Note 14 - Reportable Segments

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

14. Reportable Segments

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; the carrier network group consists primarily of products and solutions for optical-based communications infrastructure for services such as video, data and voice communications, and the enterprise network group consists primarily of optical-based communication networks sold to businesses, governments and individuals for their own use.

● Display Technologies – manufactures high quality glass substrates for flat panel displays, including liquid crystal displays and organic light-emitting diodes that are used primarily in televisions, notebook computers, desktop monitors, tablets and handheld devices.

● Specialty Materials – manufactures products that provide material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs across a wide variety of commercial and industrial markets, including materials optimized for mobile consumer electronics, semiconductor equipment optics and consumables, aerospace and defense optics, radiation shielding products, sunglasses and telecommunications components.

● Environmental Technologies – manufactures ceramic substrates and filter products for emissions control systems in mobile applications.

● Life Sciences – develops, manufactures, and supplies laboratory products, including 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. Net sales for this group are mainly attributable to HSG, 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 (loss) of translating these currencies into U.S. dollars.  Therefore, the Company utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact on segment sales and segment net income from the Japanese yen, South Korean won, Chinese yuan, New Taiwan dollar and euro, as applicable to the segment.  In addition, effective January 1, 2024, the Company began utilizing constant-currency reporting for the Optical Communications segment to exclude the impact from the Mexican peso on segment results. Prior periods were not recasted as the impact was not material. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment. 

The constant-currency rates established for our core performance measures are internally derived long-term management estimates, which are closely aligned with our hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt. 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.

Constant-currency rates used are as follows and are applied to all periods presented and to all foreign exchange exposures during the period, even though we may be less than 100% hedged:

Currency	Japanese yen	Korean won	Chinese yuan	New Taiwan dollar	Euro	Mexican peso
Rate	¥107	₩1,175	¥6.7	NT$31	€.81	MX$20

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 net income attributable to Corning Incorporated. 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 be 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 (loss) to net income attributable to Corning Incorporated. Segment net income (loss) may not be consistent with measures used by other companies.

The following provides selected segment information as described above:

Segment information (in millions):

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended March 31, 2024
Segment net sales	$	930		$	872		$	454		$	455		$	236		$	311		$	3,258
Depreciation (1)	$	66		$	116		$	36		$	32		$	17		$	38		$	305
Research, development and engineering expenses (2)	$	65		$	26		$	60		$	23		$	6		$	36		$	216
Income tax provision (3)	$	(28	)	$	(53	)	$	(11	)	$	(28	)	$	(4	)	$	(1	)	$	(125	)
Segment net income (loss)	$	100		$	201		$	44		$	105		$	13		$	(10	)	$	453

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended March 31, 2023
Segment net sales	$	1,125		$	763		$	406		$	431		$	256		$	386		$	3,367
Depreciation (1)	$	66		$	123		$	35		$	33		$	17		$	33		$	307
Research, development and engineering expenses (2)	$	60		$	23		$	53		$	24		$	10		$	39		$	209
Income tax provision (3)	$	(43	)	$	(42	)	$	(10	)	$	(22	)	$	(2	)	$	(9	)	$	(128	)
Segment net income	$	159		$	160		$	39		$	82		$	9		$	16		$	465

(1)	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.
(2)	Research, development and engineering expenses include direct project spending that is identifiable to a segment.
(3)	Income tax provision reflects a tax rate of 21%.

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

	Three months ended
	March 31,
	2024			2023
Net sales of reportable segments	$	2,947		$	2,981
Net sales of Hemlock and Emerging Growth Businesses		311			386
Impact of constant-currency reporting (1)		(283	)		(189	)
Consolidated net sales	$	2,975		$	3,178

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

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

	Three months ended
	March 31,
	2024			2023
Net income of reportable segments	$	463		$	449
Net (loss) income of Hemlock and Emerging Growth Businesses		(10	)		16
Unallocated amounts:
Impact of constant-currency reporting		(226	)		(149	)
Translated earnings contract gain (loss), net		39			(8	)
Translation gain on Japanese yen-denominated debt		81			18
Research, development, and engineering expenses		(42	)		(45	)
Amortization of intangibles		(30	)		(31	)
Interest expense, net		(61	)		(56	)
Income tax benefit		54			91
Restructuring, impairment and other charges and credits		9			(66	)
Other corporate items		(68	)		(43	)
Net income attributable to Corning Incorporated	$	209		$	176