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STMicroelectronics Announces 2012 Q4 and Full Year Results

STMicroelectronics reported financial results for the fourth quarter and full year ended December 31, 2012.

Fourth quarter net revenues totaled $2.16 billion and gross margin was 32.3%. Net loss attributable to parent company was $428 million, mainly due to a charge of $544 million for the impairment of Wireless goodwill and other intangible assets following the Company’s decision to exit the ST-Ericsson joint venture after the communicated transition period as part of the Company’s new strategic plan announced on December 10, 2012.

President and CEO Carlo Bozotti commented, “In the fourth quarter, both revenue and gross margin results came in above the midpoint of our guidance despite the ongoing softness in the semiconductor market. We extended our leadership in key areas. Thanks to new product momentum, revenues from our wholly-owned businesses increased 0.2% and 1.6% on a sequential and year-ago basis driven by a very strong ramp of our MEMS products in the fourth quarter.

“Looking at 2012 overall, we improved our net financial position compared to 2011 despite the significant cash used by ST-Ericsson as well as the impact of weak business conditions. We were able to end the year with significant financial flexibility and strong cash balances while providing shareholders with the same level of dividend compared to 2011.

“Important decisions were made in 2012 that are shaping a new, more focused, higherperforming ST. In December, we announced our new strategic plan targeting leadership in two product segments: Sense & Power and Automotive Products and Embedded Processing Solutions. This new strategy includes a sharper focus on five growth drivers: MEMS and sensors, Smart Power, automotive products, microcontrollers, and application processors including digital consumer products. Importantly, from a financial model perspective, we are targeting an operating margin of 10% or more. A key component to achieving this objective is bringing our net operating expenses to an average quarterly rate in the range of $600 million to $650 million by the beginning of 2014.

“In connection with our strategic plan, we decided to exit ST-Ericsson after a transition period and our actions this past quarter, including the further impairment charge, are aligned with moving this decision forward.”

Fourth Quarter Review

In the fourth quarter, ST’s wholly-owned businesses’ revenue increased 0.2% and 1.6% on a sequential and year-ago basis, respectively. Wireless product-segment revenues decreased by 2.2% sequentially, and included revenue from IP licensing of $43 million compared to $35 million in the prior quarter. The Japan & Korea and Greater China & South Asia regions grew sequentially 16% and 1%, respectively, while the Americas and EMEA decreased 0.4% and 13%, respectively.

Fourth quarter gross margin decreased 250 basis points sequentially to 32.3% mainly due to negative price effect, lower volumes that were associated with the planned reduction in inventory that resulted in the underloading of ST’s wafer fabs partially offset by favorable product mix; as a result of the inventory reduction unsaturation charges in the fourth quarter of 2012 were $66 million compared to $19 million and $99 million in the prior and year-ago quarters, respectively.

Combined SG&A and R&D expenses increased 3% to $876 million compared to $852 million in the prior quarter mainly due to unfavorable seasonal effects. Combined operating expenses as a percentage of sales were 40.5% in the 2012 fourth quarter compared to 39.3% in the prior quarter.

Restructuring and impairment charges for the fourth and third quarters were $588 million and $713 million, respectively, principally reflecting non-cash impairment charges on Wireless goodwill and other intangible assets bringing the investment value of ST-Ericsson on our books to a negligible amount.

Operating margin before impairment, restructuring and one-time items attributable to ST decreased to negative 3.3% in the 2012 fourth quarter compared to positive 0.3% in the prior quarter.*

Income tax expense in the fourth quarter was $39 million mainly due to the write-off of STEricsson deferred tax assets following ST’s decision to exit from the joint venture after a transition period.

In the fourth quarter of 2012, net loss attributable to non-controlling interests was $361 million, which mainly included the 50% owned by Ericsson in the ST-Ericsson joint venture, as consolidated by ST. In the third quarter of 2012, the corresponding amount was $351 million.

Fourth quarter net loss attributable to parent company was $428 million or $(0.48) per share,
compared to a net loss of $(0.54) and $(0.01) per share in the prior and year-ago quarters, respectively. On an adjusted basis, net of related taxes, ST reported a non-U.S. GAAP net loss
per share of $(0.11), excluding impairment, restructuring charges and one-time items in the fourth quarter, compared to a net loss of $(0.03) and $(0.01) per share in the prior and year-ago quarters, respectively.*

For the fourth quarter of 2012, the effective average exchange rate for the Company was approximately $1.30 to €1.00, compared to $1.29 to €1.00 for the third quarter of 2012, and $1.36 to €1.00 for the fourth quarter of 2011.

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