Note 20 - Reportable Segments

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

20.      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 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’s Pharmaceutical Technologies business, which consists of a pharmaceutical glass business and a glass tubing business used in the pharmaceutical packaging industry.  This segment also includes Corning Precision Materials’ non-LCD business and new product lines and development projects such as laser technologies, advanced flow reactors and adjacency businesses in pursuit of thin, strong glass, as well as certain corporate investments such as Eurokera and Keraglass equity affiliates.

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.

The following provides historical segment information as described above:

Segment Information (in millions)

	Display Technologies		Optical Communications		Environmental Technologies		Specialty Materials		Life Sciences		All Other		Total
For the year ended December 31, 2015
Net sales	$	3,086	$	2,980	$	1,053	$	1,107	$	821	$	64	$	9,111
Depreciation (1)	$	605	$	163	$	125	$	112	$	60	$	43	$	1,108
Amortization of purchased intangibles			$	32					$	20	$	1	$	53
Research, development and engineering expenses (2)	$	105	$	138	$	93	$	113	$	23	$	186	$	658
Restructuring, impairment and other charges			$	(1)			$	16					$	15
Equity in earnings of affiliated companies	$	(9)									$	17	$	8
Income tax (provision) benefit	$	(499)	$	(115)	$	(78)	$	(85)	$	(30)	$	89	$	(718)
Net income (loss) (4)	$	1,095	$	237	$	161	$	167	$	61	$	(202)	$	1,519
Investment in affiliated companies, at equity	$	43	$	1	$	32					$	261	$	337
Segment assets (5)	$	8,344	$	1,783	$	1,288	$	1,407	$	514	$	738	$	14,074
Capital expenditures	$	594	$	171	$	117	$	88	$	32	$	57	$	1,059
For the year ended December 31, 2014
Net sales	$	3,851	$	2,652	$	1,092	$	1,205	$	862	$	53	$	9,715
Depreciation (1)	$	676	$	154	$	119	$	113	$	60	$	31	$	1,153
Amortization of purchased intangibles			$	10					$	22			$	32
Research, development and engineering expenses (2)	$	138	$	141	$	91	$	140	$	22	$	177	$	709
Restructuring, impairment and other charges	$	45	$	17			$	(1)	$	1	$	6	$	68
Equity in earnings of affiliated companies	$	(20)			$	2					$	18
Income tax (provision) benefit	$	(608)	$	(111)	$	(89)	$	(75)	$	(33)	$	83	$	(833)
Net income (loss) (4)	$	1,396	$	194	$	178	$	138	$	67	$	(198)	$	1,775
Investment in affiliated companies, at equity	$	63	$	2	$	32					$	214	$	311
Segment assets (5)	$	8,863	$	1,737	$	1,297	$	1,288	$	553	$	518	$	14,256
Capital expenditures	$	492	$	145	$	173	$	104	$	30	$	101	$	1,045
For the year ended December 31, 2013
Net sales	$	2,545	$	2,326	$	919	$	1,170	$	851	$	8	$	7,819
Depreciation (1)	$	481	$	147	$	120	$	137	$	57	$	18	$	960
Amortization of purchased intangibles			$	10					$	21			$	31
Research, development and engineering expenses (2)	$	84	$	140	$	89	$	144	$	20	$	116	$	593
Restructuring, impairment and other charges	$	7	$	12	$	1	$	19	$	4	$	8	$	51
Equity in earnings of affiliated companies (3)	$	357	$	2	$	1	$	4			$	(24)	$	340
Income tax (provision) benefit	$	(337)	$	(96)	$	(63)	$	(88)	$	(34)	$	59	$	(559)
Net income (loss) (4)	$	1,293	$	189	$	127	$	181	$	68	$	(165)	$	1,693
Investment in affiliated companies, at equity	$	3,666	$	3	$	31	$	10			$	232	$	3,942
Segment assets (5)	$	9,501	$	1,654	$	1,230	$	1,333	$	551	$	422	$	14,691
Capital expenditures	$	350	$	105	$	196	$	62	$	51	$	55	$	819

(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) In 2013, equity in earnings of affiliated companies in the Display Technologies segment included a $28 million restructuring charge for our share of costs for headcount reductions and asset write-offs.

(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) Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation, and associated equity companies and cost investments.

For the year ended December 31, 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 62% 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 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.

A significant amount of specialized manufacturing capacity for our Display Technologies segment is concentrated in Asia.  It is at least reasonably possible that the use of a facility located outside of an entity’s home country 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 to our display business and the Company as a whole.

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

	Years ended December 31,
	2015		2014		2013
Net income of reportable segments	$	1,721	$	1,973	$	1,858
Net loss of All Other		(202)		(198)		(165)
Unallocated amounts:
Net financing costs (1)		(111)		(113)		(66)
Share-based compensation expense		(46)		(58)		(54)
Exploratory research		(109)		(102)		(112)
Corporate contributions		(52)		(43)		(42)
Equity in earnings of affiliated companies, net of impairments (2)		291		269		207
Unrealized (loss) gain on foreign currency hedges related to translated earnings		(573)		1,095		368
Income tax benefit (provision)		568		(267)		(1)
Other corporate items		(148)		(84)		(32)
Net income	$	1,339	$	2,472	$	1,961

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

(2) Primarily represents the equity earnings of Dow Corning.

A reconciliation of reportable segment assets to consolidated total assets follows (in millions):

	December 31,
	2015		2014		2013
Total assets of reportable segments	$	13,336	$	13,738	$	14,269
Non-reportable segments		738		518		422
Unallocated amounts:
Current assets (1)		5,488		7,402		6,349
Investments (2)		1,638		1,490		1,595
Property, plant and equipment, net (3)		1,692		1,657		1,594
Other non-current assets (4)		5,655		5,258		4,249
Total assets	$	28,547	$	30,063	$	28,478

(1) Includes current corporate assets, primarily cash, short-term investments, current portion of long-term derivative assets and deferred taxes.

(2) Represents corporate investments in affiliated companies, at both cost and equity (primarily Dow Corning).

(3) Represents corporate property not specifically identifiable to an operating segment.

(4) Includes non-current corporate assets, pension assets, long-term derivative assets and deferred taxes.

Selected financial information concerning the Company’s product lines and reportable segments follow (in millions):

	Years Ended December 31,
Revenues from External Customers	2015		2014		2013
Display Technologies	$	3,086	$	3,851	$	2,545
Optical Communications
Carrier network		2,194		2,036		1,782
Enterprise network		786		616		544
Total Optical Communications		2,980		2,652		2,326
Environmental Technologies
Automotive and other		528		528		485
Diesel		525		564		434
Total Environmental Technologies		1,053		1,092		919
Specialty Materials
Corning Gorilla Glass		810		846		848
Advanced optics and other specialty glass		297		359		322
Total Specialty Materials		1,107		1,205		1,170
Life Sciences
Labware		512		536		529
Cell culture products		309		326		322
Total Life Science		821		862		851
All Other		64		53		8
	$	9,111	$	9,715	$	7,819

Information concerning principal geographic areas was as follows (in millions):

	2015				2014				2013
	Net sales (2)		Long- lived assets (1)		Net sales (2)		Long- lived assets (1)		Net sales (2)		Long- lived assets (1)
North America
United States	$	2,719	$	8,241	$	2,275	$	7,998	$	2,061	$	7,170
Canada		244		144		311				308
Mexico		37		135		35		50		23		36
Total North America		3,000		8,520		2,621		8,048		2,392		7,206
Asia Pacific
Japan		440		1,160		608		1,311		621		1,548
Taiwan		841		2,301		1,092		2,005		1,376		2,277
China		1,869		1,036		1,893		1,115		1,916		1,218
Korea		1,501		3,552		1,882		3,595		96		3,234
Other		331		98		308		109		278		127
Total Asia Pacific	4,982			8,147		5,783		8,135		4,287		8,404
Europe
Germany		326		189		397		217		337		171
France		90		263		81		277		79		287
United Kingdom		164		47		187		47		165		6
Other		311		987		369		1,109		280		1,147
Total Europe		891		1,486		1,034		1,650		861		1,611
Latin America
Brazil		55		36		67		36		77		66
Other		34				35				37		6
Total Latin America		89		36		102		36		114		72
All Other		149				175		19		165		25
Total	$	9,111	$	18,189	$	9,715	$	17,888	$	7,819	$	17,318

(1) Long-lived assets primarily include investments, plant and equipment, goodwill and other intangible assets.  In 2014 and 2015, assets in the U.S. include the investment in Dow Corning.  In 2013, assets in the U.S. and South Korea include investments in Dow Corning and Samsung Corning Precision Materials.

(2) Net sales are attributed to countries based on location of customer.