Note 19 - Reportable Segments

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

19.      Reportable Segments

Our reportable segments are as follows:

·   Display Technologies – manufactures liquid crystal display (“LCD”) glass for flat panel displays.

·   Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.

·   Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.  This reportable segment is an aggregation of our Automotive and Diesel operating segments as these two segments share similar economic characteristics, products, customer types, production processes and distribution methods.

·   Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.

·   Life Sciences – manufactures glass and plastic labware, equipment, media and reagents to provide workflow solutions for scientific applications.

All other reportable segments that do not meet the quantitative threshold for separate reporting are grouped as “All Other.”  This group is primarily comprised of development projects and results for new product lines.

We prepared the financial results for our reportable segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions.  We included the earnings of equity affiliates that are closely associated with our reportable segments in the respective segment’s net income.  We have allocated certain common expenses among segments differently than we would for stand-alone financial information prepared in accordance with U.S. GAAP.  Segment net income may not be consistent with measures used by other companies.  The accounting policies of our reportable segments are the same as those applied in the consolidated financial statements.

Reportable Segments (in millions)

		Display Technologies		Optical Communications		Environmental Technologies		Specialty Materials		Life Sciences		All Other		Total
Three months ended   March 31, 2014
	Net sales	$	929	$	593	$	275	$	261	$	210	$	21	$	2,289
	Depreciation (1)	$	173	$	36	$	30	$	27	$	15	$	5	$	286
	Amortization of purchased intangibles			$	2					$	6			$	8
	Research, development and engineering expenses (2)	$	45	$	37	$	21	$	33	$	5	$	28	$	169
	Restructuring, impairment and other charges	$	5	$	12									$	17
	Equity in earnings of affiliated companies	$	(9)			$	1					$	2	$	(6)
	Income tax (provision) benefit	$	(198)	$	(19)	$	(21)	$	(16)	$	(8)	$	16	$	(246)
	Net income (loss) (3)	$	209	$	27	$	43	$	31	$	17	$	(40)	$	287
Three months ended   March 31, 2013
	Net sales	$	650	$	470	$	228	$	258	$	207	$	1	$	1,814
	Depreciation (1)	$	124	$	34	$	31	$	39	$	14	$	4	$	246
	Amortization of purchased intangibles			$	2					$	5			$	7
	Research, development and engineering expenses (2)	$	19	$	35	$	23	$	35	$	5	$	36	$	153
	Equity in earnings of affiliated companies	$	133	$	1							$	5	$	139
	Income tax (provision) benefit	$	(80)	$	(17)	$	(13)	$	(19)	$	(5)	$	15	$	(119)
	Net income (loss) (3)	$	349	$	35	$	27	$	39	$	12	$	(28)	$	434

(1) Depreciation expense for Corning’s reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment.

(2) Research, development, and engineering expenses include direct project spending that is identifiable to a segment.

(3) 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.

A reconciliation of reportable segment net income to consolidated net income follows (in millions):

	Three months ended March 31,
	2014		2013
Net income of reportable segments	$	327	$	462
Non-reportable segments		(40)		(28)
Unallocated amounts:
Net financing costs (1)		(29)		(34)
Stock-based compensation expense		(15)		(11)
Exploratory research		(27)		(24)
Corporate contributions		(5)		(13)
Equity in earnings of affiliated companies, net of impairments (2)		92		34
Asbestos settlement		(2)		(2)
Purchased collars and average forward contracts		2		24
Other corporate items (3)		(2)		86
Net income	$	301	$	494

(1) Net financing costs include interest income, interest expense, and interest costs and investment gains associated with benefit plans.

(2) Primarily represents the equity earnings of Dow Corning, which includes our portion of a mark-to-market gain on a derivative instrument, totaling $32 million, for the three months ended March 31, 2014 and a $2 million restructuring charge for our share of costs for headcount reductions and asset write-offs for the three months ended March 31, 2013.

(3) For the three months ended March 31, 2013, Corning recorded a $54 million tax benefit for the impact of the American Taxpayer Relief Act enacted on January 3, 2013 retroactive to 2012.

The sales of each of our reportable segments are concentrated across a relatively small number of customers.  In the first quarter of 2014, the following number of customers, which individually accounted for 10% or more of each segment’s sales, represented the following concentration of segment sales:

·   In the Display Technologies segment, four customers accounted for 72% of total segment sales.

·   In the Optical Communications segment, no customer accounted for 10% of total segment sales.

·   In the Environmental Technologies segment, three customers accounted for 88% of total segment sales.

·   In the Specialty Materials segment, three customers accounted for 50% of total segment sales.

·   In the Life Sciences segment, two customers accounted for 43% of total segment sales.

A significant amount of specialized manufacturing capacity for our Display Technologies segment is concentrated in Asia.  It is at least reasonably possible that the operation of a facility could be disrupted.  Due to the specialized nature of the assets, it would not be possible to find replacement capacity quickly.  Accordingly, loss of these facilities could produce a near-term severe impact on our display business and the Company as a whole.