STMicroelectronics Reports 2009 Fourth Quarter and Full Year Financial Results

ACCI (Automotive/Consumer/Computer/Communication Infrastructure Product Groups) fourth quarter net revenues increased 17% sequentially to $997 million, mainly driven by automotive, set-top box and computer peripherals and reflected solid holiday sales and continuing improvement in industry conditions. In a significant turnaround, ACCI returned to profitability in the fourth quarter, posting operating income of $57 million, compared to a loss of $36 million in the prior quarter and a profit of $18 million in the year-ago quarter.

IMS (Industrial and Multisegment Product Sector) fourth quarter net revenues increased 23% sequentially to $854 million, driven by strong growth in microcontrollers, analog, smartcards and power discretes and reflected improved market conditions and solid growth in the multi-segment market and in distribution. IMS operating income returned to a double-digit margin, and increased significantly to $90 million in the fourth quarter, and compares to income of $27 million in the prior quarter and income of $101 million in the year-ago quarter.

Wireless net revenues in the fourth quarter increased 1% sequentially to $712 million. Net revenues were driven by continued demand in China. Wireless operating loss in the fourth quarter narrowed to $48 million benefiting from the ongoing cost restructuring plans, compared to an operating loss of $75 million in the prior quarter. Wireless operating results in the fourth quarter of 2009 exclude $61 million in restructuring charges related to ST-Ericsson, as consolidated by ST.

In the fourth quarter of 2009, ST booked $59 million of income, reflecting the net loss 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 Ericsson's 50% share in the joint venture's loss, as consolidated by ST.  

For additional information on ST-Ericsson, see www.stericsson.com

In the fourth quarter of 2009, ST's loss on equity investments was $13 million including a charge of $5 million that represents ST's proportional share of the loss reported by Numonyx in its third quarter of 2009. As of December 31, 2009, Numonyx held approximately $572 million in cash on its balance sheet.

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

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

(c) Operating income (loss) of "Others" includes items such as unused capacity charges, impairment, restructuring charges, and other related closure costs, start-up 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 $13 million, $47 million and $57 million of unused capacity charges in the fourth and third quarters of 2009 and fourth quarter of 2008, respectively and $96 million, $53 million and $91 million of impairment and restructuring charges in the fourth and third quarters of 2009 and fourth quarter of 2008, respectively.

The fourth quarter of 2009 income statement includes a pre-tax non-cash loss of $68 million related to the sale of certain asset-backed securities. These securities were purchased by Credit Suisse Securities (USA) LLC without ST's authorization and were the subject of a favorable ruling by the Financial Industry Regulatory Authority issued on February 12, 2009, which ordered Credit Suisse Securities (USA) LLC to pay ST approximately $406 million plus interest against restitution of the securities. ST sold a part of the securities portfolio pursuant to correspondence from Credit Suisse Securities (USA) LLC, while the collection of the related award is still pending. As a result, the Company collected $75 million as a partial payment towards the collection of the awarded amount and posted the difference of $68 million as an Income Statement loss. Such amount comes in addition to the $245 million impairment that had been taken as of September 30, 2009 with respect to our portfolio of auction rate securities. These amounts should be recovered upon collection of the award. The Company is seeking confirmation of the award from the United States District Court of the Southern District of New York.

Income tax expense in the fourth quarter was $48 million, largely reflecting valuation allowances taken on loss carryforwards in certain jurisdictions and a year-end true-up on the final earnings distribution among jurisdictions.

ST's net loss narrowed to $70 million in the fourth quarter of 2009, or $-0.08 per share, compared to a net loss of $201 million and $366 million in the prior quarter and year-ago period, respectively. On an adjusted basis, ST reported a fourth quarter of 2009 net income, excluding impairment and restructuring and Other-Than-Temporary-Impairment (OTTI) charges and losses on financial assets attributable to parent Company's shareholders, of $36 million, or $0.04 per share.*

For the 2009 fourth quarter, the effective average exchange rate for the Company was approximately $1.43 to 1.00 euro compared to $1.38 to 1.00 euro for the 2009 third quarter and $1.40 to 1.00 euro for the 2008 fourth quarter.

Cash Flow and Balance Sheet Highlights

Net operating cash flow, excluding M&A transactions, was $221 million for the fourth quarter of 2009 compared to $100 million in the prior quarter and $161 million in the year-ago quarter*.

Capital expenditures were $190 million during the fourth quarter of 2009, compared to $98 million in the prior quarter and $206 million in the year-ago quarter. For the full year 2009, capital expenditures totaled $451 million, compared to $983 million in 2008 and were consistent with the Company's expectations and to the Company's new asset lighter model.

Inventory was $1.28 billion at quarter end, down from $1.30 billion at September 26, 2009 and $1.84 billion at December 31, 2008. Inventory turns in the fourth quarter improved to a record 5.1 turns compared to 4.8 turns sequentially and 3.1 turns in the year-ago quarter.

ST's net financial position improved significantly to a net cash position of $420 million at December 31, 2009 compared to a net debt position of $545 million at December 31, 2008*. ST's cash and cash equivalents, marketable securities (current and non-current), short-term deposits and restricted cash equaled $2.91 billion. Excluding cash and cash equivalents and marketable securities of $226 million related to ST-Ericsson, a $250 million restricted cash deposit as collateral for the Hynix-Numonyx loan and $42 million of non-current securities, the Company's liquidity totaled $2.39 billion. Total debt was $2.49 billion. On January 14, 2010, ST completed a program to repurchase about 30.6% of its 2016 convertible bonds. ST paid $314.6 million in outstanding cash to repurchase the bonds out of which $103 million was paid in the fourth quarter. Total equity was $8.36 billion, including non-controlling interest of $1.22 billion .

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