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Note 14 - Reportable Segments | 6 Months Ended
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Jun. 30, 2023
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. 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, 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 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. 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 and included in the unallocated amounts in the reconciliation of reportable segment net income 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 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 to consolidated net income. Segment net income may not be consistent with measures used by other companies. Segment Information (in millions):
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Hemlock |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | and |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Emerging |  |  |  |
|  | Optical |  |  | Display |  |  | Specialty |  |  | Environmental |  |  | Life |  |  | Growth |  |  |  |  |
|  | Communications |  |  | Technologies |  |  | Materials |  |  | Technologies |  |  | Sciences |  |  | Businesses |  |  | Total |
Three months ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segment net sales |  | $ | 1,066 |  |  | $ | 928 |  |  | $ | 423 |  |  | $ | 457 |  |  | $ | 231 |  |  | $ | 377 |  |  | $ | 3,482 |
Depreciation (1) |  | $ | 64 |  |  | $ | 120 |  |  | $ | 39 |  |  | $ | 32 |  |  | $ | 17 |  |  | $ | 35 |  |  | $ | 307 |
Research, development and engineering expenses (2) |  | $ | 56 |  |  | $ | 24 |  |  | $ | 57 |  |  | $ | 23 |  |  | $ | 8 |  |  | $ | 41 |  |  | $ | 209 |
Income tax provision (3) |  | $ | (38 | ) |  | $ | (55 | ) |  | $ | (9 | ) |  | $ | (28 | ) |  | $ | (3 | ) |  | $ | (11 | ) |  | $ | (144 | )
Segment net income |  | $ | 140 |  |  | $ | 208 |  |  | $ | 33 |  |  | $ | 107 |  |  | $ | 11 |  |  | $ | 26 |  |  | $ | 525 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Hemlock |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | and |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Emerging |  |  |  |  |
|  | Optical |  |  | Display |  |  | Specialty |  |  | Environmental |  |  | Life |  |  | Growth |  |  |  |  |
|  | Communications |  |  | Technologies |  |  | Materials |  |  | Technologies |  |  | Sciences |  |  | Businesses |  |  | Total |
Three months ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segment net sales |  | $ | 1,313 |  |  | $ | 878 |  |  | $ | 485 |  |  | $ | 356 |  |  | $ | 312 |  |  | $ | 418 |  |  | $ | 3,762 |
Depreciation (1) |  | $ | 68 |  |  | $ | 146 |  |  | $ | 42 |  |  | $ | 34 |  |  | $ | 16 |  |  | $ | 35 |  |  | $ | 341 |
Research, development and engineering expenses (2) |  | $ | 58 |  |  | $ | 30 |  |  | $ | 44 |  |  | $ | 24 |  |  | $ | 9 |  |  | $ | 38 |  |  | $ | 203 |
Income tax provision (3) |  | $ | (51 | ) |  | $ | (59 | ) |  | $ | (24 | ) |  | $ | (16 | ) |  | $ | (10 | ) |  | $ | (10 | ) |  | $ | (170 | )
Segment net income |  | $ | 182 |  |  | $ | 228 |  |  | $ | 91 |  |  | $ | 62 |  |  | $ | 37 |  |  | $ | 25 |  |  | $ | 625 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Hemlock |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | and |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Emerging |  |  |  |  |
|  | Optical |  |  | Display |  |  | Specialty |  |  | Environmental |  |  | Life |  |  | Growth |  |  |  |  |
|  | Communications |  |  | Technologies |  |  | Materials |  |  | Technologies |  |  | Sciences |  |  | Businesses |  |  | Total |
Six months ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segment net sales |  | $ | 2,191 |  |  | $ | 1,691 |  |  | $ | 829 |  |  | $ | 888 |  |  | $ | 487 |  |  | $ | 763 |  |  | $ | 6,849 |
Depreciation (1) |  | $ | 130 |  |  | $ | 243 |  |  | $ | 74 |  |  | $ | 65 |  |  | $ | 34 |  |  | $ | 68 |  |  | $ | 614 |
Research, development and engineering expenses (2) |  | $ | 116 |  |  | $ | 47 |  |  | $ | 110 |  |  | $ | 47 |  |  | $ | 18 |  |  | $ | 80 |  |  | $ | 418 |
Income tax provision (3) |  | $ | (81 | ) |  | $ | (97 | ) |  | $ | (19 | ) |  | $ | (50 | ) |  | $ | (5 | ) |  | $ | (20 | ) |  | $ | (272 | )
Segment net income |  | $ | 299 |  |  | $ | 368 |  |  | $ | 72 |  |  | $ | 189 |  |  | $ | 20 |  |  | $ | 42 |  |  | $ | 990 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Hemlock |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | and |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Emerging |  |  |  |  |
|  | Optical |  |  | Display |  |  | Specialty |  |  | Environmental |  |  | Life |  |  | Growth |  |  |  |  |
|  | Communications |  |  | Technologies |  |  | Materials |  |  | Technologies |  |  | Sciences |  |  | Businesses |  |  | Total |
Six months ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segment net sales |  | $ | 2,511 |  |  | $ | 1,837 |  |  | $ | 978 |  |  | $ | 765 |  |  | $ | 622 |  |  | $ | 793 |  |  | $ | 7,506 |
Depreciation (1) |  | $ | 127 |  |  | $ | 302 |  |  | $ | 82 |  |  | $ | 67 |  |  | $ | 30 |  |  | $ | 73 |  |  | $ | 681 |
Research, development and engineering expenses (2) |  | $ | 113 |  |  | $ | 61 |  |  | $ | 97 |  |  | $ | 49 |  |  | $ | 18 |  |  | $ | 78 |  |  | $ | 416 |
Income tax provision (3) |  | $ | (96 | ) |  | $ | (122 | ) |  | $ | (44 | ) |  | $ | (36 | ) |  | $ | (21 | ) |  | $ | (11 | ) |  | $ | (330 | )
Segment net income |  | $ | 348 |  |  | $ | 464 |  |  | $ | 166 |  |  | $ | 136 |  |  | $ | 79 |  |  | $ | 17 |  |  | $ | 1,210 |
(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 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 |  |  | Six months ended |
|  | June 30, |  |  | June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net sales of reportable segments |  | $ | 3,105 |  |  | $ | 3,344 |  |  | $ | 6,086 |  |  | $ | 6,713 |
Net sales of Hemlock and Emerging Growth Businesses |  |  | 377 |  |  |  | 418 |  |  |  | 763 |  |  |  | 793 |
Impact of constant currency reporting (1) |  |  | (239 | ) |  |  | (147 | ) |  |  | (428 | ) |  |  | (211 | )
Consolidated net sales |  | $ | 3,243 |  |  | $ | 3,615 |  |  | $ | 6,421 |  |  | $ | 7,295 |
(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 consolidated net income (in millions):
|  | Three months ended |  |  | Six months ended |
|  | June 30, |  |  | June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net income of reportable segments |  | $ | 499 |  |  | $ | 600 |  |  | $ | 948 |  |  | $ | 1,193 |
Net income of Hemlock and Emerging Growth Businesses |  |  | 26 |  |  |  | 25 |  |  |  | 42 |  |  |  | 17 |
Unallocated amounts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impact of constant currency reporting |  |  | (174 | ) |  |  | (120 | ) |  |  | (323 | ) |  |  | (183 | )
Gain on foreign currency hedges related to translated earnings |  |  | 116 |  |  |  | 196 |  |  |  | 108 |  |  |  | 325 |
Translation gain on Japanese yen-denominated debt |  |  | 109 |  |  |  | 153 |  |  |  | 127 |  |  |  | 237 |
Research, development, and engineering expenses (1) |  |  | (42 | ) |  |  | (37 | ) |  |  | (87 | ) |  |  | (72 | )
Amortization of intangibles |  |  | (31 | ) |  |  | (30 | ) |  |  | (62 | ) |  |  | (61 | )
Interest expense, net |  |  | (61 | ) |  |  | (60 | ) |  |  | (117 | ) |  |  | (121 | )
Income tax benefit (provision) |  |  | 38 |  |  |  | 4 |  |  |  | 129 |  |  |  | (16 | )
Severance charges |  |  | (68 | ) |  |  |  |  |  |  | (73 | ) |  |  |  |
Disposal of assets and other charges and credits |  |  | (64 | ) |  |  | (46 | ) |  |  | (125 | ) |  |  | (79 | )
Gain on sale of business |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 53 |
Other corporate items |  |  | (67 | ) |  |  | (122 | ) |  |  | (110 | ) |  |  | (149 | )
Net income attributable to Corning Incorporated |  | $ | 281 |  |  | $ | 563 |  |  | $ | 457 |  |  | $ | 1,144 |
(1) | Amount does not include research, development and engineering expense related to severance charges.

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