Note 19 - Reportable Segments

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

The Company has determined that it has five reportable segments for financial reporting purposes, 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 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.

• Environmental Technologies – manufactures ceramic substrates and filters for emission control systems.

• 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 HSG, which is an operating segment that produces solar and semiconductor products. The emerging growth businesses primarily consist of Pharmaceutical Technologies, Auto Glass Solutions and the Emerging Innovations Group.

Financial results for the reportable segments and Hemlock and Emerging Growth Businesses 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. As 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 segment net sales and segment net income of translating these currencies into U.S. dollars. Therefore, the Company utilizes constant-currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact on segment sales and segment net income (loss) from the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and the euro, as applicable to the segment. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment. Management utilizes constant-currency reporting based on internally-derived rates, as detailed below, which are closely aligned with the currencies we have hedged. 

The Company believes that the use of constant-currency reporting allows management to understand segment results without the volatility of currency fluctuation, analyze underlying trends in the businesses and establish operational goals and forecasts. Further, it reflects the underlying economics of the translated earnings contracts used to mitigate the impact of changes in currency exchange rates on our earnings and cash flows.

Constant-currency rates are as follows and are applied to all periods presented:

Currency	Japanese yen	Korean won	Chinese yuan	New Taiwan dollar	Euro
Rate	¥107	₩1,175	¥6.7	NT$31	€.81

In addition, certain income and expenses are excluded from segment net income (loss) and included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These items are not used by the CODM in allocating resources or evaluating the results of the segments and include the following: the impact of translating the Japanese yen-denominated debt; the impact of the translated earnings contracts; acquisition-related costs; certain discrete tax items and other tax-related adjustments; restructuring, impairment and other charges and credits; certain litigation, regulatory and other legal matters; pension mark-to-market adjustments; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

Corning's administrative and staff functions are performed on a centralized basis and such costs and expenses are allocated among the segments differently than they would for stand-alone financial reporting purposes. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income to consolidated net income. Segment net income (loss) may not be consistent with measures used by other companies.

The following provides historical segment information as described above:

Segment Information (in millions)

	Optical Communications			Display Technologies			Specialty Materials			Environmental Technologies			Life Sciences			Hemlock and Emerging Growth Businesses (1)			Total
For the year ended December 31, 2022
Segment net sales	$	5,023		$	3,306		$	2,002		$	1,584		$	1,228		$	1,662		$	14,805
Depreciation (2)	$	249		$	547		$	155		$	128		$	60		$	146		$	1,285
Research, development and engineering expenses (3)	$	230		$	124		$	222		$	98		$	37		$	163		$	874
Income tax provision (4)	$	(180	)	$	(203	)	$	(90	)	$	(78	)	$	(40	)	$	(24	)	$	(615	)
Net income	$	661		$	769		$	340		$	292		$	153		$	39		$	2,254
Investment in affiliated companies, at equity	$	3		$	102		$	8					$	4		$	144		$	261
Segment assets (5)	$	3,295		$	8,104		$	2,419		$	2,061		$	862		$	2,136		$	18,877
Capital expenditures	$	368		$	495		$	306		$	110		$	116		$	218		$	1,613
For the year ended December 31, 2021
Segment net sales	$	4,349		$	3,700		$	2,008		$	1,586		$	1,234		$	1,243		$	14,120
Depreciation (2)	$	224		$	605		$	161		$	139		$	52		$	134		$	1,315
Research, development and engineering expenses (3)	$	216		$	110		$	208		$	111		$	33		$	160		$	838
Income tax (provision) benefit (4)	$	(152	)	$	(249	)	$	(99	)	$	(72	)	$	(51	)	$	11		$	(612	)
Net income (loss)	$	553		$	960		$	371		$	269		$	194		$	(51	)	$	2,296
Investment in affiliated companies, at equity	$	3		$	109		$	6					$	4		$	142		$	264
Segment assets (5)	$	3,183		$	8,672		$	2,328		$	2,150		$	791		$	2,024		$	19,148
Capital expenditures	$	301		$	710		$	183		$	228		$	128		$	149		$	1,699
For the year ended December 31, 2020
Segment net sales	$	3,563		$	3,172		$	1,884		$	1,370		$	998		$	465		$	11,452
Depreciation (2)	$	242		$	548		$	162		$	132		$	50		$	81		$	1,215
Research, development and engineering expenses (3)	$	204		$	99		$	155		$	100		$	26		$	170		$	754
Income tax (provision) benefit (4)	$	(101	)	$	(190	)	$	(113	)	$	(52	)	$	(37	)	$	58		$	(435	)
Net income (loss)	$	366		$	717		$	423		$	197		$	139		$	(214	)	$	1,628
Investment in affiliated companies, at equity	$	3		$	107		$	4					$	2		$	142		$	258
Segment assets (5)	$	2,868		$	8,842		$	2,571		$	1,986		$	683		$	2,157		$	19,107
Capital expenditures	$	127		$	311		$	125		$	159		$	83		$	123		$	928

(1)	Corning obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in Hemlock and Emerging Growth Businesses since September 9, 2020.  Refer to Note 3 (HSG Transactions and Acquisitions) in the notes to the consolidated financial statements for additional information.
(2)	Depreciation expense for Corning’s reportable segments and Hemlock and Emerging Growth Businesses includes an allocation of depreciation of corporate property not specifically identifiable to a segment.

(3) Research, development and engineering expenses include direct project spending that is identifiable to a segment.

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

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

The following table presents a reconciliation of net sales of reportable segments to consolidated net sales (in millions):

	Year ended December 31,
	2022			2021			2020
Net sales of reportable segments	$	13,143		$	12,877		$	10,987
Net sales of Hemlock and Emerging Growth Businesses (1)		1,662			1,243			465
Impact of constant currency reporting (2)		(616	)		(38	)		(44	)
Cumulative adjustment related to customer contract (3)								(105	)
Consolidated net sales	$	14,189		$	14,082		$	11,303

(1)	Corning obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in Hemlock and Emerging Growth Businesses since September 9, 2020.  Refer to Note 3 (HSG Transactions and Acquisitions) in the notes to the consolidated financial statements for more information.
(2)	This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment.

(3) Amount represents the negative impact of a cumulative adjustment recorded during the first quarter of 2020 to reduce revenue in the amount of $105 million. 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 substantially exited its production of LCD panels. 

The following table presents a reconciliation of net income of reportable segments to consolidated net income (in millions):

	Year ended December 31,
	2022			2021			2020
Net income of reportable segments	$	2,215		$	2,347		$	1,842
Net income (loss) of Hemlock and Emerging Growth Businesses (1)		39			(51	)		(214	)
Unallocated amounts:
Impact of constant currency reporting not included in segment net income (loss)		(480	)		(87	)		(22	)
Gain (loss) on foreign currency hedges related to translated earnings		348			354			(46	)
Translation gain (loss) on Japanese yen-denominated debt		191			180			(86	)
Litigation, regulatory and other legal matters		(100	)		(16	)		(144	)
Research, development, and engineering expense (2)(3)		(163	)		(151	)		(150	)
Transaction-related gain, net (4)								498
Amortization of intangibles		(123	)		(129	)		(121	)
Interest expense, net		(237	)		(265	)		(261	)
Income tax benefit		204			120			324
Pension mark-to-market		(11	)		(32	)		(31	)
Cumulative adjustment related to customer contract (5)								(105	)
Severance (charges) credits (3)		(70	)		13			(148	)
Asset impairment (3)								(217	)
Capacity realignment and other charges and credits (3)		(344	)		(123	)		(462	)
Bond redemption loss (6)					(31	)		(22	)
Gain (loss) on investments (7)		8			(23	)		107
Gain on sale of business		53			54
Other corporate items		(214	)		(254	)		(230	)
Net income	$	1,316		$	1,906		$	512

(1) Corning obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in Hemlock and Emerging Growth Businesses since September 9, 2020.  Refer to Note 3 (HSG Transactions and Acquisitions) in the notes to the consolidated financial statements for additional information.

(2) Amount does not include research, development and engineering expense related to restructuring, impairment and other charges and credits and pension mark-to-market.

(3)	Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) in the notes to the consolidated financial statements for additional information on restructuring activities and impairment.
(4)	Amount represents the pre-tax gain recorded on Corning’s previously held equity investment in HSG recorded in 2020. Refer to Note 3 (HSG Transactions and Acquisitions) in the notes to the consolidated financial statements for additional information.

(5) 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 substantially exited its production of LCD panels. 

(6) Refer to Note 11 (Debt) in the notes to the consolidated financial statements for additional information.

(7) Amount for the year ended December 31, 2020 primarily represents the gain recognized from the initial public offering of an investment.

The following table presents a reconciliation of total assets of reportable segments to consolidated total assets (in millions):

	December 31,
	2022		2021		2020
Total assets of reportable segments	$	16,741	$	17,124	$	16,950
Total assets of Hemlock and Emerging Growth Businesses		2,136		2,024		2,157
Unallocated amounts:
Current assets (1)		2,823		3,163		3,434
Investments (2)		99		54		177
Property, plant and equipment, net (3)		1,385		1,426		1,463
Other non-current assets (4)		6,315		6,363		6,594
Total assets	$	29,499	$	30,154	$	30,775

(1) Includes cash, other receivables, prepaid expenses and current portion of long-term derivative assets.

(2) Represents other corporate investments. HSG became a fully consolidated subsidiary of Corning on September 9, 2020.

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

(4) Includes goodwill, other intangible assets, pension assets, long-term derivative assets, operating leases and deferred income taxes.

The following table presents selected financial information about the Company’s product lines and reportable segments (in millions):

	Year ended December 31,
Revenue from external customers	2022			2021			2020
Optical Communications
Carrier network	$	3,760		$	3,200		$	2,612
Enterprise network		1,263			1,149			951
Total Optical Communications		5,023			4,349			3,563
Display Technologies		3,306			3,700			3,172
Specialty Materials
Corning® Gorilla® Glass		1,331			1,403			1,420
Advanced optics and other specialty glass		671			605			464
Total Specialty Materials		2,002			2,008			1,884
Environmental Technologies
Automotive and other		934			936			883
Diesel		650			650			487
Total Environmental Technologies		1,584			1,586			1,370
Life Sciences
Labware		657			671			552
Cell culture products		571			563			446
Total Life Science		1,228			1,234			998
Hemlock and Emerging Growth Businesses
Polycrystalline Silicon		1,191			892			194
Other		471			351			271
Total Hemlock and Emerging Growth Businesses		1,662			1,243			465
Net sales of reportable segments		13,143			12,877			10,987
Net sales of Hemlock and Emerging Growth Businesses		1,662			1,243			465
Impact of constant currency reporting (1)		(616	)		(38	)		(44	)
Cumulative adjustment related to customer contract (2)								(105	)
Consolidated net sales	$	14,189		$	14,082		$	11,303

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

(2) Amount represents the negative impact of a cumulative adjustment recorded during the first quarter of 2020 to reduce revenue in the amount of $105 million. 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.

The following table presents information relating to the Company’s operations by geographic area (in millions):

	2022				2021				2020
	Net sales (1)		Long-lived assets (2)		Net sales (1)		Long-lived assets (2)		Net sales (1)		Long-lived assets (2)
North America:
United States	$	5,149	$	8,937	$	4,539	$	8,600	$	3,412	$	8,718
Canada		503		99		472		114		274		121
Mexico		96		180		93		289		75		239
Total North America		5,748		9,216		5,104		9,003		3,761		9,078
Asia Pacific:
Japan		617		429		780		496		505		583
Taiwan		813		1,696		983		1,923		887		2,247
China		4,435		4,794		4,495		4,966		3,734		4,469
Korea		514		3,294		640		3,479		748		3,597
Other		729		81		459		84		340		83
Total Asia Pacific		7,108		10,294		7,357		10,948		6,214		10,979
Europe:
Germany		539		459		462		500		378		579
Other		1,116		937		925		910		838		931
Total Europe		1,655		1,396		1,387		1,410		1,216		1,510
All Other		294		67		272		68		261		83
Total	$	14,805	$	20,973	$	14,120	$	21,429	$	11,452	$	21,650

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

(2) Long-lived assets primarily include investments, plant and equipment, goodwill and other intangible assets.