Reportable Segments

3 Months Ended

Mar. 31, 2012

Reportable Segments [Abstract]

Reportable Segments

16.      Reportable Segments

Our reportable segments are as follows:

·   Display Technologies – manufactures liquid crystal display (LCD) glass for flat panel displays.

·   Telecommunications – manufactures optical fiber and cable, and hardware and equipment components for the telecommunications industry.

·   Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.  This reportable segment is an aggregation of our Automotive and Diesel operating segments as these two segments share similar economic characteristics, products, customer types, production processes and distribution methods.

·   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.

·   Life Sciences – manufactures glass and plastic consumables for scientific applications.

All other segments that do not meet the quantitative threshold for separate reporting are grouped as "All Other."  This group is primarily comprised of development projects and results for new product lines.

We prepared the financial results for our reportable segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions.  We included the earnings of equity affiliates that are closely associated with our reportable segments in the respective segment's net income.  We have allocated certain common expenses among segments differently than we would for stand-alone financial information prepared in accordance with U.S. GAAP.  Segment net income may not be consistent with measures used by other companies.  The accounting policies of our reportable segments are the same as those applied in the consolidated financial statements.

Reportable Segments (in millions)

	Display Technologies		Telecom- munications		Environmental Technologies		Specialty Materials		Life Sciences		All Other		Total
Three months ended March 31, 2012
Net sales	$	705	$	508	$	263	$	288	$	155	$	1	$	1,920
Depreciation (1)	$	129	$	30	$	28	$	34	$	10	$	3	$	234
Amortization of purchased intangibles			$	3					$	2			$	5
Research, development and engineering expenses (2)	$	27	$	35	$	26	$	37	$	6	$	27	$	158
Equity in earnings (loss) of affiliated companies	$	182	$	(4)	$	1					$	4	$	183
Income tax (provision) benefit	$	(96)	$	(12)	$	(20)	$	(11)	$	(6)	$	10	$	(135)
Net income (loss) (3)	$	421	$	21	$	40	$	21	$	12	$	(20)	$	495
Three months ended March 31, 2011
Net sales	$	790	$	474	$	259	$	254	$	144	$	2	$	1,923
Depreciation (1)	$	124	$	28	$	25	$	37	$	8	$	2	$	224
Amortization of purchased intangibles			$	1					$	2			$	3
Research, development and engineering expenses (2)	$	25	$	29	$	23	$	29	$	4	$	22	$	132
Equity in earnings of affiliated companies	$	294	$	3			$	3			$	7	$	307
Income tax (provision) benefit	$	(139)	$	(19)	$	(14)	$	(3)	$	(7)	$	9	$	(173)
Net income (loss) (3)	$	638	$	41	$	29	$	8	$	15	$	(15)	$	716

(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) 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.

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

	Three months ended March 31,
	2012		2011
Net income of reportable segments	$	515	$	731
Non-reportable segments		(20)		(15)
Unallocated amounts:
Net financing costs (1)		(40)		(52)
Stock-based compensation expense		(24)		(23)
Exploratory research		(23)		(17)
Corporate contributions		(13)		(21)
Equity in earnings of affiliated companies, net of impairments (2)		35		91
Asbestos settlement (3)		(1)		(5)
Other corporate items		33		59
Net income	$	462	$	748

(1) Net financing costs include interest income, interest expense, and interest costs and investment gains associated with benefit plans.

(2) Primarily represents the equity earnings of Dow Corning Corporation.

(3) In the first quarter of 2012, Corning recorded a charge of $1 million to adjust the asbestos liability for the change in value of components of the Modified PCC Plan.  In the first quarter of 2011, Corning recorded a charge of $5 million to adjust the asbestos liability for the change in value of components of the Modified PCC Plan.

The sales of each of our reportable segments are concentrated across a relatively small number of customers.  In the first quarter of 2012, the following number of customers, which individually accounted for 10% or more of each segment's sales, represented the following concentration of segment sales:

·   In the Display Technologies segment, four customers accounted for 80% of total segment sales.

·   In the Telecommunications segment, one customer accounted for 12% of total segment sales.

·   In the Environmental Technologies segment, three customers accounted for 88% of total segment sales.

·   In the Specialty Materials segment, two customers accounted for 50% of total segment sales.

·   In the Life Sciences segment, two customers accounted for 39% of total segment sales.

A significant amount of specialized manufacturing capacity for our Display Technologies segment is concentrated in Asia.  It is at least reasonably possible that the use of a facility could be disrupted.  Due to the specialized nature of the assets, it would not be possible to find replacement capacity quickly.  Accordingly, loss of these facilities could produce a near-term severe impact on our display business and the Company as a whole.