STMicroelectronics N.V. Q1 2010 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated April 23, 2010, reports the unaudited financial results for STMicroelectronics N.V. for the first quarter ended March 27, 2010. The company, a global semiconductor leader, reported a return to profitability driven by a significant rebound in market demand following the economic crisis. The results include consolidated sales from the ST-Ericsson joint venture.
Key Financial Metrics
| Metric | Q1 2010 | Q1 2009 | Q4 2009 |
|---|---|---|---|
| Net Revenues | $2,325 million | $1,660 million | $2,583 million |
| Gross Margin | 37.7% | 26.3% | 37.0% |
| Operating Income (Loss) | ($20) million | ($393) million | ($6) million |
| Net Income (Loss) | $57 million | ($541) million | ($70) million |
| Diluted EPS | $0.06 | ($0.62) | ($0.08) |
| Net Operating Cash Flow | $176 million | ($139) million | $247 million |
| Total Debt | $2.19 billion | $2.65 billion | $2.49 billion |
| Net Cash Position | $566 million | $254 million | $420 million |
Material Changes vs. Prior Periods
- Revenue Growth: Net revenues increased 40.1% year-over-year (YoY) and decreased 10.0% sequentially due to fewer days in the quarter. All market segments posted double-digit YoY growth, led by Automotive (+61%) and Computer (+59%).
- Profitability: The company returned to net profitability ($57 million) compared to a net loss of $541 million in Q1 2009. This turnaround was driven by a 1,140 basis point increase in gross margin YoY, attributed to high fab loading and new product mix.
- Segment Performance:
- ACCI (Automotive/Consumer/Computer): Revenues up 47% YoY; Operating income of $48 million vs. a loss of $28 million YoY.
- IMS (Industrial/Multisegment): Revenues up 60% YoY; Operating income of $92 million vs. $5 million YoY.
- Wireless: Revenues up 13% YoY; Operating loss widened to $116 million (excluding $25 million in restructuring charges) due to lower revenues and ST-Ericsson restructuring costs.
- Restructuring: Restructuring and impairment charges totaled $33 million, down from $96 million in Q4 2009 and $56 million in Q1 2009. $25 million of the current quarter's charges were related to ST-Ericsson.
Guidance, Outlook, and Risks
- Q2 2010 Outlook: Management expects sequential revenue growth of 6% to 12%, translating to 24% to 31% YoY growth. Gross margin is expected to improve slightly to approximately 38% (+/- 1 percentage point).
- Dividend: The Supervisory Board recommended an increase in the annual cash dividend to $0.28 per share (approx. 2.7% yield), to be paid in four quarterly installments.
- Corporate Developments:
- Credit Suisse Litigation: A federal court confirmed a FINRA award requiring Credit Suisse to pay STMicroelectronics approximately $354 million (plus interest) regarding unauthorized auction rate securities.
- Numonyx Transaction: ST entered a definitive agreement for Micron Technology to acquire the Numonyx flash memory joint venture in an all-stock transaction. ST will hold Micron shares as a financial investment.
- Risks: Key risks include supply chain constraints limiting revenue opportunities, the ongoing restructuring and competitive challenges of the ST-Ericsson joint venture, foreign exchange volatility, and the timing/closing of the Numonyx transaction.
Investor Verification Checklist
- Verify the reconciliation of non-GAAP measures (Adjusted Net Income of $62 million) to GAAP figures in Attachment A.
- Monitor the status of the Credit Suisse litigation appeal and the expected timing of the $354 million recovery.
- Assess the progress of the ST-Ericsson restructuring and its impact on the Wireless segment's operating losses.
- Confirm the closing timeline and share price conditions for the Numonyx acquisition by Micron.
- Review the impact of the $250 million restricted cash deposit (collateral for Hynix-Numonyx loan) on liquidity calculations.