Note 14 - Reportable Segments

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

14. Reportable Segments

The Company’s reportable segments are as follows:

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

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

● 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 businesses that do not meet the quantitative threshold for separate reporting have been grouped as “Hemlock and Emerging Growth Businesses”.  The net sales for this group are primarily attributable to Hemlock, which is an operating segment that produces solar and semiconductor products.  The emerging growth businesses primarily consist of Pharmaceutical Technologies (“CPT”), Auto Glass Solutions (“AGS”) and the Emerging Innovations Group (“EIG”), which are also operating segments.  

Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the chief operating decision maker (“CODM”) in making internal operating decisions. A significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar. Management believes it is important to understand the impact on core net income of translating these currencies into U.S. dollars.  The Company uses constant currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences.  Corning excludes the impact of these currencies from segment sales and net income.  The adjustment for constant currency is primarily related to the Display Technologies’ segment and excludes the impact of the fluctuation of the Japanese yen, South Korean won, Chinese yuan, and new Taiwan dollar.   Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of, or in allocating resources to, the segments and include the following:  the impact of 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; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

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

Reportable Segments and Hemlock and Emerging Growth Businesses (in millions):

																Hemlock and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended
March 31, 2022
Segment net sales	$	1,198		$	959		$	493		$	409		$	310		$	375		$	3,744
Depreciation (1)	$	59		$	156		$	40		$	33		$	14		$	38		$	340
Research, development and   engineering expenses (2)	$	55		$	31		$	53		$	25		$	9		$	40		$	213
Income tax provision (3)	$	(45	)	$	(63	)	$	(20	)	$	(20	)	$	(11	)	$	(1	)	$	(160	)
Segment net income (loss) (4)	$	166		$	236		$	75		$	74		$	42		$	(8	)	$	585

																Hemlock and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended
March 31, 2021
Segment net sales	$	937		$	863		$	451		$	441		$	300		$	271		$	3,263
Depreciation (1)	$	58		$	148		$	41		$	36		$	12		$	32		$	327
Research, development and   engineering expenses (2)	$	51		$	22		$	45		$	27		$	8		$	34		$	187
Income tax (provision) benefit (3)	$	(31	)	$	(56	)	$	(24	)	$	(20	)	$	(13	)	$	8		$	(136	)
Segment net income (loss) (4)	$	111		$	213		$	91		$	74		$	48		$	(24	)	$	513

(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 income.

A reconciliation of reportable segments and Hemlock and Emerging Growth Businesses net sales to consolidated net sales follows (in millions):

	Three months ended
	March 31,
	2022			2021
Net sales of reportable segments	$	3,369		$	2,992
Net sales of Hemlock and Emerging Growth Businesses		375			271
Impact of foreign currency movements (1)		(64	)		27
Consolidated net sales	$	3,680		$	3,290

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

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

	Three months ended
	March 31,
	2022			2021
Net income of reportable segments	$	593		$	537
Net loss of Hemlock and Emerging Growth Businesses		(8	)		(24	)
Unallocated amounts:
Impact of foreign currency movements not included in segment net income (loss)		(63	)		6
Gain on foreign currency hedges related to translated earnings		129			272
Translation gain on Japanese yen-denominated debt		84			118
Research, development, and engineering expenses		(35	)		(34	)
Amortization of intangibles		(31	)		(32	)
Interest expense, net		(61	)		(74	)
Income tax provision		(20	)		(90	)
Other corporate items		(7	)		(80	)
Net income	$	581		$	599