Reportable Segments

6 Months Ended

Jun. 30, 2017

Reportable Segments [Abstract]

Reportable Segments

15.   Reportable Segments

Our reportable segments are as follows:

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

· Optical Communications – manufactures carrier 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 enabling 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 and new product lines and development projects, 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. 

Reportable Segments (in millions)

	Display		Optical		Environmental		Specialty		Life		All
	Technologies		Communications		Technologies		Materials		Sciences		Other		Total
Three months ended
June 30, 2017
Net sales	$	748	$	882	$	263	$	337	$	221	$	46	$	2,497
Depreciation (1)	$	130	$	48	$	31	$	31	$	13	$	10	$	263
Amortization of purchased    intangibles		—	$	11		—		—	$	5	$	2	$	18
Research, development and    engineering expenses (2)	$	23	$	40	$	27	$	37	$	6	$	52	$	185
Income tax (provision)    benefit	$	(86)	$	(52)	$	(16)	$	(28)	$	(7)	$	30	$	(159)
Net income (loss) (3)	$	211	$	101	$	32	$	56	$	14	$	(58)	$	356

	Display		Optical		Environmental		Specialty		Life		All
	Technologies		Communications		Technologies		Materials		Sciences		Other		Total
Three months ended
June 30, 2016
Net sales	$	801	$	782	$	259	$	266	$	215	$	37	$	2,360
Depreciation (1)	$	149	$	43	$	33	$	27	$	13	$	11	$	276
Amortization of purchased    intangibles			$	8					$	5	$	2	$	15
Research, development and    engineering expenses (2)	$	17	$	36	$	26	$	34	$	6	$	45	$	164
Income tax (provision)    benefit	$	(86)	$	(39)	$	(19)	$	(19)	$	(8)	$	23	$	(148)
Net income (loss) (3)	$	204	$	77	$	37	$	38	$	17	$	(55)	$	318

	Display		Optical		Environmental		Specialty		Life		All
	Technologies		Communications		Technologies		Materials		Sciences		Other		Total
Six Months Ended
June 30, 2017
Net sales	$	1,484	$	1,700	$	538	$	637	$	431	$	82	$	4,872
Depreciation (1)	$	259	$	93	$	62	$	60	$	25	$	22	$	521
Amortization of purchased    intangibles			$	22					$	10	$	3	$	35
Research, development and    engineering expenses (2)	$	42	$	77	$	52	$	73	$	12	$	104	$	360
Income tax (provision)    benefit	$	(188)	$	(97)	$	(30)	$	(52)	$	(15)	$	55	$	(327)
Net income (loss) (3)	$	460	$	183	$	63	$	104	$	31	$	(111)	$	730

	Display		Optical		Environmental		Specialty		Life		All
	Technologies		Communications		Technologies		Materials		Sciences		Other		Total
Six Months Ended
June 30, 2016
Net sales	$	1,506	$	1,391	$	523	$	493	$	419	$	75	$	4,407
Depreciation (1)	$	300	$	84	$	65	$	55	$	28	$	22	$	554
Amortization of purchased    intangibles			$	15					$	10	$	4	$	29
Research, development and    engineering expenses (2)	$	35	$	73	$	51	$	65	$	12	$	92	$	328
Income tax (provision)    benefit	$	(179)	$	(50)	$	(35)	$	(31)	$	(14)	$	66	$	(243)
Net income (loss) (3)	$	413	$	94	$	71	$	64	$	29	$	(140)	$	531

(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.  Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income to consolidated net income below.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2017		2016		2017		2016
Net income of reportable segments	$	414	$	373	$	841	$	671
Net loss of All Other		(58)		(55)		(111)		(140)
Unallocated amounts:
Net financing costs (1)		(26)		(29)		(52)		(58)
Stock-based compensation expense		(11)		(14)		(25)		(23)
Exploratory research		(23)		(28)		(47)		(55)
Corporate contributions		(6)		(16)		(22)		(23)
Gain on realignment of equity investment				2,676				2,676
Equity in earnings of affiliated companies (2)		31		48		110		104
Unrealized loss on foreign currency hedges    related to translated earnings		148		(1,253)		(370)		(2,203)
Resolution of Department of Justice investigation				(98)				(98)
Income tax benefit		15		653		233		1,054
Other corporate items		(45)		(50)		(32)		(66)
Net income	$	439	$	2,207	$	525	$	1,839

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

(2) For the periods ending June 30, 2017, the amounts represent the equity earnings of HSG.  For the periods ending June 30, 2016, the amounts primarily represent equity earnings from Dow Corning.  Refer to Note 7, Investments, for additional information.