Note 20 - Reportable Segments

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Reportable segments are as follows:

• Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.

• Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.

• 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.

• Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.

• 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 “All Other.” This group is primarily comprised of the results of HSG, pharmaceutical technologies, auto glass, new product lines and development projects, as well as other businesses and certain corporate investments.

The Company obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in “All Other” since September 9, 2020.  Refer to Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information on this transaction.

Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM in making internal operating decisions. The impact of changes in the Japanese yen, South Korean won, Chinese yuan and new Taiwan dollar are excluded from segment sales and segment net income for the Display Technologies and Specialty Materials segments. The impact of changes in the euro and Chinese yuan are excluded from segment sales and segment net income for the Environment Technologies segment. The impact of changes in the euro, Chinese yuan and Japanese yen are excluded from segment sales and segment net income for the Life Sciences segment. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of or in allocating resources to the segments and include the following items: the impact of the translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; adjustments relating to acquisitions; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

Earnings of equity affiliates that are closely associated with the reportable segments are included in the respective segment’s net income (loss). Certain common expenses among reportable segments have been allocated differently than they would for stand-alone financial information. 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)

	Display Technologies			Optical Communications			Specialty Materials			Environmental Technologies			Life Sciences			All Other			Total
For the year ended December 31, 2021
Segment net sales	$	3,700		$	4,349		$	2,008		$	1,586		$	1,234		$	1,243		$	14,120
Depreciation (1)	$	605		$	224		$	161		$	139		$	52		$	134		$	1,315
Research, development and engineering expenses (2)	$	110		$	216		$	208		$	111		$	33		$	160		$	838
Income tax (provision) benefit (3)	$	(249	)	$	(152	)	$	(99	)	$	(72	)	$	(51	)	$	11		$	(612	)
Net income (loss) (4)	$	960		$	553		$	371		$	269		$	194		$	(51	)	$	2,296
Investment in affiliated companies, at equity	$	109		$	3		$	6					$	4		$	142		$	264
Segment assets (5)	$	8,498		$	3,183		$	2,308		$	2,150		$	791		$	2,024		$	18,954
Capital expenditures	$	710		$	301		$	183		$	228		$	128		$	149		$	1,699
For the year ended December 31, 2020
Segment net sales	$	3,172		$	3,563		$	1,884		$	1,370		$	998		$	465		$	11,452
Depreciation (1)	$	548		$	242		$	162		$	132		$	50		$	81		$	1,215
Research, development and engineering expenses (2)	$	99		$	204		$	155		$	100		$	26		$	170		$	754
Income tax (provision) benefit (3)	$	(190	)	$	(101	)	$	(113	)	$	(52	)	$	(37	)	$	58		$	(435	)
Net income (loss) (4)	$	717		$	366		$	423		$	197		$	139		$	(214	)	$	1,628
Investment in affiliated companies, at equity	$	107		$	3		$	4					$	2		$	142		$	258
Segment assets (5)	$	8,777		$	2,868		$	2,551		$	1,986		$	683		$	2,157		$	19,022
Capital expenditures	$	311		$	127		$	125		$	159		$	83		$	123		$	928
For the year ended December 31, 2019
Segment net sales	$	3,254		$	4,064		$	1,594		$	1,499		$	1,015		$	230		$	11,656
Depreciation (1)	$	583		$	237		$	145		$	128		$	49		$	50		$	1,192
Research, development and engineering expenses (2)	$	119		$	218		$	154		$	118		$	21		$	237		$	867
Income tax (provision) benefit (3)	$	(206	)	$	(134	)	$	(81	)	$	(70	)	$	(40	)	$	80		$	(451	)
Net income (loss) (4)	$	786		$	489		$	302		$	263		$	150		$	(289	)	$	1,701
Investment in affiliated companies, at equity	$	145		$	3		$	3					$	3		$	137		$	291
Segment assets (5)	$	9,022		$	3,004		$	2,433		$	1,912		$	627		$	1,028		$	18,026
Capital expenditures	$	872		$	329		$	176		$	287		$	80		$	155		$	1,899

(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) benefit reflects a tax rate of 21%.

(4) 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. Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income (loss) to consolidated net income.

(5) Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation, and associated equity companies. HSG assets are included as of December 31, 2021 and 2020.

A reconciliation of reportable segments and “All Other” net sales to consolidated net sales is as follows (in millions):

	Year ended December 31,
	2021			2020			2019
Net sales of reportable segments and All Other	$	14,120		$	11,452		$	11,656
Impact of foreign currency movements (1)		(38	)		(44	)		(153	)
Cumulative adjustment related to customer contract (2)					(105	)
Consolidated net sales	$	14,082		$	11,303		$	11,503

(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 substantially exited its production of LCD panels. Refer to Note 5 (Revenue) to the consolidated financial statements for additional information.

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

	Year ended December 31,
	2021			2020			2019
Net income of reportable segments	$	2,347		$	1,842		$	1,990
Net loss of All Other (1)		(51	)		(214	)		(289	)
Unallocated amounts:
Impact of foreign currency movements not included in segment net loss		(87	)		(22	)		(115	)
Gain (loss) on foreign currency hedges related to translated earnings		354			(46	)		245
Translation gain (loss) on Japanese yen-denominated debt		180			(86	)		(3	)
Litigation, regulatory and other legal matters		(16	)		(144	)		17
Research, development, and engineering expense (2)(3)		(149	)		(153	)		(134	)
Transaction-related gain, net (4)					498
Equity in earnings (losses) of affiliated companies (5)		5			(24	)		15
Amortization of intangibles		(129	)		(121	)		(113	)
Interest expense, net		(265	)		(261	)		(200	)
Income tax benefit		120			324			195
Pension mark-to-market		(32	)		(31	)		(95	)
Cumulative adjustment related to customer contract (6)					(105	)
Severance charges (3)		13			(148	)		(63	)
Asset impairment (3)					(217	)
Capacity realignment and other charges and credits (3)		(123	)		(462	)		(376	)
Bond redemption loss (7)		(31	)		(22	)
(Loss) gain on investment (8)		(23	)		107
Gain on sale of business		54
Other corporate items		(261	)		(203	)		(114	)
Net income	$	1,906		$	512		$	960

(1) The Company obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in “All Other” since September 9, 2020.

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

(3)	Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) 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 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for additional information on this transaction.

(5) Primarily represents the equity earnings of HSG prior to September 9, 2020. Refer to Note 3 (Investments) and Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.

(6) 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. Refer to Note 5 (Revenue) to the consolidated financial statements for additional information.

(7) Refer to Note 12 (Debt) to the consolidated financial statements for additional information on the bond redemption loss.

(8) Primarily represents the gain recognized from the initial public offering of an investment in the fourth quarter of 2020.

A reconciliation of reportable segment assets to consolidated total assets follows (in millions):

	December 31,
	2021		2020		2019
Total assets of reportable segments	$	16,930	$	16,865	$	16,998
Total assets of All Other		2,024		2,157		1,028
Unallocated amounts:
Current assets (1)		3,163		3,434		3,301
Investments (2)		54		177		43
Property, plant and equipment, net (3)		1,620		1,548		1,764
Other non-current assets (4)		6,363		6,594		5,764
Total assets	$	30,154	$	30,775	$	28,898

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

(2) Represents other corporate investments. Asset balance does not include equity method affiliate liability balance of $270 million for HSG in 2019. 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 non-current corporate assets, including goodwill, other intangible assets, pension assets, long-term derivative assets, operating leases and deferred income taxes.

Selected financial information concerning the Company’s product lines and reportable segments follow (in millions):

	Year ended December 31,
Revenue from external customers	2021			2020			2019
Display Technologies	$	3,700		$	3,172		$	3,254
Optical Communications
Carrier network		3,200			2,612			2,885
Enterprise network		1,149			951			1,179
Total Optical Communications		4,349			3,563			4,064
Specialty Materials
Corning® Gorilla® Glass		1,403			1,420			1,180
Advanced optics and other specialty glass		605			464			414
Total Specialty Materials		2,008			1,884			1,594
Environmental Technologies
Automotive and other		936			883			907
Diesel		650			487			592
Total Environmental Technologies		1,586			1,370			1,499
Life Sciences
Labware		671			552			550
Cell culture products		563			446			465
Total Life Science		1,234			998			1,015
All Other
Polycrystalline Silicon		892			194
Other		351			271			230
Total All Other		1,243			465			230
Net sales of reportable segments and All Other		14,120			11,452			11,656
Impact of foreign currency movements (1)		(38	)		(44	)		(153	)
Cumulative adjustment related to customer contract (2)					(105	)
Consolidated net sales	$	14,082		$	11,303		$	11,503

(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. Refer to Note 5 (Revenue) to the consolidated financial statements for additional information.

Information concerning principal geographic areas for reportable segments and "All Other" was as follows (in millions):

	2021				2020				2019
	Net sales (1)(3)		Long-lived assets (2)(3)		Net sales (1)(3)		Long-lived assets (2)(3)		Net sales (1)		Long-lived assets (2)
North America:
United States	$	4,539	$	8,600	$	3,412	$	8,718	$	3,760	$	7,654
Canada		472		114		274		121		277		126
Mexico		93		289		75		239		55		267
Total North America		5,104		9,003		3,761		9,078		4,092		8,047
Asia Pacific:
Japan		780		496		505		583		441		893
Taiwan		983		1,923		887		2,247		880		2,280
China		4,495		4,966		3,734		4,469		3,096		3,816
Korea		640		3,479		748		3,597		1,051		3,625
Other		459		84		340		83		401		86
Total Asia Pacific		7,357		10,948		6,214		10,979		5,869		10,700
Europe:
Germany		462		500		378		579		435		546
Other		925		910		838		931		886		914
Total Europe		1,387		1,410		1,216		1,510		1,321		1,460
All Other		272		68		261		83		374		71
Total	$	14,120	$	21,429	$	11,452	$	21,650	$	11,656	$	20,278

(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.

(3) Includes HSG’s net sales and long-lived assets as of December 31, 2021 and on and after September 9, 2020. Refer to Note 3 (Investments) and Note 4 (HSG Transactions and Acquisitions) to the consolidated financial statements for more information.