Reportable Segments

6 Months Ended

Jun. 30, 2020

Reportable Segments [Abstract]

Reportable Segments

16. Reportable Segments

Our reportable segments are as follows:

Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.

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

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.

Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.

Life Sciences – manufactures glass and plastic labware, equipment, media, serum and reagents enabling workflow solutions for drug discovery and bioproduction.

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 the pharmaceutical technologies, auto glass and new product lines and development projects, as well as certain corporate investments.

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We prepared the financial results for our reportable segments on a basis consistent with our internal disaggregation of financial information to assist our chief operating decision maker (“CODM”) in making internal operating decisions. The impact of changes in the Japanese yen, South Korean won, Chinese yuan and new Taiwan dollar are excluded from segment sales and segment net income for the Display Technologies and Specialty Materials segments. The impact of changes in the euro, Chinese yuan and Japanese yen are excluded from segment sales and segment net income for our Environmental Technologies and Life Sciences segments. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net (loss) income. These include items that are not used by our CODM in evaluating the results of or in allocating resources to our segments and include the following items: the impact of our translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; adjustments relating to acquisitions; and other non-recurring non-operational items. Although we exclude these amounts from segment results, they are included in reported consolidated results.

We included the earnings of equity affiliates that are closely associated with our reportable segments in the respective segment’s net income (loss). We have allocated certain common expenses among reportable segments differently than we would for stand-alone financial information. Segment net income (loss) may not be consistent with measures used by other companies.

Reportable Segments (in millions):

	Display		Optical		Specialty		Environmental		Life		All
	Technologies		Communications		Materials		Technologies		Sciences		Other		Total
Three months ended
June 30, 2020
Segment net sales	$	753	$	887	$	417	$	226	$	243	$	62	$	2,588
Depreciation (1)	$	133	$	62	$	38	$	33	$	13	$	14	$	293
Research, development and ‎   engineering expenses (2)	$	25	$	52	$	33	$	22	$	6	$	43	$	181
Income tax (provision) ‎   benefit (3)	$	(41)	$	(23)	$	(24)	$	—	$	(8)	$	19	$	(77)
Segment net income (loss) (4)	$	152	$	81	$	90	$	—	$	31	$	(66)	$	288

	Display		Optical		Specialty		Environmental		Life		All
	Technologies		Communications		Materials		Technologies		Sciences		Other		Total
Three months ended
June 30, 2019
Segment net sales	$	848	$	1,090	$	369	$	366	$	260	$	53	$	2,986
Depreciation (1)	$	149	$	60	$	35	$	32	$	12	$	12	$	300
Research, development and ‎   engineering expenses (2)	$	29	$	54	$	41	$	28	$	5	$	57	$	214
Income tax (provision) ‎   benefit (3)	$	(55)	$	(43)	$	(18)	$	(17)	$	(11)	$	18	$	(126)
Segment net income (loss) (4)	$	213	$	158	$	67	$	65	$	40	$	(68)	$	475

	Display		Optical		Specialty		Environmental		Life		All
	Technologies		Communications		Materials		Technologies		Sciences		Other		Total
Six months ended
June 30, 2020
Segment net sales	$	1,504	$	1,678	$	769	$	546	$	501	$	119	$	5,117
Depreciation (1)	$	266	$	124	$	80	$	67	$	25	$	27	$	589
Research, development and ‎   engineering expenses (2)	$	55	$	107	$	74	$	50	$	13	$	91	$	390
Income tax (provision) ‎   benefit (3)	$	(81)	$	(31)	$	(38)	$	(9)	$	(18)	$	38	$	(139)
Segment net income (loss) (4)	$	304	$	110	$	141	$	35	$	69	$	(135)	$	524

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	Display		Optical		Specialty		Environmental		Life		All
	Technologies		Communications		Materials		Technologies		Sciences		Other		Total
Six months ended
June 30, 2019
Segment net sales	$	1,666	$	2,154	$	678	$	728	$	503	$	107	$	5,836
Depreciation (1)	$	301	$	119	$	72	$	63	$	25	$	23	$	603
Research, development and ‎   engineering expenses (2)	$	55	$	110	$	82	$	58	$	10	$	112	$	427
Income tax (provision) ‎   benefit (3)	$	(110)	$	(82)	$	(31)	$	(32)	$	(19)	$	37	$	(237)
Segment net income (loss) (4)	$	421	$	300	$	116	$	120	$	71	$	(140)	$	888

(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)Income tax (provision) benefit reflects a tax rate of 21%.

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

A reconciliation of reportable segment and All Other net sales to consolidated net sales follows (in millions):

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Net sales of reportable segments and All Other	$	2,588	$	2,986	$	5,117	$	5,836
Impact of foreign currency movements (1)		(27)		(46)		(60)		(84)
Cumulative adjustment related to customer contract (2)						(105)
Consolidated net sales	$	2,561	$	2,940	$	4,952	$	5,752

(1)This amount primarily represents the impact of foreign currency adjustments in the Display Technologies and Environmental Technologies segments.

(2)Amount represents the negative impact of a cumulative adjustment to reduce revenue in the amount of $105 million recorded during the first quarter of 2020. The adjustment was associated with a previously recorded commercial benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that is exiting its production of LCD panels. Refer to Note 3 (Revenue) to the consolidated financial statements for additional information.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income of reportable segments	$	354	$	543	$	659	$	1,028
Net loss of All Other		(66)		(68)		(135)		(140)
Unallocated amounts:
Impact of foreign currency movements not ‎    included in segment net income (loss)		(6)		(36)		(25)		(73)
Gain (loss) on foreign currency hedges ‎    related to translated earnings		35		(107)		93		77
Translation gain (loss) on Japanese yen-denominated debt		3		(36)		(11)		(21)
Research, development, and engineering expenses		(37)		(35)		(76)		(71)
Equity in earnings of affiliated companies (1)		81		34		99		60
Amortization of intangibles		(28)		(28)		(54)		(57)
Interest expense, net		(64)		(49)		(122)		(94)
Income tax benefit		55		2		129		37
Cumulative adjustment related to customer contract (2)						(105)
Severance charges (3)		(58)		(7)		(135)		(7)
Asset impairment (3)		(195)				(195)
Capacity realignment and other charges and credits (3)		(84)		(60)		(232)		(67)
Other corporate items		(61)		(61)		(57)		(81)
Net (loss) income	$	(71)	$	92	$	(167)	$	591

(1)Primarily represents the equity earnings of HSG.

(2)Amount represents the negative impact of a cumulative adjustment to reduce revenue in the amount of $105 million recorded during the first quarter of 2020. The adjustment was associated with a previously recorded commercial benefit asset, reflected as a prepayment, to a customer with a long-term supply agreement that is exiting its production of LCD panels. Refer to Note 3 (Revenue) to the consolidated financial statements for additional information.

(3)Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) to the consolidated financial statements for additional information on restructuring activities and impairment.