Note 18 - Reportable Segments

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

18.      Reportable Segments

Our reportable segments are as follows:

·   Display Technologies – manufactures glass substrates for flat panel liquid crystal 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.

·   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 have been grouped as “All Other.”  This group is primarily comprised of the results of Corning Precision Materials’ non-LCD business and new product lines and development projects that involve the use of various technologies for new products such as advanced flow reactors and adjacency businesses in pursuit of thin, strong glass.

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 reportable segments differently than we would for stand-alone financial information.  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   June 30, 2015
	Net sales	$	789	$	800	$	260	$	272	$	211	$	11	$	2,343
	Depreciation (1)	$	152	$	43	$	32	$	27	$	15	$	11	$	280
	Amortization of purchased intangibles			$	11					$	5			$	16
	Research, development and engineering expenses (2)	$	26	$	35	$	23	$	29	$	6	$	44	$	163
	Restructuring, impairment and other charges							$	3					$	3
	Equity in earnings of affiliated companies	$	(3)									$	6	$	3
	Income tax (provision) benefit	$	(136)	$	(37)	$	(22)	$	(22)	$	(9)	$	21	$	(205)
	Net income (loss) (3)	$	303	$	77	$	46	$	44	$	18	$	(45)	$	443

		Display Technologies		Optical Communications		Environmental Technologies		Specialty Materials		Life Sciences		All Other		Total
Three months ended   June 30, 2014
	Net sales	$	987	$	686	$	285	$	298	$	223	$	3	$	2,482
	Depreciation (1)	$	171	$	37	$	30	$	29	$	16	$	7	$	290
	Amortization of purchased intangibles			$	2					$	6			$	8
	Research, development and engineering expenses (2)	$	41	$	34	$	21	$	34	$	5	$	48	$	183
	Restructuring, impairment and other charges	$	24									$	10	$	34
	Equity in earnings of affiliated companies	$	(4)			$	1					$	7	$	4
	Income tax (provision) benefit	$	(119)	$	(31)	$	(23)	$	(21)	$	(9)	$	22	$	(181)
	Net income (loss) (3)	$	282	$	61	$	47	$	39	$	18	$	(59)	$	388

		Display Technologies		Optical Communications		Environmental Technologies		Specialty Materials		Life Sciences		All Other		Total
Six months ended   June 30, 2015
	Net sales	$	1,597	$	1,497	$	542	$	544	$	408	$	20	$	4,608
	Depreciation (1)	$	308	$	81	$	61	$	53	$	30	$	20	$	553
	Amortization of purchased intangibles			$	17					$	10			$	27
	Research, development and engineering expenses (2)	$	50	$	68	$	46	$	60	$	11	$	89	$	324
	Restructuring, impairment and other charges			$	(1)			$	3					$	2
	Equity in earnings of affiliated companies	$	(5)									$	8	$	3
	Income tax (provision) benefit	$	(268)	$	(66)	$	(45)	$	(43)	$	(17)	$	44	$	(395)
	Net income (loss) (3)	$	597	$	134	$	94	$	82	$	34	$	(93)	$	848

		Display Technologies		Optical Communications		Environmental Technologies		Specialty Materials		Life Sciences		All Other		Total
Six months ended   June 30, 2014
	Net sales	$	1,916	$	1,279	$	560	$	559	$	433	$	24	$	4,771
	Depreciation (1)	$	344	$	73	$	60	$	56	$	31	$	12	$	576
	Amortization of purchased intangibles			$	4					$	12			$	16
	Research, development and engineering expenses (2)	$	86	$	71	$	42	$	67	$	10	$	76	$	352
	Restructuring, impairment and other charges	$	29	$	12							$	10	$	51
	Equity in earnings of affiliated companies	$	(13)			$	2					$	9	$	(2)
	Income tax (provision) benefit	$	(317)	$	(50)	$	(44)	$	(37)	$	(17)	$	38	$	(427)
	Net income (loss) (3)	$	491	$	88	$	90	$	70	$	35	$	(99)	$	675

(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 June 30,				Six months ended June 30,
	2015		2014		2015		2014
Net income of reportable segments	$	488	$	447	$	941	$	774
Non-reportable segments		(45)		(59)		(93)		(99)
Unallocated amounts:
Net financing costs (1)		(25)		(30)		(49)		(59)
Stock-based compensation expense		(15)		(13)		(25)		(28)
Exploratory research		(28)		(24)		(54)		(51)
Corporate contributions		(12)		(11)		(24)		(16)
Equity in earnings of affiliated companies, net of impairments (2)		59		59		153		151
Asbestos settlement		(2)		(4)		(3)		(6)
Unrealized loss on foreign currency hedges related to translated earnings		(7)		(119)		(82)		(149)
Other corporate items (3)		83		(77)		139		(47)
Net income	$	496	$	169	$	903	$	470

(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.

(3) Other corporate items include the tax impact of the unallocated amounts, excluding foreign currency hedges related to translated earnings.

The sales of each of our reportable segments are concentrated across a relatively small number of customers.  In the three months ended June 30, 2015, 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, three customers accounted for 61% of total segment sales.

·   In the Optical Communications segment, two customers accounted for 22% of total segment sales.

·   In the Environmental Technologies segment, three customers accounted for 87% of total segment sales.

·   In the Specialty Materials segment, three customers accounted for 53% of total segment sales.

·   In the Life Sciences segment, two customers accounted for 48% of total segment sales.

In the six months ended June 30, 2015, 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, three customers accounted for 61% of total segment sales.

·   In the Optical Communications segment, one customer accounted for 11% of total segment sales.

·   In the Environmental Technologies segment, three customers accounted for 86% of total segment sales.

·   In the Specialty Materials segment, three customers accounted for 56% of total segment sales.

·   In the Life Sciences segment, two customers accounted for 46% of total segment sales.