Note 3 - Investments

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Investments are comprised of the following (in millions):

	Ownership	December 31,
	interest	2021		2020
Affiliated companies accounted for by the equity method	50% or less	$	264	$	258
Other investments			64		177
Total investment assets		$	328	$	435

Affiliated Companies at Equity Method

The results of operations and financial position of the investments accounted for under the equity method are presented below as of December 31 for each respective year (in millions):

	2021		2020			2019
Statement of operations (1):
Net sales	$	816	$	1,201		$	1,508
Gross profit	$	104	$	136		$	79
Net income (loss)	$	113	$	(48	)	$	(102	)
Net income (loss) attributable to the affiliated companies	$	114	$	(15	)	$	70
Corning’s equity in earnings (losses) of affiliated companies	$	35	$	(25	)	$	17
Related party transactions:
Corning sales to affiliated companies	$	312	$	253		$	277
Corning purchases from affiliated companies	$	12	$	8		$	12
Corning transfers of assets, at cost, to affiliated companies	$	1	$	9		$	8
Dividends received from affiliated companies	$	6	$	1		$	106
Intercompany sales within HSG (included in net sales)			$	55		$	112

	2021		2020
Balance sheet:
Current assets	$	648	$	534
Noncurrent assets	$	549	$	466
Short-term borrowings, including current portion of long-term debt	$	6	$	2
Other current liabilities	$	159	$	164
Long-term debt	$	58	$	60
Other long-term liabilities	$	66	$	11
Related party transactions:
Balances due from affiliated companies	$	38	$	36
Balances due to affiliated companies	$	1	$	1

(1) The year ended December 31, 2020, only includes HSG’s results of operations through September 8, 2020. Immediately following the Redemption, Corning began consolidating HSG on September 9, 2020.

As of December 31, 2021 and 2020, the undistributed earnings of equity companies included in retained earnings were not material.

Hemlock Semiconductor Group (“HSG”)

In 2016, Corning realigned its ownership interest in Dow Corning, exchanging its 50% interest in the joint venture between Corning and Dow Chemical for a newly formed company that held a 49.9% interest in Hemlock Semiconductor LLC and a 40.25% interest in Hemlock Semiconductor Operations LLC which were recorded as equity method investments of Corning and are affiliated companies of HSG. DuPont de Nemours, Inc. (“DuPont”) subsequently undertook Dow Chemical Company’s ownership interest in HSG. HSG manufactures polysilicon products for the semiconductor and solar industries, and it is one of the world’s leading providers of ultra-pure polycrystalline silicon to the semiconductor industry.

On September 9, 2020, HSG entered into a series of agreements with DuPont resulting in a change in control and consolidation for Corning.

Through the agreements, HSG acquired DuPont’s TCS manufacturing assets, which were determined to be a business and recorded as a business combination. The fair value of the purchase price was $255 million.  In conjunction with this acquisition, HSG settled the pre-existing TCS relationship (“TCS Settlement”) for a contractual amount of $175 million, which was determined to have a fair value of $200 million.  HSG is paying for the TCS Settlement over three years with equal annual payments of approximately $58 million.  Corning’s share of the pre-tax loss related to the TCS Settlement was $81 million and was recorded in equity in earnings (losses) of affiliated companies in the consolidated statements of income (loss) for the year ended December 31, 2020.  

HSG also completed the Redemption, redeeming Dupont’s entire ownership of HSG with a value of $250 million.  The Redemption was funded with HSG’s existing cash on-hand of $75 million and its newly obtained third-party debt of $175 million, maturing on September 8, 2021.  Debt repayments have been recorded as a financing activity on Corning's consolidated statements of cash flows.   As of December 31, 2021, the third-party debt has been fully repaid.

Upon completion of the Redemption, Corning obtained a 100% interest in HS LLC and an 80.5% interest in HSO LLC.  Corning accounted for the Redemption under the acquisition method of accounting in accordance with business combinations without the transfer of net cash consideration.  The Redemption price of $250 million approximated the fair value of Corning’s equity interest in HSG immediately preceding the Redemption.

See Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.

HSG’s results of operations and balance sheet as of September 8, 2020 were as follows (in millions):

	2020		2019
Statement of operations:
Net sales	$	423	$	779
Gross profit	$	87	$	9
Net income (loss) (1)	$	11	$	(117	)
Net income attributable to HSG	$	44	$	54
Corning’s equity in earnings of affiliated companies	$	22	$	27
Related party transactions:
Dividends received from affiliated companies			$	100
Intercompany sales within HSG (included in net sales)	$	55	$	112

	2020
Balance sheet:
Current assets	$	853
Noncurrent assets	$	725
Short-term borrowings, including current portion of long-term debt	$	178
Other current liabilities	$	337
Long-term debt	$	6
Other long-term liabilities	$	1,499
Non-controlling interest	$	9
Related party transactions:
Intercompany receivables and payables within HSG (included in current assets and other current liabilities)	$	8

(1) HSG’s net income for the period ended September 8, 2020, included a pre-tax gain recorded in the second quarter of 2020, related to the settlement of a long-term supply agreement of approximately $165 million, partially offset by an inventory provision of approximately $44 million associated with the settlement of the agreement. Prior to the Redemption, in the third quarter of 2020, HSG recorded a pre-tax loss of $200 million resulting from the TCS Settlement, of which Corning’s share of the pre-tax loss was $81 million. Accordingly, Corning’s share of the net impact was an equity loss of $19 million.