(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, phase out and start-up costs, NXP arbitration award and other unallocated expenses such as: strategic or special research and development programs, certain corporate-level operating expenses, patent claims and litigations, and other costs that are not allocated to product groups, as well as operating earnings of the Subsystems and Other Products Group. "Others" includes $19 million, $16 million and $42 million of unused capacity charges in the third and second quarters of 2012 and third quarter of 2011, respectively; and $713 million, $56 million and $10 million of impairment, restructuring charges and other related closure costs in the third and second quarters of 2012 and third quarter of 2011, respectively.
Automotive (APG) third quarter net revenues decreased 3.1% sequentially, mainly due to weak market trends. APG third quarter operating margin was 8.6%, compared to 9.4% in the prior quarter.
Analog, MEMS and Microcontrollers (AMM) third quarter net revenues increased 3.9% sequentially driven by analog and microcontroller applications. AMM operating margin was 12.6% in the 2012 third quarter, stable compared to the prior quarter.
Digital third quarter net revenues decreased 7.8% sequentially principally due to weak demand from specific Imaging customers leading to a sequential revenue decrease of the Imaging, Bi-CMOS ASIC and Silicon Photonics (IBP) division to $85 million from $124 million in the previous quarter. Digital operating loss was reduced to negative $30 million in the 2012 third quarter, compared to a loss of $36 million in the prior quarter.
Power Discrete (PDP) third quarter net revenues increased 5.2% sequentially due to higher demand for Power MOSFET and IGBT. PDP operating margin increased to 6.4% in the 2012 third quarter compared to 1.6% in the prior quarter.
Wireless net revenues in the third quarter increased 4.3% compared to the prior quarter reflecting ST-Ericsson's continued ramp of NovaThor platforms as well as revenues from IP licensing. Wireless operating loss was $184 million in the third quarter, or $98 million after considering non-controlling interest, compared to a loss of $240 million, or $113 million after considering non-controlling interest, in the prior quarter. For additional information, see ST-Ericsson's Q3 2012 earnings results press release at www.st.com and at www.stericsson.com
Cash Flow and Balance Sheet Highlights
Free cash flow was negative $80 million in the third quarter mainly due to the results of ST-Ericsson. In the prior quarter free cash flow was negative $129 million.*
Capital expenditures, net of proceeds from sale, were $203 million during the third quarter of 2012 compared to $70 million in the prior quarter. Year-to-date capital expenditures are down significantly, at $398 million, compared to $1.2 billion in the first nine months of 2011.
Inventory slightly decreased at quarter end to $1.48 billion.
In the third quarter, dividends paid to stockholders were $89 million.
ST continued to maintain a solid attributable net financial position with a net cash position of $1.06 billion, as adjusted, taking into account the 50% of ST-Ericsson's debt, at September 29, 2012 compared to $1.17 billion at December 31, 2011. ST's cash and cash equivalents, marketable securities and restricted cash equaled $1.93 billion and total debt was $1.56 billion, including $695 million of short-term debt by ST-Ericsson to Ericsson, at September 29, 2012.*
Total equity, including non-controlling interest, was $6.33 billion at quarter end.
In the 2012 third quarter the Company posted a return on net assets (RONA) attributable to ST of 0.5%.*
Nine Months 2012 Results
Net revenues for the first nine months of 2012 decreased approximately 16% to $6.33 billion from $7.54 billion in the year-ago period mainly due to lower volumes, including a significant drop in sales at ST's former largest customer, and a slowdown in the overall semiconductor market.
Gross margin was 32.9% of net revenues, compared to 37.7% of net revenues for the 2011 first nine months. The first nine months 2012 gross margin was negatively impacted by lower sales, unsaturation charges of $106 million and, to a lesser extent, a one-time $53 million charge to ST's cost of sales due to an arbitration
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(*)Free cash flow, net financial position and RONA attributable to ST are non-U.S. GAAP measures. For additional information and reconciliation to U.S. GAAP, please refer to Attachment A.
award. Net loss, as reported, was $730 million in the first nine months of 2012, or ($0.82) per share, compared to a net income of $661 million, or $0.73 diluted earnings per share in the first nine months of 2011. On an adjusted basis, net of related taxes, ST reported a non-U.S. GAAP net loss per share of ($0.22) excluding impairment, restructuring charges and one-time items in the first nine months of 2012 compared to diluted earnings of $0.43 per share in the first nine months of 2011.*
The effective average exchange rate for the Company was approximately $1.31 to EUR 1.00 for the first nine months of 2012, compared to $1.37 to EUR 1.00 for the first nine months of 2011.
2012 Nine Months Revenue and Operating Results by Product Segment
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Operating Segment Nine Months Nine Months Nine Months Nine Months
(In Million US$) 2012 2012 2011 2011
Net Operating Net Operating
Revenues Income (Loss) Revenues Income (Loss)
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Automotive (APG) 1,186 108 1,295 187
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Analog, MEMS &
Microcontrollers (AMM) 2,336 298 2,631 490
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Digital 1,014 (103) 1,451 98
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Power Discrete (PDP) 770 16 986 123
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Wireless 994 (717) 1,143 (601)
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Others 31 (954) 37 (119)
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TOTAL 6,331 (1,352) 7,543 178
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