STMicroelectronics Reports 2010 Fourth Quarter and Full Year Financial Results

(a)Reflecting the transfer of a small business unit from ACCI to IMS as of January 1, 2010, the Company has reclassified prior period revenues and operating income results from ACCI to IMS.

(b) Starting February 3, 2009, "Wireless" includes the portion of sales and operating results of ST-Ericsson as consolidated in the Company's revenues and operating results, as well as other items affecting operating results related to the wireless business.

(c) Net revenues of "Others" includes revenues from sales of Subsystems, assembly services and other revenues.

(d) Operating income (loss) of "Others" includes items such as unused capacity charges, impairment, restructuring charges and other related closure costs, start-up and phase-out costs, and other unallocated expenses such as: strategic or special research and development programs, certain corporate-level operating expenses, patent claims and litigations, and the other costs that are not allocated to product groups, as well as operating earnings or losses of the Subsystems and Other Products Group. "Others" includes $2 million, $0 million and $13 million of unused capacity charges in the fourth and third quarters of 2010 and fourth quarter of 2009, respectively; and $32 million, $27 million, and $96 million of impairment and restructuring charges in the fourth and third quarters of 2010 and fourth quarter of 2009, respectively.

ACCI (Automotive/Consumer/Computer/Communication Infrastructure Product Groups) fourth quarter net revenues increased 15% year-over-year to a record $1,128 million driven by strong growth in Automotive and Telecom applications. Sequentially, ACCI grew net revenues 4%, also led by robust demand in Automotive and Telecom while, as expected, Digital Consumer decreased due to weaker market conditions. ACCI operating margin improved, both sequentially and year-on-year, to 11.9%, from 11.7% and 6.3%, in the prior and year-ago quarters, respectively.

IMS (Industrial and Multisegment Product Sector) fourth quarter net revenues increased 30% year-over-year to a record $1,131 million. Revenue growth was strong in all segments and in distribution. Sequentially, IMS grew net revenues 12%, led by MEMS, microcontrollers, power and industrial products. IMS operating margin improved, both sequentially and year-on-year, to 22.5% from 19.7% and 9.8% in the prior and year-ago quarters, respectively.

Wireless net revenues in the fourth quarter increased 3% sequentially to $562 million, reflecting continued strong performance from ST-Ericsson's new 2G/EDGE platforms and initial HSPA+ modem sales offset by weakness in the TD-SCDMA market and the anticipated decrease in legacy products. Wireless operating loss, excluding $24 million of restructuring charges, in the fourth quarter was $136 million. Wireless operating loss, excluding non-controlling interest, was $64 million in the fourth quarter compared to a loss of $37 million and $11 million in the prior and year-ago periods. Sequentially, Wireless results reflect increased losses at ST-Ericsson due to anticipated seasonality and currency effects, as well as price erosion due to their ongoing legacy product transition.

ST recorded $83 million of income in the fourth quarter of 2010 compared to $60 million and $59 million in the prior and year-ago quarters, respectively, reflecting the net results attributable to non-controlling interest, mainly related to the ST-Ericsson joint venture. This amount is posted below operating results in ST's Consolidated Income Statement and reflects primarily Ericsson's 50% share in the joint venture's results, as consolidated by ST.  

For additional information, including key design wins, on ST-Ericsson, see www.stericsson.com

Net Results

ST reported net income of $219 million in the fourth quarter of 2010, or $0.24 per diluted share, compared to net income of $198 million in the prior quarter and a net loss of $70 million in the year-ago period. On an adjusted basis, excluding restructuring charges and loss on the sale of Micron shares, ST reported fourth quarter 2010 net earnings of $0.27 per diluted share. In the third quarter of 2010 and fourth quarter of 2009, the Company reported on an adjusted basis a net income of $0.23 per diluted share and of $0.04 per diluted share, respectively.*

For the 2010 fourth quarter, the effective average exchange rate for the Company was approximately $1.34 to euro 1.00 compared to $1.34 to euro 1.00 for the 2010 third quarter and $1.43 to euro 1.00 for the 2009 fourth quarter.

Cash Flow and Balance Sheet Highlights

Net operating cash flow was $349 million compared to $224 million and $247 million in the prior and year ago periods, respectively. For the full year 2010, net operating cash flow was $961 million.*

In the fourth quarter ST realized net proceeds of $319 million from selling a substantial part of the Micron shares received in 2010 as a result of its final divestiture of the Flash memory business. The approximately 20 million remaining shares are fully hedged.

Capital expenditures were $423 million during the fourth quarter of 2010 compared to $298 million in the prior quarter. Expenditures were principally for front-end equipment to support various technologies and to support the ramp of new products for the current and upcoming quarters for MEMS, the U8500 smartphone platform as well as a capacity increase for automotive products. For the 2010 full year period, capital expenditures totaled $1,034 million. Combined capital expenditures for the years 2009-10 were 7.9% as a percentage of net revenues.

Inventory was $1.50 billion at quarter end compared to $1.43 billion at September 25, 2010. In the fourth quarter inventory turns were 4.6.

ST, during the quarter, continued its debt buy-back programs related to its outstanding 2016 convertible bonds and 2013 Eurobond. In the year, $510 million have been repurchased, out of which $121 million were repurchased in the fourth quarter.

Excluding $161 million of Micron shares currently held as marketable securities, ST's net financial position increased significantly to a net cash position of $1,152 million at December 31, 2010 compared to $878 million at September 25, 2010 and $420 million at December 31, 2009. ST's cash and cash equivalents, short-term deposits, marketable securities (current and non-current, excluding remaining Micron shares) equaled $2.92 billion. Total debt was $1.77 billion.*

Total equity was $8.50 billion, including non-controlling interest of $0.9 billion.

In the fourth quarter the Company posted a return on net assets (RONA) attributable to ST of 20.7%.*

Mr. Bozotti said "Over the last two years we have completed our product portfolio repositioning and funded the restructuring of operations. Our net financial position has improved significantly by about $1.7 billion while, at the same time, making the appropriate level of investment to fuel revenue growth."

Legal proceedings with respect to the collection of approximately $358 million due to ST by Credit Suisse pursuant to the FINRA award are continuing, with trial before the Court of Appeals of the Federal Circuit currently set to occur as from the last week of March 2011.

(*)Adjusted net earnings, net operating cash flow, net financial position and RONA attributable to ST are non-U.S. GAAP measures. For additional information, please refer to Attachment A.

2010 Full Year Results

Net revenues for the full year 2010 increased 21.6% to a record $10,346 million from $8,510 million in the prior year, thanks to a broad and deep product portfolio and significantly better industry conditions,  with IMS and ACCI increasing 45% and 32%, respectively.

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