilities  manufacture  products  included  in more  than  one  operating
segment. Total assets and capital expenditures by operating segment are included
in  Note 22  (Operating  Segments)  to the  Consolidated  Financial  Statements.
Information  concerning  lease  commitments is included in Note 16 (Commitments,
Contingencies,  Guarantees and Hedging Activities) to the Consolidated Financial
Statements.

During 2002,  Corning  continued the  restructuring  program that closed several
manufacturing  facilities and consolidated  certain smaller  facilities.  In the
opinion of  management,  Corning's  facilities are now suitable and adequate for
production and  distribution  of the Company's  products based upon the level of
demand we anticipate in 2003. At December 31, 2002, and throughout 2003, Corning
expects to have excess  capacity  and will not utilize a portion of space in the
facilities  listed  above.  The  largest  unused  portion is our  optical  fiber
manufacturing  facility in  Concord,  NC which has been  mothballed  until fiber
demand rebounds.  Management  believes that the Concord facility can be returned
to  productive  capacity  within six to nine  months of a decision  to do so and
construction in progress at the Concord facility can be completed efficiently.

Item 3.  Legal Proceedings
--------------------------

Environmental Litigation. Corning has been named by the Environmental Protection
Agency under the  Superfund  Act, or by state  governments  under  similar state
laws, as a potentially  responsible  party at 12 active  hazardous  waste sites.
Under the  Superfund  Act, all parties who may have  contributed  any waste to a
hazardous  waste site,  identified  by such  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.  Corning has accrued  approximately  $22 million for its  estimated
liability for  environmental  cleanup and litigation at December 31, 2002. Based
upon the  information  developed to date,  management  believes that the accrued
reserve is a reasonable  estimate of the Company's  estimated liability and that
the risk of an additional loss in an amount  materially higher than that accrued
is remote.

Schwinger and Stevens  Toxins  Lawsuits.  In April 2002,  Corning was named as a
defendant in two actions,  Schwinger  and  Stevens,  filed in the United  States
District  Court for the Eastern  District of New York,  which  asserted  various
personal  injury  and  property  damage  claims  against a number  of  corporate
defendants.  These claims  allegedly arise from the release of toxic  substances
from a Sylvania nuclear materials processing facility near Hicksville, New York.
Amended  complaints  naming 205 plaintiffs  and seeking  damages in excess of $3
billion  were served in  September  2002.  The sole basis of  liability  against
Corning was plaintiffs' claim that Corning was the successor to Sylvania-Corning
Nuclear  Corporation,  a Delaware  corporation  formed in 1957 and  dissolved in
1960.  Management  intends to vigorously  contest all claims against Corning for

<PAGE>

the reason that  Corning is not the  successor to  Sylvania-Corning.  Management
will also defend on the grounds that almost all of the wrongful death claims and
personal injury claims are time-barred.  At a status conference in December, the
Court  decided to  "administratively  close" the Schwinger and Stevens cases and
ordered  plaintiffs'  counsel to bring new amended  complaints with "bellwether"
plaintiffs.  In these actions,  known as Schwinger II and Astuto, the plaintiffs
have not named Corning as a defendant.  Although it appears that  plaintiffs may
proceed only against the other corporate defendants,  the original Schwinger and
Stevens cases remain pending and no order has been entered  dismissing  Corning.
Based upon the information  developed to date, and recognizing  that the outcome
of litigation is  uncertain,  management  believes that the risk of a materially
adverse verdict is remote.

Dow Corning Bankruptcy. Corning and The Dow Chemical Company each own 50% of the
common  stock of Dow  Corning  Corporation,  which  has  been in  reorganization
proceedings  under  Chapter 11 of the United States  Bankruptcy  Code since May,
1995. Dow Corning filed for bankruptcy protection to address pending and claimed
liabilities arising from breast-implant  product lawsuits.  On November 8, 1998,
Dow Corning and the Tort  Claimants  Committee  jointly  filed a revised Plan of
Reorganization   (Joint  Plan)  which  provided  for  the  settlement  or  other
resolution of implant claims. The Joint Plan included releases for third parties
(including   Corning  and  Dow  Chemical  as   shareholders)   in  exchange  for
contributions  to the Joint  Plan.  By an order dated  November  30,  1999,  the
Bankruptcy  Court  confirmed  the  Joint  Plan,  but  with  certain  limitations
concerning  the third  party  releases  as  reflected  in an  opinion  issued on
December 21, 1999. On November 13, 2000, the U.S. District Court for the Eastern
District of Michigan reversed the Bankruptcy Court's order with respect to these
limitations on the  third-party  releases and confirmed the Joint Plan.  Certain
foreign  claimants,  the U.S.  government,  and  certain  other  tort  claimants
appealed from the District Court's order. On January 29, 2002, the U.S. Court of
Appeals for the Sixth Circuit affirmed the  determinations  made in the District
Court with respect to the foreign claimants,  but remanded to the District Court
for  further  proceedings  with  respect  to  certain  lien  claims  of the U.S.
government and with respect to the findings  supporting the non-debtor  releases
in favor of Dow Corning's  shareholders,  foreign subsidiaries and insurers. The
Plan proponents agreed to settle the lien claims of the U.S. government for $9.8
million to be paid from the Settlement  Fund under the Plan. This settlement was
approved by the  District  Court in the third  quarter of 2002.  On December 11,
2002, the District Court entered further findings and conclusions supporting the
non-debtor releases. Certain tort claimants have filed a notice of appeal to the
U.S.  Court of Appeals for the Sixth  Circuit from the District  Court's  order.
Management  expects the  appellate  process may take another 12 to 16 months. If
the Joint  Plan with  shareholder  releases  is upheld  after all  appeals,  any
remaining  personal  injury  claims  against  Corning in these  matters  will be
channeled to the resolution  procedures  under the Joint Plan. If the Joint Plan
with shareholder releases is not upheld after all appeals,  Corning would expect
to defend  any  remaining  claims  against  it (and any new  claims) on the same
grounds  that led to a series of orders  and  judgments  dismissing  all  claims
against  Corning in the  federal  courts and in many state  courts as  described
under the  heading  Implant  Tort  Lawsuits  immediately  hereafter.  Management
believes that the claims against  Corning lack merit and that the breast implant
litigation against Corning will be resolved without material impact on Corning's
financial statements.

Under the terms of the Joint Plan,  Dow Corning would be required to establish a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or litigate  their claims.  Dow Corning  would have the  obligation to
fund the Trust and the Facility,  over a period of up to 16 years,  in an amount
up to  approximately  $3.3  billion,  subject  to  the  limitations,  terms  and
conditions  stated in the Joint Plan.  Corning and Dow Chemical have each agreed
to provide a credit  facility to Dow Corning of up to $150 million ($300 million
in the aggregate), subject to the terms and conditions stated in the Joint Plan.
The Joint Plan also provides for Dow Corning to make full payment,  through cash
and issuance of senior notes, to its commercial creditors. These creditors claim
approximately  $810 million in  principal  plus an  additional  sum for pendency
interest,  costs and fees from the  petition  date (May 15,  1995)  through  the
effective  date under the Plan when payment is made.  The  commercial  creditors
have  contested  the  Bankruptcy  Court's   disallowance  of  their  claims  for
post-petition  interest at default  rates of interest,  and have appealed to the
District Court. The District Court heard oral arguments on this appeal on May 2,
2002,  and has not ruled.  The  amount of  additional  interest,  costs and fees
claimed by the commercial  creditors is approximately  $100 million pre-tax more
than Dow Corning believes it should pay.

In 1995,  Corning fully  reserved its  investment in Dow Corning upon its filing
for bankruptcy and has not recognized  equity  earnings since the second quarter
of 1995. Corning has determined that this decline in the value of its investment
in Dow Corning is other than temporary. Management has assessed the December 11,
2002,  findings  by Judge  Hood and  concluded  that  emergence  of Dow  Corning
Corporation  from  bankruptcy  protection  is  probable.   Management  has  also
concluded that it has adequately  provided for the other than temporary  decline
associated with the bankruptcy.  With the exception of the remote possibility of
a future bankruptcy related charge, Corning considers the difference between the
carrying  value of its investment in Dow Corning and its 50 percent share of Dow
Corning's  equity to be permanent.  This  difference is $270 million at December
31, 2002.

Corning will resume recognition of equity earnings from Dow Corning in the first
quarter of 2003.  Corning does not expect to receive  dividends from Dow Corning
in 2003.

<PAGE>

Implant Tort Lawsuits. Corning and Dow Chemical, the shareholders of Dow Corning
Corporation,  were named in a number of state and federal tort lawsuits alleging
injuries  arising from Dow Corning's  implant  products.  The claims against the
shareholders  alleged a variety of direct or indirect theories of liability.  In
1992, the federal breast implants cases were  coordinated for pretrial  purposes
in the United States District Court,  Northern District of Alabama (Judge Sam C.
Pointer,  Jr.).  In April 1995,  the District  Court  granted  Corning a summary
judgment  dismissing it from over 4,000 federal court cases.  On March 12, 1996,
the U.S.  Court of Appeals for the Eleventh  Circuit  dismissed the  plaintiffs'
appeal  from that  judgment.  In state  court  litigation,  Corning  was awarded
summary  judgment  in  California,  Connecticut,  Illinois,  Indiana,  Michigan,
Mississippi,  New Jersey, New York, Pennsylvania,  Tennessee, and Dallas, Harris
and Travis  Counties  in Texas,  thereby  dismissing  approximately  7,000 state
cases. In Louisiana,  Corning's  summary judgment was vacated by an intermediate
appeals court in Louisiana as premature. The Louisiana cases were transferred to
the United States District Court for the Eastern District of Michigan,  Southern
Division  (Michigan  Federal  Court) to which  substantially  all breast implant
cases were transferred in 1997. In the Michigan Federal Court,  Corning is named
as a defendant in  approximately  70 pending  cases  (including  some cases with
multiple  claimants),  in  addition  to the  transferred  Louisiana  cases.  The
Michigan  Federal Court heard Corning's  motion for summary judgment on February
27, 1998, but has not ruled.  Based upon the  information  developed to date and
recognizing  that the outcome of complex  litigation  is  uncertain,  management
believes that the risk of a materially  adverse result in the implant litigation
against  Corning is remote and believes the implant  litigation  against Corning
will be resolved without material impact on Corning's financial statements.

Federal Securities Cases. A federal securities class action lawsuit was filed in
1992 against Corning and certain individual  defendants by a class of purchasers
of Corning stock who allege  misrepresentations  and omissions of material facts
relative to the silicone gel breast implant  business  conducted by Dow Corning.
This  action is pending in the United  States  District  Court for the  Southern
District of New York. The class consists of those purchasers of Corning stock in
the period from June 14, 1989, to January 13, 1992,  who allegedly  purchased at
inflated   prices  due  to  the   non-disclosure   or  concealment  of  material
information.  No amount of damages is specified in the  complaint.  In 1997, the
Court  dismissed the  individual  defendants  from the case.  In December  1998,
Corning filed a motion for summary  judgment  requesting that all claims against
it be dismissed. Plaintiffs requested the opportunity to take depositions before
responding  to the  motion  for  summary  judgment.  The  discovery  process  is
continuing  and the Court  has set no  schedule  to  address  the still  pending
summary  judgment  motion.  Corning  intends to  continue  to defend this action
vigorously.  Based upon the information  developed to date and recognizing  that
the outcome of litigation is uncertain,  management believes that the likelihood
of a materially adverse verdict is remote.

From  December  2001 through  April 2002,  Corning and three of its officers and
directors  were named  defendants  in lawsuits  alleging  violations of the U.S.
securities  laws in  connection  with  Corning's  November  2000  offering of 30
million  shares  of  common  stock  and $2.7  billion  zero  coupon  convertible
debentures,  due  November  2015.  In  addition,  the Company and the same three
officers and directors were named in lawsuits alleging selective disclosures and
non-disclosures  that allegedly  inflated the price of Corning's Common Stock in
the period from  September  2000 through July 9, 2001.  The  plaintiffs in these
actions seek to represent  classes of  purchasers  of Corning's  stock in all or
part of the period  indicated.  These  lawsuits are pending in the United States
District  Court for the  Western  District of New York.  On August 2, 2002,  the
District  Court entered an order  consolidating  these actions for all purposes,
designating lead plaintiffs and lead counsel,  and directing that a consolidated
complaint be served within sixty days. The  consolidated  amended  complaint was
served at the end of October,  2002. The defendants have until February 10, 2003
to answer,  move or respond.  The order  further  sets a schedule for briefing a
motion to dismiss  and  provides  that a motion to certify the action as a class
action shall be filed after all motions to dismiss are resolved. Another lawsuit
has  been  filed,  also in the  Western  District  of New  York,  on  behalf  of
participants  in  the  Company's   Investment   Plan  for  Salaried   Employees,
purportedly  as a class  action  on  behalf  of  participants  in the  Plan  who
purchased or held Corning stock in a Plan account. The defendants in that action
responded  with a motion to dismiss  the  lawsuit on a variety  of  grounds.  On
December 12, 2002, the Court entered  judgment  dismissing the claims as to each
of the defendants.  On December 19, 2002,  plaintiffs filed a motion to open the
judgment  and for  leave  to file an  amended  complaint.  This  motion  will be
scheduled for a hearing in March,  2003.  Management is prepared to defend these
lawsuits  vigorously  and,   recognizing  that  the  outcome  of  litigation  is
uncertain,  believes that these will be resolved,  net of applicable  insurance,
without material impact on Corning's financial statements.

Pittsburgh Corning Corporation.  Corning and PPG Industries, Inc. (PPG) each own
50% of the  capital  stock of  Pittsburgh  Corning  Corporation  (PCC).  PCC and
several other defendants, including PPG and Corning, have been named in numerous
lawsuits involving claims alleging personal injury from exposure to asbestos. On
April 16, 2000,  PCC filed for Chapter 11  reorganization  in the United  States
Bankruptcy Court for the Western District of Pennsylvania.  As of the bankruptcy
filing,  PCC had in  excess  of  140,000  open  claims  and now has in excess of
240,000 open claims.

In the  bankruptcy  court,  PCC in April 2000 obtained a preliminary  injunction
against the  prosecution of asbestos  actions  against its two  shareholders  to
afford  the  parties  a  period  of time  (the  Injunction  Period)  in which to
negotiate a plan of reorganization for PCC.

On May 14, 2002,  PPG announced  that it had agreed with several other  parties,
including certain of its insurance  carriers and  representatives of current and
future asbestos claimants,  on the terms of a settlement arrangement relating to
asbestos claims against PPG and PCC. This settlement  would be incorporated in a
plan of reorganization  for PCC, and would be subject to a favorable vote by 75%
of the asbestos claimants voting on the PCC reorganization plan, and approval by
the  Bankruptcy   Court.   According  to  its   announcement,   PPG  would  make
contributions to a trust under the reorganization plan consisting of:
.    cash payments by PPG's  participating  insurance  carriers of approximately
     $1.7 billion over a 21 year period;
.    the  assignment  of rights to  certain  proceeds  of  policies  by  certain
     insurance carriers not participating in the settlement;
.    PPG's shares in PCC and Pittsburgh Corning Europe, a Belgian corporation;
.    1,388,889  shares of PPG's common  stock;  and
.    cash payments from PPG of approximately $998 million over 21 years.

<PAGE>

PPG announced on July 18, 2002,  that it recorded a charge in its second quarter
results of $495 million after-tax related to this settlement.

The Injunction Period as to Corning was extended through September 30, 2002, and
later for a period from  December  23, 2002 through  January 23,  2003,  when it
expired by its terms. Under the terms of the Bankruptcy  Court's Order,  Corning
has 90 days from the  expiration  of the  Injunction  Period to seek removal and
transfer of pending  cases in which it is named as a defendant.  At the time PCC
filed for bankruptcy protection,  there were approximately 12,400 claims pending
against  Corning  alleging  various  theories of liability  based on exposure to
PCC's asbestos  products.  Although the outcome of litigation and the bankruptcy
case is uncertain, management believes that the separate corporate status of PCC
will  continue to be upheld and that  Corning has strong  legal  defenses to any
claims of direct liability arising from PCC's asbestos products.

After PPG announced its settlement,  negotiations between representatives of the
asbestos  claimants and Corning became more intensive.  These  negotiations have
failed to produce a settlement,  but  discussions  continue  intermittently.  In
Corning's  negotiations with the asbestos  claimants,  the range of negotiations
has been framed by demands  translating into  approximately $400 million to $500
million in net present value  (inclusive of insurance),  which is  significantly
lower than that reflected in the PPG settlement.  These  negotiations  have been
difficult,  and no assurances  can be offered that a settlement can be concluded
within this range.

Based on negotiations to date, management believes that a settlement (if one can
be reached) would probably include some  combination of the following  elements:
cash  payments  by Corning  over time into a trust;  contribution  of  Corning's
shares in PCC and Pittsburgh  Corning  Europe and common shares of Corning;  and
insurance  through cash payments or  assignments  of certain rights to insurance
proceeds.  However,  the  structure  of a  settlement  has not been  agreed  and
management can not estimate the likelihood  that any settlement will emerge from
negotiations with the claimants or Corning's  insurers,  or the probability that
Corning will be able to secure a release  through  PCC's plan of  reorganization
upon terms and conditions satisfactory to Corning.

At this time,  it appears more likely than not that  Corning  will  litigate the
asbestos cases, but will continue to explore a settlement through the bankruptcy
process.  The exposure for this asbestos litigation (net of insurance) cannot be
estimated at this time due to the wide range of potential  outcomes.  Corning is
also currently named in approximately 11,400 other cases  (approximately  34,000
claims)  alleging  injuries  from  asbestos.  Those  cases have been  covered by
insurance  without  material impact to Corning to date.  Asbestos  litigation is
inherently difficult, and the outcome of litigation is uncertain and past trends
may not be indicators of future outcomes.

As a result of PCC's bankruptcy filing,  Corning recorded an after-tax charge of
$36 million in the first quarter of 2000 to impair its entire  investment in PCC
and discontinued  recognition of equity earnings.  At December 31, 2002, Corning
has not  recorded any  additional  charges  associated  with the outcome of this
litigation.  As noted above, management believes there are strong legal defenses
to the claims against Corning.  Management estimates that the insurance coverage
available to Corning related to these matters exceeds $600 million and depending
on the outcome of potential  coverage  issues may exceed $1 billion.  Management
estimates  that  the  low end of the  range  of loss  resulting  from  continued
litigation is not material.  Due to the inherent uncertainty of asbestos related
litigation,  management  is unable to estimate  the maximum  exposure  from this
litigation.

Alternatively,  in the event that  Corning  and its  insurers  agree to a global
settlement of the  PCC-related  cases through the PCC  bankruptcy  process,  the
outcome may be material  to the  results of  operations  for the period in which
such costs, if any, are recognized. Management expects that any after-tax charge
resulting from Corning's  contributions  as part of a possible  settlement could
approximate  $125  million to $175  million  and will  depend upon the timing of
contributions  and  relative  participation  of insurance  carriers.  Management
cannot provide  assurances  that the ultimate  outcome of a settlement  would be
within this range.

Under either  alternative,  management  believes  these matters will be resolved
without material impact to Corning's overall financial position or its liquidity

Astrium. In December of 2000, Astrium,  SAS and Astrium,  Ltd. filed a complaint
for negligence in the United States  District Court for the Central  District of
California against TRW, Inc., Pilkington Optronics Inc., Corning NetOptix, Inc.,
OFC Corporation  and Optical Filter  Corporation  claiming  damages in excess of
$150 million.  The complaint alleges that certain cover glasses for solar arrays
used to generate  electricity  from solar energy on satellites sold by Astrium's
corporate  successor  were  negligently  coated by NetOptix or its  subsidiaries
(prior to  Corning's  acquisition  of NetOptix) in such a way that the amount of
electricity  the satellite can produce and their  effective life were materially
reduced.  NetOptix  has denied  that the  coatings  produced  by NetOptix or its
subsidiaries  caused the damage alleged in the complaint,  or that it is legally
liable for any damages  which  Astrium may have  experienced.  Formal  discovery
through document production and depositions was completed for fact witnesses and
will continue through January 2003 for experts. In April 2002, the Court granted

<PAGE>

motions for summary  judgment by NetOptix  and other  defendants  to dismiss the
negligence  claims,  but  permitted   plaintiffs  to  add  fraud  and  negligent
misrepresentation  claims  against all defendants and a breach of warranty claim
against NetOptix and its  subsidiaries.  In October 2002 the Court again granted
defendants'   motions  for  summary   judgment  and   dismissed   the  negligent
misrepresentation  and breach of warranty claims.  The only claims remaining are
claims by plaintiff for intentional fraud against all defendants. Based upon the
current case  management  order,  a trial has been scheduled for April 15, 2003.
Based upon the information developed to date and recognizing that the outcome of
litigation is uncertain,  management  believes that there are strong defenses to
these  claims and  believes  they will be resolved  without  material  impact on
Corning's financial statements.

In November 2002,  American  Motorists  Insurance  Company and Lumbermens Mutual
Casualty  Company  (collectively  "AIMCO") filed a declaratory  judgment  action
against Corning, as well as Corning NetOptix,  Inc., OFC Corporation and Optical
Filter  Corporation.  In the  complaint,  AIMCO  seeks a ruling that its duty to
defend the insureds in the  underlying  Astrium action ceased with the dismissal
of the negligence  claims.  AIMCO also seeks  reimbursement  of approximately $4
million dollars spent for defense costs through November 2002.  Corning believes
that AIMCO remains responsible for the continued  representation of all insureds
and for any amount  spent on the defense of the  insureds to date.  Answers were
filed in January 2003 on behalf of the  defendants  other than Corning.  Corning
has moved to dismiss  all claims  filed  against it as it was not a party to the
underlying  Astrium  action.  Based upon the  information  developed to date and
recognizing  that the outcome of litigation is  uncertain,  management  believes
that there are strong defenses to the reimbursement claim for $4 million.

Optel Arbitration. On June 28, 2002, Madeco S.A. and Madeco Brasil Ltda. filed a
notice of  arbitration  and  statement of claim  against  Corning  International
Corporation ("CIC") with the American  Arbitration  Association in New York, New
York,  alleging "breaches of its contractual duties and partnership  obligations
to Madeco." Madeco asserts that it has the right,  under a "Put Option," to sell
shares of another  company to CIC for  approximately  $18  million.  Among other
things,  Madeco requested "no less than $20 million to compensate Madeco for the
breach of its rights under the Put Option,  plus  additional  damages  caused by
Corning's  failure  to  perform  under  the  Investment  Agreement  and  related
contracts." The arbitration panel has been convened and the arbitration hearings
are scheduled for late March 2003. Based upon the information  developed to date
and  recognizing  that the  outcome  of  arbitration  is  uncertain,  management
believes that the risk of a materially adverse verdict is remote.

Astarte/Tellium. In July of 2002, Corning filed a demand for binding arbitration
between  Corning and Astarte Fiber Networks Inc.;  Tellium,  Inc.; AFN, LLC; and
their related parties.  The arbitration  concerns a contract relating to certain
patents and patent applications  previously owned by Astarte and now held by AFN
and  Tellium,  Astarte's  successor.  Corning's  demand  includes  a  claim  for
approximately $38 million from those parties due to material  misrepresentations
and fraud, as well as a claim to have the contract canceled for breach.  AFN has
counterclaimed in the arbitration, asking the arbitrators to decide that Corning
remains obligated under the contract for future contingent payments to AFN of up
to $50 million. While the outcome of arbitration  proceedings concerning complex
contracts  involving  intellectual  property  matters  cannot be predicted  with
certainty,  based upon the information  discovered to date,  management believes
that Corning's claims are well founded.  Management expects that the disputes in
arbitration  will be resolved  without  material  negative  impact on  Corning's
financial statements.

Furukawa  Electric  Company.  On February 3, 2003, The Furukawa Electric Company
filed  suit in the  Tokyo  District  Court in Japan  against  CCS  International
Corporation  alleging  infringement of Furukawa's  Japanese Patent No. 2,023,966
which relates to separable fiber ribbon units used in optical cable.  Furukawa's
complaint  requests  slightly  over (Y)6  billion in damages  and an  injunction
against further sales in Japan of these fiber ribbon units.  CCS intends to deny
the allegation of infringement and will defend vigorously  against this lawsuit.
Because  it  only  recently   received  the  legal   complaint,   CCS  is  still
investigating  the  complaint  and  preparing  its  answer,   which  may  assert
additional defenses.  While recognizing that litigation is inherently uncertain,
based upon the  information  developed  to date,  management  believes  that the
claims  against CCS will not have  material  impact on the  Company's  financial
statements.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

None


<PAGE>


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters
------------------------------------------------------------------------------

(a)  Market Information

Corning  Incorporated  common stock is listed on the New York Stock Exchange and
the Zurich Stock  Exchange.  In addition,  it is traded on the Boston,  Midwest,
Pacific and Philadelphia stock exchanges. Common stock options are traded on the
Chicago  Board  Options  Exchange.  The  abbreviated  ticker  symbol for Corning
Incorporated is "GLW."

The following table sets forth the high and low sales price of Corning's  common
stock as reported on the Composite Tape and the quarterly dividends declared for
the past two years.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                          First        Second        Third       Fourth        Total
                                         Quarter       Quarter      Quarter      Quarter       Year
-------------------------------------------------------------------------------------------------------------
2002
-------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>           <C>          <C>
Price range
   High                                 $  10.70     $   7.78     $   4.12      $  4.99
   Low                                  $   6.25     $   3.15     $   1.46      $  1.10
-------------------------------------------------------------------------------------------------------------
2001
-------------------------------------------------------------------------------------------------------------
Common dividend declared                $   0.06     $   0.06                                $  0.12
Price range
   High                                 $  70.25     $  26.70     $  16.82      $ 10.30
   Low                                  $  19.98     $  13.00     $   8.35      $  7.01
-------------------------------------------------------------------------------------------------------------
</TABLE>

(b)  Holders

As of December  31, 2002,  the  approximate  number of record  holders of common
stock was 22,940.

(c)  Dividends

On July 9, 2001,  Corning  announced  the  discontinuation  of the  payments  of
dividends on its common stock.  Dividends  paid to common  shareholders  in 2001
totaled $112 million.

(d)  Securities Authorized for Issuance under Equity Compensation Plans

The section entitled "Equity  Compensation  Plan  Information" in our Definitive
Proxy  Statement for our 2003 annual meeting of shareholders to be held on April
24, 2003, is incorporated by reference in this Annual Report on Form 10-K.


<PAGE>


Item 6.  Selected Financial Data (Unaudited)
--------------------------------------------

(In millions, except per share amounts and number of employees)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Years ended December 31,
                                                        ----------------------------------------------------------------------------
                                                           2002            2001            2000          1999             1998
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                     <C>             <C>            <C>            <C>             <C>
Results of Operations

Net sales                                               $   3,164       $   6,047      $   6,920      $   4,586       $   3,687
Research, development and engineering expenses          $     483       $     622      $     531      $     372       $     301
Equity in earnings of associated companies, net of
  impairments                                           $     116       $     148      $     149      $     112       $      97
(Loss) income from continuing operations                $  (1,780)      $  (5,532)     $     363      $     482       $     333
Income from discontinued operations,
  net of income taxes                                         478              34             59             34              88
------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income                                       $  (1,302)      $  (5,498)     $     422      $     516       $     421
------------------------------------------------------------------------------------------------------------------------------------

Basic (loss) earnings per common share (1)
    Continuing operations                               $   (1.85)      $   (5.93)     $    0.42      $    0.63       $    0.45
    Discontinued operations                                  0.46            0.04           0.07           0.04            0.12
------------------------------------------------------------------------------------------------------------------------------------
    (Loss) earnings per common share                    $   (1.39)      $   (5.89)     $    0.49      $    0.67       $    0.57
------------------------------------------------------------------------------------------------------------------------------------
Diluted (loss) earnings per common share (1)
    Continuing operations                               $   (1.85)      $   (5.93)     $    0.41      $    0.61       $    0.44
    Discontinued operations                                  0.46            0.04           0.07           0.05            0.12
------------------------------------------------------------------------------------------------------------------------------------
    (Loss) earnings per common share                    $   (1.39)      $   (5.89)     $    0.48      $    0.66       $    0.56
------------------------------------------------------------------------------------------------------------------------------------
Common dividends declared                                               $    0.12      $    0.24      $    0.24       $    0.24
Shares used in computing per share amounts: (1)
    Basic earnings per common share                         1,030             933            858            765             733
    Diluted earnings per common share                       1,030             933            879            795             778
------------------------------------------------------------------------------------------------------------------------------------

Financial Position

Working capital                                         $   2,145       $   2,113      $   2,685      $     430       $     348
Total assets                                            $  11,548       $  12,793      $  17,526      $   6,526       $   5,464
Long-term debt                                          $   3,963       $   4,463      $   3,966      $   1,490       $   1,218
Shareholders' equity                                    $   4,691       $   5,414      $  10,633      $   2,463       $   1,707
------------------------------------------------------------------------------------------------------------------------------------

Supplemental Data for SFAS No. 142

Adjusted net (loss) income excluding
  amortization of goodwill                              $  (1,302)      $  (5,153)     $     625      $     534       $     434
Basic (loss) earnings per common share (1)
    Continuing operations                               $   (1.85)      $   (5.56)     $    0.66      $    0.65       $    0.47
    Discontinued operations                                  0.46            0.04           0.07           0.05            0.12
------------------------------------------------------------------------------------------------------------------------------------
    (Loss) earnings per common share                    $   (1.39)      $   (5.52)     $    0.73      $    0.70       $    0.59
------------------------------------------------------------------------------------------------------------------------------------
Diluted (loss) earnings per common share (1)
    Continuing operations                               $   (1.85)      $   (5.56)     $    0.64      $    0.64       $    0.46
    Discontinued operations                                  0.46            0.04           0.07           0.04            0.11
------------------------------------------------------------------------------------------------------------------------------------
    (Loss) earnings per common share                    $   (1.39)      $   (5.52)     $    0.71      $    0.68       $    0.57
------------------------------------------------------------------------------------------------------------------------------------

Selected Data

Capital expenditures                                    $     357       $   1,741      $   1,485      $     748       $     723
Depreciation and amortization                           $     661       $   1,060      $     747      $     391       $     308
Number of employees (2)                                    23,200          30,300         40,400         20,400          18,200
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Reference should be made to the notes to the Consolidated  Financial  Statements
and Management's  Discussion and Analysis of Financial  Condition and Results of
Operations.

(1)  Adjusted to reflect the three-for-one  stock split of Corning common stock,
     in the form of a 200% stock dividend, paid on October 3, 2000.
(2)  Amounts do not include employees of discontinued operations.


<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

The financial  data related to the precision lens business which was sold in the
fourth  quarter of 2002 is reported as  discontinued  operations for all periods
presented.  See Note 2 to the Consolidated  Financial  Statements and Results of
Discontinued Operations below.

Overview

During 2002 Corning continued the restructuring efforts that began in the second
quarter of 2001. The  telecommunications  industry continued to decline over the
course of the year as the trends  exhibited  in 2001 such as softness in demand,
excess  capacity,  increased  intensity of competition  and growing  pressure on
price and profits have persisted.  Major carriers have reduced capital  spending
for  a  variety  of  reasons,  some  of  which  include  network  over-capacity,
bankruptcy  of key  telecommunications  customers  and suppliers and the overall
economic  uncertainties  in the world economy.  The significant  lack of capital
spending by these  carriers  resulted in  drastically  reduced sales volumes for
Corning in 2002. As a result,  Corning  continued to see revenues decline in its
Telecommunications Segment and thus incurred significant losses again in 2002.

These current business  conditions caused Corning to revise future  expectations
for its  Telecommunications  Segment which  resulted in the  recognition  of the
following fourth quarter charges in 2002:

.    a pre-tax  charge of $400  million  ($294  million  after-tax)  to impair a
     portion of the goodwill in its Telecommunications Segment, and
.    a  pre-tax  charge  of $269  million  ($195  million  after-tax)  to impair
     tangible and intangible assets in its photonic technologies business.

In addition, Corning recorded the following fourth quarter charges in 2002:

.    a pre-tax  charge of $140  million  ($44  million  after-tax  and  minority
     interest) to impair tangible assets in its  conventional  video  components
     business due to the  maturation of the  conventional  television  market in
     North America, and
.    a pre-tax charge of $652 million ($516 million after-tax) for restructuring
     actions,  primarily  in the  Telecommunications  Segment  that  resulted in
     recording a total of $1.3 billion of restructuring  and impairment  charges
     for the full year.

Corning took the  following  actions to  compensate  for a decrease in cash from
operations and preserve liquidity:

.    in December 2002, Corning completed the sale of its precision lens business
     for  approximately  $850 million and recorded a gain of $652 million  ($415
     million after-tax),
.    in July 2002,  Corning  issued 5.75 million shares of 7% Series C mandatory
     convertible  preferred  stock which  generated net proceeds of $440 million
     and declared a one-time dividend of $117 million on the offering, and
.    from  time to  time  throughout  the  year,  Corning  retired  zero  coupon
     convertible  debentures  with an accreted value of $493 million for cash of
     $308  million  and  recorded  total  gains of $176  million  ($108  million
     after-tax).  Corning  also  spent a total  of $490  million  to  repay  its
     commercial paper borrowings and a portion of other long-term debt.


<PAGE>


RESULTS OF CONTINUING OPERATIONS

Selected  highlights  from Corning's  continuing  operations were as follows (in
millions, except per share amounts and percentages):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                            2002                  2001                  2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                   <C>                   <C>
Net sales                                                 $  3,164              $  6,047              $  6,920

Gross margin                                              $    602              $  1,820              $  2,911
  (gross margin %)                                             19%                   30%                   42%

Selling, general and administrative expenses              $    716              $  1,090              $  1,041
  (as a % of revenues)                                         23%                   18%                   15%

Research, development and engineering expenses            $    483              $    622              $    531
  (as a % of revenues)                                         15%                   10%                    8%

Amortization of goodwill                                                        $    363              $    216
  (as a % of revenues)                                                                6%                    3%

Operating (loss) income                                   $(2,720)              $(6,048)              $    631
  (as a % of revenues)                                       (86)%                (100)%                    9%

(Loss) income from continuing operations                  $(1,780)              $(5,532)              $    363
  (as a % of revenues)                                       (56)%                 (91)%                    5%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Net sales

Consolidated  net sales for 2002 were $3.2  billion,  a decrease of 48%, or $2.9
billion,  from 2001 sales of $6.1 billion. The sales decline was most pronounced
in the  Telecommunications  Segment where  significantly  lower demand and price
declines  for  Corning's  optical  fiber  and cable  and  photonic  technologies
products  drove a sales  decline in that segment of 63%, or $2.8 billion year to
year. Sales in the  Technologies  Segment for 2002 decreased 4%, or $55 million,
compared to 2001. Consolidated net sales for 2001 decreased 13%, or $873 million
from 2000 net  sales of $6.9  billion.  Excluding  the  impact of  acquisitions,
Corning's  consolidated  sales in 2001  decreased 17%,  compared to 2000.  Sales
declines for 2001 occurred in both operating segments,  but were most pronounced
in the Telecommunications Segment where sales fell 14%.

Gross margin

As a percentage of net sales,  gross margin  decreased  from 30% to 19% in 2002.
Gross  margin   continued  to  be  impacted  by  lower  sales   volumes  in  the
Telecommunications  Segment where the lower volumes were  insufficient  to cover
the fixed  manufacturing  costs.  Downward  pricing  pressure also  continued to
negatively  impact  gross  margins,  primarily  in the  optical  fiber and cable
business. These negative trends were offset by significant fixed cost reductions
as  manufacturing  capacity  was shut  down.  Gross  margin in the  Technologies
Segment  decreased  approximately  2 points  from 2001.  In 2001,  gross  margin
decreased to 30% from 42% in 2000. The decrease was primarily due to the loss of
sales volume in premium fiber and photonics products and a total of $333 million
of charges for the write-down of inventory in the photonic technologies business
over the second and fourth quarters of 2001.

Selling, general and administrative expenses

Selling,  general  and  administrative  (SG&A)  expenses  decreased  34% to $716
million in 2002 while SG&A  increased 5 points as a  percentage  of net sales to
23% over 2001.  The  decrease in SG&A for the year  reflected  the cost  savings
which  resulted from the  restructuring  actions which began in 2001,  while the
increase  as a  percentage  of net  sales  indicated  the  decline  in  revenues
continued  to outpace  the cost  benefit of  restructuring  actions.  Management
expects  SG&A as a  percentage  of sales to  decline in 2003 as a result of 2002
restructuring  actions.  SG&A increased 5% in 2001 over 2000 to $1,090  million,
while SG&A as a percentage of net sales also  increased 3 points over 2000.  The
increase was  primarily  due to a $90 million  charge  related to the release of
restrictions  on shares of  Corning  common  stock held by  employees  partially
offset by the benefits of cost reduction activities.  The Compensation Committee
removed the restrictions on approximately 4.8 million shares,  primarily because
they were no longer  effective as a retention tool due to the sharp reduction in
share price from their grant date.


<PAGE>


Research, development and engineering

Research,  development and engineering  expenses (RD&E) totaled $483 million for
2002, which  represented a decline of 22%,  compared to 2001. As a percentage of
net sales,  RD&E  increased 5 points from 2001.  The decrease in expense for the
year reflected the impact of the restructuring  actions, while the increase as a
percentage  of net  sales was  caused by the  decline  in  revenues.  Management
expects to  continue to invest in RD&E in 2003,  but expects  RD&E to decline to
10% of sales. In 2001, RD&E increased 17% to $622 million from 2000,  while RD&E
as a  percentage  of net sales  increased 2 points over 2000.  The increase as a
percentage  of sales was due to higher  spending  and  lower  revenues  in 2001,
compared to 2000.

Amortization of Goodwill

Effective  January 1, 2002,  Corning adopted  Statement of Financial  Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, which eliminated
the  amortization of goodwill.  The new standard is discussed  further under New
Accounting  Standards  and  Note 1 to  the  Consolidated  Financial  Statements.
Amortization of goodwill totaled $363 million ($344 million  after-tax) in 2001,
compared to $216 million  ($202  million  after-tax)  in 2000.  Amortization  of
goodwill increased in 2001 as it included charges for the entire year related to
transactions completed late in 2000. The amortization of goodwill was reduced by
the impairment of goodwill charge taken in the second quarter of 2001.

Operating (loss) income

Corning incurred a significant  operating loss of $2.7 billion in 2002. The loss
was primarily due to  restructuring  charges and goodwill and asset  impairments
totaling  $2.1  billion.  Further  discussion  of  these  charges  begins  under
Restructuring,  Impairment  and Other  Charges.  The 2001 operating loss of $6.0
billion is largely  attributable to a charge of approximately $4.8 billion ($4.7
billion  after-tax) in the second  quarter to impair  goodwill and certain other
intangible assets of the photonic technologies  business.  Corning's results for
2001 were also  impacted by charges for  restructuring  actions of $953 million,
which included  charges for headcount  reductions,  exit costs and impairment of
plant and equipment,  an operating  charge of $333 million to write-down  excess
and  obsolete  inventory,  a $90  million  charge  related  to  the  release  of
restrictions  on shares of  Corning  common  stock and a $28  million  charge to
write-down an investment in intellectual property.

Corning's 2000 results included  purchased  in-process  research and development
(IPRD)  charges of $416  million  and other  acquisition-related  charges of $47
million.

Gain on Repurchases and Retirement of Debt

Corning  repurchased  and retired  zero-coupon  convertible  debentures  with an
accreted value of $493 million in exchange for cash of $308 million resulting in
gains of $176 million ($108 million  after-tax)  on these  transactions  for the
year ended December 31, 2002. See Liquidity and Capital Resources.

Income taxes

Corning's  (benefit)  provision  for  income  taxes  and the  related  effective
(benefit)  income  tax rates  for  continuing  operations  were as  follows  (in
millions):
--------------------------------------------------------------------------------
                                            For the years ended December 31,
                                           -----------------------------------
                                             2002           2001        2000
--------------------------------------------------------------------------------

(Benefit) provision for income taxes       $  (726)       $  (468)    $   383
Effective (benefit) income tax rate          (26.7)%         (7.6)%      61.7%
--------------------------------------------------------------------------------

The effective benefit rate in 2002 was impacted by restructuring, impairment and
other charges and the gain on repurchases  of debt.  The effective  benefit rate
without  consideration of these items was 30% for 2002. The effective income tax
(benefit) rate for the year is lower than the U.S.  statutory income tax rate of
35% due to the impact of nondeductible expenses and losses.

The effective  income tax  (benefit)  rate for 2001 was much lower than the U.S.
statutory income tax rate,  primarily due to non-tax deductible  amortization of
acquired  intangibles and goodwill,  which partially  offset the U.S.  statutory
income  tax  (benefit)  rate.  The  effective  income tax rate for 2000 was much
higher  than the U.S.  statutory  income  tax  rate,  primarily  due to  non-tax
deductible amortization of acquired intangibles and goodwill, in addition to the
write-offs of non-tax  deductible  IPRD.  Note 9 to the  Consolidated  Financial
Statements reconciles the statutory tax rate to the effective tax rate.


<PAGE>


Equity earnings

Equity earnings in 2002 were $116 million and declined 22% from 2001,  primarily
due to the impairment of an equity  investment in the second quarter of 2002 for
$14  million  and a $20  million  reduction  in equity  earnings  in the  fourth
quarter,  primarily due to  restructuring  and  impairment  charges  recorded by
Samsung   Corning  Micro  Optics.   Excluding   these  items,   equity  earnings
approximated  those in 2001.  As a  percentage  of net  sales,  equity  earnings
increased 2 points  over 2001,  primarily  due to the  decline in sales.  Equity
earnings in 2001 were $148 million and relatively  flat,  compared to 2000. As a
percentage of net sales,  equity earnings were also relatively flat, compared to
2000.

In the  first  quarter  of 2000,  Corning  discontinued  recognition  of  equity
earnings  from  Pittsburgh  Corning  Corporation  (PCC) and recorded a charge to
impair  its  investment  for $36  million  due to  PCC's  decision  to file  for
bankruptcy   protection  and  reorganization   under  Chapter  11  for  asbestos
litigation.  See Legal  Proceedings  and Note 10 to the  Consolidated  Financial
Statements for further detail.

(Loss) income from continuing operations

As a result of the above,  the (loss) income from continuing  operations and per
share data were as follows (in millions, except per share amounts):
--------------------------------------------------------------------------------
                                                For the years ended December 31,
                                                --------------------------------
                                                    2002        2001      2000
--------------------------------------------------------------------------------

(Loss) income from continuing operations         $ (1,780)   $ (5,532)   $  363
Basic (loss) earnings per common share from
  continuing operations                          $  (1.85)   $  (5.93)   $ 0.42
Diluted (loss) earnings per common share from
  continuing operations                          $  (1.85)   $  (5.93)   $ 0.41
Shares used in computing per share amounts:
     Basic                                          1,030         933       858
     Diluted                                        1,030         933       879
--------------------------------------------------------------------------------

RESULTS OF DISCONTINUED OPERATIONS

Precision lens business

On December 13, 2002, Corning completed the sale of its Cincinnati, OH precision
lens business to 3M Company  (3M).  This business  manufactures  precision  lens
assemblies  for  projection  video  systems.  Corning  sold the  precision  lens
business  for cash  proceeds up to $850  million,  of which $50 million has been
deposited in an escrow account.  A portion of the escrow account balance will be
used to pay state  income  taxes  relating  to the  transaction.  The  remaining
balance plus accrued interest will be paid to Corning in December 2003,  subject
to any amounts due to 3M relating to certain  indemnifications  made by Corning.
The  transaction  price is also subject to adjustment  due to changes in working
capital between signing and closing.

In 2002,  proceeds  from the sale of  precision  lens  were  approximately  $800
million in cash.  The gain on the sale was $415 million,  net of tax,  which has
been  recorded  in  income  from  discontinued  operations  in the  Consolidated
Statements of Operations.  In 2003,  Corning could record an additional  gain on
the sale of up to $25 million,  net of tax. This amount is conditional  upon the
ultimate  amount paid to Corning from the escrow account.  Management  currently
expects to  receive  additional  proceeds  of $10  million  from 3M in the first
quarter  of 2003  and $40  million  in the  fourth  quarter  of  2003,  which is
currently held in escrow.

The precision  lens business is accounted  for as a  discontinued  operation and
therefore,  the  results of  operations  and cash flows have been  removed  from
Corning's  results of  continuing  operations  for all  periods  presented.  The
precision  lens  business  was  part of  Corning's  former  Information  Display
Segment.  The results of operations  for the  precision  lens business have been
excluded from the Operating Segments data.

Sales  from  discontinued  operations  increased  19%,  or $43  million in 2002,
compared to 2001.  The increase was  primarily  due to continued  strong  volume
growth for digital  projection  televisions,  particularly  in North America and
Asia, driven by demand for larger size televisions in the  entertainment  market
sector.  Excluding the gain on sale,  earnings for the business  increased  more
than 85% over  2001 to $63  million  as sales  volume  gains  and  manufacturing
efficiencies from new capacity were realized.


<PAGE>


Sales  from  discontinued  operations  increased  9%,  or $18  million  in 2001,
compared  to 2000.  The  increase  was due to the growth of  digital  projection
televisions  in the U.S.  and in China  where  the  demand  for high  definition
television  was  growing.  Despite  the  increase  in sales,  earnings  for 2001
decreased approximately 26% to $34 million, primarily due to manufacturing costs
related to capacity expansion of projection television assemblies.

Summarized  selected  financial  information  for  the  discontinued  operations
related to the precision lens business is as follows (in millions):
--------------------------------------------------------------------------------
                                     For the years ended December 31,
                                     --------------------------------
                                       2002        2001        2000
--------------------------------------------------------------------------------

Net sales                            $  268      $  225      $  207
                                     ================================


Income before taxes                  $  100      $   50      $   70
Gain on sale before taxes               652
Provision for income taxes              274          16          24
                                     --------------------------------

Net income                           $  478      $   34      $   46
                                     ================================

--------------------------------------------------------------------------------

Distribution of Shares of Quest Diagnostics and Covance Inc.

On  December  31,  1996,   Corning   distributed  shares  of  Quest  Diagnostics
Incorporated and Covance Inc.,  which  collectively  comprised  Corning's Health
Care  Services   Segment,   to  its  shareholders  on  a  pro  rata  basis  (the
Distributions).  Corning agreed to indemnify  Quest  Diagnostics on an after-tax
basis for the settlement of certain  government claims and against certain other
claims  that  were   pending  at  December  31,   1996.   Coincident   with  the
Distributions,  Corning recorded a payable to Quest Diagnostics of approximately
$25 million, which was management's best estimate of amounts which were probable
of  being  paid by  Corning  to  Quest  Diagnostics  to  satisfy  the  remaining
indemnified  claims  on  an  after-tax  basis.   Quest  Diagnostics   settled  a
significant matter with the Department of Justice late in 2000 requiring Corning
to reimburse Quest Diagnostics $9 million. As a result, in the fourth quarter of
2000 Corning released  reserves  totaling $13 million after-tax in excess of the
indemnified settlement between Quest Diagnostics and the Department of Justice.

OUTLOOK

Corning expects 2003 net sales to approximate 2002,  reflecting a year over year
decline in the Telecommunications Segment and an improvement in the Technologies
Segment.  Corning also expects, at a minimum, to significantly  reduce operating
losses in 2003  versus 2002 as a result of  restructuring  actions in the second
half  of  2002 in  Telecommunications  and an  expected  strong  performance  in
Technologies.  Corning's  goal is to  return  to  profitability  in 2003  before
consideration  of  restructuring  or other one-time  charges.  Corning's goal to
return  to  profitability  is  dependent  upon  stabilization  of  revenues  and
continued strength in North America and world economies.

Corning will begin recognizing  equity earnings from Dow Corning  Corporation in
the first quarter of 2003. Corning does not expect to receive any dividends from
Dow Corning in 2003.

For the  first  quarter  of 2003,  Corning  expects  sales in the  range of $700
million to $730  million.  Corning  expects a net loss in the range of $0.01 per
share to $0.04 per share,  excluding gains on debt repurchases and restructuring
charges in the  quarter.  This loss is net of  expected  equity  earnings in the
range of $10 million to $20 million from Dow Corning.

Management  continues to believe  Corning has  sufficient  liquidity to meet its
funding needs for 2003 and beyond.  Corning  finished the year with $2.1 billion
in cash and short-term investments and full access to an unused revolving credit
facility of $2.0  billion.  Capital  spending is  expected to  approximate  $350
million to $450 million in 2003. The  anticipated  spending will focus primarily
on the  planned  expansion  in the  liquid  crystal  display  and  environmental
businesses.


<PAGE>


RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES

Corning  recorded  significant  charges  in 2002 and  2001.  These  charges  are
summarized  in  the  following  table  and  discussed  in  the  following  three
subsections of Management Discussion and Analysis (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                              For the years ended December 31,
                                                              --------------------------------
                                                                   2002               2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>
Impairment of goodwill                                          $    400            $  4,648
Restructuring actions                                              1,271                 953
Impairment of long lived assets other than goodwill:
    Photonic technologies business                                   269                 116
    Conventional video components business                           140
                                                                ----------------------------
Total restructuring, impairment and other charges               $  2,080            $  5,717
                                                                ============================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Impairment Of Goodwill

2002 Charge

As  discussed  in New  Accounting  Standards  and  Note  1 to  the  Consolidated
Financial  Statements,  in January  2002,  Corning  adopted SFAS No. 142,  which
requires  companies to stop amortizing  goodwill and certain  intangible  assets
with an indefinite useful life. Instead,  SFAS No. 142 requires that goodwill be
reviewed  for  impairment  upon  adoption of SFAS No. 142  (January 1, 2002) and
annually  thereafter.  Corning  performed an initial  benchmark  assessment upon
adoption at January 1, 2002,  and  determined  that a transition  charge was not
required.  Corning  chose the fourth  quarter to conduct  its annual  impairment
test.

Under  SFAS No.  142,  goodwill  impairment  occurs  if the net book  value of a
reporting  unit  exceeds its  estimated  fair value.  The  majority of Corning's
goodwill is included in the telecommunications reporting unit, which is the same
as the  Telecommunications  Segment.  The test  completed in the fourth  quarter
indicated  that the recorded book value of this reporting unit exceeded its fair
value, as determined by discounted cash flows.

Management  believes the  telecommunication  industry is currently depressed but
will  ultimately  recover.  Management does not expect growth in this segment in
the  short-term,  but believes  that growth will return to this segment by 2005.
Corning's  view  that the  industry  will  recover  is  based  on the fact  that
bandwidth demand continues to grow currently,  and the belief that a combination
of public policy changes,  consolidation and recovery of industry  players,  and
the advancement of profitable  broadband  business models will drive recovery in
the  future.  The  decrease in fair value from that  measured  in the  benchmark
assessment primarily reflects:

.    a delay in the timing of the  expected  recovery  from late 2002,  or early
     2003 to 2005,
.    a reduction in the short-term cash flow expectations of the fiber and cable
     business and a lower base from which the expected recovery will occur, and
.    a  reduction  in the short and  long-term  cash  flow  expectations  of the
     photonic technologies business.

Management  retained  valuation  specialists  to assist in the  valuation of its
tangible and  identifiable  intangible  assets for purposes of  determining  the
implied  fair value of goodwill at December  31, 2002.  Upon  completion  of the
annual assessment, Corning recorded a non-cash impairment charge of $400 million
($294  million  after-tax)  to reduce  the  carrying  value of  goodwill  in the
telecommunications reporting unit to its estimated fair value of $1.6 billion.

Management cannot provide  assurance that future impairment  charges will not be
required if the  telecommunications  industry  does not recover as  projected by
management in its expected future cash flow estimates.  Management must exercise
judgment in assessing the  recoverability of goodwill.  See Critical  Accounting
Estimates for related discussion.

2001 Charge

During the first half of 2001, Corning experienced a significant decrease in the
rate of growth of its  Telecommunications  Segment,  primarily  in the  photonic
technologies business,  due to a dramatic decline in infrastructure  spending in
the telecommunications  industry.  During the second quarter, major customers in
the photonic  technologies  business  reduced their order forecasts and canceled
orders  already  placed.  As a result,  management  determined  that the  growth
prospects of this business were significantly less than previously  expected and
those of historical periods.


<PAGE>


Corning reviews the recoverability of its long-lived assets,  including goodwill
and other intangible assets,  when events or changes in circumstances occur that
indicate the carrying value of the asset may not be recoverable.  As a result of
the business  conditions noted above,  Corning  concluded such an assessment was
required for its photonic technologies  business in the second quarter.  Corning
assesses  recoverability  of the carrying value based upon  cumulative  expected
future pre-tax cash flows  (undiscounted  and without  interest  charges) of the
related operations.

As a  result  of this  test,  Corning  determined  that the  long-lived  assets,
including  goodwill  and other  intangibles  related to the  acquisition  of the
Pirelli  optical  components and devices  business (the Pirelli  transaction) in
December  2000,  as well as those of the unit into  which  NetOptix  Corporation
(acquired in May 2000) had been integrated,  were not recoverable under SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be  Disposed  of," which was the  governing  U.S.  generally  accepted
accounting principle (GAAP) guidance at that time. The impairment assessment was
performed  at these  levels as  discrete  cash  flows were  available  for these
divisions  within the photonic  technologies  business.  Corning's  policy is to
write-down long-lived assets to fair value in such circumstances.

Management  estimated  fair value using  several  techniques.  While each method
generated  comparable fair values,  management  adjusted the assets to estimates
based on average  multiples of  forecasted  revenues and earnings of  comparable
publicly  traded  companies  with  operations  in the optical  component  market
segment.  This  valuation  method is  consistent  with that used in the original
valuation of the  acquisitions  of Net Optix and certain assets from the Pirelli
transaction.  The fair value of these  assets were lower in June 2001 from their
acquisition  dates as market  multiples  had  changed  from those  reflected  in
transactions consummated in 2000.

In the  second  quarter  of 2001,  Corning  recorded  pre-tax  charges of $4,648
million to impair a  significant  portion of goodwill and $116 million to impair
other intangible assets. Of the total goodwill charge of $4,648 million,  $3,038
million  related  to the  Pirelli  transaction  and  $1,610  million  related to
goodwill resulting from the acquisition of NetOptix Corporation.

In the  second  quarter of 2001,  it was  determined  that there were  events of
impairment within portions of the photonic technologies business. The accounting
literature effective at that time (SFAS No. 121) required that intangible assets
be assessed for recoverability at the lowest level for which discrete cash flows
can be measured. As a result of this analysis, Corning recorded a charge of $116
million to impair a portion of the patents acquired in the Pirelli  transaction.
The valuation methods from which this results are described above.

Restructuring Actions

2002 Restructuring Actions

The continued  decline in demand in the  Telecommunications  Segment during 2002
required   additional   restructuring   beyond  that  taken  in  2001  to  bring
manufacturing  capacity in line with  revenue  projections.  Corning  recorded a
total of $1.3  billion  in pre-tax  charges  over the  second,  third and fourth
quarters. Actions approved and initiated in 2002 included the following:

.    permanent  closing of Corning's optical fiber  manufacturing  facilities in
     Noble Park, Victoria,  Australia, and Neustadt bei Coburg, Germany. Corning
     also mothballed its optical fiber manufacturing facility in Concord, NC and
     transferred certain capabilities to its Wilmington, NC facility,
.    reductions in capacity and employment in Corning's cabling and hardware and
     equipment locations worldwide to reduce costs,
.    permanent   closure  of  its   photonic   technologies   thin  film  filter
     manufacturing facility in Marlborough, MA,
.    permanent  abandonment  of  certain  construction  projects  that  had been
     stopped   in  2001  in  the   fiber   and   cable   business   within   the
     Telecommunications Segment,
.    closure   of   minor   manufacturing    facilities,    primarily   in   the
     Telecommunications Segment,
.    closure and consolidation of research facilities,
.    elimination  of  positions  worldwide  through  voluntary  and  involuntary
     programs, and
.    divestiture  of a portion of the  controls and  connectors  business in the
     Telecommunications Segment.


<PAGE>


In addition,  Corning  impaired  cost based  investments  in a number of private
telecommunications companies based upon a decision in the fourth quarter of 2002
to divest the portfolio.

     Restructuring Charges
     ---------------------
     The 2002  restructuring  charges of $447 million  included  $376 million of
     employee  separation costs (including  special  termination and curtailment
     losses  related to pension  and  postretirement  health  care  plans),  $85
     million in other exit costs  (principally  lease  termination  and contract
     cancellation  payments)  and a $14  million  credit  related  to  the  2001
     restructuring actions. The charge entailed the elimination of approximately
     7,100 hourly and salaried positions in the  Telecommunications  Segment and
     corporate research and administrative staffs organizations.  Employees have
     been informed of the  restructuring  initiatives and benefits  available to
     them under applicable  benefit plans.  These benefits included  involuntary
     separation, early retirement and social programs.

     Impairment of Plant and Equipment
     ---------------------------------
     Corning has evaluated the carrying value of the  long-lived  assets at each
     site impacted by the  restructuring  actions for  impairment.  The carrying
     value of a long-lived  asset is considered  impaired  when the  anticipated
     separately  identifiable  undiscounted  cash flows from that asset are less
     than  the  carrying  value  of  the  asset.  The  impairment  charges  were
     determined  based on the amount by which the  carrying  value  exceeded the
     fair market value of the asset.  Corning  recorded  $712 million in 2002 to
     impair  plant  and  equipment  related  to  facilities  to be  shutdown  or
     disposed,   primarily  in  the  fiber  and  cable  business,  the  photonic
     technologies  business  and  certain  research  facilities.  The charge was
     partially offset by an $11 million  adjustment to assumed salvage values on
     asset disposals,  related to the 2001 restructuring  actions.  Of the total
     charge,  $107 million pertained to abandoned  construction  projects in the
     fiber and cable business, primarily the latest expansion in Concord, NC and
     Oklahoma City, OK.

     A significant  portion of the assets  impaired were recently  acquired,  or
     built in connection  with capacity  expansions  in  anticipation  of future
     demand.  Most of the impaired  facilities are currently available for sale,
     others will be demolished or abandoned.  The remaining  impaired  equipment
     will be auctioned, sold, disposed of or abandoned during 2003.

     Loss on Divestiture
     -------------------
     In the second quarter of 2002,  Corning completed the sale of its appliance
     controls group which was included in the controls and  connectors  business
     in the Telecommunications Segment. In the second and third quarter of 2002,
     Corning  received  cash of $24  million,  note  proceeds  of $6 million and
     recorded  a loss on the sale of  approximately  $16  million  ($10  million
     after-tax) which is included in impairment charges.

     Impairment of Cost Investments
     ------------------------------
     During the  second and fourth  quarters  of 2002,  Corning  recorded  total
     charges of $107 million ($66 million  after-tax)  for other than  temporary
     declines in certain cost investments in the Telecommunications  Segment. In
     the fourth quarter,  Corning  decided to divest its remaining  portfolio of
     cost investments in private  telecommunications  related  companies.  These
     investments have been written down to their estimated fair value based upon
     information available from prospective purchasers.


<PAGE>


The  following  table  illustrates  the  charges,  credits  and  balances of the
restructuring reserves as of December 31, 2002 (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Remaining
                                                                             Net                          Cash         reserve at
                                                          January 1,      charges/        Non-cash      payments        Dec. 31,
                                                             2002          credits         charges       in 2002          2002
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                       <C>            <C>              <C>           <C>            <C>
Restructuring charges:
Employee related costs                                    $    198       $     371 (a)    $    40       $    256       $     273
Other charges                                                   78              76 (b)                        22             132
                                                          ----------------------------------------------------------------------
     Total restructuring charges                          $    276       $     447        $    40       $    278       $     405
                                                          ----------------------------------------------------------------------

Impairment of long-lived assets:
Assets to be disposed of by sale or abandonment                          $     717 (c)    $   717
Cost investments                                                               107            107
                                                                         ------------------------
     Total impairment charges                                            $     824        $   824
                                                                         ------------------------

Total restructuring and impairment
  charges and credits                                                    $   1,271
Tax benefit and minority interest                                              342
                                                                         ---------
Restructuring and impairment charges and credits, net                    $     929
                                                                         =========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Amount is net of $5 million adjustment in employee related costs reflecting
     the difference between estimated and actual costs.
(b)  Amount is net of $9 million  adjustment in other exit costs  reflecting the
     difference between estimated and actual costs.
(c)  Amount is net of $11 million  adjustment to assumed salvage values on asset
     disposals and includes $16 million loss on divestiture.

The following table illustrates the charges for 2002 restructuring actions as it
relates to Corning's operating segments (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Charges for restructuring actions
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Functions
                                                Telecom-                         Including
                                               munications     Technologies      Research           Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>              <C>
Charges for restructuring actions              $ 1,053           $    10         $   208          $  1,271
                                               ============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table  illustrates the headcount  reduction  amongst U.S.  Hourly,
U.S. Salaried and Non-U.S. positions:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Headcount reduction
------------------------------------------------------------------------------------------------------------------------------------
                                               U.S. Hourly     U.S. Salaried      Non-U.S.           Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>             <C>               <C>
Headcount reduction                              1,650             2,950           2,500             7,100
                                               ============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 2002,  approximately  5,100 of the 7,100  employees  had been
separated under the plans.  Although Corning expects the remaining  employees to
be  separated by December 31,  2003,  the  majority of these  employees  will be
separated by the end of the first quarter of 2003. Corning expects approximately
one  third  of the  2002  restructuring  charges  to be  paid  in  cash.  If the
restructuring actions are successfully implemented, Corning expects such actions
to yield  approximately  $465 million in annual savings.  The savings consist of
lower wage and benefit  costs,  avoided  depreciation  and fixed costs on closed
facilities. Approximately 40% of the savings from the restructuring actions will
be realized in cost of sales with the remainder split between  selling,  general
and administrative and research, development and engineering expenses.


<PAGE>


2001 Restructuring Actions

In July and October of 2001, Corning announced a series of restructuring actions
in  response  to  significant  deteriorating  business  conditions  which  began
initially in its Telecommunications  Segment, but eventually spread to its other
businesses  as the year  progressed.  The  following  actions were  approved and
undertaken in 2001:

.    closure of seven major  manufacturing  facilities and the  consolidation of
     several smaller  facilities,  in the  Telecommunications  and  Technologies
     Segments,
.    discontinuation  of  its  initiative  in  Corning   Microarray   Technology
     products, part of Corning's life sciences business, and
.    elimination  of  approximately  12,000  positions  affecting  all operating
     segments, but especially impacting the photonic technologies,  hardware and
     equipment and the optical fiber and cable businesses.  This action included
     a selective  voluntary early retirement program for certain employees along
     with involuntary separations.

These actions  resulted in a pre-tax charge  totaling $953 million ($585 million
after-tax  and minority  interest)  for the year ended  December  31, 2001.  The
charge  included  restructuring  costs of $419  million and $542 million for the
impairment  of  plant  and  equipment  of  which  $3  million  and  $5  million,
respectively related to discontinued operations.  Approximately one third of the
total  charge was expected to be paid in cash.  As of December 31, 2002,  all of
the 12,000 employees had been separated under the plans.  Certain obligations of
the plans will be paid in 2003 and beyond.

The  following  table  illustrates  the  charges,  credits  and  balances of the
restructuring reserves as of December 31, 2001 (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                         Non-              Cash           Remaining
                                                          Total          cash            payments        reserve at
                                                         charges        charges           in 2001       Dec. 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>              <C>               <C>
Restructuring charges:
Employee related costs                                 $     324       $      66        $      60         $     198
Other charges                                                 95                               17                78
                                                       ------------------------------------------------------------
    Total restructuring charges                        $     419       $      66        $      77         $     276
                                                       ------------------------------------------------------------

Impairment of long-lived assets:
Assets held for use                                    $      46       $      46
Assets held for disposal                                     496             496
                                                       -------------------------
    Total impairment charges                           $     542       $     542
                                                       -------------------------

Total restructuring and impairment charges             $     961
Discontinued operations                                       (8)
                                                       ---------
Restructuring and impairment charges
  from continuing operations                                 953
Tax benefit and minority interest                            368
                                                       ---------

Restructuring and impairment charges, net              $     585
                                                       =========

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table illustrates the charge for 2001 restructuring  actions as it
relates to Corning's operating segments (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Charges for restructuring actions
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Functions
                                                Telecom-                         Including
                                               munications      Technologies     Research            Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>               <C>
Charges for restructuring actions              $   640           $    122        $   191           $    953
                                               =============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


The following table  illustrates the headcount  reduction  amongst U.S.  Hourly,
U.S. Salaried and Non-U.S. positions:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Headcount reduction
------------------------------------------------------------------------------------------------------------------------------------
                                               U.S. Hourly    U.S. Salaried       Non-U.S.          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>              <C>              <C>
Headcount reduction                               6,000           3,100            2,900            12,000
                                               ============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Impairment Of Long-Lived Assets Other Than Goodwill

Photonic technologies business

The photonic  technologies  business is a manufacturer  of photonic  modules and
components for the worldwide  telecommunications industry and is reported in the
Telecommunications  Segment.  The  telecommunications  market  is  undergoing  a
dramatic  decline in demand for  telecommunication  products as major  buyers of
network  equipment in this industry have reduced  their capital  spending  plans
over the past two years and are expected to continue such reductions in the near
future.  The lack of demand for optical component products started in early 2001
and resulted in  restructuring  and  impairment  charges in 2001 and 2002.  This
negative trend is expected to continue into the foreseeable future.

As disclosed in Corning's third quarter Form 10-Q, certain competitors indicated
that they will exit the business and others  announced  decisions to consolidate
or restructure.  Corning continues to evaluate  strategic  alternatives for this
business.  While  certain  product  lines are promising in the event of industry
recovery, the pace and extent of that recovery is uncertain.  Alternatives under
consideration for this business include staying in the business with scaled down
operations  or  contract  manufacturing,  partnering,  sale or  abandonment.  In
February 2003,  Corning  announced it would close its optical  switching product
line and  record a pre-tax  charge of $20  million  to $30  million in the first
quarter of 2003. As short term projections  reflect continued operating and cash
losses and the long-term expectations are uncertain,  it was determined that the
long-lived assets of this business  (property,  plant and equipment and patents)
should be evaluated for impairment.

The impairment  evaluation  required  management to develop  operating cash flow
projections  for  each  strategic  alternative  and make  assessments  as to the
probability  of each outcome.  It was determined  that the long-lived  assets of
this business were not  recoverable  through future cash flows.  The assets were
written down to estimated  salvage value,  as this amount is the best reflection
of  fair  value.  This  resulted  in a $269  million  ($195  million  after-tax)
write-down of the assets,  which was reflected in the line item  "restructuring,
impairment and other charges" in the Consolidated Statements of Operations.  The
charge included $90 million related to patents. The estimate of salvage value is
an area of management  judgement.  See Critical Accounting Estimates for related
discussion.  The remaining  long-term  assets of this business  approximate  $24
million and are classified as "held for use."

Conventional video components business

Corning  Asahi Video  Products  Company,  a 51% owned  consolidated  subsidiary,
(conventional video components business),  is a manufacturer of glass panels and
funnels  for  use  in  conventional  tube  televisions  and is  reported  in the
Technologies  Segment  for  SFAS  No.  131  reporting.   The  conventional  tube
television  segment  of the market in North  America  is very  mature and highly
competitive.   The  market  has  been  impacted  by  a  decline  in  demand  for
conventional  television glass associated with shifting consumer  preference for
flat  panel  and  projection   television  sets,  as  well  as  other  competing
technologies.  The segment has also been  impacted by dramatic  increases in the
importation  of television  glass,  tubes and sets from Asia.  The  conventional
television tube market is undergoing  intense  competition at this time and as a
result is experiencing tremendous price pressure. One major customer has already
exited this market and industry consolidation continues. Demand from another key
customer  is  uncertain.   Competition  from  imported  products  has  increased
significantly within the last year, while the demand for flat screen televisions
has been  increasing  for several  years.  These trends are expected to continue
into the foreseeable future.

These market trends combined with cash losses in this business in the short-term
indicated an evaluation for the  recoverability  of the long-lived assets of the
business was required and management  determined  that the long-lived  assets of
the business have been impaired.  The impairment  evaluation required management
to develop  operating cash flow  projections for each strategic  alternative and
make  assessments as to the probability of each outcome.  It was determined that
the long lived assets were not recoverable through future cash flows. Management
estimated  the fair  value of the  long-lived  assets,  which  were  limited  to
property,  plant and  equipment,  using the  expected  cash flow  approach  as a
measure of fair value.  This  resulted in a $140 million ($44 million  after-tax
and minority interest) write-down of the assets, which was reflected in the line
item   "restructuring,   impairment  and  other  charges"  in  the  Consolidated
Statements of Operations.


<PAGE>


The cash flow  realized by this  business  will be impacted by actions  taken by
competitors and customers.  Should our future  performance differ adversely from
our  projections,  Corning  could be  required to record  additional  impairment
charges.  It is also  possible  that  Corning  could choose to exit the business
should  cash  flows be less than  projected.  The  remaining  net assets of this
business approximate $77 million.

OPERATING SEGMENTS

Corning  previously   grouped  its  products  into  three  operating   segments:
Telecommunications, Advanced Materials and Information Display. Beginning in the
fourth quarter of 2002,  Corning's reportable segments consist of the following:
Telecommunications  and Technologies.  As a result of the fourth quarter sale of
the precision  lens business and the reduced  significance  of the  conventional
video components business, management realigned the remainder of the Information
Display Segment with the businesses previously reported in Advanced Materials to
create the  Technologies  Segment.  The precision lens business is reported as a
discontinued operation and therefore its results have been excluded from segment
reporting and historical periods have been conformed to this presentation. Also,
in the second  quarter of 2002,  Corning  revised its  definition of segment net
income.  Prior  to the  second  quarter,  Corning  disclosed  restructuring  and
impairment  charges and  acquisition-related  charges by segment,  but  excluded
these from quantitative segment results. These charges have now been included in
the  segment  net income and  historical  periods  have been  conformed  to this
presentation. This change was made to increase the transparency of the impact of
these  charges  on segment  results.  Corning  excludes  the  restructuring  and
impairment charges and acquisition-related  charges in discussing the results of
each  business  in the  segment to provide  clarity on the  underlying  business
trends. Corning also includes the earnings of equity affiliates that are closely
associated  with  Corning's  operating  segments in segment net income.  Segment
amounts  exclude  revenues,   expenses  and  equity  earnings  not  specifically
identifiable to segments.

Corning  prepared the financial  results for its  operating  segments on a basis
that is  consistent  with the  manner  in which  Corning  management  internally
disaggregates  financial  information  to assist in  making  internal  operating
decisions.   Corning  has  allocated  certain  common  expenses  among  segments
differently  than it would for  stand-alone  financial  information  prepared in
accordance  with GAAP.  These  expenses  include  interest,  taxes and corporate
functions.  Segment net income may not be consistent with measures used by other
companies.


<PAGE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications
(In millions)                                                          2002              2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>                 <C>
Net sales                                                            $  1,631          $  4,458            $  5,186
Research, development and engineering expenses (1)                   $    308          $    474            $    395
Acquisition-related charges                                                                                $    463
Restructuring, impairment and other charges (related tax
  benefit of $452 and $282)                                          $  1,722          $  5,404
Interest expense (2)                                                 $     99          $    104            $     70
Income tax (benefit) expense                                         $   (722)         $   (336)           $    308
Segment (loss) earnings before minority interests
   and equity earnings (3)(4)                                        $ (1,838)         $ (5,215)           $    250
     Minority interests                                                     1                                     3
     Equity in (losses) earnings of associated companies,
       net of impairments                                                 (60)               12                   1
                                                                     --------          --------            --------
Segment net (loss) income                                            $ (1,897)         $ (5,203)           $    254
                                                                     ========          ========            ========

Segment (loss) earnings before minority interests and
   equity earnings as a percentage of segment sales                    (112.7)%          (117.0)%               4.8%
Segment net (loss) income as a percentage of segment sales             (116.3)%          (116.7)%               4.9%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Technologies
(In millions)                                                          2002               2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>                 <C>
Net sales                                                            $  1,513          $  1,568            $  1,708
Research, development and engineering expenses (1)                   $    177          $    151            $    136
Restructuring, impairment and other charges (related tax
  benefit of $30 and $48)                                            $    150          $    122
Interest expense (2)                                                 $     71          $     48            $     37
Income tax (benefit) expense                                         $    (28)         $    (38)           $     54
Segment (loss) earnings before minority interests
   and equity earnings (3)(4)                                        $   (145)         $    (53)           $    130
     Minority interests (5)                                                96                13                 (27)
     Equity in earnings of associated companies                           168               132                 167
                                                                     --------          --------            --------
Segment net income                                                   $    119          $     92            $    270
                                                                     ========          ========            ========

Segment (loss) earnings before minority interests and
   equity earnings as a percentage of segment sales                      (9.6)%            (3.4)%               7.6%
Segment net income as a percentage of segment sales                       7.9%              5.9%               15.8%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Total Segments
(In millions)                                                          2002               2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>                 <C>
Net sales                                                            $  3,144          $  6,026            $  6,894
Research, development and engineering expenses (1)                   $    485          $    625            $    531
Acquisition-related charges                                                                                $    463
Restructuring, impairment and other charges                          $  1,872          $  5,526
Interest expense (2)                                                 $    170          $    152            $    107
Income tax (benefit) expense                                         $   (750)         $   (374)           $    362
Segment (loss) earnings before minority interests
   and equity earnings (3)(4)                                        $ (1,983)         $ (5,268)           $    380
     Minority interests (5)                                                97                13                 (24)
     Equity in earnings of associated companies,
       net of impairments                                                 108               144                 168
                                                                     --------          --------            --------
Segment net (loss) income                                            $ (1,778)         $ (5,111)           $    524
                                                                     ========          ========            ========

Segment (loss) earnings before minority interests and
   equity earnings as a percentage of segment sales                     (63.1)%           (87.4)%               5.5%
Segment net (loss) income as a percentage of segment sales              (56.6)%           (84.8)%               7.6%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


A  reconciliation  of the totals  reported  for the  operating  segments  to the
applicable line items in the consolidated financial statements is as follows (in
millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Years ended December 31,
                                                                      -----------------------------------------------
                                                                        2002                2001             2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                <C>               <C>
Net Sales
Total segment net sales                                               $  3,144           $  6,026          $  6,894
Non-segment net sales                                                       20                 21                26
                                                                      -----------------------------------------------
   Total net sales                                                    $  3,164           $  6,047          $  6,920
                                                                      ===============================================

(Loss) Income from Continuing Operations
Total segment net (loss) income (6)                                   $ (1,778)          $ (5,111)         $    524
   Unallocated items:
Non-segment income (loss) and other (7)                                      4                (33)               (9)
Amortization of goodwill (8)                                                                 (363)             (216)
Non-segment restructuring, impairment and other charges (9)               (208)              (191)
Interest income (10)                                                        41                 68               104
Gain on repurchases of debt                                                176
Income tax (expense) benefit (11)                                          (24)                94               (21)
Equity in earnings (losses) of associated companies, net of
  impairments                                                                8                  4               (19)
Minority interests                                                           1
                                                                      -----------------------------------------------
   (Loss) income from continuing operations                           $ (1,780)          $ (5,532)         $    363
                                                                      ===============================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Non-direct  research,  development and  engineering  expenses are allocated
     based upon direct project spending for each segment.
(2)  Interest  expense is allocated to segments based on a percentage of segment
     net operating assets.  Consolidated  subsidiaries with independent  capital
     structures do not receive additional allocations of interest expense.
(3)  Includes an allocation of  depreciation  of corporate  property,  plant and
     equipment not specifically  identifiable to a segment.  Related depreciable
     assets are not allocated to segment assets.
(4)  Many of Corning's  administrative  and staff  functions  are performed on a
     centralized  basis.  Where  practicable,  Corning charges these expenses to
     segments  based upon the extent to which each  business  uses a centralized
     function. Other staff functions, such as corporate finance, human resources
     and legal are allocated to segments, primarily as a percentage of sales.
(5)  Includes  $68  million  related  to  impairment  of  long-lived  assets  in
     conventional video components business.
(6)  Includes royalty, interest and dividend income.
(7)  Includes  amounts derived from corporate  investments.  Non-segment  (loss)
     income also includes nonoperating gains and losses.  Includes one-time gain
     of $11 million  included in equity earnings from Samsung Corning related to
     divestment of its interest in Samsung Corning Precision in 2000.
(8)  Amortization  of  goodwill  relates  primarily  to  the  Telecommunications
     Segment.
(9)  See  Restructuring,  Impairment and Other Charges for further discussion of
     the restructuring actions.
(10) Corporate interest income is not allocated to reportable segments.
(11) Includes tax  associated  with  non-segment  impairment  and  restructuring
     charges, amortization of goodwill and nonoperating gains.

Telecommunications

The  Telecommunications  Segment  produces  optical  fiber  and  cable,  optical
hardware and equipment,  photonic modules and components and optical  networking
devices for the  worldwide  telecommunications  industry.  The  following  table
provides net sales for the Telecommunications Segment:

--------------------------------------------------------------------------------
Telecommunications
(In millions)                      2002             2001              2000
--------------------------------------------------------------------------------

Net sales:
   Optical fiber and cable       $    859         $  2,889          $  2,875
   Hardware and equipment             552              817             1,020
   Photonic technologies              111              547             1,050
   Controls and connectors            109              205               241
                                 --------         --------          --------
     Total net sales             $  1,631         $  4,458          $  5,186
                                 ========         ========          ========

--------------------------------------------------------------------------------


<PAGE>


2002 vs. 2001

This segment incurred  significant  restructuring and impairment charges in 2002
and 2001.  The 2002 and 2001 charges are  described in detail in  Restructuring,
Impairment and Other Charges.  The  restructuring  activities were undertaken to
reduce the operating cost structure due to continued market declines.  More than
half of the 2002 charge is impairment  of fixed  assets,  primarily in the fiber
and cable  business.  A  significant  portion of the asset  impairments  in this
business represent the closure of two fiber plants and permanent  abandonment of
certain construction projects that had been stopped in 2001 in the optical fiber
and cable  business.  The balance of the charge  represents  impairments of cost
based  investments,   primarily  in  the  photonic  technologies  business,  and
severance and benefits for retirees and separated  personnel in all  businesses.
In addition,  the segment  incurred a $400 million  charge for the impairment of
goodwill and a $269 million charge for long-lived asset  impairments at photonic
technologies.  The  impairment  charge  incurred  in the second  quarter of 2001
relates to goodwill and certain acquired  intangible assets from acquisitions in
the photonic technologies business. These charges are described in Impairment of
Goodwill and Impairment of Other Long-Lived Assets.

Sales in the segment declined 63%, or $2,827 million, from 2001 as each business
in the  segment  experienced  a  significant  decline in volume with the largest
declines in optical  fiber and cable and the photonic  technologies  businesses.
The segment  incurred losses of $1.9 billion in 2002,  compared to a net loss of
$5.2  billion  in 2001.  The  2002  loss was  primarily  due to the  significant
decrease in sales volume and restructuring and impairment charges. Each business
also  reported  a  loss  in  2002.   The  trend  between  years  reflects  lower
restructuring  and  impairment   charges.   Excluding  these  restructuring  and
impairment charges,  segment net loss was $592 million compared to a loss of $81
million in 2001. The increase in the loss in 2002 reflects reduced sales volumes
and lower  prices in each  business  offset by cost  reductions  resulting  from
restructuring actions.

The optical  fiber and cable  business is the largest  business in the  segment.
Sales in the optical fiber and cable business declined 70%, or $2,030 million in
2002.  The decrease was  primarily  due to a sales volume  decline for fiber and
cable  products  of more  than 50% for the year as well as  double  digit  price
declines.  Excluding restructuring and impairment charges, the optical fiber and
cable business  incurred a significant loss in 2002,  compared to profits in the
prior year, primarily due to significantly lower sales volume,  declining prices
and unfavorable product mix.

As discussed in  Restructuring  Actions,  the optical  fiber and cable  business
undertook significant restructuring actions in the fourth quarter. These actions
included permanent closure of two international fiber  manufacturing  plants and
the mothballing of the Concord,  NC facility.  In addition,  cabling  operations
will continue to be consolidated. Corning is not exiting any product or business
lines as a result of the decision to reduce capacity,  but is adjusting capacity
to most  efficiently  meet expected  demand  levels  through at least the end of
2004.  Management  believes  that  the  Concord  facility  can  be  returned  to
productive  capacity  within  six to  nine  months  of a  decision  to do so and
construction in progress at the Concord  facility can be completed  efficiently.
Management  believes the Concord and Wilmington  plants will provide  sufficient
capacity for the foreseeable future of this business.

Sales in the hardware and  equipment  business  decreased  32%, or $265 million,
compared to 2001. The sales  decreases were primarily due to the overall lack of
spending   impacting   the   entire   telecommunications   industry.   Excluding
restructuring  charges, the business incurred a loss driven by lower volumes and
pricing pressure in 2002, compared to a near breakeven performance in 2001. This
business  also  undertook  restructuring  actions in the fourth  quarter.  These
actions included exiting certain product lines,  headcount  reductions and asset
abandonments.

The photonic technologies business manufactures photonic modules and components,
primarily  for  the  optical   amplification   market.  Sales  in  the  photonic
technologies business declined 80%, or $436 million, compared to 2001, primarily
due to  lower  sales  volume  as  network  buildouts  in the  telecommunications
industry  declined  resulting in much lower demand for  photonic  products.  The
business  incurred  a  significant  loss  for  2002  before   restructuring  and
impairment charges,  primarily due to dramatically lower sales volumes. However,
the 2002 losses  decreased  more than 50%,  compared  to the losses  incurred in
2001, which included inventory  writedowns of $333 million.  The results in 2002
reflect cost reductions  resulting from restructuring  actions taken in 2001 and
2002.

During the second quarter of 2002, the business favorably resolved an open issue
from  the  second  quarter  of 2001  with a  major  customer,  resulting  in the
recognition  of revenue of $14 million and  pre-tax  income of $3 million.  This
revenue was recognized in part on shipment of inventory previously reserved.  In
addition,  the business settled an open matter with a significant vendor in 2002
resulting in the  reversal of a vendor  reserve of $20 million that was recorded
as part of the charge in the second quarter of 2001.

The lack of demand  for  optical  component  products  started in early 2001 and
resulted in restructuring and impairment charges in 2001 and 2002. This negative
trend is expected to continue into the foreseeable future.


<PAGE>


As disclosed in Corning's third quarter Form 10-Q, certain competitors indicated
that they will exit the business and others  announced  decisions to consolidate
or restructure.  Corning continues to evaluate  strategic  alternatives for this
business.  While  certain  product  lines are promising in the event of industry
recovery, the pace and extent of that recovery is uncertain.  Alternatives under
consideration for this business include staying in the business with scaled down
operations  or  contract  manufacturing,  partnering,  sale or  abandonment.  In
February 2003, Corning announced it will stop  commercialization  of its optical
switching  product in 2003 and will incur pre-tax  charges of $20 million to $30
million  related  to the  exit  representing  severance  and  cash  exit  costs.
Management  estimates  that  severance  and exit  costs  related  to a  complete
abandonment  of remaining  product  lines could  approximate  $70 million to $80
million in total pre-tax charges.

The controls and connectors business  manufactures high performance  oscillators
and  crystals  used in  various  telecommunications  applications.  Sales in the
controls and  connectors  business  decreased  47%, or $96 million,  compared to
2001,  due to the sale of the appliance  controls group in May 2002 and the lack
of capital spending in the telecommunications  industry. Excluding restructuring
charges,  earnings  were also down due to lower  sales  volumes as the  business
incurred  a loss  for the  year,  compared  to  earnings  in  2001.  The loss on
divestiture of $16 million ($10 million after-tax) is included in restructuring,
impairment and other charges.  The business undertook  restructuring  actions in
the fourth quarter that are expected to reduce operating costs in 2003.

2001 vs. 2000

Sales in the Telecommunications Segment decreased 14%, or $728 million from 2000
to $4.5  billion.  Excluding the impact of  acquisitions,  the sales decline was
19%. The decrease in sales was primarily  due to sales volume  decreases in most
businesses throughout the segment as capital spending in the  telecommunications
industry  decreased  significantly.   Segment  net  income  fell  precipitously,
compared to 2000's  strong  results as net income in the optical fiber and cable
business  was more  than  offset  by  losses  in all  other  businesses  and the
significant  restructuring and impairment  charges.  The loss of sales volume in
premium  fiber and  photonic  products  reduced  gross  margins  and the segment
incurred  operating  charges  totaling $333 million ($221 million  after-tax) to
write-down  excess  and  obsolete   inventory,   including   estimated  purchase
commitments,  further lowering gross margin percentages.  Segment net income for
2000   was   impacted   by   $463   million   ($442   million    after-tax)   of
acquisition-related charges, primarily IPRD. See IPRD section for more detail.

Sales in the  optical  fiber and cable  business in 2001  remained  flat at $2.9
billion, compared with 2000, although sales declined significantly in the fourth
quarter  of 2001.  Excluding  the impact of  acquisitions,  sales  declined  4%,
compared  to 2000.  The lack of growth  reflects  the loss of volume in  premium
products  beginning in the second quarter due to the decline in long-haul demand
as capital spending for network  buildouts  diminished and the business began to
experience  volume decreases in sales of single-mode fiber in the third quarter.
As a result,  most  fiber  manufacturing  facilities  were  idled in the  fourth
quarter.  Overall,  fiber and cable volume decreased  approximately  15% for the
year as a result of an  increase of  approximately  30% in the first half of the
year,  offset  by a  decrease  of  approximately  50% in the  second  half.  The
weighted-average  price for Corning's  optical fiber and cable products remained
relatively   stable,   compared  to  2000,  as  higher  prices  were  offset  by
significantly  decreased  volumes  for  premium  products.  Premium  fiber  as a
percentage of total fiber demand was approximately 20% in 2001.

Net income for the optical fiber and cable business  decreased over 5%, compared
to 2000, as the loss of sales volume in premium products was partially offset by
increased  sales of lower margin  single-mode  products.  In response to reduced
demand for fiber  products,  Corning  announced  it will  permanently  close its
optical fiber operations in Deeside,  North Wales and its cabling  operations in
Saskatoon,  Canada in  addition to  temporarily  ceasing  production  at smaller
cabling facilities.

Sales in the hardware and  equipment  business  declined 20%, or $203 million in
2001,  compared to 2000.  Excluding the impact of  acquisitions,  sales declined
28%,  compared to 2000. The decrease was primarily due to lower sales volumes as
capital spending in the cable television  industry fell significantly from prior
year levels.  Business  performance  decreased  significantly to a small loss in
2001 primarily due to considerably  lower sales volumes.  This business  reduced
its headcount during the year and closed a small manufacturing facility.

Sales in the  photonic  technologies  business  declined  48%, or $503  million,
compared to 2000. The sales decrease  reflected  significant  declines in orders
from  major  customers  caused  by  the  decrease  in  capital  spending  in the
telecommunications  industry. The business incurred a significant operating loss
for the year largely due to lower sales volumes, excess capacity, a higher fixed
cost  structure and charges for excess and obsolete  inventory in the second and
fourth quarters.


<PAGE>


During the second quarter, major customers in the photonic technologies business
reduced their order forecasts and canceled  orders already placed.  As a result,
management  determined that certain products were not likely to be sold in their
product life cycle.  Corning  recorded a charge to writedown excess and obsolete
inventory,  including  estimated  purchase  commitments,  of $273 million  ($184
million  after-tax) in cost of sales in the second quarter of 2001. The business
recorded an  additional  charge of $60 million  ($37 million  after-tax)  in the
fourth quarter as a result of lower revenue forecasts for 2002.

Corning  has,  or is in the  process of  disposing  all such  inventory,  except
approximately  $100 million.  Corning has retained and isolated this  inventory,
and in the unlikely event that product is sold,  Corning will fully disclose the
impact on its margins.

Corning announced a downsizing of the photonic  technologies business and closed
the following three manufacturing facilities in 2001:

.    Benton Park facility in Benton Township, PA,
.    Corning Lasertron's facility in Nashua, NH, and
.    Monroe Park manufacturing and development operations in Henrietta, NY.

In addition,  Corning scaled back its photonic technologies  operations in Erwin
Park,  NY  and  the   remainder  of  its  photonic   facilities  to  adjust  its
manufacturing  capacity levels and headcount to lower revenue expectations.  The
business reduced its headcount  approximately 75% from peak employment levels in
2001.

Sales in the controls and connectors  business  decreased 15%, or $36 million in
2001,  compared  to 2000.  Lower  sales  volume was the  primary  reason for the
decline due to the weak U.S.  economy.  The business  incurred an  insignificant
loss  for the  year,  compared  to an  insignificant  profit  in 2000 due to the
depressed volume.

Outlook:  Business conditions in the  Telecommunications  Segment have been very
difficult  due  to  sharply  reduced  capital  spending  by   telecommunications
companies.  Management anticipates that these difficult conditions will continue
through  at  least  the end of  2003.  While  management  ultimately  expects  a
recovery,  it is  difficult  to forecast  when  capital  spending  by  Corning's
customers will increase and therefore difficult to predict revenues and earnings
in this segment in the  short-term.  Corning  expects sales to deteriorate  $200
million to $250 million from 2002 sales.  The industry  continues to  experience
significant  excess capacity,  resulting in pricing pressure that is expected to
continue  throughout  2003.  Corning  expects  the  loss  in the  segment  to be
significantly  less  than  2003 due to  significantly  lower  restructuring  and
impairment  charges.  The results  will also  reflect  cost savings from actions
undertaken in 2002.

Technologies

The  Technologies   Segment   manufactures   specialized  products  with  unique
properties for customer applications  utilizing glass, glass ceramic and polymer
technologies. Its primary products include liquid crystal display glass for flat
panel  displays,  ceramic  substrates for  automobile  and diesel  applications,
scientific  laboratory  products,  glass panels and funnels for  televisions and
cathode ray tubes.

The following table provides net sales for the Technologies Segment:
--------------------------------------------------------------------------------
Technologies
(In millions)                            2002           2001            2000
--------------------------------------------------------------------------------

Net sales:
   Display technologies                $    405       $    323       $    333
   Environmental technologies               394            379            411
   Life sciences                            280            267            248
   Conventional video components            166            252            354
   Other technologies businesses            268            347            362
                                       --------       --------       --------
     Total net sales                   $  1,513       $  1,568       $  1,708
                                       ========       ========       ========

--------------------------------------------------------------------------------


<PAGE>


2002 vs. 2001

Sales in the  Technologies  Segment  during 2002  decreased  4%, or $55 million,
compared to 2001,  as  increased  sales in display  technologies,  environmental
technologies  and life  sciences  were  offset by much lower sales in the mature
conventional  video  components  business,  decreased  demand for  semiconductor
materials  and the impact of  Corning's  exit of its lighting  products  line in
2002.  Segment  earnings  increased  29%, or $27 million,  compared to 2001,  as
improved  operating  performance in display  technologies  and the life sciences
business and stronger equity earnings were partially offset by restructuring and
impairment  charges and decreased  earnings in the  semiconductor  materials and
conventional video components businesses.  The 2002 restructuring costs recorded
in this segment  consisted  entirely of  severance  and benefits for retired and
separated  employees in several  businesses.  The impairment  charges related to
assets  held  for  use  in  the  conventional  video  components  business.  See
Impairment of Long-Lived Assets Other than Goodwill.

Sales in the display technologies  business, the largest business in the segment
and a leading supplier of ultra-thin glass substrates used to produce flat panel
display,  increased  25%, or $82  million,  compared to 2001.  The  increase was
primarily  due to higher  sales  volume as  penetration  in the  desktop  market
increased.  The prior  year's  sales were  negatively  impacted by an  inventory
correction  in the industry in the first  quarter of 2001.  Volume gains of over
46% for the current  year were  partially  offset by price  declines of 10% on a
constant  currency  basis.  Earnings in the business  increased over 30% for the
year,  compared  to 2001,  primarily  due to  volume  gains  and a more than 30%
improvement in equity earnings from Samsung Corning Precision Glass Company Ltd.
(Samsung  Corning  Precision),  a Korean  manufacturer of liquid crystal display
glass.  Both  Corning and  Samsung  Corning  Precision  have  recently  approved
expansions of manufacturing  capacity in Taiwan and Korea,  respectively.  These
capital projects are expected to begin production in 2003.

Sales in the environmental  technologies  business,  a manufacturer of catalytic
converter substrates,  increased 4%, or $15 million, compared to 2001, primarily
due to increased U.S. auto production driven by financing  incentives and strong
growth in Europe and Japan.  Earnings in this business  improved 8%, compared to
2001,  as a  significant  increase in equity  earnings  from  Cormetech,  a U.S.
designer and manufacturer of industrial catalysts, was partially offset by price
declines  and  increased  manufacturing  and  development  costs  related to new
products.

In October 2001,  Corning  announced the  construction  of a new diesel emission
control product manufacturing  facility.  The new plant is being built in Erwin,
NY. Construction on the project began in 2002 and is expected to be completed in
2004.

Sales in the life  sciences  business,  a supplier of advanced  microplates  and
other  laboratory  products,  increased  5%, or $13  million,  compared to 2001,
primarily due to strong growth in most product  lines.  Earnings in the business
more  than  doubled  over  2001,   primarily   due  to  cost  savings  from  the
discontinuation of Corning's investment in microarray technology products in the
third quarter of 2001, as well as improved manufacturing efficiencies and higher
sales.

Sales in the conventional video components business, a manufacturer of optically
pure, mechanically precise face plates and funnels for larger-screen  television
tubes,  decreased  34%, or $86 million,  compared to 2001.  Pricing  pressure is
strong in this market due to increased  competition.  A  significant  portion of
this business is  concentrated  with few  customers,  two of which have recently
merged.  One significant  customer has exited the business and sales demand from
another key customer is uncertain.  Management is  considering  operational  and
strategic alternatives should the business continue to decline. Corning recorded
an impairment of the property, plant and equipment of this business, recognizing
a charge of $140  million in the  fourth  quarter  of 2002.  See  Restructuring,
Impairment and Other Charges for further detail.  Excluding the asset impairment
and restructuring charges, the loss in the business increased almost 50% for the
year,  compared to 2001,  primarily due to decreased  sales volume and continued
competitive pricing pressures. Samsung Corning Company Ltd. (Samsung Corning), a
50% owned  manufacturer  of glass panels and funnels based in South Korea,  also
experienced  pricing pressure  resulting in an approximate 10% decline in equity
earnings for 2002, compared to the prior year.

Sales  in  Corning's  other  technologies  businesses,  including  semiconductor
materials and ophthalmic  products,  decreased 23%, or $79 million,  compared to
2001. The decrease was led by the exit of the lighting  business and lower sales
volume of high  purity  fused  silica  products in the  semiconductor  materials
business as capital spending in the semiconductor equipment industry remained at
relatively low levels.  The businesses  incurred a loss for the year compared to
break-even results in 2001. The losses were primarily due to significantly lower
sales volume and increased  spending in development  and engineering for calcium
fluoride products.


<PAGE>


2001 vs. 2000

Sales  in 2001 for the  Technologies  Segment  decreased  8%,  or $140  million,
compared to 2000.  Excluding  the impact of  acquisitions,  sales  declined 10%.
Sales increases in the life sciences  business were more than offset by declines
in every other  business in this  segment.  Segment net income also  declined in
2001 as the segment recorded net income of $92 million, compared to $270 million
in 2000, for a 66% decrease,  or $178 million.  The decline in profitability was
primarily due to restructuring charges and weaker performance by most businesses
in the segment,  which was partially offset by improved  performance in the life
sciences business.

Sales in the display technology  business decreased 3%, or $10 million, in 2001,
compared to 2000.  A  significant  shift in customer  demand from Japan to Korea
caused volume to increase approximately 35% at Samsung Corning Precision and 17%
in the consolidated  business.  This volume growth, when offset by the impact of
price declines and the  deterioration of the yen,  resulted in the sales decline
of 3%.  Earnings for 2001 decreased  approximately  25%,  primarily due to lower
operating margins driven by pricing  pressures,  start-up costs incurred for the
May opening of a new manufacturing facility in Taiwan and additional development
and engineering expenses for Eagle2000(TM), a new glass substrate used in active
matrix  liquid  crystal  displays.  Additionally,  equity  earnings from Samsung
Corning Precision decreased over 15% compared to 2000,  primarily due to Corning
having a smaller ownership interest in the company in 2001 versus 2000.

Sales in the environmental  technologies  business decreased 8%, or $32 million,
in 2001,  compared  to 2000.  The  business  experienced  lower  sales  volumes,
compared to 2000, due to decreased vehicle production. Volume growth in Asia was
more than offset by declining volumes in North America and Europe.  Earnings for
the  year  were  down  almost  50%,   primarily  due  to  lower  sales  volumes,
manufacturing  inefficiencies related to the introduction of new ultra thin wall
products, excess capacity and start-up costs in South Africa and China.

Sales in the life  sciences  business  increased  8%, or $19  million,  in 2001,
compared to 2000.  The  improvement  was  primarily  due to an increase in sales
volume.  Earnings in the base business (excluding microarray  technology) almost
doubled over 2000,  primarily due to a shift to higher margin  products in sales
mix along with  improvements  in  manufacturing  costs and selling,  general and
administrative  expenses.  Overall  earnings in the business were diluted due to
the investment in microarray  technology,  which Corning discontinued at the end
of 2001.

Sales in the  conventional  video  components  business  decreased  29%, or $102
million, in 2001, compared to 2000. The decline was primarily due to a weak U.S.
economy and increased  competitive  pricing pressure.  Earnings were down almost
50% due to lower sales volumes,  decreased margins, a production slowdown in the
fourth quarter and lower equity earnings. Samsung Corning also experienced lower
sales  volumes  and  increased  competitive  pricing  pressure,  and thus  lower
earnings.

Sales in Corning's other technologies  businesses  decreased 4%, or $15 million,
in 2001,  compared to 2000.  Excluding the  acquisition of Tropel in March 2001,
sales  decreased  11%.  The  decrease  was due to  softness  in the  market  for
ophthalmic  products  and high purity fused  silica.  Earnings for the year were
approximately breakeven and down slightly, compared to 2000. Lower sales volumes
and production  slowdowns were partially offset by a marginal increase in equity
earnings from Eurokera,  a French based  manufacturer of glass ceramic cooktops,
which resulted in comparable earnings between years. Corning exited the lighting
and  tubing  businesses  in  2002  and  shutdown  manufacturing   facilities  in
Greenville, OH and Corning, NY.

Outlook:  Management  expects sales in the  Technologies  Segment to increase in
2003 versus 2002 due to increased desktop monitor  penetration rates,  continued
global  clean air  emission  requirements  and a recovery  in the  semiconductor
market.  Most businesses in this segment are expected to increase sales with the
display technologies  business at the forefront.  Thus,  management  anticipates
sales may  improve  $175  million to $225  million  over 2002.  Corning  expects
profitability  in this  segment to improve  approximately  $100  million to $120
million in 2003, primarily through increased sales volume and the achievement of
significant manufacturing gains. This segment includes South Korean based equity
companies that generated  equity earnings of $124 million in 2002.  Political or
economic  instability in that region could adversely impact these operations and
the results of this segment overall.

NON-SEGMENT RESULTS

Corning's non-segment results include the operations of Steuben, a crystal glass
manufacturer,  and equity earnings from small nonstrategic  investments that are
not aligned with Corning's two operating segments.  In addition,  the results of
operating segments do not include amortization of goodwill,  gain on repurchases
and  retirement of debt and  impairment  charges  related to Pittsburgh  Corning
Corporation.


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash Flow and Key 2002 Activities

In  2002,  Corning's  short  and  long-term  debt  ratings  were  downgraded  to
sub-investment  grade. At this sub-investment  grade level, Corning is precluded
from accessing the short-term  commercial paper market.  Corning's access to the
long-term  debt  markets  has been and will likely  continue to be limited.  The
terms that Corning  could  receive on new debt issues will likely be  consistent
with those generally available to high yield issuers.

As an additional source of funds, Corning currently has full unrestricted access
to a $2.0 billion  revolving  credit facility with 16 banks,  expiring on August
17, 2005.  As of December 31, 2002,  there were no  borrowings  under the credit
facility.  The facility  includes one financial  covenant  limiting the ratio of
total debt to total  capital,  as defined,  to not greater than 60%. At December
31, 2002 and 2001, this ratio was 47%. As disclosed in Restructuring, Impairment
and Other  Charges,  Corning  recorded an  impairment  of goodwill in the fourth
quarter.  Further  declines  in the fair value of  Corning's  Telecommunications
Segment  could cause  future  impairments  of goodwill,  tangible or  intangible
assets or prompt  restructuring  actions.  Such  charges  could cause a material
increase to Corning's debt to capital ratio.

On December 13, 2002,  Corning completed the sale of its precision lens business
to 3M for net proceeds of $787 million in cash.  The  transaction  resulted in a
gain of $652  million  ($415  million  after-tax).  In addition,  Corning  could
receive an  additional  $50  million in cash in 2003,  the  majority of which is
currently on deposit in escrow.

In July and August  2002,  Corning  issued  5.75  million  shares of 7% Series C
mandatory  convertible  preferred stock having a liquidation  preference of $100
per share,  plus accrued and unpaid  dividends,  resulting in gross  proceeds of
$557 million. The mandatory convertible stock has an annual dividend rate of 7%,
payable  quarterly  in cash.  The first  dividend  payment date was November 16,
2002.  The dividends  are also payable  immediately  upon  conversion to Corning
common  sock.  At the time  Corning  issued the Series C  convertible  preferred
stock,  a one-time  dividend was declared for all dividends that will be payable
from issuance through the mandatory  conversion date of August 16, 2005. Corning
secured the payment of the dividends  through the issuance of a promissory  note
and used a portion of the proceeds from the sale of the Series C preferred stock
to  purchase  $117  million of U.S.  treasury  securities  that were  pledged as
collateral  to secure the  payments on the  promissory  note.  As a result,  net
proceeds of the offering were $440 million.  In addition,  Corning  redeemed the
remaining  69  thousand  shares of Series B  preferred  stock for $7  million in
August.

The  Series C  preferred  stock  will  automatically  convert  on the  mandatory
conversion  date of August 16,  2005,  into  between  50.813 and 62.5  shares of
Corning common stock,  depending on the then current  market price.  At any time
prior to the mandatory conversion date, holders may elect to convert in whole or
part of their  shares of Series C preferred  stock into 50.813  shares of common
stock plus an amount of cash  equal to the market  value at that time of the pro
rata share of the  collateral  portfolio  that secures the  promissory  note. At
December 31, 2002,  approximately  4.2 million  shares of the Series C preferred
stock had been converted into 213.3 million common shares.

As the closing  price of Corning  common stock was $1.60 on July 31,  2002,  the
holder could immediately convert the Series C preferred stock and obtain a value
of  $101.72  (50.813  shares  valued at $1.60 plus  $20.42 in future  dividends)
indicating that the preferred stock contained a beneficial conversion feature of
$1.72 per preferred share. The beneficial  conversion totaled  approximately $10
million and was charged to the  accumulated  deficit in the third  quarter.  The
beneficial  conversion  was also deducted from earnings  attributable  to common
shareholders in the 2002 earnings per share calculations.

In March 2001, Corning filed a universal shelf  registration  statement with the
U.S. Securities and Exchange Commission (SEC) that became effective in the first
quarter.  The shelf  permits the  issuance of up to $5.0 billion of various debt
and equity  securities.  Subsequent to the issuance above and as of December 31,
2002,   Corning's   remaining   capacity  under  its  shelf   registration   was
approximately $3.5 billion.


<PAGE>


Uses of Cash and Key 2002 Activities

In  addition  to  funding  operations  in  2002,  Corning  used  cash  for  debt
repurchases, capital spending and restructuring actions.

During 2002, Corning repurchased and retired zero-coupon  convertible debentures
with an accreted  value of $493 million in exchange for cash of $308 million for
the year ended December 31, 2002.  Corning  recorded gains of $176 million ($108
million  after-tax) on these  transactions for the year ended December 31, 2002.
Corning  recorded  the  gain  on  repurchases  as a  component  of  income  from
continuing  operations,  as permitted by SFAS No. 145. The remaining  debentures
may be put back to Corning on November 8, 2005,  at $819.54 per debenture and on
November 8, 2010, at $905.29 per  debenture.  Corning has the option of settling
this  obligation in cash,  common stock,  or a combination of both. From time to
time,  Corning may repurchase  certain additional debt securities in open-market
or privately negotiated  transactions.  Through February 14, 2003, Corning spent
an additional $165 million to repurchase and retire more zero coupon convertible
debentures and expects to record a pre-tax gain of approximately  $34 million in
the first quarter of 2003.

Corning also spent $233 million to retire its commercial paper borrowings during
2002.  Corning had no commercial  paper  borrowings as of December 31, 2002, nor
does it anticipate issuing commercial paper in the foreseeable future. In total,
Corning spent $815 million in 2002 to pay down short and long-term debt.

Corning reduced its capital  spending  dramatically in 2002, which reflected the
downturn  in  telecommunications  and was  part  of a  comprehensive  effort  to
conserve  cash.  Capital  spending  totaled $0.4 billion,  $1.7 billion and $1.5
billion in 2002, 2001 and 2000, respectively. The high level of capital spending
in  2001  and  2000  related  primarily  to  capacity  expansions  in  Corning's
Telecommunications  Segment and expanded  research and  development  facilities.
Corning's  2003  capital  spending  program  is  expected  to be limited to $350
million to $450 million. Capital spending activity in 2003 is primarily expected
to be the planned  expansion  in the liquid  crystal  display and  environmental
businesses.

During 2002, Corning made payments of $256 million related to employee severance
and  termination  costs and $22  million  in other  exit  costs  resulting  from
restructuring actions.  Corning expects additional payments for actions taken in
2001 and 2002 to  approximate  $290 million in 2003. In February  2003,  Corning
announced it will exit its optical switching product line and incur cash charges
of $20 million to $30 million.

In the third  quarter of 2002,  Corning  repurchased  5.5 million  shares of its
common stock in a privately negotiated transaction for $23 million.

Key Balance Sheet Data

At December 31, 2002,  cash and  short-term  investments  totaled $2.1  billion,
compared with $2.2 billion at December 31, 2001.  The decrease from December 31,
2001 was  primarily due to short and long-term  debt  repayments,  restructuring
payments and the use of working  capital.  These items were partially  offset by
significantly  lower capital  spending,  the sale of the precision lens business
and  proceeds  from the  issuance  of Series C mandatory  convertible  preferred
stock.

Balance sheet and working  capital  measures are provided in the following table
(dollars in millions):
--------------------------------------------------------------------------------
                                                             As of December 31,
                                                             ------------------
                                                              2002       2001
--------------------------------------------------------------------------------

Working capital                                              $2,145     $2,113
Working capital, excluding cash and short-term investments     $55      $(106)
Current assets to current liabilities                         2.3:1      2.1:1
Trade accounts receivable, net of allowances                  $470       $593
Days sales outstanding (1)                                     56         55
Inventories                                                   $559       $725
Inventory turns                                                4.4        4.5
Days payable outstanding                                       46         42
Long-term debt                                               $3,963     $4,463
Total debt to total capital                                    47%        47%
--------------------------------------------------------------------------------

(1)  Days  sales  outstanding  are  calculated  on the  fourth  quarter  of each
     respective year.


<PAGE>


The increase in working  capital,  excluding  cash and  short-term  investments,
reflected lower  short-term  borrowings and accounts payable and the recognition
of an income tax  receivable  compared to December 31, 2001. The increase in the
current  ratio  was  primarily  due  to  the  elimination  of  commercial  paper
borrowings.  Trade accounts receivable and inventories  decreased largely due to
significantly lower sales and sales volumes compared to 2001.

In 2001, tax legislation was enacted in the U.S. that extended the net operating
loss carryback period from two to five years.  Due to this  legislation  change,
Corning  will be  able to  carryback  the  anticipated  2002  U.S.  federal  net
operating loss and claim a refund which would not have otherwise been available.
Other  accounts  receivable at December 31, 2002,  included a receivable of $192
million  as a result of Corning  availing  itself of this  opportunity.  Corning
expects to receive this refund in the second quarter of 2003.

Credit Ratings

Corning's credit ratings as of February 18, 2003 were as follows:

--------------------------------------------------------------------------------
RATING AGENCY                 Rating                     Rating
Last Update               Long-Term Debt            Commercial Paper
--------------------------------------------------------------------------------

Standard & Poor's               BB+                         B
    July 29, 2002

Moody's                         Ba2                     Not Prime
    July 29, 2002

Fitch                           BB                          B
    July 24, 2002
--------------------------------------------------------------------------------

Note:  All three rating agencies maintain a Negative Outlook.

In July 2002, all three rating agencies announced a downgrade which is reflected
in the ratings  above.  Should  business  performance  decline  further from the
levels  experienced  in 2002,  these ratings could  receive  further  review for
possible downgrade. Although the sub-investment grade ratings preclude Corning's
access to the commercial paper market,  Corning's overall financial  flexibility
remains  adequate as a result of its cash position,  short-term  investments and
committed revolving credit facilities.  Corning's debt agreements do not include
covenants  that  accelerate the maturity of borrowings as a result of changes in
credit ratings.

If business  performance  should decline  further from levels seen in the fourth
quarter of 2002, Corning's ability to enter into foreign exchange contracts with
a duration of greater than one year could be adversely impacted. Such limitation
would not  significantly  impact  the  Company's  current  hedging  program.  In
addition,  the  sub-investment  grade  credit  rating  has,  in some  instances,
resulted in requirements to deposit cash with  counterparties  under performance
surety bond and letter of credit arrangements. At December 31, 2002, $82 million
of restricted cash was included in other long-term assets.

A security  rating is not a  recommendation  to buy, sell or hold securities and
may be subject to revision or  withdrawal  at any time by the  assigning  rating
organization. Each rating should be evaluated independently of any other rating.

Management Assessment of Liquidity

Corning's   2002   earnings  were  not  adequate  to  cover  its  fixed  charges
(principally  interest  and related  charges on debt),  primarily as a result of
losses incurred in Corning's  Telecommunication's  Segment.  Corning's  earnings
will likely not be sufficient to cover its fixed charges in 2003.

Corning's  major  source  of  funds  in 2003  will be its  cash  and  short-term
investments. Management believes Corning has ample liquidity to meet its funding
needs for 2003 and beyond,  which  includes  funding  operations,  restructuring
payments, research and development and capital expenditures.


<PAGE>


Obligations

At December 31, 2002, the contractual obligations of Corning were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     2007 and
                                                          2003       2004       2005       2006     thereafter      Total
------------------------------------------------------------------------------------------------------------------------------------
(In millions)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>       <C>         <C>        <C>           <C>
Long-term debt                                          $  191     $  127    $  1,910    $   11     $  1,964      $  4,203
Minimum rental commitments                                  48         42          36        33          195           354
------------------------------------------------------------------------------------------------------------------------------------
Total contractual cash obligations                      $  239     $  169    $  1,946    $   44     $  2,159      $  4,557
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Off Balance Sheet Arrangements
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                Amount of commitment and contingency expiration per period
                                                                ----------------------------------------------------------
                                                                   Less than   1 to 2     2 to 3       3 to 4     5 years and
(In millions)                                          Total        1 year      years      years        years     thereafter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>          <C>         <C>         <C>         <C>
Performance bonds and guarantees                      $  189       $   49       $  5        $ 21                    $  114
Contingent purchase price for acquisitions               126           48         24           2                        52
Dow Corning credit facility                              150                                                           150
Stand-by letters of credit                                33           33
Loan guarantees                                           37            5          1           1        $  1            29
------------------------------------------------------------------------------------------------------------------------------------
Total other commercial commitments
  and contingencies                                   $  535       $  135       $ 30        $ 24        $  1        $  345
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 2002,  Corning had guaranteed  debt of equity  affiliates  which
totaled $14 million.  In addition,  Corning and certain of its subsidiaries have
provided other  financial  guarantees and contingent  liabilities in the form of
purchase price adjustments related to attainment of milestones, stand-by letters
of credit and  performance  bonds,  some of which do not have fixed or scheduled
expiration dates. Corning has agreed to provide a credit facility related to Dow
Corning  Corporation  as  discussed  in  Note 10 to the  Consolidated  Financial
Statements.  The funding of the Dow Corning credit facility is subject to events
connected to the Bankruptcy  Plan as described in Note 10.  Management  believes
the significant  majority of these  guarantees and contingent  liabilities  will
expire without being funded.

Corning has leased equipment from three unconsolidated  special purpose entities
(SPE) for which the sole purpose is the leasing of  equipment to Corning.  These
SPEs are not  consolidated  in the 2002  financial  statements  since the equity
investor of the SPE has made a  substantial  investment  that is at risk for the
life of the SPE. However, the Financial Accounting Standards Board (FASB) issued
Interpretation 46,  Consolidation of Variable Interest Entities in January 2003.
Interpretation  46 will require the  consolidation of variable interest entities
(VIE) by the primary  beneficiary.  Management is still assessing the impacts of
this  interpretation,  however,  it is reasonably  possible that Corning will be
considered  the  primary  beneficiary  of the three  VIEs,  and  therefore  will
consolidate  these entities  beginning on July 1, 2003. As of December 31, 2002,
the total assets in unconsolidated VIEs were $46 million. In addition, Corning's
maximum  loss  exposure  as a result of its  involvement  with these VIEs is $46
million.  This amount  represents  payments  that would be due to the VIE in the
event of a total loss of the equipment.  Corning carries insurance  coverage for
this risk.

Pensions

Corning has a number of defined benefit pension plans covering  certain domestic
and international  employees.  Its largest single pension plan is Corning's U.S.
qualified  plan. At December 31, 2002,  this plan accounted for 83% of Corning's
consolidated defined benefit pension plans' projected benefit obligation and 89%
of the related  plans'  assets.  In 2002,  global  capital  market  developments
resulted in negative returns on this plan's assets and a decline in the discount
rate used to estimate the related pension  liability.  As a result,  at December
31, 2002, this U.S. plan's  accumulated  benefit  obligation  (ABO) exceeded the
fair value of its assets, which required Corning to record an additional minimum
pension  liability in accordance  with SFAS No. 87,  "Employer's  Accounting for
Pensions."  The  effect of this  non-cash  adjustment  was to  increase  pension
liabilities  by $322  million,  increase  intangible  assets by $61  million and
increase other comprehensive loss by $261 million ($161 million after-tax).


<PAGE>


Corning has traditionally  contributed to this qualified U.S. pension plan on an
annual  basis.  Over the last ten years,  voluntary  contributions  averaged $25
million  a year.  Corning  has  historically  contributed  in  excess of the IRS
minimum requirements,  and as a result, mandatory contributions are not expected
to be required  for this U.S.  plan until 2006.  In the fourth  quarter of 2002,
Corning made voluntary  pension  contributions to this U.S. plan of $30 million,
resulting in total contributions for the year of $56 million. Corning expects to
increase the level of voluntary  contributions  to this U.S.  plan over the next
few years. For 2003, Corning anticipates making voluntary contributions totaling
$60 million to this plan.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial  statements  requires  management to make estimates
and  assumptions  that affect  amounts  reported  therein.  The  estimates  that
required  management's  most  difficult,  subjective  or complex  judgments  are
described below.

Impairment of goodwill in the telecommunications reporting unit

SFAS No. 142,  "Goodwill and Other Intangible  Assets,"  requires  management to
make judgments about the fair value of its reporting unit. Corning measures fair
value on the basis of discounted  expected future cash flows. The  determination
of expected future cash flows involves  judgment.  Corning's  judgment was based
upon our historical experience in the  telecommunications  business, our current
knowledge from our commercial relationships,  and available external information
about future trends. With this input, it is management's  expectation that there
will be minimal  volume  growth in the short term,  volume  growth is assumed to
accelerate beginning in 2005 commensurate with overall market recovery. Terminal
value of the business assumes a growth in perpetuity of 3%. These cash flows are
also used to value  intangible and tangible  assets which  determine the implied
value of reporting unit goodwill.  The discount rate applied to these cash flows
represents a  telecommunications  weighted  average  cost of capital  based upon
current debt and equity  activity of 11 public  companies  representing  a cross
section of worldwide  competitors of the reporting unit. Corning used a discount
rate of 12% in its  calculation of fair value of the expected  future cash flows
and recorded an impairment  charge of $400 million.  Had Corning used a discount
rate of 11.5%,  the fair value of the  reporting  unit would have  exceeded  its
carrying value and there would not have been an  impairment.  Had Corning used a
discount  rate  of  12.5%,  the  pre-tax   impairment  charge  would  have  been
approximately $225 million higher.

Impairment of assets held for use

SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets,"
requires  management  to assess  the  recoverability  of the  carrying  value of
long-lived  assets when an event of  impairment  has occurred.  Management  must
exercise  judgment in assessing  whether an event of  impairment  has  occurred.
Corning  concluded events of impairment had occurred in two of its businesses in
the fourth quarter of 2002 and the company  recorded  pre-tax  charges  totaling
$409 million.  In each  circumstance,  behavior of external  parties,  including
customers  and  competitors,  were  considered  in  the  determination  that  an
assessment for impairment was required.  Management must also exercise  judgment
in the  determination of expected future cash flows against which to compare the
carrying value of the asset group being  evaluated.  In both  measurements,  the
carrying value far exceeded the expected cash flows.  Management  then exercised
judgment in  determining  the fair value of the assets from which the impairment
charge was measured.  For its photonic technologies  business,  management based
the fair value of its  long-lived  assets on the actual  results of recent asset
auctions  of  similar  equipment.  For  the  conventional  television  business,
management   exercised   judgment  about  alternative  volume  and  sales  price
scenarios,  computed  discounted  cash flows and assigned  its best  estimate of
probability to each alternative.  Management has reduced the useful lives of the
fixed assets of this business as a result of this assessment.

Restructuring charges and impairments resulting from restructuring actions

During  2001 and 2002,  Corning  recorded  write-downs  of  property,  plant and
equipment  as a  result  of  decisions  to  exit  facilities,  primarily  in the
Telecommunications   Segment.   Assets   impaired  were   primarily   equipment,
construction in progress and buildings.  Some of the equipment is to be sold and
some  abandoned.  Corning used  information  available  from recent  auctions of
telecommunications   equipment  to  estimate   salvage   value  when   measuring
impairment.  The  estimated  salvage  values are very low,  primarily due to the
currently depressed market for telecommunications related equipment. The salvage
values of  property  impaired  were also  estimated  to be  minimal  as  certain
facilities  will be abandoned and not sold.  It is possible that actual  results
will differ from assumptions and require adjustments to reserves.


<PAGE>


Valuation allowances for deferred income taxes

SFAS No. 109,  "Accounting  for Income Taxes,"  requires  management to exercise
judgment about its future results in assessing the realizability of its deferred
tax assets. At December 31, 2002,  Corning had gross deferred tax assets of $1.8
billion.  Corning  determined  that the  likelihood  of  realization  of certain
deferred tax assets is less than 50% and recorded  valuation  allowances of $417
million.   If  future  taxable  income  differs  from   management's   estimate,
adjustments  to these  allowances  will be required  and will impact  future net
income.

Probability of litigation outcomes

SFAS  No.  5,  "Accounting  for  Contingencies,"  requires  management  to  make
judgments  about  future  events that are  inherently  uncertain.  In making its
determinations of likely outcomes of litigation  matters,  management  considers
the evaluation of outside counsel  knowledgeable  about each matter,  as well as
known  outcomes  in case law.  See Item 3,  "Legal  Proceedings"  for a detailed
discussion of the key litigation matters the Company faces. The most significant
matter  involving  management's  most  complex  judgment  is that of  Pittsburgh
Corning  Corporation.  There are a number of factors  bearing upon the Company's
potential  liability,  including the inherent complexity of a Chapter 11 filing,
the Company's  history of success in defending  itself against  asbestos claims,
the Company's  assessment of the strength of its corporate  veil  defenses,  the
Company's  continuing  dialogue with its insurance  carriers and the  claimant's
representatives,  and other factors. The Company's conclusion, subject to change
as future events unfold,  is that there is no guarantee that a global settlement
can or will be  reached,  and that it is more  likely  than not that the Company
will continue to litigate.

Pension assumptions

In 2002, management made a change in assumption that will impact pension expense
in future periods.  Specifically,  management has lowered its expected long-term
rate of return on pension assets from 9% to 8.5%. Management has not altered the
nature of the pension trust investments. Recent asset performance has been below
the 9%  assumption.  As  such,  it is  lowering  its  long-term  rate of  return
assumption.  This  will  increase  Corning's  pension  expense  as  measured  in
accordance with SFAS No. 87,  "Employers'  Accounting for Pension,"  compared to
amounts recorded in 2002. The increase will approximate $8 million in 2003.

IN-PROCESS RESEARCH AND DEVELOPMENT

Corning  completed  a  number  of  purchase  acquisitions  in  2000.  As part of
analyzing each of these acquisitions,  Corning made a decision to buy technology
that  had not  yet  been  commercialized  rather  than  develop  the  technology
internally.  Corning based this  decision on a number of factors,  including the
amount of time it would take to bring the  technology  to market.  Corning  also
considered  its  internal  research  resource  allocation  and its  progress  on
comparable technology,  if any. Corning expects to use the same decision process
in the future.

In connection  with the  acquisitions  accounted for under the purchase  method,
management  is  responsible  for  estimating  the fair  value of the  assets and
liabilities acquired.  Management has made estimates and assumptions that affect
the reported  amounts of assets,  liabilities  and expenses  resulting from such
acquisitions.

Amounts  allocated  to  purchased  IPRD  were  established   through  recognized
valuation  techniques in the high technology  communications  industry.  Certain
projects  were  acquired  for  which  technological  feasibility  had  not  been
established at the date of acquisition and for which no alternative  future uses
existed. In accordance with SFAS No. 2, "Accounting for Research and Development
Costs," as  interpreted by FASB  Interpretation  No. 4,  "Applicability  of FASB
Statement No. 2 to Business Combinations  Accounted for by the Purchase Method,"
amounts  assigned to IPRD meeting the above  criteria must be charged to expense
at the date of consummation of the purchase.

The value  allocated to projects for which a charge was recorded was  determined
by the traditional  income approach,  which discounts  expected future debt-free
income to present  value.  The discount rates used were specific to each project
and were derived from a cost of capital for each  specific  acquisition  target,
adjusted upward for the stage of completion of each project.


<PAGE>


Expected future debt-free income was derived with the following considerations:

.    revenues were estimated based on relevant market size, growth trends in the
     industry and individual product sales cycles,
.    estimated operating expenses included cost of goods sold, selling,  general
     and  administrative  expenses,  and  research and  development  expenses to
     maintain the products once they have been introduced,
.    estimated tax expenses  were  specific to each acquired  entity and its tax
     profile, and
.    for certain  projects,  as  appropriate,  a return on core  technology  was
     deducted based upon market standards for licensed existing technology and a
     return on assets was deducted based upon industry comparisons.

The nature of the efforts to develop the acquired  technology into  commercially
viable  products  consists  principally  of  planning,   designing  and  testing
activities necessary to determine that the product can meet market expectations.
Corning expected that products  incorporating the acquired technology from these
projects  will be completed  and will begin to generate cash flows over the five
years following integration.

The timing and success of development of the technologies not abandoned  remains
a risk due to the  remaining  effort to  achieve  technical  viability,  rapidly
changing customer markets,  uncertain standards for new products and significant
competition in the marketplace.

The following is a more detailed  discussion of the valuations  associated  with
acquisitions for which such charges have been recorded:

Acquisition of Pirelli's Optical Components and Devices Business
----------------------------------------------------------------

On December 12, 2000, Corning completed the Pirelli  transaction.  This business
had a significant  number of research and  development  projects  ongoing at the
time of  acquisition  of  which  12 were  valued  as  IPRD  projects.  Projected
debt-free  income was  initially  discounted  using a rate of 17% to reflect the
weighted-average cost of capital (entity risk) for this entity. Each product was
also  discounted  to account for the research  project's  stage of  development.
Corning recorded a non-tax  deductible IPRD charge of $323 million in the fourth
quarter of 2000.

Costs to complete the in-process research programs were originally  estimated to
approximate  $25 million to $30 million at the valuation  date.  These  projects
have been categorized into four product technologies as follows:

Lithium Niobate Modulators

The business is  developing a number of different  lithium  niobate  modulators.
Lithium niobate  modulators are ideally suited for use in high-speed,  long-haul
optical communications networks. The technology has been chosen by a majority of
long-haul  equipment  suppliers  because it has the best combination of optical,
electronic and reliability performance.  Five of the research projects qualified
as IPRD projects and the completion  percentages  of these five projects  ranged
from 10% to 90%. A non-tax  deductible charge of $235 million was recognized and
the value of individual modulator projects in-process ranged from $19 million to
$83 million.

Corning plans to continue research on lithium niobate modulators.  However,  due
to the downturn in the telecommunications industry future revenues expected from
these projects will be significantly less than originally estimated.

Submarine Products

The business had planned to develop high  reliability  980  nanometer  (nm) pump
laser chips and modules for submarine use.  These devices are components  within
an optical amplifier. At the acquisition date, two IPRD projects with completion
percentages  of 10% and 50% were  valued.  A  non-tax  deductible  charge of $26
million  resulted  from  980  nm  pump  laser  submarine  projects  in  process.
Individual research values were $3 million and $23 million.

As part of the  downsizing of the photonic  technologies  business  announced on
July 9,  2001,  Corning  abandoned  this  project.  This  action  did not have a
material impact on cash flow, or the results of operations.


<PAGE>


Gratings

At the date of acquisition,  three qualifying  gratings programs with completion
percentages  ranging  from 20% to 85% were  valued.  A non-tax  deductible  IPRD
charge of $16 million  resulted from gratings  programs.  Individual  in-process
projects were valued between $2 million and $11 million.

As part of the  downsizing of the photonic  technologies  business  announced on
July 9,  2001,  Corning  abandoned  this  project.  This  action  did not have a
material impact on cash flow, or the results of operations.

Specialty Fiber

Two  specialty  fiber  programs  at the  business  met the  definition  of IPRD.
Specialty  fibers are used in conjunction  with several other components to make
an erbium  doped  fiber  amplifier,  which  boosts the  strength  of the optical
signal.  At the acquisition  date,  these projects were 40% and 60% complete.  A
non-tax  deductible  IPRD charge of $46 million  resulted from  specialty  fiber
programs, with the largest program being valued at $42 million.

Corning plans to continue research in specialty fiber.

IntelliSense
------------

On June 12, 2000,  Corning  completed the acquisition of the remaining shares of
IntelliSense,  a manufacturer and developer of micro-electro-mechanical  systems
(MEMs), or small electro-mechanical,  micro-fabricated devices. MEMs technology,
when integrated with optics and packaging expertise,  enables the development of
optical add-drop switches and optical cross connects,  that are expected to play
a key role in the development and buildout of the optical  networking  layer. As
of the acquisition  date,  IntelliSense had three qualifying  research  projects
underway.  These  research and  development  projects are  anticipated to result
primarily  in the  development  of new  telecommunications  products.  Projected
debt-free  income was  initially  discounted  using a rate of 20% to reflect the
weighted-average  cost of capital (entity risk) for  IntelliSense.  Each product
was also discounted to account for the research  project's stage of development.
The completion  percentages ranged from 10% to 90%. At the acquisition date, the
projected costs to complete the IPRD programs approximated $20 million.  Corning
recorded a $7 million  IPRD  charge in the  second  quarter of 2000.  No project
valued exceeded $5 million.

Failure of any single project would not materially  impact  Corning's  financial
condition, results of operations or liquidity.

As of December 31, 2002,  one of the projects has been  canceled,  the other two
projects are  continuing  with one at a reduced level.  As a result,  the future
revenues expected from these projects will be significantly less than originally
estimated.

NZ Applied Technologies
-----------------------

On May 5, 2000,  Corning  completed the  acquisition of NZ Applied  Technologies
(NZAT).  NZAT was  developing a line of high speed,  solid-state  components for
dense  wavelength  division  multiplexing  systems,  such  as  variable  optical
attenuators,  that will meet  industry  demands for speed and quality.  Of these
projects, four were determined to meet the criteria for purchased IPRD as of the
acquisition date.  Projected  debt-free income was initially  discounted using a
rate of 21% to reflect the  weighted-average  cost of capital  (entity risk) for
NZAT.  Each product was also  discounted  to account for the research  project's
stage of development.  The completion percentages ranged from 10% to 80%. At the
acquisition date, the projected costs to complete the IPRD programs approximated
$10 million. A $44 million non-tax deductible IPRD charge was recognized and the
value of individual projects ranged from $1 million to $29 million.

In the third  quarter of 2002,  due to the  significant  downturn  in demand for
telecommunication  products,  Corning decided to suspend the research related to
these  projects.  When  the  demand  for  Corning's  telecommunication  products
rebound,  management will reevaluate the market at that time and a decision will
be made as to whether research and development on these projects should resume.


<PAGE>


Photonics Technology Research Center
------------------------------------

On February 14, 2000, Corning acquired the Photonics  Technology Research Center
(PTRC).  Located in Suffolk, UK, the PTRC had extensive research and development
efforts  underway at the  acquisition  date including work on planar  integrated
optics,  semiconductor  optical  amplifiers,  electro-absorption  modulators and
optical networking devices.  Seven projects were determined to meet the criteria
for purchased IPRD.  Projected  debt-free  income was determined for each of the
projects  and  initially   discounted  using  a  rate  of  35%  to  reflect  the
weighted-average  cost of capital  (entity risk) for PTRC. Each product was also
discounted  to account for the  research  project's  stage of  development.  The
completion  percentages  ranged from 50% to 80%. At the  acquisition  date,  the
projected costs to complete the IPRD programs  approximated  $40 million.  A $42
million  ($25 million  after-tax)  IPRD charge was  recognized  and the value of
individual projects ranged from less than $1 million to $16 million.

In the fourth  quarter of 2002,  due to the  significant  downturn in demand for
telecommunication  products,  Corning announced it would close this facility and
abandon most of the projects.  Research will continue  related to  semiconductor
optical   amplifiers  and   electro-absorption   modulators  at  other  research
facilities.  As a result,  the future revenues expected from these projects will
be significantly less than originally estimated.

ENVIRONMENT

Corning  has  been  named  by the  Environmental  Protection  Agency  under  the
Superfund  Act,  or  by  state  governments  under  similar  state  laws,  as  a
potentially  responsible  party for 12 active  hazardous waste sites.  Under the
Superfund  Act,  all parties who may have  contributed  any waste to a hazardous
waste site,  identified by such 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 and  operated by Corning
based on expert analysis and continual  monitoring by both internal and external
consultants.  Corning has accrued  approximately  $22 million for its  estimated
liability for environmental cleanup and related litigation at December 31, 2002.
Based upon the  information  developed  to date,  management  believes  that the
accrued  amount is a reasonable  estimate of Corning's  estimated  liability and
that the risk of an  additional  loss in an amount  materially  higher than that
accrued is remote.

NEW ACCOUNTING STANDARDS

In June 2001, the FASB issued SFAS No. 141,  "Business  Combinations,"  and SFAS
No. 142,  "Goodwill and Other Intangible  Assets." Among other  provisions,  all
future business  combinations will be accounted for using the purchase method of
accounting  and the use of the  pooling-of-interests  method is  prohibited  for
transactions initiated after June 30, 2001. In addition, goodwill will no longer
be amortized but will be subject to impairment tests at least annually. SFAS No.
142 was  effective  for  Corning  on  January  1,  2002.  An  assessment  of the
recoverability of goodwill recorded on the date of adoption was completed in the
first quarter indicating that the carrying value of goodwill was recoverable. At
December 31, 2002, goodwill  approximated $1.7 billion.  Corning recorded a $400
million  ($294  million  after-tax)  charge for  impairment  of a portion of the
goodwill  in  its   Telecommunications   Segment  after  completing  its  annual
assessment  in the fourth  quarter.  See  Impairment  of  Goodwill  for  further
discussion of the charge recorded.

The following table presents a reconciliation  of reported net (loss) income and
(loss)  earnings per share to adjusted net (loss) income and (loss) earnings per
share, as if SFAS No. 142 had been in effect as follows (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Years ended December 31,
                                                                       ----------------------------------------
                                                                          2002            2001          2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>
Reported net (loss) income                                             $  (1,302)     $  (5,498)     $     422
Goodwill amortization, net of income taxes                                                  345            203
                                                                       ----------------------------------------
Adjusted net (loss) income                                             $  (1,302)     $  (5,153)     $     625
                                                                       ========================================

Reported net (loss) income per share - basic                           $   (1.39)     $   (5.89)     $    0.49
Goodwill amortization, net of income taxes                                                 0.37           0.24
                                                                       ----------------------------------------
Adjusted net (loss) income per share - basic                           $   (1.39)     $   (5.52)     $    0.73
                                                                       ========================================

Reported net (loss) income per share - diluted                         $   (1.39)     $   (5.89)     $    0.48
Goodwill amortization, net of income taxes                                                 0.37           0.23
                                                                       ----------------------------------------
Adjusted net (loss) income per share - diluted                         $   (1.39)     $   (5.52)     $    0.71
                                                                       ========================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations."  This standard  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset retirement  costs.  Corning was required to implement SFAS No.
143 on January 1, 2003. Corning does not expect this standard to have a material
impact on its consolidated financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived   Assets."  This  standard  supercedes  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of." The  standard  retains  the  previously  existing  accounting
requirements  related to the  recognition  and  measurement of the impairment of
long-lived   assets  to  be  held  and  used  while  expanding  the  measurement
requirements  of  long-lived  assets  to be  disposed  of  by  sale  to  include
discontinued  operations.  It also expands on the previously  existing reporting
requirements  for  discontinued  operations  to include a component of an entity
that either has been  disposed  of or is  classified  as held for sale.  Corning
adopted SFAS No. 144 on January 1, 2002.  Corning has followed  this standard to
measure  impairments  of  long-lived  assets  through  2002 and report  business
divestitures.

In April  2002,  the FASB  issued  SFAS No.  145,  which  rescinds  SFAS No.  4,
"Reporting  Gains  and  Losses  from  Extinguishment  of  Debt,"  SFAS  No.  44,
"Accounting  for  Intangible   Assets  of  Motor  Carriers"  and  SFAS  No.  64,
"Extinguishments of Debt Made to Satisfy  Sinking-Fund  Requirements" and amends
SFAS No. 13,  "Accounting  for Leases." This  statement  updates,  clarifies and
simplifies  existing accounting  pronouncements.  As a result of rescinding SFAS
No. 4 and SFAS No. 64, the criteria in Accounting  Principles Bulletin (APB) No.
30 will be used to  classify  gains  and  losses  from  extinguishment  of debt.
Corning adopted the reporting  guidance of SFAS No. 145 in the second quarter of
2002 in its  accounting for  repurchases  and retirement of debt. See Note 14 to
the Consolidated Financial Statements.  The remaining provisions of SFAS No. 145
will be  adopted by Corning  in fiscal  year 2003.  Corning  does not expect the
adoption  of  the  remaining  provisions  to  have  a  material  impact  on  its
consolidated financial position or results of operations.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." This standard nullifies Emerging Issues Task
Force Issue No. 94-3,  "Liability  Recognition for Certain Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring)."  This  standard  requires  that  a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred rather than the date of an entity's commitment to an exit plan. Corning
is  required  to  implement  SFAS No. 146 on January 1, 2003.  Corning  does not
expect this  standard to have a material  impact on its  consolidated  financial
position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others," which expands previously issued accounting guidance and
disclosure  requirements for certain guarantees.  The Interpretation requires an
entity to recognize  an initial  liability  for the fair value of an  obligation
assumed by issuing a  guarantee.  The  provision  for  initial  recognition  and
measurement  of  the  liability  will  be  applied  on a  prospective  basis  to
guarantees  issued or modified after December 31, 2002.  Corning does not expect
this  Interpretation  to have a material  impact on its  consolidated  financial
position or results of operations.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123," which provides optional  transition  guidance for those companies electing
to voluntarily adopt the accounting provisions of SFAS No. 123. In addition, the
statement  mandates  certain interim  disclosures  that are incremental to those
required  by SFAS No. 123.  Corning  will  continue  to account for  stock-based
compensation  in  accordance  with APB No. 25. As such,  Corning does not expect
this standard to have a material impact on its consolidated  financial  position
or results of operations.  Corning has adopted the disclosure-only provisions of
SFAS No. 148 at December 31, 2002.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities, an Interpretation of ARB No. 51," which requires all
VIEs to be consolidated by the primary  beneficiary.  The primary beneficiary is
the entity that holds the  majority of the  beneficial  interests in the VIE. In
addition, the interpretation expands disclosure  requirements for both VIEs that
are  consolidated  as well as VIEs  from  which the  entity  is the  holder of a
significant  amount  of the  beneficial  interests,  but not the  majority.  The
disclosure  requirements of this  interpretation are effective for all financial
statements issued after January 31, 2003. The consolidation requirements of this
interpretation  are  effective  for all periods  beginning  after June 15, 2003.
Management is still assessing the impacts of this interpretation, however, it is
reasonably  possible that Corning will be considered the primary  beneficiary of
three  existing  SPEs and therefore  would need to  consolidate  these  entities
beginning on July 1, 2003. The assets and debt of these entities at December 31,
2002, approximates $46 million.


<PAGE>


FORWARD-LOOKING STATEMENTS

The statements in this Annual Report, in reports  subsequently  filed by Corning
with the SEC on Forms 10-Q and 8-K, and related comments by management which are
not  historical  facts or  information  and  contain  words such as  "believes,"
"expects," "anticipates,"  "estimates," "forecasts," and similar expressions are
forward-looking  statements.  These forward-looking statements involve risks and
uncertainties that may cause the actual outcome to be materially different. Such
risks and uncertainties include, but are not limited to:

-    global economic and political conditions,
-    currency fluctuations,
-    product demand and industry capacity,
-    competitive products and pricing,
-    sufficiency of manufacturing capacity and efficiencies,
-    cost reductions,
-    availability and costs of critical materials,
-    new product development and commercialization,
-    attracting and retaining key personnel,
-    order activity and demand from major customers,
-    fluctuations  in capital  spending by customers  in the  telecommunications
     industry and other business segments,
-    financial condition of customers,
-    changes in the mix of sales between premium and non-premium products,
-    facility expansions and new plant start-up costs,
-    adverse litigation or regulatory developments,  including future or pending
     tax legislation,
-    adequacy and availability of insurance,
-    capital resource and cash flow activities,
-    capital spending,
-    equity company activities,
-    interest costs,
-    acquisition and divestiture activity,
-    the rate of technology change,
-    the ability to enforce patents,
-    product performance issues,
-    stock price fluctuations, and
-    other risks detailed in Corning's SEC filings.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risks
---------------------------------------------------------------------

Corning operates and conducts business in many foreign countries and as a result
is exposed to movements in foreign currency exchange rates.  Corning's  exposure
to exchange rate effects includes:

.    exchange  rate  movements  on  financial   instruments   and   transactions
     denominated in foreign currencies which impact earnings, and
.    exchange  rate  movements   upon   conversion  of  net  assets  in  foreign
     subsidiaries  for which the  functional  currency  is not the U.S.  dollar,
     which impact Corning's net equity.

Corning's most significant  foreign currency  exposures relate to Japan,  Korea,
Taiwan and Western European  countries.  Corning selectively enters into foreign
exchange forward and option contracts with durations generally 12 months or less
to hedge its  exposure  to  exchange  rate risk on  foreign  source  income  and
purchases.  The hedges are scheduled to mature coincident with the timing of the
underlying foreign currency commitments and transactions. The objective of these
contracts is to neutralize  the impact of exchange  rate  movements on Corning's
operating  results.  Corning also enters into foreign exchange forward contracts
when situations  arise where its foreign  subsidiaries  or Corning  Incorporated
enter into lending situations,  generally on an intercompany basis,  denominated
in  currencies  other than their  local  currency.  Corning  holds a  derivative
contract that hedges certain foreign  currency  denominated net asset exposures.
Corning  does not hold or issue  derivative  financial  instruments  for trading
purposes.


<PAGE>


Equity in  earnings of  associated  companies  has  historically  represented  a
significant amount of Corning's (loss) income from continuing operations. Equity
in earnings of associated  companies net of impairments was $116 million in 2002
with  foreign-based  affiliates  comprising  over 100% of this amount due to the
impairments  recorded in equity  income.  Samsung  Corning  and Samsung  Corning
Precision Glass totaled $124 million in equity earnings for 2002.  Exchange rate
fluctuations  and actions taken by  management of these  entities to reduce this
risk can affect the earnings of these companies.

Corning uses a sensitivity  analysis to assess the market risk  associated  with
its foreign  currency  exchange  risk.  Market risk is defined as the  potential
change  in fair  value of  assets  and  liabilities  resulting  from an  adverse
movement in foreign currency  exchange rates. At December 31, 2002,  Corning and
its consolidated subsidiaries had open forward contracts, open option contracts,
foreign  denominated  debt and foreign cash and cash  equivalent  holdings  with
values  exposed to exchange  rate  movements,  all of which were  designated  as
hedges at December 31, 2002. A 10% adverse  movement in quoted foreign  currency
exchange rates could result in a loss in fair value of these instruments of $117
million.

The nature of Corning's  foreign  exchange  rate risk  exposures has not changed
materially from December 31, 2001.

Interest Rate Risk Management

In March and April of 2002,  Corning  entered into  interest rate swaps that are
fair  value  hedges  and  economically  exchanged  $275  million  of fixed  rate
long-term  debt to floating rate debt.  Under the terms of the swap  agreements,
Corning  will pay the  counterparty  a  floating  rate  that is  indexed  to the
six-month  LIBOR rate and receive  the fixed rates of 8.3% to 8.875%,  which are
the stated  interest  rates on the long-term  debt  instruments.  As a result of
these  transactions,  Corning is exposed to the impact of interest rate changes.
The interest rate on these instruments is reset every six months and they expire
in 14 to 23 years. It is Corning's policy to conservatively  manage its exposure
to changes in  interest  rates.  Corning's  policy is that  total  floating  and
variable  rate debt will not exceed 35% of the total debt  portfolio at anytime.
At  December  31,  2002,   Corning's   consolidated  debt  portfolio   contained
approximately 8% of variable rate instruments.


Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

See Item 15 (a) 1.


Item 9. Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------

None.


<PAGE>


                                    PART III


Item 10.  Directors and Executive Officers
------------------------------------------

The sections  entitled  "Nominees for Election as Directors"  and "Section 16(a)
Beneficial  Ownership  Reporting  Compliance" in our Definitive  Proxy Statement
relating to our annual meeting of  shareholders to be held on April 24, 2003, is
incorporated by reference in this Annual Report on Form 10-K.


<PAGE>


                      Executive Officers of the Registrant


James R. Houghton   Chairman and Chief Executive Officer
Mr.  Houghton joined Corning in 1962. He was elected a vice president of Corning
and general manager of the Consumer  Products Division in 1968, vice chairman in
1971,  chairman of the executive  committee and chief strategic  officer in 1980
and chairman and chief executive officer in April 1983,  retiring in April 1996.
Mr.  Houghton was the  non-executive  Chairman of the Board of Corning from June
2001 to April 2002.  Mr.  Houghton  came out of retirement in April 2002 when he
was elected to his current position.  Mr. Houghton is a director of Metropolitan
Life  Insurance  Company  and Exxon  Mobil  Corporation.  He is a trustee of the
Metropolitan  Museum of Art, the Pierpont  Morgan Library and the Corning Museum
of Glass and a member of the Harvard Corporation. Mr. Houghton has been a member
of Corning's Board of Directors since 1969. Age 67.

James B. Flaws   Vice Chairman and Chief Financial Officer
Mr.  Flaws  joined  Corning in 1973 and served in a variety  of  controller  and
business  management  positions.  Mr. Flaws was elected  assistant  treasurer of
Corning in 1993,  vice  president and  controller in 1997 and vice  president of
finance and treasurer in May 1997,  senior vice  president  and chief  financial
officer in December 1997,  executive vice president and chief financial  officer
in 1999 and to his  current  position  in 2002.  Mr.  Flaws is a director of Dow
Corning Corporation. Mr. Flaws has been a member of Corning's Board of Directors
since 2000. Age 54.

Kirk P. Gregg   Executive Vice President and Chief Administrative Officer
Mr. Gregg joined Corning in 1993 as director of Executive  Compensation.  He was
named vice  president of  Executive  Resources  and  Employee  Benefits in 1994,
senior  vice  president,  administration  in  December  1997 and to his  current
position in 2002. Prior to joining Corning,  Mr. Gregg was with General Dynamics
Corporation as corporate director,  Key Management Programs, and was responsible
for executive  compensation and benefits,  executive development and recruiting.
Age 43.

Joseph A. Miller   Executive Vice President and Chief Technology Officer,
                   Science and Technology
Dr. Miller joined Corning in 2001 as senior vice president and chief  technology
officer.  He was  appointed  to his current  position in 2002.  Prior to joining
Corning,  Dr. Miller was with E.I. DuPont de Nemours,  Inc.,  where he served as
chief technology  officer and senior vice president for research and development
since 1994. He began his career with DuPont in 1966. Age 61.

Peter F. Volanakis   President, Corning Technologies
Mr. Volanakis joined Corning in 1982 and  subsequently  held various  marketing,
development and commercial positions in several divisions. He was named managing
director  Corning GmbH in 1992,  executive vice president of CCS Holding,  Inc.,
formerly known as Siecor Corporation, in 1995, senior vice president of Advanced
Display Products in 1997,  executive vice president of Display  Technologies and
Life Sciences in 1999 and to his current  position in 2001.  Mr.  Volanakis is a
director  of Dow  Corning  Corporation.  Mr.  Volanakis  has  been a  member  of
Corning's Board of Directors since 2000. Age 47.

Wendell P. Weeks   President and Chief Operating Officer
Mr. Weeks joined Corning in 1983 and has served in various accounting,  business
development,  and business manager positions.  He was named a vice president and
deputy general manager of the Opto-Electronics Components Business in 1995, vice
president and general  manager of  Telecommunications  Products in 1996,  senior
vice  president  in 1997,  senior vice  president of  Opto-Electronics  in 1998,
executive vice president of Optical Communications in 1999, president of Corning
Optical  Technologies in 2001 and to his current position in 2002. Mr. Weeks has
been a member of Corning's Board of Directors since 2000. Age 43.

Larry Aiello Jr.   President and Chief Executive Officer, Corning Cable Systems
Mr.  Aiello  joined  Corning  in  1973  and  served  in  several   positions  in
manufacturing  from 1975 to 1981.  He was named  manager-Domestic  Accounting in
1981,  controller-Telecommunications Products Division in 1984, director-Control
and Analysis in 1987 and assistant controller and director in 1989. He was named
division  vice  president  and   director-Business   Development  and  Planning,
Opto-Electronics  Group in 1990,  general  manager-Component  Products  Group in
1992, vice president and controller,  Corning  Incorporated in 1993, senior vice
president-International and President-Corning International Corporation in 1997,
senior vice president and chief of staff-Corning Optical  Communications in 2000
and to his current position in 2002. Age 53.

Katherine A. Asbeck   Senior Vice President and Controller
Ms. Asbeck joined Corning in 1991 as director of  accounting.  She was appointed
assistant  controller  in 1993,  designated  chief  accounting  officer in 1994,
elected vice  president and  controller  in 1997 and to her current  position in
2001. Age 46.


<PAGE>


Robert B. Brown   Vice President and General Manager, Optical Fiber
Mr. Brown joined  Corning in 1972 and served in a variety of  manufacturing  and
engineering  positions.  He was appointed division vice  president-manufacturing
and engineering,  Telecommunications  Products  Division in 1995, vice president
manufacturing  and  engineering,  Opto-Electronics  in  1999,  president-Corning
Lasertron in February  2000,  vice  president and general  manager-Amplification
Products in December 2000 and to his current position in 2002. Age 52.

Robert L. Ecklin   Executive Vice President, Environmental Technologies and
                   Strategic Growth
Mr.  Ecklin  joined  Corning  in 1961  and  served  in a  variety  of  U.S.  and
international  manufacturing and engineering managerial positions.  He was named
vice president of Corning Engineering in 1982,  president of Corning Engineering
in 1983, vice president of Business  Development in 1986, general manager of the
Industrial Products Division in 1989 and senior vice president of the Industrial
Products  Division in 1990. He was  appointed  executive  vice  president of the
Environmental  Products  Division in 1999,  executive  vice  president,  Optical
Communications in 2001 and to his current position in 2002. Age 64.

William D. Eggers   Senior Vice President and General Counsel
Mr. Eggers joined Corning in 1997 as vice president and deputy general  counsel.
He was elected senior vice  president and general  counsel in February 1998. Mr.
Eggers was a Partner with the Rochester firm of Nixon, Hargrave, Devans & Doyle,
LLP, before joining Corning, and was outside litigation counsel for Corning in a
number of commercial matters. Age 58.

Gerald J. Fine   Senior Vice President and General Manager, Photonic
                 Technologies
Dr. Fine joined Corning in 1985 as a research scientist in a variety of research
and managerial positions. He was named deputy general  manager-Advanced  Display
Products  in 1995,  vice  president  and general  manager-Photonic  Technologies
Division in 1997 and to his current position in 2001. Age 45.

Donald B. McNaughton   Vice President, Information Display
Mr.  McNaughton  joined  Corning in 1989 and  served in a variety of  managerial
positions.  He  was  named  general  manager,   Display  Technologies  in  1999,
president,  Display  Technologies in Asia in 2000 and to his current position in
2002. Age 43.

Mark S. Rogus   Vice President and Treasurer
Mr.  Rogus  joined  Corning  in 1996 as  manager of  corporate  finance.  He was
appointed assistant treasurer in 1999 and to his current position in 2000. Prior
to joining  Corning,  Mr. Rogus held various business  development  positions at
Wachovia Bank. Age 43.


<PAGE>


Item 11.  Executive Compensation
--------------------------------

The  sections  entitled  "Executive  Compensation,"  "Option  SAR Grants in Last
Fiscal Year,"  "Aggregated  Option/SAR  Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values" and "Pension Plan" in our Definitive Proxy Statement
relating to the annual meeting of  shareholders to be held on April 24, 2003, is
incorporated by reference in this Annual Report on Form 10-K.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

The section entitled "Security  Ownership of Certain Beneficial  Owners," in our
Definitive Proxy Statement  relating to the annual meeting of shareholders to be
held on April 24, 2003,  is  incorporated  by reference in this Annual Report on
Form 10-K.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

The section  entitled "Other Matters - Certain  Business  Relationships"  in our
Definitive Proxy Statement  relating to the annual meeting of shareholders to be
held on April 24, 2003,  is  incorporated  by reference in this Annual Report on
Form 10-K.

Item 14.  Controls and Procedures
---------------------------------

Within the 90-day period prior to the date of the report, Corning carried out an
evaluation,  under the supervision and with the participation of the management,
including  its Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness of the design and operation of Corning's  disclosure  controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation,  the
Chief  Executive  Officer and Chief Financial  Officer  concluded that Corning's
disclosure  controls  and  procedures  are  effective  to timely  alert  them to
material   information   related  to   Corning   (including   its   consolidated
subsidiaries) required to be included in Corning's Exchange Act filings.

Subsequent to the date of our management's evaluation, there were no significant
changes in our internal  controls or in other  factors that could  significantly
affect  these  controls,   including  any  corrective  actions  with  regard  to
significant deficiencies and material weaknesses.


<PAGE>


                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

(a)  Documents filed as part of this report:

                                                                           Page

     1.   Financial  statements and financial statement schedule,
          filed  as  part  of this  report:
               See  separate   index  to  financial   statements
               and financial statement schedule                             58

     2.   Supplementary Data:
               Quarterly Operating Results                                 106

     3.   Exhibits filed as part of this report: see (c) below.

(b)  Reports on Form 8-K filed during the last quarter of fiscal 2002:

     Five  reports on Form 8-K were filed  October  1, 2002,  October 9,  2002*,
     October 30,  2002,  November  12,  2002*,  and  December 5, 2002 during the
     quarter  ended  December  31, 2002  reporting  matters  under Item 5, Other
     Events,   under  Item  7,  Financial   Statements,   Pro  Forma   Financial
     Information, and Exhibits and furnishing material under Item 9*.

     *Information  furnished  under  Item 9 of Form 8-K is not  incorporated  by
     reference,  is not  deemed  filed and is not  subject  to  liability  under
     Section 11 of the  Securities  Act of 1933 or Section 18 of the  Securities
     and Exchange Act of 1934 for such Regulation FD disclosures.

(c)  Exhibits filed as part of this report:

     3(i)1     Restated  Certificate  of  Incorporation  dated December 6, 2000,
               filed  with the  Secretary  of State of the  State of New York on
               January 22, 2001  (Incorporated  by  reference to Exhibit 3(i) of
               Corning's  Annual Report on Form 10-K for the year ended December
               31, 2000)

     3(i)2     Certificate of Amendment to Restated Certificate of Incorporation
               filed  with the  Secretary  of State of the  State of New York on
               August 5, 2002  (Incorporated  by  reference  to Exhibit  99.1 to
               Corning's Form 8-K filed on August 7, 2002)

     3(ii)1    Bylaws of Corning effective as of December 6, 2000  (Incorporated
               by reference to Exhibit 3(ii) of Corning's  Annual Report on Form
               10-K for the year ended December 31, 2000)

     3(ii)2    Amendment  to  Article  III,  Section  9, of  Bylaws  of  Corning
               effective as of February 5, 2003.

     4         Rights   Agreement   of   Corning   dated  as  of  June  5,  1996
               (Incorporated  by reference  to Exhibit 1 to  Corning's  Form 8-K
               filed on July 10, 1996)

     10        Agreement and Release  between John W. Loose and Corning dated as
               of April 12, 2002  (Incorporated  by  reference  to Exhibit 10 of
               Corning's  Quarterly  Report on Form 10-Q for the  quarter  ended
               June 30, 2002)

     12        Computation  of Ratio of Earnings to Combined  Fixed  Charges and
               Preferred Dividends.

     21        Subsidiaries of the Registrant at December 31, 2002.

     23        Consent of Independent Accountants.

     24        Powers of Attorney.

     99.1      Certification of Principal  Executive Officer pursuant to Section
               906 of The Sarbanes-Oxley Act of 2002.

     99.2      Certification of Principal  Financial Officer pursuant to Section
               906 of The Sarbanes-Oxley Act of 2002.


<PAGE>


Signatures

Pursuant to the requirements of Sections 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

<TABLE>
<CAPTION>
Corning Incorporated
<S>    <C>                                         <C>                                                             <C>
              Principal Executive Officer
By               /s/ James R. Houghton             Chairman and                                                    February 20, 2003
       ----------------------------------------    Chief Executive Officer
                  (James R. Houghton)

              Principal Financial Officer
By               /s/ James B. Flaws                Vice Chairman and                                               February 20, 2003
       ----------------------------------------    Chief Financial Officer
                  (James B. Flaws)

             Principal Accounting Officer
                /s/ Katherine A. Asbeck
By     ----------------------------------------    Senior Vice President and Controller                            February 20, 2003
                (Katherine A. Asbeck)
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
on the date indicated.
<TABLE>
<CAPTION>
<S>                                                <C>                                                             <C>
                                                   Capacity                                                              Date


                      *                            Chairman of the Board of Directors                              February 20, 2003
-----------------------------------------------
             (James R. Houghton)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
             (John Seely Brown)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
              (James B. Flaws)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
                (Gordon Gund)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
             (John M. Hennessy)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
             (Jeremy R. Knowles)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
             (James J. O'Connor)
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

<S>                                                <C>                                                             <C>

                      *                            Director                                                        February 20, 2003
-----------------------------------------------
             (Deborah D. Rieman)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
              (H. Onno Ruding)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
           (William D. Smithburg)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
            (Hansel E. Tookes II)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
            (Peter F. Volanakis)


                      *                            Director                                                        February 20, 2003
-----------------------------------------------
             (Wendell P. Weeks)


                 /s/ William D. Eggers
*By
       ----------------------------------------
         (William D. Eggers, Attorney-in-fact)
</TABLE>


<PAGE>


  Certifications of Principal Executive Officer and Principal Financial Officer
          Regarding Facts and Circumstances Relating to Annual Reports


I, James R. Houghton, certify that:

1.   I have reviewed this annual report on Form 10-K of Corning Incorporated;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.


Dated:  February 20, 2003          /s/ James R. Houghton
                                       -----------------------------------------
                                       James R. Houghton
                                       Chairman and Chief Executive Officer


<PAGE>


  Certifications of Principal Executive Officer and Principal Financial Officer
          Regarding Facts and Circumstances Relating to Annual Reports


I, James B. Flaws, certify that:

1.   I have reviewed this annual report on Form 10-K of Corning Incorporated;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.


Dated:  February 20, 2003          /s/ James B. Flaws
                                       -----------------------------------------
                                       James B. Flaws
                                       Vice Chairman and Chief Financial Officer


<PAGE>


                              Corning Incorporated
                               2002 Annual Report
         Index to Financial Statements and Financial Statement Schedule


<TABLE>
<CAPTION>

                                                                                                 Page
<S>                                                                                              <C>
Statement of Management Responsibility for Financial Statements                                   59
Report of Independent Accountants                                                                 60
Consolidated Statements of Operations                                                             61
Consolidated Balance Sheets                                                                       62
Consolidated Statements of Cash Flows                                                             63
Consolidated Statements of Changes in Shareholders' Equity                                        64
Notes to Consolidated Financial Statements
         1        Summary of Significant Accounting Policies                                      65
         2.       Discontinued Operations                                                         70
         3.       Inventory Write-down                                                            71
         4.       Impairment of Goodwill                                                          71
         5.       Restructuring Actions                                                           73
         6.       Impairment of Long-Lived Assets Other Than Goodwill                             76
         7.       Short-Term Investments                                                          77
         8.       Inventories                                                                     78
         9.       Income Taxes                                                                    78
         10.      Investments                                                                     80
         11.      Property, Net                                                                   84
         12.      Goodwill and Other Intangible Assets                                            84
         13.      Other Accrued Liabilities                                                       85
         14.      Long-Term Debt and Loans Payable                                                86
         15.      Employee Retirement Plans                                                       87
         16.      Commitments, Contingencies, Guarantees and Hedging Activities                   90
         17.      Series B Convertible Preferred Stock                                            91
         18.      Shareholders' Equity                                                            91
         19.      (Loss) Earnings Per Common Share                                                94
         20.      Stock Compensation Plans                                                        95
         21.      Business Combinations and Divestitures                                          97
         22.      Operating Segments                                                              99
Financial Statement Schedule:
         II. Valuation Accounts and Reserves                                                     105

</TABLE>

<PAGE>


STATEMENT OF MANAGEMENT RESPONSIBILITY
FOR FINANCIAL STATEMENTS


The  management of Corning  Incorporated  is  responsible  for the  preparation,
presentation  and integrity of the consolidated  financial  statements and other
information  included in this annual report. The financial  statements have been
prepared in accordance with generally accepted accounting principles and include
certain amounts based on management's best estimates and judgments.

In meeting its responsibility for the reliability of these financial statements,
Corning maintains  comprehensive  systems of internal accounting control.  These
systems are designed to provide  reasonable  assurance at  reasonable  cost that
corporate  assets  are  protected  against  loss or  unauthorized  use and  that
transactions  and events are properly  recorded.  Such systems are reinforced by
written  policies,  selection  and  training of competent  financial  personnel,
appropriate division of responsibilities and a program of internal audits.

The  consolidated  financial  statements  have been  audited by our  independent
accountants,  PricewaterhouseCoopers  LLP. Their responsibility is to express an
independent,  professional  opinion with respect to the  consolidated  financial
statements  on the basis of an audit  conducted  in  accordance  with  generally
accepted auditing standards.

The Audit  Committee of the Board of Directors is responsible  for reviewing and
monitoring Corning's financial reporting and accounting practices and the annual
appointment  of  the  independent  accountants.  The  Committee,   comprised  of
independent directors, meets periodically with management, the internal auditors
and the  independent  accountants  to review and assess the  activities of each.
Both  the  independent  accountants  and the  internal  auditors  meet  with the
Committee, without management present, to review the results of their audits and
their assessment of the adequacy of the systems of internal  accounting  control
and the quality of financial reporting.


James R. Houghton                      James B. Flaws
Chairman and Chief Executive Officer   Vice Chairman and Chief Financial Officer

                      Katherine A. Asbeck
                      Senior Vice President and Controller


<PAGE>


Report of Independent Accountants


PricewaterhouseCoopers LLP


To the Board of Directors and Shareholders of Corning Incorporated

In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing under Item 15(a)(1)  present  fairly,  in all material  respects,  the
financial position of Corning  Incorporated and its subsidiaries at December 31,
2002 and 2001, and the results of their operations and their cash flows for each
of the three years in the period  ended  December  31, 2002 in  conformity  with
accounting  principles  generally  accepted in the United States of America.  In
addition,  in our opinion,  the financial statement schedule listed in the index
appearing under Item 15(a)(1)  presents fairly,  in all material  respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management;  our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule  based on our audits.  We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United  States of America,  which  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Notes 1, 2 and 4 of the consolidated financial statements, as of
January 1, 2002,  the Company  ceased  amortization  of goodwill and changed its
method of accounting for discontinued  operations to conform with the provisions
of Statement of Financial  Accounting  Standards ("SFAS") No. 142, "Goodwill and
Other  Intangible  Assets" and SFAS No. 144,  "Accounting  for the Impairment or
Disposal of Long-Lived Assets", respectively.


PricewaterhouseCoopers LLP
New York, New York


January 21, 2003


<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Operations                                                  Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------

                                                                                            For the years ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)                                                  2002            2001              2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>             <C>               <C>
Net sales                                                                             $  3,164        $  6,047          $  6,920
Cost of sales (Note 3)                                                                   2,562           4,227             4,009
                                                                                      --------------------------------------------

Gross margin                                                                               602           1,820             2,911

Operating expenses:
   Selling, general and administrative expenses                                            716           1,090             1,041
   Research, development and engineering expenses                                          483             622               531
   Amortization of purchased intangibles (Note 12)                                          43              76                29
   Amortization of goodwill (Note 1)                                                                       363               216
   Acquisition-related charges (Note 21)                                                                                     463
   Restructuring, impairment and other charges (Notes 4, 5 and 6)                        2,080           5,717
                                                                                      --------------------------------------------

Operating (loss) income                                                                 (2,720)         (6,048)              631

Interest income                                                                             41              68               105
Interest expense (Note 14)                                                                (179)           (153)             (107)
Gain on repurchases of debt (Note 14)                                                      176
Other expense, net                                                                         (38)            (28)               (8)
                                                                                      --------------------------------------------

(Loss) income from continuing operations before income taxes                            (2,720)         (6,161)              621
(Benefit) provision for income taxes (Note 9)                                             (726)           (468)              383
                                                                                      --------------------------------------------

(Loss) income from continuing operations before minority interests
  and equity earnings                                                                   (1,994)         (5,693)              238
Minority interests                                                                          98              13               (24)
Equity in earnings of associated companies, net of impairments (Note 10)                   116             148               149
                                                                                      --------------------------------------------

(Loss) income from continuing operations                                                (1,780)         (5,532)              363
Income from discontinued operations, net of income taxes (Note 2)                          478              34                59
                                                                                      --------------------------------------------

Net (loss) income                                                                       (1,302)         (5,498)              422

Dividend requirements of preferred stock (Note 18)                                        (128)             (1)               (1)
                                                                                      --------------------------------------------

(Loss) earnings attributable to common shareholders                                   $ (1,430)       $ (5,499)         $    421
                                                                                      ============================================

Basic (loss) earnings per common share from (Note 19):
  Continuing operations                                                               $  (1.85)       $  (5.93)         $   0.42
  Discontinued operations (Note 2)                                                        0.46            0.04              0.07
                                                                                      --------------------------------------------
(Loss) earnings per common share                                                      $  (1.39)       $  (5.89)         $   0.49
                                                                                      ============================================

Diluted (loss) earnings per common share from (Note 19):
  Continuing operations                                                               $  (1.85)       $  (5.93)         $   0.41
  Discontinued operations (Note 2)                                                        0.46            0.04              0.07
                                                                                      --------------------------------------------
(Loss) earnings per common share                                                      $  (1.39)       $  (5.89)         $   0.48
                                                                                      ============================================

</TABLE>

The accompanying notes are an integral part of these statements.


<PAGE>

<TABLE>
<CAPTION>
Consolidated Balance Sheets                                                            Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                        December 31,
------------------------------------------------------------------------------------------------------------------------------------
(In millions, except share and per share amounts)                                                2002                  2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>                   <C>
Assets

Current assets:
  Cash and cash equivalents (Note 1)                                                          $   1,471             $   1,037
  Short-term investments, at fair value (Note 7)                                                    619                 1,182
                                                                                              ----------------------------------
    Total cash and short-term investments                                                         2,090                 2,219
  Trade accounts receivable, net of doubtful accounts and allowances - $59 and $60                  470                   593
  Inventories (Note 8)                                                                              559                   725
  Deferred income taxes (Note 9)                                                                    296                   347
  Other accounts receivable                                                                         358                   149
  Prepaid expenses and other current assets                                                          52                    74
                                                                                              ----------------------------------
    Total current assets                                                                          3,825                 4,107
                                                                                              ----------------------------------

Restricted cash and investments (Note 1)                                                             82
Investments (Note 10)                                                                               769                   778
Property, net (Note 11)                                                                           3,705                 5,097
Goodwill (Note 12)                                                                                1,715                 1,937
Other intangible assets, net (Note 12)                                                              261                   352
Deferred income taxes (Note 9)                                                                      887                   313
Other assets                                                                                        304                   209
                                                                                              ----------------------------------

Total Assets                                                                                  $  11,548             $  12,793
                                                                                              ==================================

Liabilities and Shareholders' Equity

Current liabilities:
  Loans payable (Note 14)                                                                     $     204             $     477
  Accounts payable                                                                                  339                   441
  Other accrued liabilities (Note 13)                                                             1,137                 1,076
                                                                                              ----------------------------------
    Total current liabilities                                                                     1,680                 1,994
                                                                                              ----------------------------------

Long-term debt (Note 14)                                                                          3,963                 4,463
Postretirement benefits other than pensions (Note 15)                                               617                   608
Pensions (Note 15)                                                                                  455                    92
Other liabilities                                                                                    83                    96
Commitments and contingencies (Note 16)
Minority interests                                                                                   59                   119
Series B convertible preferred stock (Note 17)                                                                              7
Shareholders' equity (Note 18):
  Preferred stock - Par value $100.00 per share;
    Shares authorized: 10 million
      Series C mandatory convertible preferred stock - Shares issued:
      5.75 million; Shares outstanding:  1.55 million                                               155
  Common stock - Par value $0.50 per share; Shares authorized:
      3.8 billion; Shares issued: 1,267 million and 1,023 million                                   634                   512
  Additional paid-in capital                                                                      9,695                 9,532
  Accumulated deficit                                                                            (4,921)               (3,610)
  Treasury stock, at cost: 70 million and 79 million                                               (702)                 (827)
  Accumulated other comprehensive loss                                                             (170)                 (193)
                                                                                              ----------------------------------
    Total shareholders' equity                                                                    4,691                 5,414
                                                                                              ----------------------------------

Total Liabilities and Shareholders' Equity                                                    $  11,548             $  12,793
                                                                                              ==================================
</TABLE>

The accompanying notes are an integral part of these statements.


<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows                                                  Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------

                                                                                             For the years ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
(In millions)                                                                                2002         2001          2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>           <C>          <C>
Cash Flows from Operating Activities:
   (Loss) income from continuing operations                                               $ (1,780)     $(5,532)     $    363
   Adjustments to reconcile (loss) income from continuing operations
      to net cash (used in) provided by operating activities:
     Amortization of purchased intangibles                                                      43           76            29
     Amortization of goodwill                                                                               363           216
     Depreciation                                                                              618          621           502
     Restructuring, impairment and other charges                                             2,080        5,717
     Gain on repurchases of debt                                                              (176)
     Acquisition-related charges                                                                                          463
     Inventory write-down                                                                                   333
     Stock compensation charges                                                                             130            31
     Equity in earnings of associated companies, net of impairments,
       in excess of dividends received                                                         (25)         (94)         (104)
     Minority interests, net of dividends paid                                                 (98)         (22)          (83)
     Deferred tax benefit                                                                     (432)        (528)          (47)
     Interest expense on convertible debentures                                                 38           41             7
     Tax benefit on stock options                                                                            27           321
     Restructuring payments                                                                   (278)         (77)
     Increases in restricted cash                                                              (53)
     Changes in certain working capital items (Note 1)                                        (233)         240          (389)
     Other, net                                                                                (28)          87            64
                                                                                          ------------------------------------
Net cash (used in) provided by operating activities                                           (324)       1,382         1,373
                                                                                          ------------------------------------

Cash Flows from Investing Activities:
   Capital expenditures                                                                       (357)      (1,741)       (1,485)
   Acquisitions of businesses, net of cash acquired                                            (56)         (66)       (5,053)
   Net proceeds from sale of precision lens business                                           787
   Net proceeds from sale or disposal of assets                                                 92           67            80
   Net increase in long-term investments and other long-term assets                            (31)        (113)          (55)
   Short-term investments - acquisitions                                                    (2,177)      (1,320)       (1,482)
   Short-term investments - liquidations                                                     2,742          853           767
   Restricted investments - acquisitions                                                      (117)
   Restricted investments - liquidations                                                        88
  Other, net                                                                                    (2)           4             5
                                                                                          ------------------------------------
Net cash provided by (used in) investing activities                                            969       (2,316)       (7,223)
                                                                                          ------------------------------------

Cash Flows from Financing Activities:
   Net (repayments of) proceeds from loans payable                                            (490)         181          (386)
   Proceeds from issuance of long-term debt                                                     11          735         2,728
   Repayments of long-term debt                                                               (325)        (104)         (169)
   Redemption of Series B preferred stock                                                       (7)
   Proceeds from issuance of Series C preferred stock, net                                     557
   Proceeds from issuance of common stock, net                                                  52          247         4,744
   Repurchases of common stock                                                                 (23)
   Redemption of common stock for income tax withholding                                        (1)         (42)          (57)
   Cash dividends paid to preferred and common shareholders                                    (88)        (113)         (211)
                                                                                          ------------------------------------
Net cash (used in) provided by financing activities                                           (314)         904         6,649
                                                                                          ------------------------------------
Effect of exchange rates on cash                                                                43           (7)           (5)
                                                                                          ------------------------------------
Cash provided by (used in) continuing operations                                               374          (37)          794
Cash provided by (used in) discontinued operations (Note 2)                                     60           (5)            5
                                                                                          ------------------------------------
Net increase (decrease) in cash and cash equivalents                                           434          (42)          799
Cash and cash equivalents at beginning of year                                               1,037        1,079           280
                                                                                          ------------------------------------

Cash and cash equivalents at end of year                                                  $  1,471      $ 1,037      $  1,079
                                                                                          ====================================
</TABLE>

The accompanying notes are an integral part of these statements.


<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity                             Corning Incorporated and Subsidiary Companies
------------------------------------------------------------------------------------------------------------------------------------
(In millions)
                                                                                 Retained               Accumulated
                                 Series C             Capital in                 earnings                  other          Total
                                 Preferred  Common     excess of    Unearned   (accumulated Treasury   comprehensive  shareholders'
                                   stock     stock     par value  compensation   deficit)     stock    income (loss)     equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>        <C>        <C>           <C>          <C>        <C>          <C>          <C>
Balance, December 31, 1999                  $  136     $  1,479      $ (255)      $ 1,790    $ (656)      $  (31)      $  2,463

Net income                                                                            422                                   422
Foreign currency translation
  adjustment                                                                                                (118)          (118)
Net unrealized gain on
  investments,  net of tax                                                                                    22             22
                                                                                                                       -----------
Total comprehensive income                                                                                                  326

Shares issued in acquisitions                   10        2,980                                                           2,990
Shares issued in equity offerings               32        4,560                                                           4,592
Other shares issued                              3          261                                                             264
Stock split                                    320         (320)
Shares issued to benefit plans                               45         (26)                                                 19
Tax benefit from exercise of
  options                                                   321                                                             321
Dividends on stock ($0.24 per
  share)                                                                             (211)                                 (211)
Other, net                                                  (11)        (23)                    (97)                       (131)
                                 ---------------------------------------------------------------------------------------------------
Balance, December 31, 2000                     501        9,315        (304)        2,001      (753)        (127)        10,633

Net loss                                                                           (5,498)                               (5,498)
Foreign currency translation
  adjustment                                                                                                 (31)           (31)
Net unrealized loss on
  investments, net of tax                                                                                    (45)           (45)
Other comprehensive income                                                                                    10             10
                                                                                                                       -----------
Total comprehensive loss                                                                                                 (5,564)

Shares issued in acquisitions                    2          163                                                             165
Shares issued in equity offerings                7          218                                                             225
Other shares issued                              2           77                                                              79
Shares issued to benefit plans                             (166)        239                     (33)                         40
Tax benefit from exercise of
  options                                                    27                                                              27
Dividends on stock ($0.12 per
  share)                                                                             (113)                                 (113)
Other, net                                                  (97)         60                     (41)                        (78)
                                 ---------------------------------------------------------------------------------------------------
Balance, December 31, 2001                     512        9,537          (5)       (3,610)     (827)        (193)         5,414

Net loss                                                                           (1,302)                               (1,302)
Foreign currency translation
  adjustment                                                                                                 208            208
Minimum pension liability
  adjustment                                                                                                (173)          (173)
Net unrealized gain on
  investments, net of tax                                                                                      6              6
Other comprehensive loss                                                                                     (18)           (18)
                                                                                                                       -----------
Total comprehensive loss                                                                                                 (1,279)

Issuance of Series C preferred
  stock, net                     $  575                     (18)                                                            557
Series C preferred stock
  conversions                      (420)       107          313
Shares issued in acquisitions                   15           34                                                              49
Shares issued to benefit plans                              (97)                                148                          51
Purchase of common stock
  for treasury                                                                                  (23)                        (23)
Dividends on preferred stock                               (118)                                                           (118)
Other, net                                                   46           3            (9)                                   40
                                 ---------------------------------------------------------------------------------------------------
Balance, December 31, 2002       $  155     $  634     $  9,697      $   (2)      $(4,921)   $ (702)      $ (170)      $  4,691
                                 ===================================================================================================
</TABLE>


The accompanying notes are an integral part of these statements.


<PAGE>


Notes to Consolidated Financial Statements
Corning Incorporated and Subsidiary Companies
--------------------------------------------------------------------------------


1.   Summary of Significant Accounting Policies

Principles of Consolidation

The  consolidated  financial  statements  include the  accounts of all  entities
controlled by Corning and its majority-owned  domestic and foreign subsidiaries,
after  elimination  of all  material  intercompany  accounts,  transactions  and
profits.

The equity method of accounting is used for investments in associated  companies
which are not controlled by Corning and in which Corning's interest is generally
between  20% and 50%.  Corning's  share of  earnings  or  losses  of  associated
companies,  in which at least 20% of the voting securities is owned, is included
in the consolidated  operating  results except for investments  where Corning is
not able to exercise  considerable  influence  over the  operating and financial
decisions of the investee, in which case, the cost method is used.

On December 13, 2002,  Corning completed the sale of its precision lens business
to 3M Company (3M). Corning's Consolidated Statements of Operations,  Cash Flows
and  related  footnotes  present the  precision  lens  business as  discontinued
operations.

Certain  amounts for 2001 and 2000 have been  reclassified  to conform  with the
2002 classifications.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect amounts reported therein.  Due to the
inherent  uncertainty  involved in making estimates,  actual results reported in
future periods may be based upon amounts that could differ from those estimates.

Revenue Recognition

Corning  recognizes  revenue  when it is  realized  or  realizable  and has been
earned. Product revenue is recognized when persuasive evidence of an arrangement
exists,  the  product  has been  delivered  and  legal  title  and all  risks of
ownership have been transferred,  written contract and sales terms are complete,
customer  acceptance  has occurred and payment is  reasonably  assured.  Corning
reduces revenue for estimated  product  returns,  allowances and price discounts
based on past experience.

Foreign Currencies

Balance  sheet  accounts  of  foreign  subsidiaries  are  translated  at current
exchange rates and  statements of operations  accounts are translated at average
exchange  rates for the year.  Translation  gains and losses are  reported  as a
separate  component of accumulated other  comprehensive  income (loss).  Foreign
currency  transaction  gains and losses  affecting  cash flows are  included  in
current earnings.

Stock-Based Compensation

Pursuant  to  Statement  of  Financial  Accounting  Standards  (SFAS)  No.  123,
"Accounting for Stock-Based  Compensation,"  Corning applies the recognition and
measurement  principles  of  Accounting  Principles  Board (APB) Opinion No. 25,
"Accounting  for Stock  Issued to  Employees,"  to its stock  options  and other
stock-based compensation plans. These plans are more fully described in Note 20.

In accordance with APB No. 25, compensation cost for stock options is recognized
in income based on the excess,  if any, of the quoted  market price of the stock
at the grant  date of the  award or other  measurement  date over the  amount an
employee must pay to acquire the stock. Generally,  the exercise price for stock
options  granted  to  employees  equals  or  exceeds  the fair  market  value of
Corning's common stock at the date of grant, thereby resulting in no recognition
of compensation expense by Corning.


<PAGE>


1.   Summary of Significant Accounting Policies (continued)

The following table illustrates the effect on income from continuing  operations
and  earnings  per share if  Corning  had  applied  the fair  value  recognition
provisions of SFAS No. 123 to stock-based employee  compensation.  The estimated
fair  value  of each  Corning  option  is  calculated  using  the  Black-Scholes
option-pricing model.

(In millions, except per share amounts):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Years ended December 31,
                                                                           ---------------------------------------------
                                                                              2002             2001              2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>              <C>
(Loss) income from continuing operations - as reported                     $  (1,780)        $ (5,532)        $     363
Less: Dividend requirements of preferred stock                                  (128)              (1)               (1)
------------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations available to common
  shareholders - as reported                                                  (1,908)          (5,533)              362
Add:  Stock-based employee compensation expense
  determined under APB No. 25, included in reported
  (loss) income from continuing operations, net of tax                             1               79                19
Less:  Stock-based employee compensation expense
  determined under fair value based method, net of tax                          (278)            (446)             (131)
------------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations available to common
  shareholders - pro forma                                                 $  (2,185)        $ (5,900)        $     250
------------------------------------------------------------------------------------------------------------------------------------

(Loss) earnings per common share from continuing operations:
    Basic - as reported                                                    $   (1.85)        $  (5.93)        $    0.42
    Basic - pro forma                                                      $   (2.12)        $  (6.32)        $    0.29

    Diluted - as reported                                                  $   (1.85)        $  (5.93)        $    0.41
    Diluted - pro forma                                                    $   (2.12)        $  (6.32)        $    0.28
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Cash and Cash Equivalents

All short-term, highly liquid investments with original maturities of 90 days or
less, are considered cash equivalents.

Supplemental disclosure of cash flow information was as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Years ended December 31,
                                                                                       ---------------------------------------
(In millions)                                                                             2002          2001             2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>           <C>              <C>
Changes in certain working capital items:
     Trade accounts receivable                                                         $   153       $   666          $  (232)
     Inventories                                                                           135           (47)            (279)
     Other current assets                                                                 (363)           92             (192)
     Accounts payable and other current liabilities, net of restructuring payments        (158)         (471)             314
------------------------------------------------------------------------------------------------------------------------------------
     Total                                                                             $  (233)      $   240          $  (389)
------------------------------------------------------------------------------------------------------------------------------------

Cash paid for interest and income taxes:
     Interest                                                                          $   112       $   111          $   132
     Income taxes, net of refunds                                                      $    60       $    99          $   127
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Short-Term Investments

Corning's  short-term  investments  consist  of debt  securities  classified  as
available-for-sale,  which are  stated  at  estimated  fair  value.  These  debt
securities include U.S. treasury notes, state and municipal bonds,  asset-backed
securities, corporate bonds, commercial paper and certificates of deposit. These
investments are on deposit with a major financial institution.  Unrealized gains
and losses, net of tax, are computed on the basis of specific identification and
are reported as a separate component of accumulated other  comprehensive  income
(loss) in shareholders' equity until realized.

Inventories

Inventories  are  stated at the  lower of cost  (first-in,  first-out  basis) or
market.


<PAGE>


1.   Summary of Significant Accounting Policies (continued)

Restricted Cash and Investments

Restricted  cash and  investments  represents  cash and  investments  Corning is
temporarily  unable to access  or funds set aside for other  legally  restricted
purposes.  Restricted cash consists  primarily of cash provided as collateral as
financial assurance for performance bonds and self-insured  workers compensation
liabilities.  Restricted investments include U.S. treasury securities pledged as
collateral to secure the payments on a promissory  note.  The note was issued in
connection  with a one-time  dividend  that was  declared at the issuance of the
Series C convertible preferred stock.

Other Investments

Corning  has  other  cost-based  investments  primarily  in  nonpublicly  traded
companies.  These  investments are included in Investments on Corning's  balance
sheet  and are  generally  carried  at cost.  A  decline  in the  value of these
cost-based investments below cost that is deemed other than temporary is charged
to earnings, resulting in a new cost basis for that investment.

Property and Depreciation

Land,  buildings and equipment  are recorded at cost.  Depreciation  is based on
estimated  useful  lives of  properties  using  the  straight-line  method.  The
estimated useful lives range from 20 to 40 years for buildings and 3 to 20 years
for the majority of Corning's equipment.

Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," Corning
has  selected  the  fourth  quarter to  perform  an annual  impairment  test for
goodwill.  Goodwill is allocated to Corning's  various reporting units which are
the same as  Corning's  reportable  operating  segments.  SFAS No. 142  requires
Corning to compare the fair value of the reporting  unit to its carrying  amount
on an annual basis to determine  if there is potential  impairment.  If the fair
value of the reporting unit is less than its carrying  value, an impairment loss
is  recorded  to the  extent  that the fair  value of the  goodwill  within  the
reporting unit is less than the carrying  value.  The fair value for goodwill is
determined based on discounted cash flows,  market multiples or appraised values
as appropriate.

Other  intangible  assets  are  recorded  at cost  and  amortized  over  periods
generally ranging from 5 to 20 years.

Impairment of Long-Lived Assets

Corning reviews the recoverability of its long-lived  assets,  such as plant and
equipment,  goodwill,  intangible assets and investments, when events or changes
in  circumstances  occur that indicate  that the carrying  value of the asset or
asset group may not be  recoverable.  The  assessment of possible  impairment is
based on Corning's  ability to recover the carrying  value of the asset or asset
group from the  expected  future  pre-tax cash flows  (undiscounted  and without
interest charges) of the related  operations.  If these cash flows are less than
the carrying  value of such asset,  an  impairment  loss is  recognized  for the
difference  between  estimated fair value and carrying value. The measurement of
impairment  requires management to estimate future cash flows and the fair value
of long-lived assets.

Treasury Stock

Shares of common stock  repurchased  by Corning are recorded at cost as treasury
stock and result in a  reduction  of  stockholders'  equity in the  consolidated
balance  sheets.  From  time to time,  treasury  shares  may be  reissued  under
Corning's employee benefit plans. When shares are reissued,  the company uses an
average cost method for determining cost. The difference between the cost of the
shares and the  reissuance  price is added or deducted from  additional  paid-in
capital.

Income Taxes

Corning uses the asset and liability approach to account for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the expected
future tax  consequences of differences  between the carrying  amounts of assets
and liabilities and their respective tax basis using enacted tax rates in effect
for the year in which the  differences  are  expected to reverse.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
income in the period when the change is enacted. Deferred tax assets are reduced
by a valuation  allowance when, in the opinion of management,  it is more likely
than not  that  some  portion  or all of the  deferred  tax  assets  will not be
realized.


<PAGE>


1.   Summary of Significant Accounting Policies (continued)

Derivative Instruments

Corning participates in a variety of foreign exchange forward contracts, foreign
exchange  option  contracts  and interest  rate swaps entered into in connection
with the  management  of its exposure to  fluctuations  in foreign  exchange and
interest  rates.  These  financial  exposures  are  managed in  accordance  with
corporate policies and procedures.

All  derivatives  are  recorded  at fair value on the balance  sheet.  Effective
changes  in the fair value of  derivatives  designated  as cash flow  hedges and
hedges of net  investments  in foreign  operations  are recorded in  accumulated
other  comprehensive  income (loss).  Amounts are reclassified  from accumulated
other  comprehensive  income  (loss) when the  underlying  hedged  item  impacts
earnings.  Changes in the fair  value of  derivatives  designated  as fair value
hedges are recorded  currently in earnings  offset to the extent the  derivative
was  effective by the changes in the fair value of the hedged  item.  Changes in
the fair value of derivatives not designated as hedging instruments are recorded
currently in earnings.

Accounting Changes

Derivative Instruments and Hedging Activities
---------------------------------------------
Effective January 1, 2001, Corning adopted Financial  Accounting Standards Board
(FASB)  SFAS  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities,"  as amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 requires
that  all  derivative  financial  instruments  be  recognized  in the  financial
statements  and measured at fair value  regardless  of the purpose or intent for
holding them. Changes in the fair value of derivative financial  instruments are
either  recognized  periodically in net earnings or shareholders'  equity,  as a
component of other comprehensive income,  depending on whether the derivative is
being used to hedge  changes in fair value or cash flows.  Changes in fair value
of  derivatives  not  designated  as  hedging  instruments  and the  ineffective
portions  of hedges are  recognized  in  earnings  in the  current  period.  The
adoption  of SFAS No.  133 as of  January  1,  2001,  resulted  in a  cumulative
after-tax  credit to  comprehensive  income of $3  million.  For the year  ended
December  31,  2001,  an  after-tax  loss of $4 million  was  recorded in "other
expense,  net" for the ineffective portion of cash flow hedges.  Corning did not
have any  ineffective  hedges for the year ended  December 31, 2002.  The amount
expected to be reclassified from other  comprehensive  loss to earnings over the
next 12 months is a loss of approximately $14 million after-tax.

Corning has issued foreign currency denominated debt that has been designated as
a hedge of the net investment in a foreign  operation.  The effective portion of
the  changes  in fair value of the debt is  reflected  as a  component  of other
comprehensive  income  (loss)  as  part  of  the  foreign  currency  translation
adjustment.  During 2001, the after-tax amounts included in other  comprehensive
income (loss) as a result of the net investment hedge was $6 million.

Goodwill and Other Intangible Assets
------------------------------------
In June 2001, the FASB issued SFAS No. 141,  "Business  Combinations,"  and SFAS
No.  142,  "Goodwill  and Other  Intangible  Assets."  Among  other  provisions,
goodwill  is no longer  amortized  but is subject to  impairment  tests at least
annually.  Corning  selected the fourth quarter to perform an annual  impairment
test for  goodwill.  Corning  adopted  SFAS No. 142 on January 1, 2002.  Corning
completed  its initial  impairment  review  during the first quarter of 2002 and
concluded a transitional impairment charge from the adoption of the standard was
not required. As described in Note 4, during the fourth quarter of 2002, Corning
recorded a goodwill impairment charge in accordance with SFAS No. 142.


<PAGE>


1.   Summary of Significant Accounting Policies (continued)

The following table presents a reconciliation  of reported net (loss) income and
(loss)  earnings per share to adjusted net (loss) income and (loss) earnings per
share, as if SFAS No. 142 had been in effect as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Years ended December 31,
                                                                       -----------------------------------------
(In millions)                                                             2002            2001           2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>
Reported net (loss) income                                             $  (1,302)     $  (5,498)     $     422
Goodwill amortization, net of income taxes                                                  345            203
                                                                       -----------------------------------------
Adjusted net (loss) income                                             $  (1,302)     $  (5,153)     $     625
                                                                       =========================================

Reported net (loss) income per share - basic                           $   (1.39)     $   (5.89)     $    0.49
Goodwill amortization, net of income taxes                                                 0.37           0.24
                                                                       -----------------------------------------
Adjusted net (loss) income per share - basic                           $   (1.39)     $   (5.52)     $    0.73
                                                                       =========================================

Reported net (loss) income per share - diluted                         $   (1.39)     $   (5.89)     $    0.48
Goodwill amortization, net of income taxes                                                 0.37           0.23
                                                                       -----------------------------------------
Adjusted net (loss) income per share - diluted                         $   (1.39)     $   (5.52)     $    0.71
                                                                       =========================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Other New Standards Adopted

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived   Assets."  This  standard  supercedes  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of." The  standard  retains  the  previously  existing  accounting
requirements  related to the  recognition  and  measurement of the impairment of
long-lived   assets  to  be  held  and  used  while  expanding  the  measurement
requirements  of  long-lived  assets  to be  disposed  of  by  sale  to  include
discontinued  operations.  It also expands on the previously  existing reporting
requirements  for  discontinued  operations  to include a component of an entity
that either has been  disposed  of or is  classified  as held for sale.  Corning
adopted  SFAS No. 144 on January 1, 2002.  The  adoption of SFAS No. 144 did not
have a material  impact on its  consolidated  financial  position  or results of
operations.

In April  2002,  the FASB  issued  SFAS No.  145,  which  rescinds  SFAS No.  4,
"Reporting  Gains  and  Losses  from  Extinguishment  of  Debt,"  SFAS  No.  44,
"Accounting  for  Intangible   Assets  of  Motor  Carriers"  and  SFAS  No.  64,
"Extinguishments  of Debt Made to Satisfy  Sinking-Fund  Requirements and amends
SFAS No. 13,  "Accounting  for Leases." This  statement  updates,  clarifies and
simplifies  existing accounting  pronouncements.  As a result of rescinding SFAS
No. 4 and SFAS No. 64, the criteria in APB No. 30 will be used to classify gains
and losses from  extinguishment of debt.  Corning adopted the reporting guidance
of SFAS No. 145 in the second quarter of 2002 in its accounting for  repurchases
and  retirement of debt.  See Note 14. The remaining  provisions of SFAS No. 145
will be  adopted by Corning  in fiscal  year 2003.  Corning  does not expect the
adoption  of  the  remaining  provisions  to  have  a  material  impact  on  its
consolidated financial position or results of operations.

New Accounting Standards

In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations."  This standard  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. Corning is required to implement SFAS No. 143
on January 1, 2003.  Corning  does not expect  this  standard to have a material
impact on its consolidated financial position or results of operations.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." This standard nullifies Emerging Issues Task
Force Issue No. 94-3,  "Liability  Recognition for Certain Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring)."  This  standard  requires  that  a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred rather than the date of an entity's commitment to an exit plan. Corning
is  required  to  implement  SFAS No. 146 on January 1, 2003.  Corning  does not
expect this  standard to have a material  impact on its  consolidated  financial
position or results of operations.


<PAGE>


1.   Summary of Significant Accounting Policies (concluded)

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others," which expands previously issued accounting guidance and
disclosure  requirements for certain guarantees.  The interpretation requires an
entity to recognize  an initial  liability  for the fair value of an  obligation
assumed by issuing a  guarantee.  The  provision  for  initial  recognition  and
measurement  of  the  liability  will  be  applied  on a  prospective  basis  to
guarantees  issued or modified after December 31, 2002.  Corning does not expect
this  interpretation  to have a material  impact on its  consolidated  financial
position or results of operations.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123," which provides optional  transition  guidance for those companies electing
to voluntarily adopt the accounting provisions of SFAS No. 123. In addition, the
statement  mandates  certain  new  disclosures  that  are  incremental  to those
required  by SFAS No. 123.  Corning  will  continue  to account for  stock-based
compensation  in  accordance  with APB No. 25. As such,  Corning does not expect
this standard to have a material impact on its consolidated  financial  position
or results of operations.  Corning has adopted the disclosure-only provisions of
SFAS No. 148 at December 31, 2002.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities, an Interpretation of ARB No. 51," which requires all
variable interest entities (VIEs) to be consolidated by the primary beneficiary.
The primary  beneficiary is the entity that holds the majority of the beneficial
interests  in the  VIE.  In  addition,  the  interpretation  expands  disclosure
requirements for both variable  interest  entities that are consolidated as well
as VIEs from  which  the  entity is the  holder of a  significant  amount of the
beneficial interests,  but not the majority. The disclosure requirements of this
interpretation  are effective for all financial  statements issued after January
31, 2003. The consolidation  requirements of this  interpretation  are effective
for all periods beginning after June 15, 2003. Management is still assessing the
impacts of this interpretation,  however, it is reasonably possible that Corning
will be considered the primary  beneficiary of three  existing  special  purpose
entities and therefore  would need to consolidate  these  entities  beginning on
July 1, 2003.  The assets  and debt of these  entities  at  December  31,  2002,
approximates $46 million.

2.   Discontinued Operations

Precision Lens Business

On December 13, 2002, Corning completed the sale of its Cincinnati, OH precision
lens business to 3M Company  (3M).  This business  manufactures  precision  lens
assemblies  for  projection  video  systems.  Corning  sold the  precision  lens
business  for cash  proceeds up to $850  million,  of which $50 million has been
deposited in an escrow account.  A portion of the escrow account balance will be
used to pay state  income  taxes  relating  to the  transaction.  The  remaining
balance plus accrued interest will be paid to Corning in December 2003,  subject
to any amounts due to 3M relating to certain  indemnifications  made by Corning.
The  transaction  price is also subject to adjustment  due to changes in working
capital between signing and closing.

In 2002,  proceeds  from the sale of  precision  lens  were  approximately  $800
million in cash.  The gain on the sale was $415 million,  net of tax,  which has
been  recorded  in  income  from  discontinued  operations  in the  Consolidated
Statements of Operations.  In 2003,  Corning could record an additional  gain on
the sale of up to $25 million,  net of tax. This amount is conditional  upon the
ultimate  amount paid to Corning from the escrow account.  Management  currently
expects to  receive  additional  proceeds  of $10  million  from 3M in the first
quarter  of 2003  and $40  million  in the  fourth  quarter  of  2003,  which is
currently held in escrow.

The precision  lens business is accounted  for as a  discontinued  operation and
therefore,  the  results of  operations  and cash flows have been  removed  from
Corning's  results of  continuing  operations  for all  periods  presented.  The
precision  lens  business  was  part of  Corning's  former  Information  Display
Segment.  The results of operations  for the  precision  lens business have been
excluded from the Operating Segments data.


<PAGE>


2.   Discontinued Operations (concluded)

Summarized selected financial information for the discontinued operations
related to the precision lens business is as follows (in millions):
--------------------------------------------------------------------------------
                                       For the years ended December 31,
                                    ----------------------------------------
                                      2002           2001            2000
--------------------------------------------------------------------------------

Net sales                           $   268        $   225         $   207
                                    ========================================


Income before taxes                 $   100        $    50         $    70
Gain on sale before taxes               652
Provision for income taxes              274             16              24
                                    ----------------------------------------

Net income                          $   478        $    34         $    46
                                    ========================================

--------------------------------------------------------------------------------

Distribution of Shares of Quest Diagnostics and Covance Inc.

On  December  31,  1996,   Corning   distributed  shares  of  Quest  Diagnostics
Incorporated and Covance Inc.,  which  collectively  comprised  Corning's Health
Care  Services   Segment,   to  its  shareholders  on  a  pro  rata  basis  (the
Distributions).  Corning agreed to indemnify  Quest  Diagnostics on an after-tax
basis for the settlement of certain  government claims and against certain other
claims  that  were   pending  at  December  31,   1996.   Coincident   with  the
Distributions,  Corning recorded a payable to Quest Diagnostics of approximately
$25 million, which was management's best estimate of amounts which were probable
of  being  paid by  Corning  to  Quest  Diagnostics  to  satisfy  the  remaining
indemnified  claims  on  an  after-tax  basis.   Quest  Diagnostics   settled  a
significant matter with the Department of Justice late in 2000 requiring Corning
to reimburse Quest Diagnostics $9 million. As a result, in the fourth quarter of
2000 Corning released  reserves  totaling $13 million after-tax in excess of the
indemnified settlement between Quest Diagnostics and the Department of Justice.

3.   Inventory Write-down

During the second quarter of 2001, major customers in the photonic  technologies
business reduced their order forecasts and canceled orders already placed.  As a
result,  management  determined that certain products were not likely to be sold
in their product life cycle.  Corning recorded a charge to write-down excess and
obsolete inventory,  including estimated purchase  commitments,  of $273 million
($184 million  after-tax)  in "cost of sales" in the second  quarter of 2001. In
the fourth quarter of 2001, Corning recorded an additional charge of $60 million
($37 million  after-tax)  in "cost of sales" for excess and  obsolete  inventory
primarily in the photonic  technologies  business in response to continued  weak
demand.

During the second quarter of 2002, the photonic  technologies business favorably
resolved  an open issue from the second  quarter of 2001 with a major  customer,
which  resulted in the  recognition of revenue of $14 million and pre-tax income
of $3 million.  This  revenue was  recognized  in part on shipment of  inventory
previously  reserved.  In addition,  the business  settled an open matter with a
significant  vendor,  which  resulted in the reversal of a vendor reserve of $20
million that was  included in the second  quarter  2001  charge.  In total,  the
impact of these  settlements  in the second  quarter was  pre-tax  income of $23
million.

4.   Impairment of Goodwill

2002 Charge

As  discussed  in New  Accounting  Standards  and  Note  1 to  the  Consolidated
Financial  Statements,  in January  2002,  Corning  adopted SFAS No. 142,  which
requires  companies to stop amortizing  goodwill and certain  intangible  assets
with an indefinite useful life. Instead,  SFAS No. 142 requires that goodwill be
reviewed  for  impairment  upon  adoption of SFAS No. 142  (January 1, 2002) and
annually  thereafter.  Corning  performed an initial  benchmark  assessment upon
adoption at January 1, 2002,  and  determined  that a transition  charge was not
required.  Corning  chose the fourth  quarter to conduct  its annual  impairment
test.

Under  SFAS No.  142,  goodwill  impairment  occurs  if the net book  value of a
reporting  unit  exceeds its  estimated  fair value.  The  majority of Corning's
goodwill is included in the telecommunications reporting unit, which is the same
as the  Telecommunications  Segment.  The test  completed in the fourth  quarter
indicated  that the recorded book value of this reporting unit exceeded its fair
value, as determined by discounted cash flows.


<PAGE>


4.   Impairment of Goodwill (concluded)

Management  believes the  telecommunication  industry is currently depressed but
will  ultimately  recover.  Management does not expect growth in this segment in
the  short-term,  but believes  that growth will return to this segment by 2005.
Corning's  view  that the  industry  will  recover  is  based  on the fact  that
bandwidth demand continues to grow currently,  and the belief that a combination
of public policy changes,  consolidation and recovery of industry  players,  and
the advancement of profitable  broadband  business models will drive recovery in
the  future.  The  decrease in fair value from that  measured  in the  benchmark
assessment primarily reflects:

.    a delay in the timing of the  expected  recovery  from late 2002,  or early
     2003 to 2005,
.    a reduction in the short-term cash flow expectations of the fiber and cable
     business and a lower base from which the expected recovery will occur, and
.    a  reduction  in the short and  long-term  cash  flow  expectations  of the
     photonic technologies business.

Management  retained  valuation  specialists  to assist in the  valuation of its
tangible and  identifiable  intangible  assets for purposes of  determining  the
implied  fair value of goodwill at December  31, 2002.  Upon  completion  of the
annual assessment, Corning recorded a non-cash impairment charge of $400 million
($294  million  after-tax)  to reduce  the  carrying  value of  goodwill  in the
telecommunications reporting unit to its estimated fair value of $1.6 billion.

Management cannot provide  assurance that future impairment  charges will not be
required if the  telecommunications  industry  does not recover as  projected by
management in its expected future cash flow estimates.  Management must exercise
judgment in assessing the  recoverability of goodwill.  See Critical  Accounting
Estimates for related discussion.

2001 Charge

During the first half of 2001, Corning experienced a significant decrease in the
rate of growth of its  Telecommunications  Segment,  primarily  in the  photonic
technologies business,  due to a dramatic decline in infrastructure  spending in
the telecommunications  industry.  During the second quarter, major customers in
the photonic  technologies  business  reduced their order forecasts and canceled
orders  already  placed.  As a result,  management  determined  that the  growth
prospects of this business were significantly less than previously  expected and
those of historical periods.

Corning reviews the recoverability of its long-lived assets,  including goodwill
and other intangible assets,  when events or changes in circumstances occur that
indicate the carrying value of the asset may not be recoverable.  As a result of
the business  conditions noted above,  Corning  concluded such an assessment was
required for its photonic technologies  business in the second quarter.  Corning
assesses  recoverability  of the carrying value based upon  cumulative  expected
future pre-tax cash flows  (undiscounted  and without  interest  charges) of the
related operations.

As a  result  of this  test,  Corning  determined  that the  long-lived  assets,
including  goodwill  and other  intangibles  related to the  acquisition  of the
Pirelli  optical  components and devices  business (the Pirelli  transaction) in
December  2000,  as well as those of the unit into  which  NetOptix  Corporation
(acquired in May 2000) had been integrated,  were not recoverable under SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be  Disposed  of," which was the  governing  U.S.  generally  accepted
accounting principle (GAAP) guidance at that time. The impairment assessment was
performed  at these  levels as  discrete  cash  flows were  available  for these
divisions  within the photonic  technologies  business.  Corning's  policy is to
write-down long-lived assets to fair value in such circumstances.

Management  estimated  fair value using  several  techniques.  While each method
generated  comparable fair values,  management  adjusted the assets to estimates
based on average  multiples of  forecasted  revenues and earnings of  comparable
publicly  traded  companies  with  operations  in the optical  component  market
segment.  This  valuation  method is  consistent  with that used in the original
valuation of the  acquisitions  of Net Optix and certain assets from the Pirelli
transaction.  The fair value of these  assets were lower in June 2001 from their
acquisition  dates as market  multiples  had  changed  from those  reflected  in
transactions consummated in 2000.

In the  second  quarter  of 2001,  Corning  recorded  pre-tax  charges of $4,648
million to impair a  significant  portion of goodwill and $116 million to impair
other intangible assets. Of the total goodwill charge of $4,648 million,  $3,038
million  related  to the  Pirelli  transaction  and  $1,610  million  related to
goodwill resulting from the acquisition of NetOptix Corporation.

In the  second  quarter of 2001,  it was  determined  that there were  events of
impairment within portions of the photonic technologies business. The accounting
literature effective at that time (SFAS No. 121) required that intangible assets
be assessed for recoverability at the lowest level for which discrete cash flows
can be measured. As a result of this analysis, Corning recorded a charge of $116
million to impair a portion of the patents acquired in the Pirelli  transaction.
The valuation methods from which this results are described above.


<PAGE>


5.   Restructuring Actions

2002 Restructuring Actions

The continued  decline in demand in the  Telecommunications  Segment during 2002
required   additional   restructuring   beyond  that  taken  in  2001  to  bring
manufacturing  capacity in line with  revenue  projections.  Corning  recorded a
total of $1.3  billion  in pre-tax  charges  over the  second,  third and fourth
quarters. Actions approved and initiated in 2002 included the following:

.    permanent  closing of Corning's optical fiber  manufacturing  facilities in
     Noble Park, Victoria,  Australia, and Neustadt bei Coburg, Germany. Corning
     also mothballed its optical fiber manufacturing facility in Concord, NC and
     transferred certain capabilities to its Wilmington, NC facility,
.    reductions in capacity and employment in Corning's cabling and hardware and
     equipment locations worldwide to reduce costs,
.    permanent   closure  of  its   photonic   technologies   thin  film  filter
     manufacturing facility in Marlborough, MA,
.    permanent  abandonment  of  certain  construction  projects  that  had been
     stopped   in  2001  in  the   fiber   and   cable   business   within   the
     Telecommunications Segment,
.    closure   of   minor   manufacturing    facilities,    primarily   in   the
     Telecommunications Segment,
.    closure and consolidation of research facilities,
.    elimination  of  positions  worldwide  through  voluntary  and  involuntary
     programs, and
.    divestiture  of a portion of the  controls and  connectors  business in the
     Telecommunications Segment.

In addition,  Corning  impaired  cost based  investments  in a number of private
telecommunications companies based upon a decision in the fourth quarter of 2002
to divest the portfolio.

     Restructuring Charges
     ---------------------
     The 2002  restructuring  charges of $447 million  included  $376 million of
     employee  separation costs (including  special  termination and curtailment
     losses  related to pension  and  postretirement  health  care  plans),  $85
     million in other exit costs  (principally  lease  termination  and contract
     cancellation  payments)  and a $14  million  credit  related  to  the  2001
     restructuring actions. The charge entailed the elimination of approximately
     7,100 hourly and salaried positions in the  Telecommunications  Segment and
     corporate research and administrative staffs organizations.  Employees have
     been informed of the  restructuring  initiatives and benefits  available to
     them under applicable  benefit plans.  These benefits included  involuntary
     separation, early retirement and social programs.

     Impairment of Plant and Equipment
     ---------------------------------
     Corning has evaluated the carrying value of the  long-lived  assets at each
     site impacted by the  restructuring  actions for  impairment.  The carrying
     value of a long-lived  asset is considered  impaired  when the  anticipated
     separately  identifiable  undiscounted  cash flows from that asset are less
     than  the  carrying  value  of  the  asset.  The  impairment  charges  were
     determined  based on the amount by which the  carrying  value  exceeded the
     fair market value of the asset.  Corning  recorded  $712 million in 2002 to
     impair  plant  and  equipment  related  to  facilities  to be  shutdown  or
     disposed,   primarily  in  the  fiber  and  cable  business,  the  photonic
     technologies  business  and  certain  research  facilities.  The charge was
     partially offset by an $11 million  adjustment to assumed salvage values on
     asset disposals,  related to the 2001 restructuring  actions.  Of the total
     charge,  $107 million pertained to abandoned  construction  projects in the
     fiber and cable business, primarily the latest expansion in Concord, NC and
     Oklahoma City, OK.

     A significant  portion of the assets  impaired were recently  acquired,  or
     built in connection  with capacity  expansions  in  anticipation  of future
     demand.  Most of the impaired  facilities are currently available for sale,
     others will be demolished or abandoned.  The remaining  impaired  equipment
     will be auctioned, sold, disposed of or abandoned during 2003.

     Loss on Divestiture
     -------------------
     In the second quarter of 2002,  Corning completed the sale of its appliance
     controls group which was included in the controls and  connectors  business
     in the Telecommunications Segment. In the second and third quarter of 2002,
     Corning  received  cash of $24  million,  note  proceeds  of $6 million and
     recorded  a loss on the sale of  approximately  $16  million  ($10  million
     after-tax) which is included in impairment charges.


<PAGE>


5.   Restructuring Actions (continued)

     Impairment of Cost Investments
     ------------------------------
     During the  second and fourth  quarters  of 2002,  Corning  recorded  total
     charges of $107 million ($66 million  after-tax)  for other than  temporary
     declines in certain cost investments in the Telecommunications  Segment. In
     the fourth quarter,  Corning  decided to divest its remaining  portfolio of
     cost investments in private  telecommunications  related  companies.  These
     investments have been written down to their estimated fair value based upon
     information available from prospective purchasers.

The following table illustrates the charges, credits and balances of the
restructuring reserves as of December 31, 2002 (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Remaining
                                                                             Net                          Cash         reserve at
                                                          January 1,      charges/        Non-cash      payments        Dec. 31,
                                                             2002          credits         charges       in 2002          2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>              <C>           <C>            <C>
Restructuring charges:
Employee related costs                                    $    198       $     371 (a)    $    40       $    256       $     273
Other charges                                                   78              76 (b)                        22             132
                                                          ----------------------------------------------------------------------
     Total restructuring charges                          $    276       $     447        $    40       $    278       $     405
                                                          ----------------------------------------------------------------------

Impairment of long-lived assets:
Assets to be disposed of by sale or abandonment                          $     717 (c)    $   717
Cost investments                                                               107            107
                                                                         ------------------------
     Total impairment charges                                            $     824        $   824
                                                                         ------------------------

Total restructuring and impairment
  charges and credits                                                    $   1,271
Tax benefit and minority interest                                              342
                                                                         ---------
Restructuring and impairment charges and credits, net                    $     929
                                                                         =========

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Amount is net of $5 million adjustment in employee related costs reflecting
     the difference between estimated and actual costs.
(b)  Amount is net of $9 million  adjustment in other exit costs  reflecting the
     difference between estimated and actual costs.
(c)  Amount is net of $11 million  adjustment to assumed salvage values on asset
     disposals and includes $16 million loss on divestiture.

The following table illustrates the charges for 2002 restructuring actions as it
relates to Corning's operating segments (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Charges for restructuring actions
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Functions
                                                Telecom-                         Including
                                               munications     Technologies      Research          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>              <C>
Charges for restructuring actions              $ 1,053           $    10         $   208          $  1,271
                                               ============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table  illustrates the headcount  reduction  amongst U.S.  Hourly,
U.S. Salaried and Non-U.S. positions:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Headcount reduction
------------------------------------------------------------------------------------------------------------------------------------
                                               U.S. Hourly     U.S. Salaried     Non-U.S.            Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>             <C>               <C>
Headcount reduction                              1,650             2,950           2,500             7,100
                                               ============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 2002,  approximately  5,100 of the 7,100  employees  had been
separated under the plans.  Although Corning expects the remaining  employees to
be  separated by December 31,  2003,  the  majority of these  employees  will be
separated by the end of the first quarter of 2003. Corning expects approximately
one third of the 2002 restructuring charges to be paid in cash.


<PAGE>


5.   Restructuring Actions (continued)

2001 Restructuring Actions

In July and October of 2001, Corning announced a series of restructuring actions
in  response  to  significant  deteriorating  business  conditions  which  began
initially in its Telecommunications  Segment, but eventually spread to its other
businesses  as the year  progressed.  The  following  actions were  approved and
undertaken in 2001:

.    closure of seven major  manufacturing  facilities and the  consolidation of
     several smaller  facilities,  in the  Telecommunications  and  Technologies
     Segments,
.    discontinuation  of  its  initiative  in  Corning   Microarray   Technology
     products, part of Corning's life sciences business, and
.    elimination  of  approximately  12,000  positions  affecting  all operating
     segments, but especially impacting the photonic technologies,  hardware and
     equipment and the optical fiber and cable businesses.  This action included
     a selective  voluntary early retirement program for certain employees along
     with involuntary separations.

These actions  resulted in a pre-tax charge  totaling $953 million ($585 million
after-tax  and minority  interest)  for the year ended  December  31, 2001.  The
charge  included  restructuring  costs of $419  million and $542 million for the
impairment  of  plant  and  equipment  of  which  $3  million  and  $5  million,
respectively related to discontinued operations.  Approximately one third of the
total  charge was expected to be paid in cash.  As of December 31, 2002,  all of
the 12,000 employees had been separated under the plans.  Certain obligations of
the plans will be paid in 2003 and beyond.

The  following  table  illustrates  the  charges,  credits  and  balances of the
restructuring reserves as of December 31, 2001 (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                         Non-              Cash           Remaining
                                                          Total          cash            payments        reserve at
                                                         charges        charges           in 2001       Dec. 31, 2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>              <C>               <C>
Restructuring charges:
Employee related costs                                 $     324       $      66        $      60         $     198
Other charges                                                 95                               17                78
                                                       ------------------------------------------------------------
    Total restructuring charges                        $     419       $      66        $      77         $     276
                                                       ------------------------------------------------------------

Impairment of long-lived assets:
Assets held for use                                    $      46       $      46
Assets held for disposal                                     496             496
                                                       -------------------------
    Total impairment charges                           $     542       $     542
                                                       -------------------------

Total restructuring and impairment charges             $     961
Discontinued operations                                       (8)
                                                       ---------
Restructuring and impairment charges
  from continuing operations                                 953
Tax benefit and minority interest                            368
                                                       ---------

Restructuring and impairment charges, net              $     585
                                                       =========

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table illustrates the charge for 2001 restructuring  actions as it
relates to Corning's operating segments (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Charges for restructuring actions
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Functions
                                                Telecom-                         Including
                                               munications      Technologies     Research            Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>               <C>
Charges for restructuring actions              $   640           $    122        $   191           $    953
                                               =============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


5.   Restructuring Actions (concluded)

The following table  illustrates the headcount  reduction  amongst U.S.  Hourly,
U.S. Salaried and Non-U.S. positions:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Headcount reduction
------------------------------------------------------------------------------------------------------------------------------------
                                               U.S. Hourly    U.S. Salaried       Non-U.S.          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>              <C>              <C>
Headcount reduction                               6,000           3,100            2,900            12,000
                                               ============================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

6.   Impairment of Long-Lived Assets Other Than Goodwill

Photonic technologies business

The photonic  technologies  business is a manufacturer  of photonic  modules and
components for the worldwide  telecommunications industry and is reported in the
Telecommunications  Segment.  The  telecommunications  market  is  undergoing  a
dramatic  decline in demand for  telecommunication  products as major  buyers of
network  equipment in this industry have reduced  their capital  spending  plans
over the past two years and are expected to continue such reductions in the near
future.  The lack of demand for optical component products started in early 2001
and resulted in  restructuring  and  impairment  charges in 2001 and 2002.  This
negative trend is expected to continue into the foreseeable future.

As disclosed in Corning's third quarter Form 10-Q, certain competitors indicated
that they will exit the business and others  announced  decisions to consolidate
or restructure.  Corning continues to evaluate  strategic  alternatives for this
business.  While  certain  product  lines are promising in the event of industry
recovery,  the pace and  extent of that  recovery  is  uncertain.  As short term
projections  reflect  continued  operating  and cash  losses  and the  long-term
expectations are uncertain, it was determined that the long-lived assets of this
business  (property,  plant and equipment  and patents)  should be evaluated for
impairment.

The impairment  evaluation  required  management to develop  operating cash flow
projections  for  each  strategic  alternative  and make  assessments  as to the
probability  of each outcome.  It was determined  that the long-lived  assets of
this business were not  recoverable  through future cash flows.  The assets were
written down to estimated  salvage value,  as this amount is the best reflection
of  fair  value.  This  resulted  in a $269  million  ($195  million  after-tax)
write-down of the assets,  which was reflected in the line item  "restructuring,
impairment and other charges" in the Consolidated Statements of Operations.  The
charge included $90 million related to patents. The estimate of salvage value is
an area of management  judgement.  See Critical Accounting Estimates for related
discussion.  The remaining  long-term  assets of this business  approximate  $24
million and are classified as "held for use."

Conventional video components business

Corning  Asahi Video  Products  Company,  a 51% owned  consolidated  subsidiary,
(conventional video components business),  is a manufacturer of glass panels and
funnels  for  use  in  conventional  tube  televisions  and is  reported  in the
Technologies  Segment  for  SFAS  No.  131  reporting.   The  conventional  tube
television  segment  of the market in North  America  is very  mature and highly
competitive.   The  market  has  been  impacted  by  a  decline  in  demand  for
conventional  television glass associated with shifting consumer  preference for
flat  panel  and  projection   television  sets,  as  well  as  other  competing
technologies.  The segment has also been  impacted by dramatic  increases in the
importation  of television  glass,  tubes and sets from Asia.  The  conventional
television tube market is undergoing  intense  competition at this time and as a
result is experiencing tremendous price pressure. One major customer has already
exited this market and industry consolidation continues. Demand from another key
customer  is  uncertain.   Competition  from  imported  products  has  increased
significantly within the last year, while the demand for flat screen televisions
has been  increasing  for several  years.  These trends are expected to continue
into the foreseeable future.

These market trends combined with cash losses in this business in the short-term
indicated an evaluation for the  recoverability  of the long-lived assets of the
business was required and management  determined  that the long-lived  assets of
the business have been impaired.  The impairment  evaluation required management
to develop  operating cash flow  projections for each strategic  alternative and
make  assessments as to the probability of each outcome.  It was determined that
the long lived assets were not recoverable through future cash flows. Management
estimated  the fair  value of the  long-lived  assets,  which  were  limited  to
property,  plant and  equipment,  using the  expected  cash flow  approach  as a
measure of fair value.  This  resulted in a $140 million ($44 million  after-tax
and minority interest) write-down of the assets, which was reflected in the line
item   "restructuring,   impairment  and  other  charges"  in  the  Consolidated
Statements of Operations.


<PAGE>


6.   Impairment of Long-Lived Assets Other Than Goodwill (concluded)

The cash flow  realized by this  business  will be impacted by actions  taken by
competitors and customers.  Should our future  performance differ adversely from
our  projections,  Corning  could be  required to record  additional  impairment
charges.  It is also  possible  that  Corning  could choose to exit the business
should  cash  flows be less than  projected.  The  remaining  net assets of this
business approximate $77 million.

7.   Short-Term Investments

Short-term  investments  held by  Corning  are  debt  securities  classified  as
available-for-sale. Corning invests in publicly traded, highly liquid securities
of entities with credit  ratings of A, or better.  Unrealized  gains and losses,
net of related income taxes, for available-for-sale securities are included as a
separate  component of  shareholders'  equity.  Corning  determines  cost on the
specific  identification basis. The following is a summary of available-for-sale
securities (in millions):

--------------------------------------------------------------------------------
                                              Amortized     Fair      Unrealized
December 31, 2002                                Cost       Value       Gains
--------------------------------------------------------------------------------
Bonds, notes, and other securities
    United States government and agencies      $  314      $  315       $  1
    States and municipalities                     127         127
    Asset-backed securities                        54          54
    Commercial paper                               10          10
    Other debt securities                         112         113          1
--------------------------------------------------------------------------------
      Total short-term investments             $  617      $  619       $  2
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                              Amortized     Fair      Unrealized
December 31, 2001                                Cost       Value       Gains
--------------------------------------------------------------------------------
Bonds, notes, and other securities
    United States government and agencies      $  262      $  262
    States and municipalities                     206         206
    Asset-backed securities                       365         369       $  4
    Corporate bonds                               206         206
    Commercial paper                               20          20
    Certificates of deposit                        16          16
    Other debt securities                         103         103
--------------------------------------------------------------------------------
      Total short-term investments             $1,178      $1,182       $  4
--------------------------------------------------------------------------------

Unrealized losses were under $1 million in 2002 and 2001.

All of these  securities are available for immediate  sale. The following  table
summarizes the  contractual  maturities of debt  securities at December 31, 2002
(in millions):

--------------------------------------------------------------------------------
                                              Amortized     Fair
                                                 Cost       Value
--------------------------------------------------------------------------------
Less than one year                             $  120      $  121
Due in 1-2 years                                  324         325
Due in 2-5 years                                  103         103
Due after 5 years                                  70          70
--------------------------------------------------------------------------------
     Total                                     $  617      $  619
--------------------------------------------------------------------------------

Proceeds from sales of short-term  investments  totaled  $2,204 million and $660
million  in 2002  and  2001.  The  gross  realized  gains  related  to  sales of
short-term  investments  were $10  million in 2002 and $2  million in 2001.  The
gross realized losses related to sales of short-term investments were $8 million
in 2002 and $2 million in 2001.


<PAGE>


8.   Inventories

<TABLE>
<CAPTION>
Inventories consisted of the following (in millions):
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       December 31,
                                                                                          -----------------------------------
                                                                                            2002                       2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                        <C>
   Finished goods                                                                         $    212                   $    251
   Work in process                                                                             115                        153
   Raw materials and accessories                                                               135                        210
   Supplies and packing materials                                                               97                        111
------------------------------------------------------------------------------------------------------------------------------------
   Total inventories                                                                      $    559                   $    725
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

9.   Income Taxes

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Years ended December 31,
                                                                                          -----------------------------------
(In millions)                                                                               2002           2001        2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>            <C>          <C>
(Loss) income from continuing operations before income taxes:
   U.S. companies                                                                         $ (2,045)      $ (2,995)    $   692
   Non-U.S. companies                                                                         (675)        (3,166)        (71)
------------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations before income taxes                              $ (2,720)      $ (6,161)    $   621
------------------------------------------------------------------------------------------------------------------------------------

Current and deferred (benefit) provision for income taxes:
Current:
   Federal                                                                                $   (330)      $    (22)    $   283
   State and municipal                                                                          (7)             9          64
   Foreign                                                                                      43             73          83
Deferred:
   Federal                                                                                    (263)          (420)        (36)
   State and municipal                                                                         (70)           (72)        (17)
   Foreign                                                                                     (99)           (36)          6
------------------------------------------------------------------------------------------------------------------------------------
(Benefit) provision for income taxes                                                      $   (726)      $   (468)    $   383
------------------------------------------------------------------------------------------------------------------------------------

Effective tax rate reconciliation:
   Statutory U.S. income tax (benefit) rate                                                  (35.0)%        (35.0)%      35.0%
   State income (benefit) tax, net of federal benefit                                         (2.7)          (0.8)        4.2
   Nondeductible goodwill and other expenses                                                   1.1           28.4        32.1
   Foreign and other tax credits                                                                             (0.3)
   Lower taxes on subsidiary earnings                                                         (0.1)          (0.3)       (7.9)
   Valuation allowance                                                                        10.2            0.5        (0.9)
   Other items, net                                                                           (0.2)          (0.1)       (0.8)
------------------------------------------------------------------------------------------------------------------------------------
Effective income tax (benefit) rate                                                          (26.7)%         (7.6)%      61.7%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


9.   Income Taxes (concluded)

The tax effects of temporary  differences  and  carryforwards  that gave rise to
significant  portions of the  deferred tax assets and  liabilities  included the
following (in millions):
--------------------------------------------------------------------------------
                                                          December 31,
                                                  ----------------------------
                                                    2002               2001
--------------------------------------------------------------------------------

Loss and tax credit carryforwards                 $   435             $  293
Capitalized research and development                  182
Restructuring reserves                                532                279
Postretirement medical and life benefits              240                243
Inventory                                              93                131
Intangible and other assets                           111                100
Other accrued liabilities                             121                 74
Other employee benefits                                45                 19
Other                                                  68                 14
--------------------------------------------------------------------------------
Gross deferred tax assets                           1,827              1,153
Valuation allowance                                  (417)              (189)
--------------------------------------------------------------------------------
Deferred tax assets                                 1,410                964
--------------------------------------------------------------------------------
Fixed assets                                         (224)              (261)
Pensions                                                                 (37)
Other                                                  (3)                (6)
--------------------------------------------------------------------------------
Deferred tax liabilities                             (227)              (304)
--------------------------------------------------------------------------------
Net deferred tax assets                           $ 1,183             $  660
--------------------------------------------------------------------------------

The change in the total  valuation  allowance  for the years ended  December 31,
2002 and 2001,  was an increase of $228 million and $117 million,  respectively.
The  increase  in  the  2002  valuation  allowance  was  primarily  due  to  the
uncertainty  regarding the realization of certain foreign tax benefits,  foreign
net operating losses and foreign tax credits.

Corning currently provides income taxes on the earnings of foreign  subsidiaries
and associated  companies to the extent these earnings are currently  taxable or
expected  to be  remitted.  Taxes have not been  provided  on  approximately  $1
billion of accumulated  foreign unremitted earnings which are expected to remain
invested indefinitely.

Corning  does not provide  income  taxes on the  post-1992  earnings of domestic
subsidiaries which Corning expects to recover tax-free without significant cost.
Income taxes have been  provided for post-1992  unremitted  earnings of domestic
corporate  joint  ventures  which  Corning does not expect to recover  tax-free.
Unremitted  earnings of domestic  subsidiaries and corporate joint ventures that
arose in fiscal  years  beginning  on or before  December  31,  1992,  have been
indefinitely reinvested.

At  December  31,  2002,   Corning  had  tax  benefits   attributable   to  loss
carryforwards and credits  aggregating $435 million that expire at various dates
beginning in 2003 through  2022,  if not  utilized.  A portion of the  valuation
allowance  arises from uncertainty as to the realization of certain of these tax
credit and net operating loss carryovers.

In 2001, tax legislation was enacted in the U.S. that  temporarily  extended the
net  operating  loss  carryback  period  from  two to  five  years.  Due to this
legislative change,  Corning will be able to carryback the anticipated 2002 U.S.
federal net  operating  loss and claim a refund  which would not have  otherwise
been  available.  Other  accounts  receivable  at December 31,  2002,  include a
receivable  of $192  million  as a result  of  Corning  availing  itself of this
opportunity.  Corning  expects to receive  this refund in the second  quarter of
2003.


<PAGE>


10.  Investments

Associated Companies at Equity

Samsung Corning Company Ltd.  (Samsung  Corning),  a 50%-owned South Korea-based
manufacturer  of glass panels and funnels for television  and display  monitors,
represented $381 million and $315 million of Corning's investments accounted for
by the equity method at year-end 2002 and 2001, respectively.

The  financial  position  and  results  of  operations  of Samsung  Corning  and
Corning's other equity companies are summarized as follows (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                       Years ended December 31,
                                             -----------------------------------------------------------------------------
                                                      2002                       2001                      2000
------------------------------------------------------------------------------------------------------------------------------------
                                               Samsung       Total       Samsung        Total       Samsung       Total
                                               Corning      Equity       Corning       Equity       Corning      Equity
                                              Co. Ltd.    Companies     Co. Ltd.     Companies     Co. Ltd.     Companies
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>            <C>          <C>          <C>         <C>
Net sales                                    $    854     $  1,846       $    886     $  1,892     $  1,011    $  1,739
Gross profit                                      222          645            244          648          346         650
Net income                                         99          317            107          340          211         366
                                             -----------------------------------------------------------------------------

Corning's equity in net income (1) (2)       $     44     $    116       $     51     $    148     $    104    $    149
                                             -----------------------------------------------------------------------------

Current assets                               $    344     $    851       $    332     $    821     $    410    $  1,091
Long-lived assets                                 864        1,562            872        1,398          866       1,311
                                             -----------------------------------------------------------------------------

Current liabilities                          $    175     $    516       $    174     $    557     $    293    $    823
Long-term debt                                     89          180            164          220          152         275
Long-term liabilities                             116          181            173          198          178         217
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Equity in  earnings  shown  above  and in the  Consolidated  Statements  of
     Operations is net of amounts recorded for income tax.
(2)  Includes $34 million and $36 million of charges for  impairment in 2002 and
     2000, respectively.

Dividends  received from Samsung  Corning and Corning's  other equity  companies
totaled  $84  million,  $73  million  and $45  million  in 2002,  2001 and 2000,
respectively.  At December  31,  2002,  approximately  $613 million of equity in
undistributed earnings of equity companies was included in Corning's accumulated
deficit.

Samsung  Corning's 2000 results include a nonoperating  gain of $23 million from
the sale of its  interest  in  Samsung  Corning  Precision  Glass  Company  Ltd.
(Samsung Corning Precision). Corning's 50% share of this gain is included in its
equity earnings. Corning continues to maintain a 50% interest in Samsung Corning
Precision.


<PAGE>


10.  Investments (continued)

Dow Corning Corporation

Corning and The Dow  Chemical  Company  each own 50% of the common  stock of Dow
Corning Corporation,  which has been in reorganization proceedings under Chapter
11 of the United States  Bankruptcy  Code since May, 1995. Dow Corning filed for
bankruptcy  protection to address pending and claimed  liabilities  arising from
breast-implant  product lawsuits.  On November 8, 1998, Dow Corning and the Tort
Claimants Committee jointly filed a revised Plan of Reorganization  (Joint Plan)
which provided for the  settlement or other  resolution of implant  claims.  The
Joint Plan  included  releases  for third  parties  (including  Corning  and Dow
Chemical as shareholders) in exchange for contributions to the Joint Plan. By an
order dated November 30, 1999, the  Bankruptcy  Court  confirmed the Joint Plan,
but with certain limitations concerning the third party releases as reflected in
an opinion issued on December 21, 1999. On November 13, 2000, the U.S.  District
Court for the Eastern District of Michigan reversed the Bankruptcy Court's order
with respect to these limitations on the third-party  releases and confirmed the
Joint Plan. Certain foreign claimants,  the U.S.  government,  and certain other
tort claimants  appealed from the District  Court's order.  On January 29, 2002,
the U.S. Court of Appeals for the Sixth Circuit affirmed the determinations made
in the District Court with respect to the foreign claimants, but remanded to the
District  Court for further  proceedings  with respect to certain lien claims of
the U.S.  government and with respect to the findings  supporting the non-debtor
releases  in favor  of Dow  Corning's  shareholders,  foreign  subsidiaries  and
insurers.  The Plan  proponents  agreed  to settle  the lien  claims of the U.S.
government for $9.8 million to be paid from the Settlement  Fund under the Plan.
This settlement was approved by the District Court in the third quarter of 2002.
On  December  11,  2002,  the  District  Court  entered  further   findings  and
conclusions  supporting  the  non-debtor  releases.  Certain tort claimants have
filed a notice of appeal to the U.S. Court of Appeals for the Sixth Circuit from
the District Court's order.  Management  expects the appellate  process may take
another 12 to 16 months.  If the Joint Plan with shareholder  releases is upheld
after all appeals, any remaining personal injury claims against Corning in these
matters will be channeled to the resolution  procedures under the Joint Plan. If
the Joint  Plan with  shareholder  releases  is not  upheld  after all  appeals,
Corning  would  expect to defend any  remaining  claims  against it (and any new
claims)  on the same  grounds  that  led to a series  of  orders  and  judgments
dismissing  all claims  against  Corning in the federal courts and in many state
courts as described under the heading Implant Tort Lawsuits in Legal Proceedings
(Item 3).  Management  believes that the claims  against  Corning lack merit and
that the breast  implant  litigation  against  Corning will be resolved  without
material impact on Corning's financial statements.

Under the terms of the Joint Plan,  Dow Corning would be required to establish a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or litigate  their claims.  Dow Corning  would have the  obligation to
fund the Trust and the Facility,  over a period of up to 16 years,  in an amount
up to  approximately  $3.3  billion,  subject  to  the  limitations,  terms  and
conditions  stated in the Joint Plan.  Corning and Dow Chemical have each agreed
to provide a credit  facility to Dow Corning of up to $150 million ($300 million
in the aggregate), subject to the terms and conditions stated in the Joint Plan.
The Joint Plan also provides for Dow Corning to make full payment,  through cash
and issuance of senior notes, to its commercial creditors. These creditors claim
approximately  $810 million in  principal  plus an  additional  sum for pendency
interest,  costs and fees from the  petition  date (May 15,  1995)  through  the
effective  date under the Plan when payment is made.  The  commercial  creditors
have  contested  the  Bankruptcy  Court's   disallowance  of  their  claims  for
post-petition  interest at default  rates of interest,  and have appealed to the
District Court. The District Court heard oral arguments on this appeal on May 2,
2002,  and has not ruled.  The  amount of  additional  interest,  costs and fees
claimed by the commercial  creditors is approximately  $100 million pre-tax more
than Dow Corning believes it should pay.

In 1995,  Corning fully  reserved its  investment in Dow Corning upon its filing
for bankruptcy and has not recognized  equity  earnings since the second quarter
of 1995. Corning has determined that this decline in the value of its investment
in Dow Corning is other than temporary. Management has assessed the December 11,
2002,  findings  by Judge  Hood and  concluded  that  emergence  of Dow  Corning
Corporation  from  bankruptcy  protection  is  probable.   Management  has  also
concluded that it has adequately  provided for the other than temporary  decline
associated with the bankruptcy.  With the exception of the remote possibility of
a future bankruptcy related charge, Corning considers the difference between the
carrying  value of its investment in Dow Corning and its 50 percent share of Dow
Corning's  equity to be permanent.  This  difference is $270 million at December
31, 2002.

Corning will resume recognition of equity earnings from Dow Corning in the first
quarter of 2003.  Corning does not expect to receive  dividends from Dow Corning
in 2003.


<PAGE>


10.  Investments (continued)

The financial  position and results of operations of Dow Corning are  summarized
in the table below as follows (in millions):

--------------------------------------------------------------------------------
                                                  Years ended December 31,
                                            ----------------------------------
                                               2002       2001 (2)    2000 (2)
--------------------------------------------------------------------------------

Net sales                                   $  2,610     $  2,438    $  2,751
Gross profit                                     727          541         725
Net income (loss)                                 59          (28)        101
--------------------------------------------------------------------------------

Current assets                              $  2,164     $  2,014    $  1,801
Long-lived assets                              3,511        3,115       4,676
--------------------------------------------------------------------------------

Current liabilities                         $  1,170     $    880    $    947
Long-term debt                                    55           39          92
Long-term liabilities                            242          207         257
Liabilities subject to compromise (1)          3,667        3,524       4,618
Shareholders' equity                             541          479         563
--------------------------------------------------------------------------------

(1)  Dow  Corning's  financial  statements  for  2002,  2001 and 2000  have been
     prepared in  conformity  with the American  Institute  of Certified  Public
     Accountants'  Statement of Position 90-7,  "Financial Reporting by Entities
     in Reorganization under the Bankruptcy Code," (SOP 90-7). SOP 90-7 requires
     a segregation of liabilities  subject to compromise by the Bankruptcy Court
     as of the filing date (May 15, 1995) and identification of all transactions
     and events that are directly associated with the reorganization.
(2)  In 2002,  Dow  Corning  changed it  inventory  valuation  methodology  from
     last-in, first-out (LIFO) to first-in, first-out (FIFO). Prior periods have
     been restated.

Pittsburgh Corning Corporation

Corning and PPG  Industries,  Inc.  (PPG) each own 50% of the  capital  stock of
Pittsburgh  Corning   Corporation  (PCC).  PCC  and  several  other  defendants,
including PPG and Corning, have been named in numerous lawsuits involving claims
alleging personal injury from exposure to asbestos. On April 16, 2000, PCC filed
for Chapter 11  reorganization  in the United  States  Bankruptcy  Court for the
Western District of Pennsylvania. As of the bankruptcy filing, PCC had in excess
of 140,000 open claims and now has in excess of 240,000 open claims.

In the  bankruptcy  court,  PCC in April 2000 obtained a preliminary  injunction
against the  prosecution of asbestos  actions  against its two  shareholders  to
afford  the  parties  a  period  of time  (the  Injunction  Period)  in which to
negotiate a plan of reorganization for PCC.

On May 14, 2002,  PPG announced  that it had agreed with several other  parties,
including certain of its insurance  carriers and  representatives of current and
future asbestos claimants,  on the terms of a settlement arrangement relating to
asbestos claims against PPG and PCC. This settlement  would be incorporated in a
plan of reorganization  for PCC, and would be subject to a favorable vote by 75%
of the asbestos claimants voting on the PCC reorganization plan, and approval by
the  Bankruptcy   Court.   According  to  its   announcement,   PPG  would  make
contributions to a trust under the reorganization plan consisting of:
.    cash payments by PPG's  participating  insurance  carriers of approximately
     $1.7 billion over a 21 year period;
.    the  assignment  of rights to  certain  proceeds  of  policies  by  certain
     insurance carriers not participating in the settlement;
.    PPG's shares in PCC and Pittsburgh Corning Europe, a Belgian corporation;
.    1,388,889 shares of PPG's common stock; and
.    cash payments from PPG of approximately $998 million over 21 years.

PPG announced on July 18, 2002,  that it recorded a charge in its second quarter
results of $495 million after-tax related to this settlement.

The Injunction Period as to Corning was extended through September 30, 2002, and
later for a period from  December 23, 2002,  through  January 23, 2003,  when it
expired by its terms. Under the terms of the Bankruptcy  Court's Order,  Corning
has 90 days from the  expiration  of the  Injunction  Period to seek removal and
transfer of pending  cases in which it is named as a defendant.  At the time PCC
filed for bankruptcy protection,  there were approximately 12,400 claims pending
against  Corning  alleging  various  theories of liability  based on exposure to
PCC's asbestos  products.  Although the outcome of litigation and the bankruptcy
case is uncertain, management believes that the separate corporate status of PCC
will  continue to be upheld and that  Corning has strong  legal  defenses to any
claims of direct liability arising from PCC's asbestos products.


<PAGE>


10.  Investments (concluded)

After PPG announced its settlement,  negotiations between representatives of the
asbestos  claimants and Corning became more intensive.  These  negotiations have
failed to produce a settlement,  but  discussions  continue  intermittently.  In
Corning's  negotiations with the asbestos  claimants,  the range of negotiations
has been framed by demands  translating into  approximately $400 million to $500
million in net present value  (inclusive of insurance),  which is  significantly
lower than that reflected in the PPG settlement.  These  negotiations  have been
difficult,  and no assurances  can be offered that a settlement can be concluded
within this range.

Based on negotiations to date, management believes that a settlement (if one can
be reached) would probably include some  combination of the following  elements:
cash  payments  by Corning  over time into a trust;  contribution  of  Corning's
shares in PCC and Pittsburgh  Corning  Europe and common shares of Corning;  and
insurance  through cash payments or  assignments  of certain rights to insurance
proceeds.  However,  the  structure  of a  settlement  has not been  agreed  and
management can not estimate the likelihood  that any settlement will emerge from
negotiations with the claimants or Corning's  insurers,  or the probability that
Corning will be able to secure a release  through  PCC's plan of  reorganization
upon terms and conditions satisfactory to Corning.

At this time,  it appears more likely than not that  Corning  will  litigate the
asbestos cases, but will continue to explore a settlement through the bankruptcy
process.  The exposure for this asbestos litigation (net of insurance) cannot be
estimated at this time due to the wide range of potential  outcomes.  Corning is
also currently named in approximately 11,400 other cases  (approximately  34,000
claims)  alleging  injuries  from  asbestos.  Those  cases have been  covered by
insurance  without  material impact to Corning to date.  Asbestos  litigation is
inherently difficult, and the outcome of litigation is uncertain and past trends
may not be indicators of future outcomes.

As a result of PCC's bankruptcy filing,  Corning recorded an after-tax charge of
$36 million in the first quarter of 2000 to impair its entire  investment in PCC
and discontinued  recognition of equity earnings.  At December 31, 2002, Corning
has not  recorded any  additional  charges  associated  with the outcome of this
litigation.  As noted above, management believes there are strong legal defenses
to the claims against Corning.  Management estimates that the insurance coverage
available to Corning related to these matters exceeds $600 million and depending
on the outcome of potential  coverage  issues may exceed $1 billion.  Management
estimates  that  the  low end of the  range  of loss  resulting  from  continued
litigation is not material.  Due to the inherent uncertainty of asbestos related
litigation,  management  is unable to estimate  the maximum  exposure  from this
litigation.

Alternatively,  in the event that  Corning  and its  insurers  agree to a global
settlement of the  PCC-related  cases through the PCC  bankruptcy  process,  the
outcome may be material  to the  results of  operations  for the period in which
such costs, if any, are recognized. Management expects that any after-tax charge
resulting from Corning's  contributions  as part of a possible  settlement could
approximate  $125  million to $175  million  and will  depend upon the timing of
contributions  and  relative  participation  of insurance  carriers.  Management
cannot provide  assurances  that the ultimate  outcome of a settlement  would be
within this range.

Under either  alternative,  management  believes  these matters will be resolved
without material impact to Corning's overall financial position or its liquidity

Other Investments

Corning's other investments  include equity securities,  which are classified as
available-for-sale.  At December 31, 2002,  the fair value and cost of Corning's
equity securities was $23 million. At December 31, 2001, the fair value and cost
of Corning's equity securities was $142 million and $148 million,  respectively.
The difference included gross unrealized losses of $6 million.

Proceeds from sales of other investments were $1 million and $38 million in 2002
and 2001,  respectively,  and related gross realized  (losses) gains included in
income were $(1) million and $22 million in 2002 and 2001, respectively.

In 2002,  Corning  management  decided  to divest  its  portfolio  of cost based
investments  related to start-up  companies  with emerging  technologies  in the
telecommunications  industry. As a result,  management impaired the portfolio to
estimated fair market value.


<PAGE>


11.  Property, Net

Property, net included the following (in millions):
--------------------------------------------------------------------------------
                                                  December 31,
                                      ------------------------------------
                                        2002                      2001
--------------------------------------------------------------------------------
Land                                  $     93                  $     97
Buildings                                1,828                     1,808
Equipment                                4,620                     5,011
Construction in progress                   539                     1,282
--------------------------------------------------------------------------------
                                         7,080                     8,198
Accumulated depreciation                (3,375)                   (3,101)
--------------------------------------------------------------------------------
Property, net                         $  3,705                  $  5,097
--------------------------------------------------------------------------------

Approximately  $13 million,  $49 million and $57 million of interest  costs were
capitalized as part of property, net in 2002, 2001 and 2000, respectively.

12.  Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the year ended December 31,
2002, by segment follow (in millions):
--------------------------------------------------------------------------------
                                   Telecom-
                                  munications       Technologies         Total
--------------------------------------------------------------------------------

Balance at January 1, 2002         $ 1,772            $  165           $  1,937
Foreign currency translation            90                                   90
Impairment                            (400)                                (400)
Divestitures                           (16)               (6)               (22)
Acquisitions                           110                                  110
--------------------------------------------------------------------------------
Balance at December 31, 2002       $ 1,556            $  159           $  1,715
--------------------------------------------------------------------------------

Other intangible assets consisted of the following (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 December 31,
                                                 -------------------------------------------------------------------------------
                                                               2002                                      2001
                                                 -------------------------------------------------------------------------------
                                                            Accumulated                              Accumulated
                                                  Gross     Amortization    Net             Gross    Amortization      Net
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>         <C>              <C>          <C>          <C>
Amortized intangible assets:
     Patents and trademarks                      $  138       $   40      $   98           $  262       $   46       $  216
     Non-competition agreements                     106           62          44              101           40           61
     Other                                            5            2           3               17            4           13
                                                 -------------------------------------------------------------------------------
         Total amortized intangible assets          249          104         145              380           90          290
                                                 -------------------------------------------------------------------------------

Other intangible assets:
     Intangible pension assets                       68                       68
     Deferred financing costs                        48                       48               62                        62
                                                 -------------------------------------------------------------------------------
         Total other intangible assets              116                      116               62                        62
                                                 -------------------------------------------------------------------------------
Total                                            $  365       $  104      $  261           $  442       $   90       $  352
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Amortized  intangible  assets are  primarily  related to the  Telecommunications
Segment.

Amortization expense related to these intangible assets is expected to be in the
range of approximately $20 million to $30 million annually from 2003 to 2007.


<PAGE>


13.  Other Accrued Liabilities

Other accrued liabilities included the following (in millions):
--------------------------------------------------------------------------------
                                                  December 31,
                                      -----------------------------------
                                        2002                      2001
--------------------------------------------------------------------------------
Restructuring reserves                $    405                 $    276
Wages and employee benefits                224                      230
Income taxes                               153                      139
Other                                      355                      431
--------------------------------------------------------------------------------
Other accrued liabilities             $  1,137                 $  1,076
--------------------------------------------------------------------------------

Provisions for estimated  expenses related to product warranties are made at the
time the  products  are sold using  historical  experience  as a  prediction  of
expected  settlements.  Reserves  are  adjusted  when  experience  indicates  an
expected  settlement  will  differ from  initial  estimates.  Corning's  reserve
relates primarily to its Telecommunications Segment. Reserves for warranty items
are included in other current  liabilities.  A reconciliation  of the changes in
the product warranty liability during 2002 is as follows (in millions):

--------------------------------------------------------------------------------
Balance at December 31, 2001                                      $   60
Provision based on 2002 sales                                         15
Adjustments to liability existing on January 1, 2002                  (4)
Foreign currency translation                                           4
Settlements made during 2002                                         (11)
                                                                  ------
Balance at December 31, 2002                                      $   64
--------------------------------------------------------------------------------


<PAGE>


14.  Long-Term Debt and Loans Payable

Long-term debt and loans payable consisted of the following (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31,
                                                                                     ------------------------------------
                                                                                       2002                      2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                       <C>
Loans Payable
    Current portion of long-term debt                                                $    191                  $    244
    Other short-term borrowings                                                            13                       233
------------------------------------------------------------------------------------------------------------------------------------
      Total loans payable                                                            $    204                  $    477
------------------------------------------------------------------------------------------------------------------------------------

Long-Term Debt
    Debentures, 8.25%, due 2002                                                                                $     75
    Debentures, 6%, due 2003                                                         $    100                       100
    Euro notes, 5.625%, due 2005                                                          206                       178
    Debentures, 7%, due 2007, net of unamortized discount of
      $25 million in 2002 and $28 million in 2001                                          75                        72
    Convertible notes, 4.875%, due 2008                                                    96                        96
    Convertible debentures, 3.5%, due 2008                                                665                       665
    Notes, 6.3%, due 2009                                                                 150                       150
    Euro notes, 6.25%, due 2010                                                           310                       267
    Debentures, 6.75%, due 2013                                                           100                       100
    Zero coupon convertible debentures, 2%, due 2015, redeemable
      and callable in 2005                                                              1,606                     2,059
    Debentures, 8.875%, due 2016                                                           86                        74
    Debentures, 8.875%, due 2021                                                           88                        75
    Debentures, 7.625%, putable in 2004, due 2024                                         100                       100
    Medium-term notes, average rate 7.9%, due through 2025                                242                       231
    Debentures, 6.85%, due 2029                                                           150                       150
    Other, average rate 1.9%, due through 2015                                            180                       315
------------------------------------------------------------------------------------------------------------------------------------
    Total long-term debt                                                                4,154                     4,707
    Less current portion of long-term debt                                                191                       244
------------------------------------------------------------------------------------------------------------------------------------
    Long-term debt                                                                   $  3,963                  $  4,463
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 2002 and 2001, the weighted-average  interest rate on short-term
borrowings was 5.5% and 4.6%, respectively.

Based on borrowing rates  currently  available to Corning for loans with similar
terms and  maturities,  the fair value of long-term  debt was $3.105  billion at
year-end 2002.

The following  table shows the  maturities by year of the total  long-term  debt
obligations at December 31 (in millions):

--------------------------------------------------------------------------------

  2003            2004               2005             2006            2007-2029
--------------------------------------------------------------------------------

  $191            $127              $1,910             $11             $1,964
--------------------------------------------------------------------------------

The zero coupon  convertible  debentures are presented in the above table as due
in 2005 representing the earliest possible redemption date.

During  2002,  Corning  repurchased  and  retired a portion  of its zero  coupon
convertible  debentures  due  November 8, 2015,  with an accreted  value of $493
million  in  exchange  for  cash of $308  million  in a  series  of  open-market
purchases.  Corning recorded a gain of $176 million ($108 million  after-tax) on
these  transactions,  net of the write-off of the  unamortized  issuance  costs.
Corning  recorded  the  gain  on  repurchases  as a  component  of  income  from
continuing operations, as permitted by SFAS No. 145.


<PAGE>


14.  Long-Term Debt and Loans Payable (concluded)

In November 2001,  Corning completed a convertible debt offering of $665 million
due November 1, 2008 and  convertible  into  approximately  69 million shares of
common stock.  Each $1,000 debenture was issued at par and pays interest of 3.5%
semi-annually on May 1 and November 1 of each year. The debentures are available
for  conversion  into  103.3592  shares  of  Corning  common  stock  if  certain
conditions  are met.  Corning may  repurchase  securities at certain  redemption
prices beginning on November 8, 2004.

In November 2000,  Corning  completed an offering of $2.7 billion (amount due at
maturity) of zero coupon convertible  debentures which generated net proceeds of
approximately $2.0 billion. The initial price of the debentures was $741.92 with
a 2% annual yield.  Interest is compounded  semi-annually  with a 25% conversion
factor. The remaining debentures mature on November 8, 2015, and are convertible
into  approximately  17 million  shares of Corning  common  stock at the rate of
8.3304 per $1,000  debenture.  Corning may call the debentures at any time on or
after  November 8, 2005.  The debentures may be redeemed for $819.54 on November
8, 2005 and $905.29 on November  8, 2010.  The holder can convert the  debenture
into Corning common stock at any time prior to maturity or  redemption.  Corning
has the  option  of  settling  this  obligation  in  cash,  common  stock,  or a
combination of both.

In February 1998,  Oak Industries  Inc. (Oak) issued $100 million of convertible
subordinated  notes  bearing  interest  at  4.875%,  due in 2008.  The notes are
convertible  into 6 million shares of Corning common stock at a conversion price
of approximately $16 per share.

Corning has full access to a revolving  line of credit with a syndicate of banks
for $2.0  billion.  The line of credit  expires  in August  2005.  There were no
borrowings  under the  agreement  at December  31, 2002.  The  revolving  credit
agreements  provide for borrowing of U.S.  dollars and  Eurocurrency  at various
rates and  supports  Corning's  commercial  paper  program when  available.  The
facility includes a covenant requiring Corning to maintain a total debt to total
capital  ratio,  as defined,  not greater than 60%. At December  31, 2002,  this
ratio was 47%.

15.  Employee Retirement Plans

Corning  has  defined  benefit  pension  plans  covering  certain  domestic  and
international  employees.  Corning's  funding policy has been to contribute,  as
necessary, an amount determined jointly by Corning and its consulting actuaries,
which provides for the current cost and  amortization  of prior service cost. In
2002,  Corning made a voluntary  incremental  contribution of $40 million to the
pension trust. In 2000,  Corning amended its U.S. pension plan to include a cash
balance  pension  feature.  All salaried and non-union  hourly  employees  hired
before July 1, 2000,  were given the choice of staying in the  existing  plan or
participating  in the cash  balance  plan  beginning  January 1, 2001.  Salaried
employees hired after July 1, 2000, automatically became participants in the new
cash balance plan. Under the cash balance plan,  employee  accounts are credited
monthly  with a  percentage  of eligible  pay based on age and years of service.
Benefits remain 100% vested after five years of service.

Corning and certain of its  domestic  subsidiaries  also offer  defined  benefit
postretirement  plans that provide health care and life  insurance  benefits for
retirees and eligible dependents. Certain employees may become eligible for such
postretirement  benefits upon reaching retirement age. Prior to January 1, 2003,
Corning's  principal retiree medical plans required retiree  contributions  each
year equal to the excess of medical cost increases over general inflation rates.
In response to rising  health care  costs,  effective  January 1, 2003,  Corning
changed its  cost-sharing  approach for retiree  medical  coverage.  For current
retirees  (including  surviving  spouses) and active employees  eligible for the
salaried  retiree medical  program,  Corning is placing a "cap" on the amount it
will  contribute  toward retiree  medical  coverage in the future.  The cap will
equal 150% of Corning's 2001 contributions toward retiree medical benefits. Once
Corning's  contributions  toward retiree medical costs reach this cap,  impacted
retirees  will have to pay the  excess  amount,  in  addition  to their  regular
contributions for coverage.


<PAGE>


15.  Employee Retirement Plans (continued)

The  change in  benefit  obligation  and  funded  status of  Corning's  employee
retirement plans follows (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                   Pension Benefits             Postretirement Benefits
                                                              -------------------------        ------------------------
December 31,                                                    2002             2001           2002            2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>              <C>             <C>
Change in Benefit Obligation
Benefit obligation at beginning of year                       $  1,742        $  1,610         $  631          $  556
Service cost                                                        37              38             11              14
Interest cost                                                      125             118             52              43
Plan participants' contributions                                     3               4              4               3
Amendments                                                          22              (3)           (80)             (3)
Curtailment (gain) loss                                            (15)             14             (9)            (13)
Special termination benefits                                        21              18             11              17
Actuarial losses                                                    82              92            151              57
Benefits paid                                                     (147)           (144)           (53)            (43)
Foreign currency exchange rate changes                              20              (5)
------------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                                1,890           1,742            718             631
------------------------------------------------------------------------------------------------------------------------------------

Change in Plan Assets
Fair value of plan assets at beginning of year                   1,628           1,872
Actual loss on plan assets                                         (76)           (152)
Employer contributions                                              96              51
Plan participants' contributions                                     3               4
Benefits paid                                                     (147)           (144)
Foreign currency exchange rate changes                              13              (3)
------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                         1,517           1,628
------------------------------------------------------------------------------------------------------------------------------------

Unfunded status                                                   (373)           (114)          (718)           (631)
Unrecognized transition asset                                       (1)             (1)
Unrecognized prior service cost (credit)                            70              79            (71)             (3)
Unrecognized actuarial loss (gain)                                 402             111            127             (15)
------------------------------------------------------------------------------------------------------------------------------------
Recognized asset (liability)                                  $     98        $     75         $ (662)         $ (649)
------------------------------------------------------------------------------------------------------------------------------------

Amounts recognized in the consolidated
 balance sheets consist of:
   Prepaid benefit cost                                       $    205        $     75
   Accrued benefit liability                                      (107)                        $ (662)         $ (649)
   Additional minimum liability                                   (348)
   Intangible asset                                                 68
   Accumulated other comprehensive loss                            280
------------------------------------------------------------------------------------------------------------------------------------
Recognized asset (liability)                                  $     98        $     75         $ (662)         $ (649)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

In 2002,  global capital  market  developments  resulted in negative  returns on
Corning's  pension funds and a decline in the discount rate used to estimate the
pension liability.  As a result, the accumulated benefit obligation exceeded the
fair value of plan assets,  which required  Corning to record a minimum  pension
liability in the  consolidated  balance sheet. The effect of this adjustment was
to increase pension  liabilities by $348 million,  increase intangible assets by
$68 million and increase accumulated other comprehensive loss by $280 million.

Defined benefit pension plan assets are comprised principally of publicly traded
debt and equity  securities.  Corning common stock  represented 0.1% and 0.3% of
plan assets at year-end 2002 and 2001, respectively.  Corning has not funded its
postretirement benefit obligations.

At December 31, 2002, the defined  pension benefit plans in which the fair value
of plan assets  exceeded the benefit  obligation had obligations of $104 million
and assets of $109  million.  The  defined  benefit  plans in which the  benefit
obligation  exceeded  the fair value of plan  assets had  obligations  of $1,786
million and assets of $1,408 million.


<PAGE>


15.  Employee Retirement Plans (concluded)

At December 31, 2001,  the defined  benefit plan in which the fair value of plan
assets  exceeded the benefit  obligation  had  obligations of $1,522 million and
assets  of $1,535  million.  The  defined  benefit  plans in which  the  benefit
obligation  exceeded  the fair  value of plan  assets  had  obligations  of $220
million and assets of $93 million.

The  weighted-average  assumptions for Corning's  domestic  employee  retirement
plans follow:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                    Pension Benefits                    Postretirement Benefits
Years ended December 31,                        2002      2001       2000             2002       2001       2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>       <C>        <C>              <C>       <C>        <C>
Discount rate                                   6.75%     7.25%      7.75%            6.75%     7.25%      7.75%
Expected return on plan assets                   9.0%     9.0%       9.0%
Rate of compensation increase                    4.5%     4.5%       4.5%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The expected  rate of return on plan assets that will be used to determine  2003
net periodic benefit cost is 8.5%.

Corning's  consolidated  postretirement  benefit  obligation  is  determined  by
application of the terms of health care and life insurance plans,  together with
relevant actuarial  assumptions and health care cost trend rates. Assumed health
care trend  rates have a  significant  effect on the  amounts  reported  for the
health care plans.  For measurement  purposes,  a 10% annual rate of increase in
the per capita cost of covered  health care  benefits  was assumed in 2002.  The
rate was assumed to decline to 9% in 2003 and  decrease on a linear  basis to 5%
in 2007 and remain at that level thereafter.

A one-percentage-point change in 2002 assumed health care trend rates would have
the following effects (in millions):
--------------------------------------------------------------------------------
                                                            One-Percentage-Point
                                                            Increase    Decrease
--------------------------------------------------------------------------------

Effect on total of service and interest cost components      $ 6.8      $ (5.8)
Effect on postretirement benefit obligation                   43.2       (38.0)
--------------------------------------------------------------------------------

The components of net periodic benefit expense for Corning's employee retirement
plans follow (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                             Pension Benefits                     Postretirement Benefits
                                                     ---------------------------------      ----------------------------------
Years ended December 31,                              2002         2001        2000           2002         2001         2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>         <C>           <C>           <C>          <C>
Service cost                                         $   37       $    38     $    32       $    11       $   14       $   10
Interest cost                                           125           118         117            52           43           41
Expected return on plan assets                         (159)         (161)       (148)
Amortization of transition asset                                       (1)         (1)
Amortization of net loss (gain)                           2            (6)         (1)            2                        (2)
Amortization of prior service cost (credit)              11            14          16            (1)          (1)          (1)
------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit expense                             16             2          15            64           56           48
------------------------------------------------------------------------------------------------------------------------------------

Discontinued operations - precision lens business         9 (1)         2                        (7) (1)       1
Curtailment loss (gain)                                  10 (2)        44 (2)      11            (2) (2)     (13) (2)
Special termination benefits                             21 (2)        18 (2)                    11 (2)       17 (2)
------------------------------------------------------------------------------------------------------------------------------------

Total expense                                        $   56       $    66     $    26       $    66       $   61       $   48
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes pension and postretirement  benefit  curtailment loss (gain) of $7
     and ($8), respectively.
(2)  Included in restructuring charges. See Note 5.

Measurement of  postretirement  benefit expense is based on assumptions  used to
value the  postretirement  benefit  obligation  at the beginning of the year. In
addition  to  defined   benefit   retirement   plans,   Corning  offers  defined
contribution plans covering employees meeting certain eligibility  requirements.
Total consolidated defined contribution expense was $44 million, $56 million and
$81 million for the years ended December 31, 2002, 2001 and 2000, respectively.


<PAGE>


16.  Commitments, Contingencies, Guarantees and Hedging Activities

Commitments, Contingencies and Guarantees

Minimum rental  commitments under leases  outstanding at December 31, 2002, were
(in millions):
--------------------------------------------------------------------------------

  2003       2004        2005        2006        2007        2008 and thereafter
--------------------------------------------------------------------------------

   $48        $42         $36         $33         $42              $153
--------------------------------------------------------------------------------

Total rental expense amounted to approximately $85 million for 2002, $89 million
for 2001 and $75 million for 2000.

Corning and PPG  Industries,  Inc. each own 50% of the capital stock of PCC. PCC
and several  other  defendants  have been named in numerous  lawsuits  involving
claims  alleging  personal  injury from  exposure to  asbestos.  At this time it
appears more likely than not that Corning will litigate the asbestos cases,  but
will continue to explore a settlement through the bankruptcy process. Management
estimates  that  the  low end of the  range  of loss  resulting  from  continued
litigation  is not  material.  Alternatively,  in the event that Corning and its
insurers agree to a global settlement through the bankruptcy process, management
expects any  after-tax  charge could  approximate  $125 million to $175 million.
Management  cannot provide  assurances that the ultimate outcome of a settlement
would be within this range. See Note 10 for a more complete discussion.

The ability of certain  subsidiaries and associated  companies to transfer funds
is limited by  provisions  of certain  loan  agreements  and foreign  government
regulations.  At  December  31,  2002,  the  amount  of equity  subject  to such
restrictions  for  consolidated  subsidiaries  totaled $53  million.  While this
amount is legally  restricted,  it does not result in  operational  difficulties
since  Corning  has  generally  permitted  subsidiaries  to retain a majority of
equity to support their growth  programs.  At December 31, 2002, loans of equity
affiliates  guaranteed by Corning totaled $14 million. In addition,  Corning and
certain  of its  subsidiaries  have  provided  other  financial  guarantees  and
contingent  liabilities  in the form of purchase  price  adjustments  related to
attainment of  milestones,  stand-by  letters of credit and  performance  bonds.
Corning  has  agreed  to  provide  a  credit  facility  related  to Dow  Corning
Corporation  as  discussed  in Note 10. The  funding of the Dow  Corning  credit
facility is subject to events  connected to the Bankruptcy  Plan as described in
Note 10.  Management  believes the significant  majority of these guarantees and
contingent  liabilities  will expire without being funded.  The amounts of these
obligations are represented in the following table (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Amount of commitment and contingency expiration per period
                                                                  -----------------------------------------------------------
                                                                  Less than    1 to 2      2 to 3      3 to 4     5 years and
                                                         Total     1 year       years       years       years     thereafter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>          <C>         <C>         <C>          <C>
Performance bonds and guarantees                        $  189     $   49       $  5        $ 21                     $ 114
Contingent purchase price for acquisitions                 126         48         24           2                        52
Dow Corning credit facility                                150                                                         150
Stand-by letters of credit                                  33         33
Loan guarantees                                             37          5          1           1        $  1            29
------------------------------------------------------------------------------------------------------------------------------------
Total other commercial commitments
  and contingencies                                     $  535     $  135       $ 30        $ 24        $  1         $ 345
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Corning has leased equipment from three unconsolidated  special purpose entities
(SPEs) for which the sole  purpose is the leasing of  equipment.  These SPEs are
not  consolidated in the 2002 financial  statements since the equity investor of
the SPE has made a  substantial  investment  that is at risk for the life of the
SPE.  However,  the FASB issued  Interpretation  46,  Consolidation  of Variable
Interest  Entities in January  2003.  FASB  Interpretation  46 will  require the
consolidation of variable interest  entities (VIEs) by the primary  beneficiary.
Management is still assessing the impacts of this interpretation, however, it is
reasonably  possible that Corning will be considered the primary  beneficiary of
the three VIEs and therefore will consolidate  these entities  beginning on July
1, 2003. As of December 31, 2002, the total assets in  unconsolidated  VIEs were
$46 million.  In addition,  Corning's  maximum loss  exposure as a result of its
involvement with these VIEs is $46 million. This amount represents payments that
would be due to the VIE in the event of a total loss of the  equipment.  Corning
carries insurance coverage for this risk.

Hedging Activities

Corning operates and conducts business in many foreign  countries.  As a result,
there is exposure to  potentially  adverse  movement  in foreign  currency  rate
changes.  Corning enters into foreign exchange forward and option contracts with
durations  generally 12 months or less to reduce its  exposure to exchange  rate
risk on foreign source income and purchases. The objective of these contracts is
to  neutralize  the  impact of  foreign  currency  exchange  rate  movements  on
Corning's operating results.


<PAGE>


16.  Commitments, Contingencies, Guarantees and Hedging Activities (concluded)

Corning engages in foreign currency  hedging  activities to reduce the risk that
changes in exchange  rates will  adversely  affect the  eventual  net cash flows
resulting  from the sale of products to foreign  customers  and  purchases  from
foreign  suppliers.  The hedge contracts  reduce the exposure to fluctuations in
exchange rate  movements  because the gains and losses  associated  with foreign
currency balances and transactions are generally offset with gains and losses of
the hedge  contracts.  Because the impact of movements in foreign exchange rates
on hedge  contracts  offsets the related  impact on the  underlying  items being
hedged, these financial instruments help alleviate the risk that might otherwise
result from currency exchange rate fluctuations.

The following table (in millions) summarizes the notional amounts and respective
fair values of the derivative financial  instruments at December 31, 2002. These
contracts are held by Corning and its subsidiaries and mature at varying dates:

--------------------------------------------------------------------------------
                                          Notional Amount        Fair Value
--------------------------------------------------------------------------------
Foreign exchange forward contracts            $ 578                $ (17)
Foreign exchange option contracts             $ 317                $  (7)
--------------------------------------------------------------------------------

The  forward  and  option  contracts  used by Corning in  managing  its  foreign
currency  exposures contain an element of risk in that the counterparties may be
unable to meet the terms of the agreements. However, Corning minimizes this risk
by limiting the counterparties to a diverse group of highly-rated major domestic
and international  financial institutions with which Corning has other financial
relationships.   Corning  is  exposed  to  potential  losses  in  the  event  of
non-performance  by these  counterparties;  however,  Corning does not expect to
record any losses as a result of counterparty default.  Corning does not require
and is not required to place collateral for these financial instruments.

17.  Series B Convertible Preferred Stock

In August  2002,  in  connection  with its  issuance  of 7%  Series C  mandatory
convertible preferred stock, as discussed below, Corning redeemed and retired 69
thousand  shares of Series B  convertible  preferred  stock for $7  million.  At
December  31, 2001 and 2000,  72,400 and 86,800  shares of Series B  convertible
preferred stock were outstanding, respectively. See Note 18 for more information
on preferred stock.

18.  Shareholders' Equity

Preferred Stock

Corning has 10 million  authorized shares of Preferred Stock, par value $100 per
share.

Series A Junior Participating Preferred Stock
---------------------------------------------
Of the authorized shares,  Corning has designated 2.4 million shares as Series A
Junior Participating Preferred Stock for which no shares have been issued.

In June 1996, the Board of Directors approved the renewal of the Preferred Share
Purchase Right Plan which entitles  shareholders  to purchase 0.01 of a share of
Series A Junior  Participating  Preferred  Stock upon the  occurrence of certain
events.  In addition,  the rights  entitle  shareholders  to purchase  shares of
common  stock at a 50%  discount in the event a person or group  acquires 20% or
more of Corning's  outstanding common stock. The preferred share purchase rights
became effective July 15, 1996 and expire July 15, 2006.

Series C Mandatory Convertible Preferred Stock
----------------------------------------------
In July and August  2002,  Corning  issued  5.75  million  shares of 7% Series C
mandatory  convertible  preferred stock having a liquidation  preference of $100
per share, plus accrued and unpaid dividends, and resulting in gross proceeds of
$557 million. The mandatory convertible stock has an annual dividend rate of 7%,
payable  quarterly  in cash.  The first  dividend  payment date was November 16,
2002.  The dividends  are also payable  immediately  upon  conversion to Corning
common  stock.  At the time Corning  issued the Series C  convertible  stock,  a
one-time  dividend  was  declared  for all  dividends  that will be payable from
issuance  through the  mandatory  conversion  date of August 16,  2005.  Corning
secured the payment of the dividends  through the issuance of a promissory  note
and used a portion of the proceeds from the sale of the Series C preferred stock
to  purchase  $117  million of U.S.  treasury  securities  that were  pledged as
collateral  to secure the  payments on the  promissory  note.  As a result,  net
proceeds of the offering were $440 million.


<PAGE>


18.  Shareholders' Equity (continued)

The  Series C  preferred  stock  will  automatically  convert  on the  mandatory
conversion  date of August 16,  2005,  into  between  50.813 and 62.5  shares of
Corning common stock,  depending on the then current  market price.  At any time
prior to the mandatory conversion date, holders may elect to convert in whole or
part of their  shares of Series C preferred  stock into 50.813  shares of common
stock plus an amount of cash  equal to the market  value at that time of the pro
rata share of the  collateral  portfolio  that secures the  promissory  note. At
December 31, 2002,  approximately  4.2 million  shares of the Series C preferred
stock had been converted into 213.3 million common shares.

As the closing  price of Corning  common stock was $1.60 on July 31,  2002,  the
holder could immediately convert the Series C preferred stock and obtain a value
of  $101.72  (50.813  shares  valued at $1.60 plus  $20.42 in future  dividends)
indicating that the preferred stock contains a beneficial  conversion feature of
$1.72 per preferred share. The beneficial  conversion totaled  approximately $10
million and was charged to the  accumulated  deficit in the third  quarter.  The
beneficial  conversion  was also deducted from earnings  attributable  to common
shareholders in the 2002 earnings per share calculations.

Common Stock

On August 16, 2001,  Corning completed an equity offering of 14.2 million shares
of common  stock  generating  net  proceeds  to  Corning of  approximately  $225
million.

On July 9,  2001,  Corning  announced  the  discontinuation  of the  payment  of
dividends on its common stock.  Dividends  paid to common  shareholders  in 2001
totaled $112 million, compared with $210 million in 2000.

Treasury Stock

On July 22, 2002, Corning repurchased 5.5 million shares of common stock for $23
million in a privately  negotiated  transaction.  Corning did not repurchase any
common stock in 2001 or 2000.


<PAGE>


18.  Shareholders' Equity (concluded)

Accumulated Other Comprehensive Loss

Components of other  comprehensive  income (loss),  accumulated in shareholders'
equity, are reported net of income taxes, as follows (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Net
                                                                                               Net      unrealized
                                                               Foreign       Minimum       unrealized      gains       Accumulated
                                                              currency       pension         gains      (losses) on      other
                                                             translation    liability      (losses) on   cash flow    comprehensive
                                                             adjustment    adjustment      investments    hedges      income (loss)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>             <C>           <C>            <C>
December 31, 1999                                             $  (50)                       $    19                      $   (31)
Foreign currency translation adjustment                         (118)                                                       (118)
Unrealized gain on investments (net of tax of $21 million)                                       33                           33
Realized gains on securities (net of tax of $7 million)                                         (11)                         (11)
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2000                                               (168)                            41                         (127)
------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation adjustment                          (31)                                                        (31)
Unrealized loss on investments (net of tax of $17 million)                                      (27)                         (27)
Realized gains on securities (net of tax of $12 million)                                        (18)                         (18)
Cumulative effect of adoption of SFAS No. 133                                                             $    3               3
Unrealized derivative gain on cash flow hedges
  (net of tax of $7 million)                                                                                  11              11
Reclassification adjustments on cash flow hedges
  (net of tax of $2 million)                                                                                  (4)             (4)
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2001                                             $ (199)                       $    (4)      $   10         $  (193)
------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation adjustment                          208                                                         208
Minimum pension liability adjustment                                        $   (173)                                       (173)
Unrealized gain on investments (net of tax of $1 million)                                         1                            1
Realized loss on securities (net of tax of $3 million)                                            5                            5
Unrealized derivative loss on cash flow hedges
  (net of tax of $17 million)                                                                                (27)            (27)
Reclassification adjustments on cash flow hedges
  (net of tax of $6 million)                                                                                   9               9
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2002                                             $    9        $   (173)       $     2       $   (8)        $  (170)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


19.  (Loss) Earnings Per Common Share

Basic (loss)  earnings per common  share is computed by dividing  (loss)  income
available to common shareholders (the numerator) by the weighted-average  number
of common shares  outstanding  (the  denominator)  for the period.  The net loss
available to common  shareholders for 2002 is further  increased by the Series C
mandatory convertible preferred stock dividend requirement.

Diluted  (loss)  earnings  per common  share is computed by dividing  net (loss)
income  available to common  shareholders,  adjusted for the preferred  dividend
requirements in 2002, by the weighted average shares outstanding.  Since Corning
reported a loss from  continuing  operations in 2002 and 2001,  the diluted loss
per share is the same as basic, as any  potentially  dilutive  securities  would
reduce the loss per share from continuing operations.  In 2000, diluted earnings
per share  assumes  that  outstanding  common  shares were  increased  by shares
issuable upon exercise of those stock options for which market price exceeds the
exercise price,  less shares which could have been purchased by Corning with the
related proceeds.

A  reconciliation  of the basic  and  diluted  (loss)  earnings  per share  from
continuing  operations  computations  for 2002, 2001 and 2000 was as follows (in
millions, except per share amounts):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                    For the years ended December 31,
                                    ------------------------------------------------------------------------------------------------
                                                 2002                             2001                             2000
                                    -------------------------------   ------------------------------   -----------------------------
                                               Weighted-                        Weighted-                       Weighted-
                                                Average   Per Share              Average   Per Share             Average   Per Share
                                      Loss      Shares     Amount      Loss      Shares     Amount     Income    Shares     Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>        <C>       <C>           <C>      <C>         <C>        <C>       <C>
(Loss) income from
  continuing operations             $(1,780)                         $(5,532)                           $ 363
Less:  Preferred stock
  dividend requirements                 128                                1                                1
------------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing
  operations available to
  common shareholders                (1,908)                          (5,533)                             362
------------------------------------------------------------------------------------------------------------------------------------

Basic (Loss) Earnings
  Per Common Share                   (1,908)    1,030      $(1.85)    (5,533)      933      $(5.93)       362      858       $0.42
------------------------------------------------------------------------------------------------------------------------------------

Effect of Dilutive
  Securities
Options                                                                                                             21
------------------------------------------------------------------------------------------------------------------------------------

Diluted (Loss) Earnings
  Per Common Share                  $ 1,908     1,030      $(1.85)   $(5,533)      933      $(5.93)     $ 362      879       $0.41
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


19.  (Loss) Earnings Per Common Share (concluded)

The potential  common shares  excluded from the  calculation of diluted loss per
share  because  their  effect  would be  anti-dilutive  and the  amount of stock
options  excluded from the  calculation  of diluted loss per share because their
exercise price was greater than the average market price of the common shares of
the periods presented was as follows (in millions):

--------------------------------------------------------------------------------
                                              For the years ended December 31,
                                              --------------------------------
                                                2002        2001       2000
--------------------------------------------------------------------------------

Potential common shares excluded from the
  calculation of diluted loss per share:
    Stock options                                  1           6
    7% mandatory convertible preferred stock      31
    Convertible preferred stock                                1          1
    4.875% convertible notes                       6           6          6
    3.5% convertible debentures                   69           9
    Zero coupon convertible debentures            20          23          4
                                               ------------------------------
     Total                                       127          45         11
                                               ==============================

Stock options excluded from the calculation
  of diluted loss per share because the
  exercise price was greater than the
  average market price of the common shares       84          48          1
                                               ==============================

--------------------------------------------------------------------------------

20.  Stock Compensation Plans

At December 31, 2002,  Corning's stock  compensation  programs are in accordance
with the 2000  Employee  Equity  Participation  Program and 2000 Equity Plan for
Non-Employee  Directors  Program.  For calendar years beginning January 1, 2001,
3.5% of Corning's common stock  outstanding at the beginning of the year and any
ungranted  shares  from prior years will be  available  for grant in the current
year.  At December 31, 2002,  69.3  million  shares will be available  under the
Programs for 2003. Any remaining shares available for grant, but not yet granted
will be carried over and used in the following year.

Stock Option Plan

Corning stock option plans provide  non-qualified and incentive stock options to
purchase  unissued or treasury  shares at the market price on the grant date and
generally  become  exercisable in  installments  from one to five years from the
grant date. The maximum term of non-qualified  and incentive stock options is 10
years from the grant date.


<PAGE>


20.  Stock Compensation Plans (continued)

Changes in the status of outstanding options were as follows:
--------------------------------------------------------------------------------
                                                 Number              Weighted-
                                                of Shares             Average
                                             (in thousands)       Exercise Price
--------------------------------------------------------------------------------

Options outstanding January 1, 2000               35,289            $  12.63
Options granted under plans                       23,549            $  66.27
Options issued in acquisitions                     4,456            $  26.55
Options exercised                                (17,297)           $  10.62
Options terminated                                  (994)           $  42.78
--------------------------------------------------------------------------------
Options outstanding December 31, 2000             45,003            $  42.27
--------------------------------------------------------------------------------

Options granted under plans                       29,784            $  21.02
Options exercised                                 (1,258)           $   9.40
Options terminated                                (1,138)           $  37.53
--------------------------------------------------------------------------------
Options outstanding December 31, 2001             72,391            $  34.21
--------------------------------------------------------------------------------

Options granted under plans                       26,852            $   4.55
Options exercised                                    (56)           $   1.86
Options terminated                                (1,860)           $  23.20
--------------------------------------------------------------------------------
Options outstanding December 31, 2002             97,327            $  26.47
--------------------------------------------------------------------------------
Options exercisable at December 31, 2002          42,428            $  28.96
--------------------------------------------------------------------------------
Options exercisable at December 31, 2001          20,882            $  26.33
Options exercisable at December 31, 2000          11,983            $  11.32
--------------------------------------------------------------------------------

The weighted-average  fair value of options granted was $3.64 in 2002, $13.83 in
2001 and $38.46 in 2000.

The following table summarizes information about Corning's stock option plans at
December 31, 2002:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                         Options Outstanding                                   Options Exercisable
------------------------------------------------------------------------------------------------------------------------------------
                          Number          Weighted-Average                                Number
                      Outstanding at          Remaining           Weighted-           Exercisable at           Weighted-
    Range of         December 31, 2002    Contractual Life         Average           December 31, 2002          Average
 Exercise Prices      (in thousands)          in Years         Exercise Price         (in thousands)        Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                   <C>               <C>                     <C>                  <C>
$   0.47 to 3.71           4,981                9.5               $  1.62                    118               $  2.21
$   4.06 to 8.74          25,456                8.5               $  6.80                  3,445               $  8.27
$   8.84 to 9.84           6,140                5.4               $  9.36                  5,770               $  9.37
$  9.95 to 13.50           7,635                8.0               $ 10.60                  3,818               $ 11.20
$ 13.52 to 15.28           7,444                8.5               $ 15.19                  3,727               $ 15.10
$ 15.36 to 19.83           6,982                7.4               $ 17.14                  6,849               $ 17.15
$ 19.94 to 31.78           7,846                8.3               $ 21.47                  3,673               $ 21.38
$ 31.83 to 47.37           6,830                7.6               $ 40.89                  4,040               $ 37.03
$ 48.33 to 55.08           6,196                7.8               $ 53.65                  3,706               $ 53.75
$ 55.48 to 69.56           4,592                7.3               $ 61.76                  2,617               $ 61.77
$ 70.08 to 70.75           5,616                7.9               $ 70.75                  3,748               $ 70.75
$ 71.04 to 72.38           6,882                7.4               $ 72.11                    418               $ 72.11
$72.99 to 111.00             727                7.7               $ 91.35                    499               $ 90.89
------------------------------------------------------------------------------------------------------------------------------------
                          97,327                7.9               $ 26.47                 42,428               $ 28.96
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Incentive Stock Plans

The Corning  Incentive  Stock Plan permits  stock grants,  either  determined by
specific performance goals or issued directly, in most instances, subject to the
possibility of forfeiture and without cash consideration.


<PAGE>


20.  Stock Compensation Plans (concluded)

In 2002, 2001 and 2000, grants of 88,500 shares,  1,028,000 shares and 1,429,000
shares,  respectively,  were made under this plan. The weighted-average price of
the grants was $7.15 in 2002, $36.89 in 2001 and $61.07 in 2000, respectively. A
total of 0.7 million  shares issued remain subject to forfeiture at December 31,
2002.

Corning  applies APB No. 25 accounting for its stock-based  compensation  plans.
Compensation  expense is recorded  for awards of shares or share rights over the
period earned.  Compensation expense of $2 million, $130 million and $31 million
was recorded in 2002, 2001 and 2000, respectively.

Corning has adopted the  disclosure-only  provisions of SFAS No. 123. If Corning
had elected to recognize  compensation expense under SFAS No. 123, Corning's net
income in 2002,  2001 and  2000,  respectively,  would  have  decreased  by $277
million, $367 million and $112 million, respectively.

SFAS No. 123 requires that reload options be treated as separate grants from the
related original option grants. Under Corning's reload program, upon exercise of
an  option,  employees  may  tender  unrestricted  shares  owned  at the time of
exercise to pay the exercise  price and related tax  withholding,  and receive a
reload option  covering the same number of shares  tendered for such purposes at
the market  price on the date of exercise.  The reload  options vest in one year
and are only granted in certain circumstances according to the original terms of
the option being  exercised.  The existence of the reload  feature  results in a
greater number of options being measured.

For purposes of SFAS No. 123 disclosure,  the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model. The
following are  weighted-average  assumptions used for grants under Corning stock
plans and predecessor Oak plans in 2002, 2001 and 2000, respectively:

--------------------------------------------------------------------------------
For Options Granted During          2002             2001              2000
--------------------------------------------------------------------------------

Expected life in years                5                 6                5
Risk free interest rate             4.0%              4.8%             5.8%
Dividend yield                                       0.46%            0.36%
Expected volatility                  80%               75%              65%
--------------------------------------------------------------------------------

Corning  discontinued payment of dividends on its common stock in July 2001. The
dividend yield assumption applies to grants prior to July 2001.

Worldwide Employee Share Purchase Plan

In addition to the Stock Option Plan and  Incentive  Stock Plans,  Corning has a
Worldwide Employee Share Purchase Plan (WESPP).  Under the WESPP,  substantially
all  employees  can elect to have up to 10% of their  annual  wages  withheld to
purchase  Corning  common stock.  The purchase  price of the stock is 85% of the
lower of the beginning-of-quarter or end-of-quarter market price.

21.  Business Combinations and Divestitures

Pooling-of-Interests

On  January  28,  2000,  Corning  merged  with  Oak  in  a  pooling-of-interests
transaction.  Corning issued 44.3 million shares of Corning common stock and 2.7
million  options to  purchase  Oak common  shares to complete  the  transaction.
During the first  quarter of 2000,  Corning  recognized  a charge of $47 million
($43 million  after-tax)  for  one-time  acquisition  costs  related to Oak. The
acquisition costs are primarily related to investment  banking,  legal and other
fees of approximately  $30 million.  The charge also included  approximately $17
million of severance and other termination  benefits for Oak corporate  officers
and headquarters employees.

Purchases

The transactions  listed on the following table were all accounted for under the
purchase method of accounting. Management is responsible for estimating the fair
value of the assets and liabilities acquired.  Management has made estimates and
assumptions that affect the reported amounts of assets, liabilities and expenses
resulting  from such  acquisitions.  From time to time  Corning  uses its common
stock as consideration for business combinations.  The value of the common stock
is based upon the average  closing price of Corning  common stock for a range of
days  surrounding  the  agreement  or  announcement  and adjusted for a discount
commensurate with restrictions on the shares, if applicable.


<PAGE>


21.  Business Combinations and Divestitures (continued)

Amounts allocated to purchased  in-process  research and development (IPRD) were
established  through  recognized  valuation  techniques  in the high  technology
communications industry.  Certain projects were acquired for which technological
feasibility had not been established at the date of acquisition and for which no
alternative future uses existed.  In accordance with SFAS No. 2, "Accounting for
Research and  Development  Costs" as interpreted by FASB  Interpretation  No. 4,
"Applicability of FASB Statement No. 2 to Business Combinations Accounted for by
the Purchase  Method,"  amounts assigned to IPRD meeting the above criteria must
be charged to expense at the date of consummation of the purchase.

The value  allocated to projects for which a charge was recorded was  determined
by the traditional  income approach which  discounts  expected future  debt-free
income to present  value.  The discount rates used were specific to each project
and were derived from a cost of capital for each  specific  acquisition  target,
adjusted upward for the stage of completion of each project. The acquired entity
discount  rates ranged from 17% to 35%, and the stage of completion  assigned to
IPRD projects varied from 10% to 90%.

Corning expected that products  incorporating the acquired technology from these
projects  will be completed and will begin to generate cash flows over the first
five years following integration.

The following table presents  information related to Corning's  acquisitions for
the years ended December 31, 2002, 2001 and 2000 (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                Initial                                  Goodwill &
         Acquisition                                 Date        Price           Form          IPRD      Intangibles
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>          <C>               <C>         <C>
2002
Lucent Technologies Joint Ventures (a)                9/02     $    198        Cash/Stock                 $    110
------------------------------------------------------------------------------------------------------------------------------------
2001
Tropel Corporation (b)                                3/01     $    160        Cash/Stock                 $    155
------------------------------------------------------------------------------------------------------------------------------------
2000
Pirelli's optical components business (c)            12/00     $  4,000        Cash/Stock     $ 323       $  3,624
Champion Products Inc. (d)                           10/00     $     85              Cash                 $     69
IntelliSense Corporation (e)                          6/00     $    410     Stock/Options     $   7       $    483
NetOptix Corporation (f)                              5/00     $  2,000     Stock/Options                 $  2,066
NZ Applied Technologies (NZAT) (g)                    5/00     $     75     Stock/Options     $  44       $     73
Photonics Technology Research Center (h)              2/00     $     66              Cash     $  42       $     24
Siemens Transaction (i)                               2/00     $  1,400         Cash/Debt                 $    650
Other 2000                                         Various     $     67              Cash                 $     64
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  Acquisition  of 56% interest in Lucent  Technologies  Shanghai  Fiber Optic
     Co.,  Ltd. and a 68% interest in Lucent  Technologies  Beijing  Fiber Optic
     Cable Co.,  Ltd.  from  Lucent  Technologies.  The  Shanghai-based  company
     manufactures optical fiber and the Beijing-based company manufactures fiber
     cable.  Purchase  price  included 30 million shares of Corning common stock
     valued   at   $48   million.   These   entities   are   included   in   the
     Telecommunications Segment.
(b)  Manufacturer  of  precision  optics  and  metrology   instruments  for  the
     semiconductor  and other  industries.  Purchase price included 1.95 million
     shares of Corning common stock valued at $94 million.
(c)  Manufacturer of lithium niobate modulators,  pump lasers, certain specialty
     fibers and fiber gratings used in optical networks.  Purchased from Pirelli
     S.p.A.,  based in Milan,  Italy (90%) and Cisco  Systems  Inc.  (10%),  the
     "Pirelli  transaction,"  for $3.6 billion in cash to Pirelli S.p.A. and 5.5
     million shares of Corning common stock valued at approximately $400 million
     to Cisco  Systems.  Corning  impaired  $3,154 million of goodwill and other
     intangible assets in 2001. See Note 4.
(d)  Manufacturer of enclosures, power pedestals, shelters and a unique patented
     design for temperature controlled enclosures for telecommunications.
(e)  Manufacturer of micro-electro-mechanical devices. Purchase of the remaining
     67% interest for 6.1 million  shares of Corning common stock and assumption
     of stock options convertible into 2 million shares of Corning common stock.
     An  additional 1 million  shares  valued at $77 million were issued in 2000
     when certain product milestones were achieved.
(f)  Manufacturer  of thin film  filters  for use in dense  wavelength  division
     multiplexing  components.  Purchase  price  included 33.7 million shares of
     Corning common stock and assumption of stock options  convertible  into 2.5
     million  Corning  shares.  Corning  impaired  $1,610 million of goodwill in
     2001. See Note 4.
(g)  Manufacturer  of photonic  components for  telecommunication  applications.
     Purchase of the  remaining  84% interest for 1.3 million  shares of Corning
     common stock valued at $75 million.  NZAT earned an additional  0.5 million
     shares of Corning common stock valued at $42 million in 2000. An additional
     0.6 million  shares valued at $14 million were issued in 2001 for achieving
     certain product milestones. An additional 0.2 million shares valued at $1.3
     million were issued in 2002 when certain milestones were achieved.
(h)  Acquired from British Telecommunications.
(i)  Purchase of the worldwide optical cable and hardware business of Siemens AG
     and the remaining 50% in Siecor Corporation and Siecor GmbH. Purchase price
     included  $120  million of  assumed  debt and $145  million  of  contingent
     performance payments to be paid, if earned, over a four-year-period.  Total
     cash paid to Siemens as of December 31, 2002 was $1.1 billion.


<PAGE>


21.  Business Combinations and Divestitures (concluded)

Divestitures

Appliance Controls Group
------------------------
In May 2002,  Corning completed the sale of its appliance  controls group, which
was   included   in  the   controls   and   connectors   business   within   the
Telecommunications  Segment.  During  2002,  Corning  received  proceeds  of $30
million  and  realized  a loss on the sale of  approximately  $16  million  ($10
million after-tax). This loss is included in restructuring, impairment and other
charges in the consolidated statements of operations.

22.  Operating Segments

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information,"  set  standards  for  reporting  information  regarding  operating
segments in financial  statements.  Operating segments are defined as components
of an enterprise about which separate financial information is available that is
evaluated  regularly by the chief  operating  decision maker, or decision making
group,  in deciding  how to allocate  resources  and in  assessing  performance.
Corning's  chief  operating  decision-making  group is  comprised  of the  Chief
Executive Officer and the officers who report to him directly.

Corning  Incorporated  is a world-leading  provider of optical fiber,  cable and
photonic products for the  telecommunications  industry;  high-performance glass
for  computer  monitors,   television  screens  and  other  information  display
applications;  advanced optical materials for the semiconductor industry and the
scientific   community;   ceramic   substrates  for  the  automotive   industry;
specialized   polymer  products  for  biotechnology   applications;   and  other
technologies.

Corning  previously   grouped  its  products  into  three  operating   segments:
Telecommunications,   Advanced  Materials  and  Information  Display.  Corning's
reportable  segments  now  consist  of  the  following:  Telecommunications  and
Technologies.  As a result of the  fourth  quarter  sale of the  precision  lens
business  and the reduced  significance  of the  conventional  video  components
business,  management realigned the remainder of the Information Display Segment
with the businesses  previously  reported under Advanced Materials to create the
Technologies  Segment. The precision lens business is reported as a discontinued
operation and  therefore  its results have been excluded from segment  reporting
and historical  periods have been conformed to this  presentation.  Also, in the
second  quarter of 2002,  Corning  revised its definition of segment net income.
Prior to the second  quarter,  Corning  disclosed  restructuring  and impairment
charges and  acquisition-related  charges by segment,  but  excluded  these from
quantitative  segment  results.  These  charges  have now been  included  in the
segment  net  income  and  historical   periods  have  been  conformed  to  this
presentation. This change was made to increase the transparency of the impact of
these charges on segment  results.  Corning also includes the earnings of equity
affiliates  that are closely  associated  with Corning's  operating  segments in
segment  net income.  Segment  amounts  exclude  revenues,  expenses  and equity
earnings not specifically identifiable to segments.

Corning  prepared the financial  results for its  operating  segments on a basis
that is  consistent  with the  manner  in which  Corning  management  internally
disaggregates  financial  information  to assist in  making  internal  operating
decisions.   Corning  has  allocated  certain  common  expenses  among  segments
differently  than it would for  stand-alone  financial  information  prepared in
accordance  with GAAP.  These  expenses  include  interest,  taxes and corporate
functions.  Segment net income may not be consistent with measures used by other
companies.  Revenue  attributed to geographic  areas is based on the location of
the customer.


<PAGE>


22.  Operating Segments (continued)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Operating Segments                                                                    Telecom-                           Total
(In millions)                                                                        munications      Technologies     Segments
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>            <C>
2002

Net sales                                                                             $   1,631        $   1,513       $   3,144
Depreciation (1)                                                                      $     379        $     245       $     624
Amortization of purchased intangibles                                                 $      41                        $      41
Research, development and engineering expenses (2)                                    $     308        $     177       $     485
Impairment, restructuring and other charges (related tax benefit, $452, $30
  and $482, respectively)                                                             $   1,722        $     150       $   1,872
Interest expense (3)                                                                  $      99        $      71       $     170
Income tax benefit                                                                    $    (722)       $     (28)      $    (750)
Segment loss before minority interests and equity earnings (4)                        $  (1,838)       $    (145)      $  (1,983)
Minority interests                                                                            1               96              97
Equity in (losses) earnings of associated companies, net of impairments (5)                 (60)             168             108
------------------------------------------------------------------------------------------------------------------------------------
Segment net (loss) income                                                             $  (1,897)       $     119       $  (1,778)
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity                                         $      72        $     655       $     727
Segment assets (6)                                                                    $   2,466        $   2,554       $   5,020
Capital expenditures                                                                  $      49        $     183       $     232
------------------------------------------------------------------------------------------------------------------------------------

2001

Net sales                                                                             $   4,458        $   1,568       $   6,026
Depreciation (1)                                                                      $     401        $     215       $     616
Amortization of purchased intangibles                                                 $      76                        $      76
Research, development and engineering expenses (2)                                    $     474        $     151       $     625
Impairment and restructuring charges (related tax benefit, $282, $48 and
  $330, respectively)                                                                 $   5,404        $     122       $   5,526
Interest expense (3)                                                                  $     104        $      48       $     152
Income tax benefit                                                                    $    (336)       $     (38)      $    (374)
Segment loss before minority interests and equity earnings (4)                        $  (5,215)       $     (53)      $  (5,268)
Minority interests                                                                                            13              13
Equity in earnings of associated companies                                                   12              132             144
------------------------------------------------------------------------------------------------------------------------------------
Segment net (loss) income                                                             $  (5,203)       $      92       $  (5,111)
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity                                         $     101        $     511       $     612
Segment assets (6)                                                                    $   3,972        $   2,571       $   6,543
Capital expenditures                                                                  $     941        $     403       $   1,344
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


22.  Operating Segments (continued)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Operating Segments                                                                    Telecom-                           Total
(In millions)                                                                        munications      Technologies     Segments
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>            <C>
2000
Net sales                                                                             $   5,186         $  1,708       $   6,894
Depreciation (1)                                                                      $     342         $    163       $     505
Amortization of purchased intangibles                                                 $      29                        $      29
Research, development and engineering expenses (2)                                    $     395         $    136       $     531
Acquisition-related charges                                                           $     463                        $     463
Interest income                                                                       $       1                        $       1
Interest expense (3)                                                                  $      70         $     37       $     107
Nonoperating gain                                                                                       $      7       $       7
Income tax expense                                                                    $     308         $     54       $     362
Segment earnings before minority interests and equity earnings (4)                    $     250         $    130       $     380
Minority interests                                                                            3              (27)            (24)
Equity in earnings of associated companies, net of impairments                                1              167             168
------------------------------------------------------------------------------------------------------------------------------------
Segment net income                                                                    $     254         $    270       $     524
------------------------------------------------------------------------------------------------------------------------------------
Investment in associated companies, at equity                                         $      34         $    447       $     481
Segment assets (6)                                                                    $   4,089         $  2,339       $   6,428
Capital expenditures                                                                  $     944         $    447       $   1,391
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes an allocation of  depreciation  of corporate  property,  plant and
     equipment not specifically  identifiable to a segment.  Related depreciable
     assets are not allocated to segment assets.
(2)  Non-direct  research,  development and  engineering  expenses are allocated
     based upon direct project spending for each segment.
(3)  Interest  expense is allocated to segments based on a percentage of segment
     net operating assets.  Consolidated  subsidiaries with independent  capital
     structures do not receive additional allocations of interest expense.
(4)  Many of Corning's  administrative  and staff  functions  are performed on a
     centralized  basis.  Where  practicable,  Corning charges these expenses to
     segments  based upon the extent to which each  business  uses a centralized
     function. Other staff functions, such as corporate finance, human resources
     and legal are allocated to segments, primarily as a percentage of sales.
(5)  Equity  losses  included  $20  million  of  charges,  primarily  related to
     restructuring and impairments.
(6)  Includes inventory,  accounts receivable, plant, property and equipment and
     investments in associated equity companies.


<PAGE>


22.  Operating Segments (continued)

A  reconciliation  of the totals  reported  for the  operating  segments  to the
applicable line items in the  consolidated  financial  statements was as follows
(in millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Years ended December 31,
                                                                                      -----------------------------------------
                                                                                          2002           2001          2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>            <C>             <C>
Net Sales
Total segment net sales                                                               $   3,144      $   6,026       $   6,894
Non-segment net sales                                                                        20             21              26
------------------------------------------------------------------------------------------------------------------------------------
   Total net sales                                                                    $   3,164      $   6,047       $   6,920
------------------------------------------------------------------------------------------------------------------------------------

(Loss) Income from Continuing Operations
Total segment net (loss) income (1)                                                   $  (1,778)     $  (5,111)      $     524
   Unallocated items:
Non-segment income (loss) and other (2)                                                       4            (33)             (9)
Amortization of goodwill (3)                                                                              (363)           (216)
Non-segment restructuring, impairment and other charges                                    (208)          (191)
Interest income (4)                                                                          41             68             104
Gain on repurchases of debt                                                                 176
Income tax (expense) benefit (5)                                                            (24)            94             (21)
Equity in earnings (losses) of associated companies, net of impairments                       8              4             (19)
Minority interests                                                                            1
------------------------------------------------------------------------------------------------------------------------------------
   (Loss) income from continuing operations                                           $  (1,780)     $  (5,532)      $     363
------------------------------------------------------------------------------------------------------------------------------------

Assets
Total segment assets                                                                  $   5,020      $   6,543       $   6,428
   Non-segment assets:
Property, net (6)                                                                           508            636           1,100
Investments (7)                                                                              25             80             140
Other assets (8)                                                                          3,249          2,811           7,577
Remaining corporate assets (9)                                                            2,746          2,723           2,281
------------------------------------------------------------------------------------------------------------------------------------
   Total consolidated assets                                                          $  11,548      $  12,793       $  17,526
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes royalty, interest and dividend income.
(2)  Includes  amounts derived from corporate  investments.  Non-segment  (loss)
     income also includes nonoperating gains and losses.  Includes one-time gain
     of $11 million  included in equity earnings from Samsung Corning related to
     divestment of its interest in Samsung Corning Precision in 2000.
(3)  Amortization  of  goodwill  relates  primarily  to  the  Telecommunications
     Segment.
(4)  Corporate interest income is not allocated to reportable segments.
(5)  Includes tax associated with the non-segment  impairment and  restructuring
     charges, amortization of goodwill and nonoperating gains.
(6)  Represents  corporate  property,   plant  and  equipment  not  specifically
     identifiable to a segment.
(7)  Represents corporate investments in associated companies,  both at cost and
     at equity.
(8)  Includes   long-term   corporate  assets,   primarily  goodwill  and  other
     intangible assets, pension assets and deferred taxes.
(9)  Includes current corporate assets,  primarily cash, short-term  investments
     and deferred taxes.


<PAGE>


22.  Operating Segments (continued)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
(In millions)                                                                   Segment           Reconciling        Consolidated
Other Significant Items                                                          Total            Adjustments            Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>                <C>
2002
Depreciation                                                                    $   624            $    (6)           $   618
Amortization of purchased intangibles                                           $    41                  2            $    43
Interest expense                                                                $   170                  9            $   179
Income tax (benefit) expense                                                    $  (750)                24            $  (726)
Equity in earnings of associated companies, net of impairments                  $   108                  8            $   116
Minority interests                                                              $    97                  1            $    98
Investment in associated companies, at equity                                   $   727                 19            $   746
Capital expenditures                                                            $   232            $    84 (2)        $   316 (3)
------------------------------------------------------------------------------------------------------------------------------------

2001
Depreciation                                                                    $   616            $     5            $   621
Interest expense                                                                $   152                  1            $   153
Income tax benefit                                                              $  (374)               (94)           $  (468)
Equity in earnings of associated companies                                      $   144                  4            $   148
Investment in associated companies, at equity                                   $   612                 24            $   636
Capital expenditures                                                            $ 1,344            $   273 (2)        $ 1,617 (3)
------------------------------------------------------------------------------------------------------------------------------------

2000
Depreciation                                                                    $   505            $    (3)           $   502
Income tax expense                                                              $   362                 21            $   383
Equity in earnings (losses) of associated companies, net of impairments (1)     $   168                (19)           $   149
Investment in associated companies, at equity                                   $   481                 13            $   494
Capital expenditures                                                            $ 1,391            $   290 (2)        $ 1,681 (3)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes a nonoperating  gain of $11 million  (Corning's share) recorded by
     Samsung  Corning  upon  divestment  of  its  interest  in  Samsung  Corning
     Precision in 2000.
(2)  Includes capital spending on shared research facilities of $9 million, $147
     million and $116 million in 2002, 2001 and 2000, respectively.
(3)  Represents  committed capital  expenditures in the period including amounts
     accrued at December 31, 2002, 2001 and 2000.


<PAGE>


22.  Operating Segments (concluded)

Information concerning principal geographic areas was as follows (in millions):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                               2002                            2001                        2000
------------------------------------------------------------------------------------------------------------------------------------
                                       Net          Long-lived          Net         Long-lived       Net        Long-lived
                                      Sales         Assets (1)         Sales        Assets (1)      Sales       Assets (1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>              <C>            <C>           <C>           <C>
North America
   United States                     $ 1,446         $ 4,730          $ 2,665        $ 6,249       $ 3,407       $  7,516
   Canada                                122              66              238             54           846             95
   Mexico                                 56              73               85              3            98             83
------------------------------------------------------------------------------------------------------------------------------------
       Total North America             1,624           4,869            2,988          6,306         4,351          7,694
------------------------------------------------------------------------------------------------------------------------------------

Asia Pacific
   Japan                                 372             292              518            264           571            257
   China                                 102             189              511            170           141            121
   Korea                                  57             574               50            454            67            385
   Other                                 331             129              373             79           125             52
------------------------------------------------------------------------------------------------------------------------------------
       Total Asia Pacific                862           1,184            1,452            967           904            815
------------------------------------------------------------------------------------------------------------------------------------

Europe
   Germany                               210             236              443            484           464            505
   France                                 46             121              141            123           253            115
   United Kingdom                         82              83              223             97           243            173
   Italy                                  47             265              114            319            68          3,489
   Other                                 183              39              479             37           404             47
------------------------------------------------------------------------------------------------------------------------------------
       Total Europe                      568             744            1,400          1,060         1,432          4,329
------------------------------------------------------------------------------------------------------------------------------------

Latin America
   Brazil                                 15               2               59              7            59             20
   Other                                   6               1               39              3            22              7
------------------------------------------------------------------------------------------------------------------------------------
       Total Latin America                21               3               98             10            81             27
------------------------------------------------------------------------------------------------------------------------------------

All Other                                 89              36              109             30           152             27
------------------------------------------------------------------------------------------------------------------------------------
       Total                         $ 3,164         $ 6,836          $ 6,047        $ 8,373       $ 6,920       $ 12,892
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Long-lived  assets  primarily  include  investments,  plant and  equipment,
     goodwill and other intangible assets.


<PAGE>


Corning Incorporated and Subsidiary Companies
Schedule II - Valuation Accounts and Reserves
(In millions)


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                  Balance at                              Net Deductions         Balance at
Year ended December 31, 2002                  Beginning of Period       Additions            and Other          End of Period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>                 <C>                  <C>
Doubtful accounts and allowances                    $   60                $   15              $   16               $   59
Deferred tax assets valuation allowance             $  189                $  228                                   $  417
Accumulated amortization of
  purchased intangible assets                       $   90                $   43              $   29               $  104
Reserves for accrued costs of
  business restructuring                            $  276                $  461              $  332               $  405
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                  Balance at                              Net Deductions         Balance at
Year ended December 31, 2001                  Beginning of Period       Additions            and Other          End of Period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>                 <C>                  <C>
Doubtful accounts and allowances                    $   47                $   32              $   19               $  60
Deferred tax assets valuation allowance             $   72                $  117                                   $  189
Accumulated amortization of goodwill                $  303                $  363              $    5               $  661
Accumulated amortization of purchased
  intangible assets                                 $   52                $   76              $   38               $   90
Reserves for accrued costs of
  business restructuring                                                  $  419              $  143               $  276
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                  Balance at                               Net Deductions         Balance at
Year ended December 31, 2000                  Beginning of Period       Additions            and Other          End of Period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>                 <C>                  <C>
Doubtful accounts and allowances                    $   20                $   30              $    3               $   47
Deferred tax assets valuation allowance             $   50                $   27              $    5               $   72
Accumulated amortization of goodwill                $  100                $  216              $   13               $  303
Accumulated amortization of purchased
  intangible assets                                 $   23                $   29                                   $   52
Reserves for accrued costs of
  business restructuring                            $    8                                    $    8
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


QUARTERLY OPERATING RESULTS
(unaudited)

(In millions, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                 First        Second        Third        Fourth       Total
2002                                                            Quarter      Quarter       Quarter      Quarter       Year
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>          <C>           <C>          <C>          <C>
Net sales                                                      $    839     $    827      $    762     $    736     $  3,164
Gross margin                                                   $    184     $    184      $    129     $    105     $    602
Restructuring, impairment and other charges                                 $    494      $    125     $  1,461     $  2,080
Loss from continuing operations before income
   taxes, minority interests and equity earnings               $   (184)    $   (606)     $   (290)    $ (1,640)    $ (2,720)
Benefit for income taxes                                            (50)        (184)          (91)        (401)        (726)
Minority interests                                                    6            6             5           81           98
Equity in earnings of associated companies, net
  of impairments                                                     30           25            42           19          116
------------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations                                     (98)        (391)         (152)      (1,139)      (1,780)
Income from discontinued operations, net of income tax (1)            8           21            19          430          478
------------------------------------------------------------------------------------------------------------------------------------
Net loss                                                       $    (90)    $   (370)     $   (133)    $   (709)    $ (1,302)
------------------------------------------------------------------------------------------------------------------------------------

Basic and diluted (loss) earnings per common share
   Continuing operations                                       $  (0.10)    $  (0.41)     $  (0.27)    $  (0.96)    $  (1.85)
   Discontinued operations (1)                                                  0.02          0.02         0.36         0.46
------------------------------------------------------------------------------------------------------------------------------------
   Loss per common share                                       $  (0.10)    $  (0.39)     $  (0.25)    $  (0.60)    $  (1.39)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                 First        Second        Third        Fourth       Total
2001                                                            Quarter      Quarter       Quarter      Quarter       Year
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>          <C>           <C>          <C>          <C>
Net sales                                                      $  1,867     $  1,811      $  1,452     $    917     $  6,047
Gross margin                                                   $    795     $    512      $    492     $     21     $  1,820
Restructuring, impairment and other charges                                 $  4,772      $    339     $    606     $  5,717
Income (loss) from continuing operations before income
   taxes, minority interest and equity earnings                $    194     $ (4,886)     $   (339)    $ (1,130)    $ (6,161)
Provision (benefit) for income taxes                                102          (85)          (74)        (411)        (468)
Minority interests                                                   (5)          (7)            1           24           13
Equity in earnings of associated companies                           34           46            39           29          148
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations                            121       (4,762)         (225)        (666)      (5,532)
Income from discontinued operations, net of income tax               11            7             5           11           34
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                              $    132     $ (4,755)     $   (220)    $   (655)    $ (5,498)
------------------------------------------------------------------------------------------------------------------------------------

Basic and diluted earnings (loss) per common share
   Continuing operations                                       $   0.13     $  (5.14)     $  (0.24)    $  (0.71)    $  (5.93)
   Discontinued operations                                         0.01         0.01                       0.02         0.04
------------------------------------------------------------------------------------------------------------------------------------
   Earnings (loss) per common share                            $   0.14     $  (5.13)     $  (0.24)    $  (0.69)    $  (5.89)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Discontinued  operations  are  described  in  Note  2 to  the  Consolidated
     Financial Statements.


<PAGE>


                                  Exhibit 99.1


Certification Required by 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
----------------------------------------------------------------------


In connection with the Annual Report of Corning  Incorporated ("the Company") on
Form 10-K for the period ended  December 31, 2002, as filed with the  Securities
and Exchange Commission on the date hereof ("the Report"), I, James R. Houghton,
as Chairman and Chief Executive Officer of the Company,  certify, pursuant to 18
U.S.C. ss 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
2002, that:

1.   The Report fully complies with the  requirements  of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.


Dated:  February 20, 2003


                                   /s/ James R. Houghton
                                       -----------------------------------------
                                       James R. Houghton
                                       Chairman and Chief Executive Officer


<PAGE>


                                  Exhibit 99.2


Certification Required by 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
----------------------------------------------------------------------


In connection with the Annual Report of Corning  Incorporated ("the Company") on
Form 10-K for the period ended  December 31, 2002, as filed with the  Securities
and Exchange Commission on the date hereof ("the Report"), I, James B. Flaws, as
Vice Chairman and Chief Financial Officer of the Company,  certify,  pursuant to
18 U.S.C. ss 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act
of 2002, that:

1.   The Report fully complies with the  requirements  of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.


Dated:  February 20, 2003


                                   /s/ James B. Flaws
                                       -----------------------------------------
                                       James B. Flaws
                                       Vice Chairman and Chief Financial Officer


<PAGE>


The following  exhibits are included only in copies of the 2002 Annual Report on
Form 10-K filed with Securities and Exchange  Commission or are  incorporated by
reference  herein.  Any document  incorporated  by reference is  identified by a
parenthetical reference to the SEC filing which included such document.


3(i)1     Restated  Certificate of  Incorporation  dated December 6, 2000, filed
          with the  Secretary  of State of the State of New York on January  22,
          2001  (Incorporated  by reference to Exhibit 3(i) of Corning's  Annual
          Report on Form 10-K for the year ended December 31, 2000).

3(i)2     Certificate  of Amendment  to Restated  Certificate  of  Incorporation
          filed with the  Secretary  of State of the State of New York on August
          5, 2002  (Incorporated  by reference to Exhibit 99.1 to Corning's Form
          8-K filed on August 7, 2002).

3(ii)1    Bylaws of Corning  effective as of December 6, 2000  (Incorporated  by
          reference to Exhibit 3(ii) of Corning's Annual Report on Form 10-K for
          the year ended December 31, 2000).

3(ii)2    Amendment to Article III, Section 9, of Bylaws of Corning effective as
          of February 5, 2003.

4         Rights Agreement of Corning dated as of June 5, 1996  (Incorporated by
          reference to Exhibit 1 to Corning's Form 8-K filed on July 10, 1996).

10        Agreement  and Release  between John W. Loose and Corning  dated as of
          April 12, 2002  (Incorporated  by reference to Exhibit 10 of Corning's
          Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).

24        Powers of Attorney.


Copies of these  exhibits  may be  obtained  by writing to Ms.  Denise  Hauselt,
assistant  general  counsel and secretary,  Corning  Incorporated,  MP-HQ-E2-10,
Corning, New York 14831.


</TEXT>
</DOCUMENT>