Table of Contents
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2008 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
Not Applicable | The Netherlands | |
(Translation of registrant’s name into English) | (Jurisdiction of incorporation or organization) |
Title of Each Class: | Name of Each Exchange on Which Registered: | |
Common shares, nominal value €1.04 per share | New York Stock Exchange |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
U.S. GAAP þ | International Financial Reporting Standards as issued o | Other o | ||
by the International Accounting Standards Board |
2 | ||||||||
4 | ||||||||
Identity of Directors, Senior Management and Advisers | 4 | |||||||
Offer Statistics and Expected Timetable | 4 | |||||||
Key Information | 4 | |||||||
Information on the Company | 24 | |||||||
Operating and Financial Review and Prospects | 59 | |||||||
Directors, Senior Management and Employees | 110 | |||||||
Major Shareholders and Related Party Transactions | 132 | |||||||
Financial Information | 141 | |||||||
Listing | 145 | |||||||
Additional Information | 152 | |||||||
Quantitative and Qualitative Disclosures About Market Risk | 171 | |||||||
Description of Securities Other Than Equity Securities | 174 | |||||||
175 | ||||||||
Defaults, Dividend Arrearages and Delinquencies | 175 | |||||||
Material Modifications to the Rights of Security Holders and Use of Proceeds | 175 | |||||||
Controls and Procedures | 175 | |||||||
Audit Committee Financial Expert | 176 | |||||||
Code of Ethics | 176 | |||||||
Principal Accountant Fees and Services | 177 | |||||||
Exemptions from the Listing Standards for Audit Committees | 178 | |||||||
Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 178 | |||||||
Change in Registrant’s Certifying Accountant | 178 | |||||||
Corporate Governance | 178 | |||||||
182 | ||||||||
Financial Statements | 182 | |||||||
Financial Statements | 182 | |||||||
Exhibits | 182 | |||||||
EX-4.3 | ||||||||
EX-4.4 | ||||||||
EX-8.1 | ||||||||
EX-12.1 | ||||||||
EX-12.2 | ||||||||
EX-13.1 | ||||||||
EX-15.1 | ||||||||
EX-15.2 |
1
Table of Contents
• | Volatility in demand in the key application markets and from key customers served by our products, and changes in customer order patterns, including order cancellations, all of which generate uncertainties and make it extremely difficult to accurately forecast and plan our future business activities and to operate our manufacturing facilities at sufficient levels to cover fixed operating costs; | |
• | significant differences in the gross margins we achieve compared to expectations, based on changes in revenue levels, product mix and pricing, capacity utilization and unused capacity charges, excess or obsolete inventory, manufacturing yields, changes in unit costs, impairments of long-lived assets (including manufacturing, assembly/test and intangible assets), and the timing, execution and associated costs for the announced transfer of manufacturing from facilities designated for closure, including phase-out andstart-up costs; | |
• | the impact of intellectual property claims by our competitors or other third parties, and our ability to obtain required licenses on reasonable terms and conditions; | |
• | the outcome of ongoing litigation as well as any new litigation to which we may become a defendant; |
2
Table of Contents
• | the current volatility in the financial markets and overall economic uncertainty increases the risk that the actual amounts potentially realized upon a future sale of our debt and equity investments could differ significantly from the fair values currently assigned to them; | |
• | the depth and length of the current financial crisis will have a negative impact on our financial performance which, in turn, may lead to negative financial results, additional restructuring measures, further impairments as well as new initiatives designed to protect our liquidity and financial strength, which may impact our ability to pursue new investment opportunities, secure financing or pay dividends; | |
• | our ability to successfully integrate the acquisitions we pursue, in particular the merger of ST-NXP Wireless with Ericsson Mobile Platforms (“EMP”) toform ST-Ericsson, which may prove even more challenging in the current difficult economic environment; | |
• | we hold significant non-marketable equity investments in Numonyx, our joint venture in the flash memory market segment, and in ST-Ericsson, our joint venture in the wireless segment. Additionally, we are a guarantor for certain Numonyx debt. Therefore, declines in these market segments could result in significant impairment charges, restructuring charges and gains/losses on equity investments; | |
• | our ability to manage in an intensely competitive and cyclical industry, where a high percentage of our costs are fixed and are incurred in currencies other than U.S. dollars, as well as our our ability to execute our restructuring initiatives in accordance with our plans if unforeseen events require adjustments or delays in implementation; | |
• | the effects of hedging, which we practice in order to minimize the impact of variations between the U.S. dollar and the currencies of the other major countries in which we have our operating infrastructure, especially the Euro, in the currently very volatile currency environment; | |
• | our ability in an intensively competitive environment to secure customer acceptance and to achieve our pricing expectations for high-volume supplies of new products in whose development we have been, or are currently, investing; | |
• | the ability to maintain solid, viable relationships with our suppliers and customers in the event they are unable to maintain a competitive market presence due, in particular, to the effects of the current economic environment; | |
• | changes in the political, social or economic environment, including as a result of military conflict, social unrestand/or terrorist activities, as well as natural events such as severe weather, health risks, epidemics or earthquakes in the countries in which we, our key customers or our suppliers, operate; and | |
• | changes in our overall tax position as a result of changes in tax laws or the outcome of tax audits, and our ability to accurately estimate tax credits, benefits, deductions and provisions and to realize deferred tax assets. |
3
Table of Contents
Item 1. | Identity of Directors, Senior Management and Advisers |
Item 2. | Offer Statistics and Expected Timetable |
Item 3. | Key Information |
Year Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions except per share and ratio data) | ||||||||||||||||||||
Consolidated Statements of Income Data: | ||||||||||||||||||||
Net sales | $ | 9,792 | $ | 9,966 | $ | 9,838 | $ | 8,876 | $ | 8,756 | ||||||||||
Other revenues | 50 | 35 | 16 | 6 | 4 | |||||||||||||||
Net revenues | 9,842 | 10,001 | 9,854 | 8,882 | 8,760 | |||||||||||||||
Cost of sales | (6,282 | ) | (6,465 | ) | (6,331 | ) | (5,845 | ) | (5,532 | ) | ||||||||||
Gross profit | 3,560 | 3,536 | 3,523 | 3,037 | 3,228 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative | (1,187 | ) | (1,099 | ) | (1,067 | ) | (1,026 | ) | (947 | ) | ||||||||||
Research and development(1) | (2,152 | ) | (1,802 | ) | (1,667 | ) | (1,630 | ) | (1,532 | ) | ||||||||||
Other income and expenses, net(2) | 62 | 48 | (35 | ) | (9 | ) | 10 | |||||||||||||
Impairment, restructuring charges and other related closure costs | (481 | ) | (1,228 | ) | (77 | ) | (128 | ) | (76 | ) | ||||||||||
Total operating expenses | (3,758 | ) | (4,081 | ) | (2,846 | ) | (2,793 | ) | (2,545 | ) | ||||||||||
Operating income (loss) | (198 | ) | (545 | ) | 677 | 244 | 683 | |||||||||||||
Other-than-temporary impairment charge on financial assets | (138 | ) | (46 | ) | — | — | — | |||||||||||||
Interest income (expense), net | 51 | 83 | 93 | 34 | (3 | ) | ||||||||||||||
Earnings (loss) on equity investments | (553 | ) | 14 | (6 | ) | (3 | ) | (4 | ) | |||||||||||
Unrealized gain on financial assets | 15 | — | — | — | — | |||||||||||||||
Loss on extinguishment of convertible debt | — | — | — | — | (4 | ) | ||||||||||||||
Income (loss) before income taxes and minority interests | (823 | ) | (494 | ) | 764 | 275 | 672 | |||||||||||||
Income tax benefit (expense) | 43 | 23 | 20 | (8 | ) | (68 | ) | |||||||||||||
Income (loss) before minority interests | (780 | ) | (471 | ) | 784 | 267 | 604 | |||||||||||||
Minority interests | (6 | ) | (6 | ) | (2 | ) | (1 | ) | (3 | ) | ||||||||||
Net income (loss) | (786 | ) | $ | (477 | ) | $ | 782 | $ | 266 | $ | 601 | |||||||||
4
Table of Contents
Year Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions except per share and ratio data) | ||||||||||||||||||||
Earnings (loss) per share (basic) | $ | (0.88 | ) | $ | (0.53 | ) | $ | 0.87 | $ | 0.30 | $ | 0.67 | ||||||||
Earnings (loss) per share (diluted) | $ | (0.88 | ) | $ | (0.53 | ) | $ | 0.83 | $ | 0.29 | $ | 0.65 | ||||||||
Number of shares used in calculating earnings per share (basic) | 892.0 | 898.7 | 896.1 | 892.8 | 891.2 | |||||||||||||||
Number of shares used in calculating earnings per share (diluted) | 892.0 | 898.7 | 958.5 | 935.6 | 935.1 | |||||||||||||||
Consolidated Balance Sheet Data (end of period): | ||||||||||||||||||||
Cash and cash equivalents(3) | $ | 1,009 | $ | 1,855 | $ | 1,659 | $ | 2,027 | $ | 1,950 | ||||||||||
Marketable securities | 651 | 1,014 | 764 | — | — | |||||||||||||||
Short-term deposits | — | — | 250 | — | — | |||||||||||||||
Restricted cash | 250 | 250 | 218 | — | — | |||||||||||||||
Non-current marketable securities | 242 | 369 | — | — | — | |||||||||||||||
Total assets | 13,913 | 14,272 | 14,198 | 12,439 | 13,800 | |||||||||||||||
Short-term debt (including current portion of long-term debt) | 143 | 103 | 136 | 1,533 | 191 | |||||||||||||||
Long-term debt (excluding current portion)(2) | 2,554 | 2,117 | 1,994 | 269 | 1,767 | |||||||||||||||
Shareholders’ equity(4) | 8,156 | 9,573 | 9,747 | 8,480 | 9,110 | |||||||||||||||
Common stock and capital surplus | 3,480 | 3,253 | 3,177 | 3,120 | 3,074 | |||||||||||||||
Other Data: | ||||||||||||||||||||
Dividends per share(5) | $ | 0.36 | $ | 0.30 | $ | 0.12 | $ | 0.12 | $ | 0.12 | ||||||||||
Capital expenditures(6) | 983 | 1,140 | 1,533 | 1,441 | 2,050 | |||||||||||||||
Net cash provided by operating activities | 1,722 | 2,188 | 2,491 | 1,798 | 2,342 | |||||||||||||||
Depreciation and amortization(6) | 1,366 | 1,413 | 1,766 | 1,944 | 1,837 | |||||||||||||||
Debt-to-equity ratio(7) | 0.33 | 0.23 | 0.22 | 0.21 | 0.21 | |||||||||||||||
Net financial position: resources (debt)(7) | $ | (545 | ) | $ | 1,268 | $ | 761 | $ | 225 | $ | (8 | ) | ||||||||
Net financial position to total shareholders’ equity ratio(7) | (0.07 | ) | 0.132 | 0.078 | 0.026 | (0.001 | ) |
(1) | Our reported research and development expenses are mainly in the areas of product design, technology and development, and do not include marketing design center costs, which are accounted for as selling expenses, or process engineering, pre-production and process-transfer costs, which are accounted for as cost of sales. As of 2008, our R&D expenses are net of certain tax credits. | |
(2) | “Other income and expenses, net” includes, among other things: funds received through government agencies for research and development expenses; the costs incurred for newstart-up and phase-out activities not involving saleable production; foreign currency gains and losses; gains on sales of tangible assets and non-current assets; and the costs of certain activities relating to intellectual property. | |
(3) | On November 16, 2000, we issued $2,146 million initial aggregate principal amount of Zero Coupon Senior Convertible Bonds due 2010 (the “2010 Bonds”), for net proceeds of $1,458 million; in 2003, we repurchased on the market approximately $1,674 million aggregate principal amount at maturity of 2010 Bonds. During 2004, we completed the repurchase of our 2010 Bonds and repurchased on the market approximately $472 million aggregate principal amount at maturity for a total amount paid of $375 million. In August 2003, we issued $1,332 million principal amount at issuance of our convertible bonds due 2013 (our “2013 Convertible Bonds”) with a negative yield of 0.5% that resulted in a higher principal amount of $1,400 million and net proceeds of $1,386 million. During 2004, we repurchased all of our outstanding Liquid Yield Option Notes due 2009 (our “2009 LYONs”) for a total amount of cash paid of $813 million. In February 2006, we issued Zero Coupon Senior Convertible Bonds due 2016 (our “2016 Convertible Bonds”) representing total gross proceeds of $974 million. In March 2006, we issued €500 million Floating Rate Senior Bonds due 2013 (our “2013 Senior Bonds”). In August 2006, as a result of almost all of the holders of our 2013 Convertible |
5
Table of Contents
Bonds exercising their August 4, 2006 put option, we repurchased $1,397 million aggregate principal amount of the outstanding convertible bonds at a conversion ratio of $985.09 per $1,000 aggregate principal amount at issuance resulting in a cash disbursement of $1,377 million. | ||
(4) | In 2001, we repurchased 9,400,000 common shares for $233 million, and in 2002, we repurchased an additional 4,000,000 shares for $115 million. In 2008, we repurchased 29,520,220 of our shares, for a total cost of $313 million. We reflected this purchase at cost as a reduction of shareholders’ equity. The repurchased shares have been designated for allocation under our share-based compensation programs as nonvested shares, including the plans as approved by the 2005, 2006, 2007 and 2008 annual general shareholders’ meetings, and those which may be attributed in the future. As of December 31, 2008, 6,889,748 shares were transferred to employees upon vesting of such stock awards. | |
(5) | Dividend per share represents the yearly dividend as approved by our annual general meeting of shareholders, which relates to the prior year’s accounts. | |
(6) | Capital expenditures are net of certain funds received through government agencies, the effect of which is to reduce our cash used in investing activities and to decrease depreciation. | |
(7) | Net financial position: resources (debt) is representing the balance between our total financial resources and our total financial debt. Our total financial resources include cash and cash equivalents, current and non-current marketable securities, short-term deposits and restricted cash, and our total financial debt include bank overdrafts, current portion of long-term debt and long-term debt, as represented in our consolidated balance sheet. Our net financial position to total shareholders’ equity ratio is anon-U.S. GAAP financial measure. The most directly comparable U.S. GAAP financial measure is considered to be “Debt-to-Equity Ratio.” However, the Debt-to-Equity Ratio measures gross debt relative to equity, and does not reflect our current cash position. We believe that our net financial position to total shareholders’ equity ratio is useful to investors as a measure of our financial position and leverage. The ratio is computed on the basis of our net financial position divided by total shareholders’ equity. For more information on our net financial position, see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Resources — Net financial position.” Our computation of net debt (cash) to total shareholders’ equity ratio may not be consistent with that of other companies, which could make comparability difficult. |
• | significant declines in sales; | |
• | significant reductions in selling prices; | |
• | the resulting significant impact on our gross margins and profitability; | |
• | increased volatilityand/or declines in our share price; | |
• | increased volatility or adverse movements in foreign currency exchange rates; | |
• | delays in, or curtailment of, purchasing decisions by our customers or potential customers either as a result of overall economic uncertainty or as a result of their inability to access the liquidity necessary to engage in purchasing initiatives or new product development; | |
• | underloading of wafer fabrication plants (“fabs”); |
6
Table of Contents
• | decreased valuations of our equity investments; | |
• | increased credit risk associated with our customers or potential customers, particularly those that may operate in industries most affected by the economic downturn, such as automotive; and | |
• | impairment of goodwill or other assets. |
• | negative economic developments in foreign economies and instability of foreign governments, including the threat of war, terrorist attacks or civil unrest; | |
• | epidemics such as disease outbreaks, pandemics and other health related issues; | |
• | changes in laws and policies affecting trade and investment, including through the imposition of new constraints on investment and trade; and | |
• | varying practices of the regulatory, tax, judicial and administrative bodies. |
7
Table of Contents
• | price; | |
• | technical performance; | |
• | product features; | |
• | product system compatibility; | |
• | product design and technology; | |
• | timely introduction of new products; | |
• | product availability; | |
• | manufacturing yields; and | |
• | sales and technical support. |
8
Table of Contents
9
Table of Contents
10
Table of Contents
• | diversion of management’s attention; | |
• | insufficient intellectual property rights or potential inaccuracies in the ownership of key IP; | |
• | assumption of potential liabilities, disclosed or undisclosed, associated with the business acquired, which liabilities may exceed the amount of indemnification available from the seller; | |
• | potential inaccuracies in the financials of the business acquired; | |
• | that the businesses acquired will not maintain the quality of products and services that we have historically provided; | |
• | whether we are able to attract and retain qualified management for the acquired business; and | |
• | whether we are able to retain customers of the acquired entity. |
• | diversion of management’s attention; | |
• | loss of activities and technologies that may have complemented our remaining businesses or operations; | |
• | loss of important services provided by key employees that are assigned to divested activities; and | |
• | social issues or restructuring costs linked to divestitures and closures. |
11
Table of Contents
12
Table of Contents
13
Table of Contents
• | performance of our key customers in the markets they serve; | |
• | order cancellations or reschedulings by customers; | |
• | excess inventory held by customers leading to reduced bookings or product returns by key customers; | |
• | manufacturing capacity and utilization rates; | |
• | restructuring and impairment charges; | |
• | losses on equity investments; | |
• | fluctuations in currency exchange rates, particularly between the U.S. dollar and other currencies in jurisdictions where we have activities; | |
• | intellectual property developments; | |
• | changes in distribution and sales arrangements; | |
• | failure to win new design projects; | |
• | manufacturing performance and yields; | |
• | product liability or warranty claims; | |
• | litigation; | |
• | acquisitions or divestitures; | |
• | problems in obtaining adequate raw materials or production equipment on a timely basis; | |
• | property loss or damage or interruptions to our business, including as a result of fire, natural disasters or other disturbances at our facilities or those of our customers and suppliers that may exceed the amounts recoverable under our insurance policies; and | |
• | changes in the market value or yield of the financial instruments in which we invest our liquidity. |
14
Table of Contents
• | spending levels of telecommunications equipment, industrialand/or automotive applications; | |
• | reduced demand resulting from a drop in consumer confidenceand/or a deterioration of general economic conditions; | |
• | development of new consumer products or applications requiring high semiconductor content; | |
• | evolving industry standards; and | |
• | the rate of adoption of new or alternative technologies. |
15
Table of Contents
16
Table of Contents
17
Table of Contents
• | European Directive 2002/96/EC (“WEEE” Directive), which imposes a “take back” obligation on manufacturers for the financing of the collection, recovery and disposal of electrical and electronic equipment. |
18
Table of Contents
Because of unclear statutory definitions and interpretations in individual member states, we are unable at this time to determine in detail the consequences of this directive for us. |
• | European Directive 2002/95/EC (“ROHS” Directive), which banned the use of lead and some flame retardants in electronic components as of July 2006. | |
• | European Directive 2003/87/EC, which established a scheme for greenhouse gas allowance trading. | |
• | Regulation 1907/2006 of December 18, 2006, which requires the registration, evaluation, authorization and restriction of a large number of chemicals (“REACH”). The REACH pre-registration process started on June 1, 2008. |
19
Table of Contents
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
Table of Contents
Item 4. | Information on the Company |
24
Table of Contents
• | Application Specific Groups (“ASG”), comprised of four product lines: Home Entertainment & Displays Group (“HED”), Mobile, Multi-media & Communications Group (“MMC”), Automotive Products Group (“APG”) and Computer Peripherals Group (“CPG”); | |
• | Industrial and Multi-segment Sector (“IMS”), comprised of Analog, Power, and Micro-Electro-Mechanical Systems (“APM”) segment, and Microcontrollers, non-Flash, non-volatile Memory and Smartcard products (“MMS”); and | |
• | Flash Memories Group (“FMG”). As of March 31, 2008, following the creation with Intel and Francisco Partners of Numonyx, a new independent semiconductor company from the key assets of our and Intel’s Flash memory business (“FMG deconsolidation”), we ceased reporting under the FMG segment. |
• | Automotive, Consumer, Computer and Communication Infrastructure Product Groups (“ACCI”), comprised of three product lines: |
• | Home Entertainment & Displays (“HED”), which now includes the Imaging division; | |
• | Automotive Products Group (“APG”); and | |
• | Computer and Communication Infrastructure (“CCI”), which now includes the Communication Infrastructure division. |
• | Industrial and Multi-segment Products Sector (“IMS”), comprised of: |
• | Analog, Power and Micro-Electro-Mechanical Systems (“APM”); and | |
• | Microcontrollers, non-Flash, non-volatile Memory and Smartcard products (“MMS”). |
• | Wireless Products Sector (“WPS”), comprised of three product lines: |
• | Wireless Multi Media (“WMM”); | |
• | Connectivity & Peripherals (“C&P”); and | |
• | Cellular Systems (“CS”). |
25
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net revenues by product segments: | ||||||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”) | $ | 4,129 | $ | 3,944 | $ | 4,122 | ||||||
Industrial and Multi-segment Products Sector (“IMS”) | 3,329 | 3,138 | 2,842 | |||||||||
Wireless Products Sector (“WPS”)(1) | 2,030 | 1,495 | 1,273 | |||||||||
Others(2) | 55 | 60 | 47 | |||||||||
Net revenues excluding Flash Memories Group (“FMG”) | 9,543 | 8,637 | 8,284 | |||||||||
Flash Memories Group (“FMG”)(3) | 299 | 1,364 | 1,570 | |||||||||
Total consolidated net revenues | $ | 9,842 | $ | 10,001 | $ | 9,854 | ||||||
(1) | WPS revenues in 2008 included a $491 million contribution from the NXP wireless business. | |
(2) | Includes revenues from the sale of subsystems and other products not allocated to product segments. | |
(3) | FMG revenues are related to the first quarter of 2008 only. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net revenues by product lines: | ||||||||||||
Home Entertainment & Displays (“HED”) | $ | 1,585 | $ | 1,402 | $ | 1,602 | ||||||
Automotive Products Group (“APG”) | 1,460 | 1,419 | 1,356 | |||||||||
Computer and Communication Infrastructure (“CCI”) | 1,077 | 1,123 | 1,164 | |||||||||
Others | 7 | — | — | |||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”) | 4,129 | 3,944 | 4,122 | |||||||||
Analog Power and Micro-Electro-Mechanical Systems (“APM”) | 2,393 | 2,313 | 2,085 | |||||||||
Microcontrollers, non-Flash, non-volatile Memory and Smartcard products (“MMS”) | 936 | 825 | 757 | |||||||||
Industrial and Multi-segment Products Sector (“IMS”) | 3,329 | 3,138 | 2,842 | |||||||||
Wireless Multi Media (“WMM”) | 1,293 | 1,288 | 1,210 | |||||||||
Connectivity & Peripherals (“C&P”)(1) | 416 | 207 | 63 | |||||||||
Cellular Systems (“CS”)(1) | 321 | — | — | |||||||||
Wireless Products Sector (“WPS”) | 2,030 | 1,495 | 1,273 | |||||||||
Others | 55 | 60 | 47 | |||||||||
Flash Memories Group (“FMG”) | 299 | 1,364 | 1,570 | |||||||||
Total consolidated net revenues | $ | 9,842 | $ | 10,001 | $ | 9,854 | ||||||
(1) | WPS revenues in 2008 included a $491 million contribution from the NXP wireless business. |
26
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net Revenues by Location of Order Shipment:(1) | ||||||||||||
Europe | $ | 2,804 | $ | 3,159 | $ | 3,073 | ||||||
North America | 1,160 | 1,176 | 1,232 | |||||||||
Asia Pacific | 2,201 | 1,874 | 2,084 | |||||||||
Greater China | 2,492 | 2,750 | 2,552 | |||||||||
Japan | 512 | 475 | 400 | |||||||||
Emerging Markets(2) | 673 | 567 | 513 | |||||||||
Total | $ | 9,842 | $ | 10,001 | $ | 9,854 |
(1) | Net revenues by location of order shipment are classified by the location of the customer invoiced. For example, products ordered byU.S.-based companies to be invoiced to Asia Pacific affiliates are classified as Asia Pacific revenues. In addition, the comparison among the different periods may be affected by shifts in order shipment from one location to another, as requested by our customers. | |
(2) | Emerging Markets included markets such as India, Latin America, the Middle East and Africa, Europe (non-EU and non-EFTA (European Free Trade Association)) and Russia. As of January 1, 2009, Emerging Markets has been reallocated to the Europe, North America and Asia Pacific organizations. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(As percentage of net revenues) | ||||||||||||
Net Revenues by Location of Order Shipment:(1) | ||||||||||||
Europe | 28.5 | % | 31.6 | % | 31.2 | % | ||||||
North America | 11.8 | 11.8 | 12.5 | |||||||||
Asia Pacific | 22.4 | 18.7 | 21.1 | |||||||||
Greater China | 25.3 | 27.5 | 25.9 | |||||||||
Japan | 5.2 | 4.7 | 4.1 | |||||||||
Emerging Markets(2) | 6.8 | 5.7 | 5.2 | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
(1) | Net revenues by location of order shipment are classified by location of customer invoiced. For example, products ordered byU.S.-based companies to be invoiced to Asia Pacific affiliates are classified as Asia Pacific revenues. Furthermore, the comparison among the different periods may be affected by shifts in order shipment from one location to another, as requested by our customers. | |
(2) | Emerging Markets included markets such as India, Latin America, the Middle East and Africa, Europe (non-EU and non-EFTA) and Russia. As of January 1, 2009, Emerging Markets has been reallocated to the Europe, North America and Asia Pacific organizations. |
27
Table of Contents
• | the changing long-term structural growth of the overall market for semiconductor products, which has moved from double-digit average growth rate to single-digit average growth rate over the last several years; | |
• | the strong development of new emerging applications in areas such as wireless communications, solid-state storage, digital TV, video products and games as well as for medical and technology applications; | |
• | the importance of the Asia Pacific region, particularly China and other emerging countries, which represent the fastest growing regional markets; | |
• | the importance of convergence between wireless, consumer and computer applications, which drives customer demand to seek new system-level, turnkey solutions from semiconductor suppliers; | |
• | the evolution of the customer base from original equipment manufacturers (“OEM”) to a mix of OEM, electronic manufacturing service providers (“EMS”) and original design manufacturers (“ODM”); | |
• | the expansion of available manufacturing capacity through third-party providers; and | |
• | the recent consolidation process, accelerated by current economic conditions, which may lead to further strategic repositioning and reorganization amongst industry players. |
28
Table of Contents
29
Table of Contents
• | Automotive Consumer, Computer and Communication Infrastructure (“ACCI”); | |
• | Industrial and Multisegment Sector (“IMS”); and | |
• | Wireless Product Sector (“WPS”). |
30
Table of Contents
31
Table of Contents
32
Table of Contents
33
Table of Contents
34
Table of Contents
35
Table of Contents
36
Table of Contents
37
Table of Contents
38
Table of Contents
Telecommunications | ||||||||
Customers: | Alcatel-Lucent Cisco Ericsson Finisar | Huawei LG Electronics Logitech Motorola | Nokia Nortel Networks Research in Motion Samsung | Sharp Siemens SIRF Sony Ericsson | ||||
Applications: | Camera modules/mobile imaging Cellular telephones Central office switching systems Data transport Infrastructure (wireless/wireline) | Internet access (XDSL) Portable multi-media Telephone terminals (wireline/wireless) Wireless connectivity | ||||||
Computer Peripherals | ||||||||
Customers: | Agilent Apple Canon Dell | Delta Hewlett-Packard Hitachi Intel | Kingston Lexmark Microsoft Samsung | Seagate Taiwan-Liteon Western Digital Xilinx | ||||
Applications: | Data storage Monitors and displays Microfluidics/print-head cartridges | Power management Printers Webcams | ||||||
Automotive | ||||||||
Customers: | Bosch Continental Delphi Denso | Harman Hella Hitachi Kostal | Lear Marelli Panasonic Pioneer | TRW Valeo Visteon Sirius Satellite Radio | ||||
Applications: | Airbags Anti-lock braking systems Body and chassis electronics Engine management systems (ignition and injection) | GPS multimedia Radio/satellite radio Telematics Vehicle stability control |
39
Table of Contents
Consumer | ||||||||
Customers: | ADB AOC Bose Corporation Echostar | Garmin General Satellite LG Electronics Nintendo | Philips Sagem Connunications Samsung Scientific Atlanta | Skyworth Sony Thomson UEC | ||||
Applications: | Audio processing (CD, DVD, Hi-Fi) Digital/analog TVs Digital cameras Digital music players Displays | DVDs Imaging Set-top boxes VCRs | ||||||
Industrial/Other Applications | ||||||||
Customers: | American Power Conversion Autostrade Delta Emerson | FNMT Gemalto General Electric Interpay | Giesecke & Devrient Nagra NDS Nintendo | Philips Siemens Taiwan-Liteon Vodafone | ||||
Applications: | Battery chargers Smartcard ICs Intelligent power switches Industrial automation/control systems Lighting systems | MEMS Motor controllers Power supplies Switch mode power supplies |
40
Table of Contents
41
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions, except percentages) | ||||||||||||
Expenditures | $ | 2,152 | $ | 1,802 | $ | 1,667 | ||||||
As a percentage of net revenues | 21.9 | % | 18.0 | % | 16.9 | % |
42
Table of Contents
• | Repatriate to Crolles the core CMOS technologies jointly developed at IBM in East Fishkill (USA). | |
• | Accelerate the development and the number of differentiated technologies for SoC so as to be able to supply amongst the worlds leading prototypes ICs, thereby develop a strategy of advanced differentiated products to compete with Asia foundries. | |
• | Develop libraries and perform transversal R&D on the methods and tools necessary to develop complex ICs using these technologies. | |
• | Perform advanced technology research linked to the conception of CMOS nano electric functionalities advance devices on 300mm wafers. | |
• | Pervade local, national and European territories, taking advantage of nano-electronic diffusion technologies to further promote innovation in various application sectors. |
43
Table of Contents
• | HW/SW platform based designs | |
• | On Chip Infrastructure | |
• | Standard Interface Subsystems | |
• | Functional Verification | |
• | Design prototyping |
44
Table of Contents
45
Table of Contents
Location | Products | Technologies | ||
Front-end facilities | ||||
Crolles1, France | Application-specific products, image sensors | Fab: 200-mm CMOS and BiCMOS, Analog/RF, imaging | ||
Crolles2, France(1) | Application-specific products and leading edge logic products | Fab: 300-mm research and development on deep sub-micron(90-nm and below) CMOS and differentiated SoC technology development, TSV pilot line | ||
Phoenix, Arizona (entering the final stages of closure) | Application-specific products and microcontrollers | Fab: 200-mm CMOS, BiCMOS, BCD, microcontrollers | ||
Agrate, Italy | Nonvolatile memories, microcontrollers and application- specific products MEMS Smart power | Fab 1: 200-mm BCD, nonvolatile memories, MEMS Fab 2: 200-mm, embedded Flash, research and development on nonvolatile memories and BCD technologies and Flash (which services Numonyx) | ||
Rousset, France | Microcontrollers, nonvolatile memories and Smartcard ICs, application-specific products and image sensors | Fab 1: 200-mm CMOS, Smartcard, embedded Flash, imaging | ||
Catania, Italy | Power transistors, Smart Power ICs and nonvolatile memories | Fab 1: 150-mm Power metal-on silicon oxide semiconductor process technology | ||
(“MOS”),VIPowertm, MO-3 and Pilot Line RF Fab 2: 200-mm, Smartcard, EEPROM BCD, power MOS and Flash (which services Numonyx) | ||||
Tours, France | Protection thyristors, diodes and ASD power transistors, IPAD | Fab: 125-mm, 150-mm and 200-mm pilot line discrete | ||
Ang Mo Kio, Singapore | Analog, microcontrollers, power transistors, commodity products, nonvolatile memories, and application-specific products | Fab 1: 125-mm, power MOS, bipolar, power Fab 2: 150-mm bipolar, power MOS and BCD, EEPROM, Smartcard, Micros, CMOS logic | ||
Fab 3: 150 mm Microfluidic, MEMS, BCD, BiCMOS, CMOS | ||||
Back-end facilities | ||||
Muar, Malaysia | Application-specific and standard products, microcontrollers, Flash | A portion of the plant (building K) has been contributed to Numonyx | ||
Kirkop, Malta | Application-specific products | |||
Toa Payoh, Singapore | Power ICs and optical packages, under reconversion into an EWS center | |||
Bouskoura, Morocco | Nonvolatile memories, discrete and standard products, micromodules, RF and subsystems | |||
Shenzhen, China(2) | Nonvolatile memories, discrete and standard products | |||
Longgang, China (under qualification) | Discrete and standard products | |||
Calamba, Philippines(3) | Application Specific Products |
(1) | Operated jointly with NXP Semiconductors and Freescale Semiconductor. The agreement terminated at the end of 2007. |
46
Table of Contents
(2) | Jointly operated with SHIC, a subsidiary of Shenzhen Electronics Group. | |
(3) | Operated by ST but contributed to the ST-Ericsson joint venture. |
47
Table of Contents
48
Table of Contents
49
Table of Contents
Percentage Ownership | ||||||
Legal Seat | Name | (Direct or Indirect) | ||||
Australia — Sydney | STMicroelectronics PTY Ltd | 100 | ||||
Belgium — Leuven | NF Belgium NV* | 80 | ||||
Belgium — Zaventem | STMicroelectronics Belgium N.V.* | 80 | ||||
Belgium — Zaventem | Proton World International N.V. | 100 | ||||
Brazil — Sao Paolo | STMicroelectronics Ltda | 100 | ||||
Brazil — Sao Paulo | Incard do Brazil Ltda | 50 | ||||
Canada — Ottawa | STMicroelectronics (Canada), Inc. | 100 | ||||
Canada — Thorn hill | Genesis Microchip (Canada) Co. | 100 | ||||
China — Shenzhen | Shenzhen STS Microelectronics Co. Ltd | 60 | ||||
China — Shenzhen | STMicroelectronics (Shenzhen) Co. Ltd | 100 | ||||
China — Shenzhen | STMicroelectronics (Shenzhen) Manufacturing Co. Ltd | 100 | ||||
China — Shenzhen | STMicroelectronics (Shenzhen) R&D Co. Ltd | 100 | ||||
China — Shanghai | STMicroelectronics (Shanghai) Co. Ltd | 100 | ||||
China — Shanghai | STMicroelectronics (Shanghai) R&D Co. Ltd | 100 | ||||
China — Shanghai | Shanghai Blue Media Co. Ltd | 65 | ||||
China — Shanghai | STMicroelectronics (China) Investment Co. Ltd | 100 | ||||
China — Shanghai | Shanghai NF Wireless Trading Co. Ltd* | 80 | ||||
China — Shanghai | Shanghai NF Wireless Technology Co. Ltd* | 80 | ||||
China — Beijing | STMicroelectronics (Beijing) R&D Co. Ltd | 100 | ||||
China — Beijing | Beijing T3G Technology Co. Ltd* | 80 | ||||
Czech Republic — Prague | STMicroelectronics Design and Application s.r.o. | 100 | ||||
Czech Republic — Prague | STN Wireless Sro* | 80 | ||||
Finland — Lohja | STMicroelectronics OY* | 80 | ||||
Finland — Helsinki | STMicroelectronics R&D OY* | 80 | ||||
France — Crolles | STMicroelectronics (Crolles 2) SAS | 100 | ||||
France — Montrouge | STMicroelectronics S.A. | 100 | ||||
France — Paris | ST-NXP Wireless France SAS* | 80 | ||||
France — Rousset | STMicroelectronics (Rousset) SAS | 100 | ||||
France — Tours | STMicroelectronics (Tours) SAS | 100 | ||||
France — Grenoble | STMicroelectronics (Grenoble 2) SAS | 100 | ||||
France — Grenoble | STMicroelectronics Wireless SAS* | 80 |
50
Table of Contents
Percentage Ownership | ||||||
Legal Seat | Name | (Direct or Indirect) | ||||
Germany — Grasbrunn | STMicroelectronics GmbH | 100 | ||||
Germany — Grasbrunn | STMicroelectronics Design and Application GmbH | 100 | ||||
Germany — Grasbrunn | NXP Falcon Germany GmbH* | 80 | ||||
Holland — Amsterdam | STMicroelectronics Finance B.V. | 100 | ||||
Holland — Luchtaven | ST Wireless (holding) NV* | 80 | ||||
Holland — Eindhoven | NXP Wireless Holding 1 BV* | 80 | ||||
Holland — Eindhoven | NXP Wireless Holding 2 BV* | 80 | ||||
Hong Kong — Hong Kong | STMicroelectronics LTD | 100 | ||||
India — Noida | STMicroelectronics Pvt Ltd | 100 | ||||
India — Noida | STMicroelectronics (Wireless) Private Limited* | 80 | ||||
India — New Delhi | STMicroelectronics Marketing Pvt Ltd | 100 | ||||
India — Bangalore | Genesis Microchip (India) Pvt Ltd | 100 | ||||
India — Bangalore | NF Wireless India Pvt Ltd* | 80 | ||||
Ireland — Dublin | NXP Falcon Ireland Ltd* | 80 | ||||
Israel — Netanya | STMicroelectronics Ltd | 100 | ||||
Italy — Catania | CO.RI.M.ME. | 100 | ||||
Italy — Aosta | DORA S.p.a. | 100 | ||||
Italy — Agrate Brianza | ST Incard S.r.l. | 100 | ||||
Italy — Naples | STMicroelectronics Services S.r.l. | 100 | ||||
Italy — Agrate Brianza | STMicroelectronics S.r.l. | 100 | ||||
Italy — Agrate Brianza | ST Wireless Italy Srl* | 80 | ||||
Japan — Tokyo | STMicroelectronics KK | 100 | ||||
Japan — Tokyo | NF Wireless Japan KK* | 80 | ||||
Japan — Tokyo | Genesis Japan KK | 100 | ||||
Korea — Seoul | ST-NXP Wireless Korea Ltd* | 80 | ||||
Malaysia — Kuala Lumpur | STMicroelectronics Marketing SDN BHD | 100 | ||||
Malaysia — Muar | STMicroelectronics SDN BHD | 100 | ||||
Malaysia — Muar | STMicroelectronics (Wireless) SDN.BHD* | 80 | ||||
Malta — Kirkop | STMicroelectronics Ltd | 100 | ||||
Mexico — Guadalajara | STMicroelectronics Marketing, S. de R.L. de C.V. | 100 | ||||
Mexico — Guadalajara | STMicroelectronics Design and Applications, S. de R.L. de C.V. | 100 | ||||
Morocco — Rabat | Electronic Holding S.A. | 100 | ||||
Morocco — Casablanca | STMicroelectronics S.A. | 100 | ||||
Morocco — Rabat | STMicroelectronics Wireless Maroc SAS* | 80 | ||||
Philippines — Calamba | NF Philippines, Inc.* | 80 | ||||
Singapore — Ang Mo Kio | STMicroelectronics ASIA PACIFIC Pte Ltd | 100 | ||||
Singapore — Ang Mo Kio | STMicroelectronics Pte Ltd | 100 | ||||
Singapore — Ang Mo Kio | ST Wireless Asia Pac Pte Ltd* | 80 | ||||
Singapore — Singapore | NF Singapore Pte Ltd* | 80 | ||||
Spain — Madrid | STMicroelectronics S.A. | 100 | ||||
Sweden — Kista | STMicroelectronics A.B. | 100 | ||||
Sweden — Stockholm | ST Wireless AB* | 80 | ||||
Switzerland — Geneva | STMicroelectronics S.A. | 100 | ||||
Switzerland — Geneva | INCARD SA | 100 | ||||
Switzerland — Geneva | INCARD Sales and Marketing SA | 100 | ||||
Switzerland — Geneva | ST Wireless SA* | 80 | ||||
Switzerland — Zurich | ST-NXP Wireless (Holding) AG* | 80 | ||||
Taiwan — Taipei | NF Taiwan Ltd* | 80 | ||||
Turkey — Istanbul | STMicroelectronics Elektronik Arastirma ve Gelistirme Anonim Sirketi* | 80 | ||||
United Kingdom — Marlow | STMicroelectronics Limited | 100 | ||||
United Kingdom — Marlow | STMicroelectronics (Research & Development) Limited | 100 | ||||
United Kingdom — Bristol | Inmos Limited | 100 | ||||
United Kingdom — Bristol | STMicroelectronics Wireless Ltd* | 80 | ||||
United Kingdom — Reading | Synad Technologies Limited | 100 |
51
Table of Contents
Percentage Ownership | ||||||
Legal Seat | Name | (Direct or Indirect) | ||||
United Kingdom — Southampton | NF UK, Ltd* | 80 | ||||
United States — Carrollton | STMicroelectronics Inc. | 100 | ||||
United States — Carrollton | ST-NXP Wireless Inc.* | 80 | ||||
United States — Carrollton | Genesis Microchip Inc, A Delaware Corporation | 100 | ||||
United States — Carrollton | Genesis Microchip (Del) Inc. | 100 | ||||
United States — Carrollton | Genesis Microchip LLC | 100 | ||||
United States — Carrollton | Genesis Microchip Limited Partnership | 100 | ||||
United States — Carrollton | Sage Inc. | 100 | ||||
United States — Carrollton | Faroudja Inc. | 100 | ||||
United States — Carrollton | Faroudja Laboratories Inc. | 100 | ||||
United States — Wilmington | STMicroelectronics (North America) Holding, Inc. | 100 | ||||
United States — Wilsonville | The Portland Group, Inc. | 100 | ||||
EQUITY INVESTMENTS | ||||||
Italy — Caivano | INGAM Srl | 20 | ||||
The Netherlands — Rotterdam | Numonyx Holding BV | 48.6 | ||||
South Korea — Yongin-si | ATLab Inc. | 8.1 | ||||
Singapore — The Curie | Veredus Laboratories Pte Ltd | 41.2 |
* | These entities are related to the joint venture with NXP, and as of February 1, 2009, they have been transferred to ST-Ericsson, in which we own 50%. |
52
Table of Contents
53
Table of Contents
54
Table of Contents
55
Table of Contents
56
Table of Contents
Worldwide Semiconductor Sales(1) | Compound Annual Growth Rates(2) | |||||||||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 1998 | 1988 | 04-08 | 07-08 | 06-07 | 88-08 | 98-08 | 88-98 | ||||||||||||||||||||||||||||||||||
In billions | Expressed as percentages | |||||||||||||||||||||||||||||||||||||||||||
Integrated Circuits and Sensors | $ | 213.8 | $ | 222.9 | $ | 214.8 | $ | 109.1 | $ | 35.9 | 3.9 | % | (4.1 | )% | 3.8 | % | 9.3 | % | 7.0 | % | 11.8 | % | ||||||||||||||||||||||
Analog, Sensors and Actuators | 40.7 | 41.6 | 42.3 | 19.1 | 7.2 | 3.0 | (2.2 | ) | (1.7 | ) | 9.0 | 7.9 | 10.2 | |||||||||||||||||||||||||||||||
Digital Logic | 126.7 | 123.5 | 114.1 | 67.0 | 17.8 | 6.0 | 2.6 | 8.2 | 10.3 | 6.6 | 14.2 | |||||||||||||||||||||||||||||||||
Memory: | ||||||||||||||||||||||||||||||||||||||||||||
DRAM | 24.0 | 31.3 | 33.8 | 14.0 | 6.3 | (2.7 | ) | (23.0 | ) | (7.4 | ) | 6.9 | 5.5 | 8.3 | ||||||||||||||||||||||||||||||
Others | 22.3 | 26.6 | 24.7 | 9.0 | 4.6 | 10.6 | (16.0 | ) | 7.7 | 8.2 | 9.5 | 6.9 | ||||||||||||||||||||||||||||||||
Total Memory | 46.3 | 57.9 | 58.5 | 23.0 | 10.9 | 2.7 | (20.0 | ) | (1.1 | ) | 7.5 | 7.2 | 7.7 | |||||||||||||||||||||||||||||||
Total Digital | 173.0 | 181.4 | 172.6 | 90.0 | 28.7 | 4.1 | (4.6 | ) | 5.1 | 9.4 | 6.8 | 12.1 | ||||||||||||||||||||||||||||||||
Discrete | 16.9 | 16.8 | 16.6 | 11.9 | 7.0 | 1.7 | 0.7 | 1.3 | 4.5 | 3.6 | 5.5 | |||||||||||||||||||||||||||||||||
Optoelectronics | 17.9 | 15.9 | 16.3 | 4.6 | 2.1 | 6.9 | 12.6 | (2.3 | ) | 11.3 | 14.6 | 8.1 | ||||||||||||||||||||||||||||||||
TAM | $ | 248.6 | $ | 255.6 | $ | 247.7 | $ | 125.6 | $ | 45.0 | 3.9 | % | (2.8 | )% | 3.2 | % | 9.3 | %(3) | 7.0 | %(3) | 10.8 | %(3) | ||||||||||||||||||||||
Europe | 38.2 | 41.0 | 39.9 | 29.4 | 8.1 | (0.8 | ) | (6.6 | ) | 2.7 | 8.1 | 2.7 | 13.8 | |||||||||||||||||||||||||||||||
Americas | 37.9 | 42.3 | 44.9 | 41.4 | 13.4 | (0.8 | ) | (10.5 | ) | (5.7 | ) | 5.3 | (0.9 | ) | 11.9 | |||||||||||||||||||||||||||||
Asia Pacific | 124.0 | 123.5 | 116.5 | 28.9 | 5.4 | 8.7 | 0.4 | 6.0 | 17.0 | 15.7 | 18.3 | |||||||||||||||||||||||||||||||||
Japan | 48.5 | 48.8 | 46.4 | 25.9 | 18.1 | 1.4 | (0.7 | ) | 5.2 | 5.1 | 6.5 | 3.7 | ||||||||||||||||||||||||||||||||
TAM | $ | 248.6 | $ | 255.6 | $ | 247.7 | $ | 125.6 | $ | 45.0 | 3.9 | % | (2.8 | )% | 3.2 | % | 9.3 | %(3) | 7.0 | %(3) | 10.8 | %(3) | ||||||||||||||||||||||
Of which SAM | $ | 155.3 | $ | 151.7 | $ | 144.4 | $ | 79.7 | $ | 35.1 | 5.3 | % | 2.4 | % | 5.1 | % | 7.7 | % | 6.9 | % | 8.6 | % | ||||||||||||||||||||||
(1) | Source: WSTS. |
57
Table of Contents
(2) | Calculated using end points of the periods specified. | |
(3) | Calculated on a comparable basis, without information with respect to actuators as they were not included in the indicator before 2003. |
58
Table of Contents
Item 5. | Operating and Financial Review and Prospects |
59
Table of Contents
60
Table of Contents
61
Table of Contents
62
Table of Contents
63
Table of Contents
64
Table of Contents
65
Table of Contents
66
Table of Contents
67
Table of Contents
• | The negative pricing trend; | |
• | The additional impairment and other restructuring charges related to our ongoing programs; | |
• | The impairment loss recorded on our equity investment in Numonyx; | |
• | The weakening of the U.S. dollar exchange rate; | |
• | The one-time items related to the purchase accounting for acquisitions; and | |
• | The other-than-temporary loss on financial assets. |
• | Our improved product mix, which contributed to our revenues; and | |
• | The improvements in our manufacturing performance. |
68
Table of Contents
69
Table of Contents
• | We will be focused on improving our competitiveness as we execute our plan to develop ST-Ericsson following its creation in the first quarter; | |
• | We are working to reduce our costs by over $700 million in 2009 with respect to our fourth quarter 2008 cost base. To reach such targets, we are pursuing a combination of initiatives, such as ongoing restructuring activities and new programs focused on resizing our manufacturing operations and streamlining expenses. Such actions are expected to affect approximately 4,500 jobs worldwide in 2009. | |
• | We continue to advance our lighter asset strategy focused on careful management of our capital investments. As a result, we have set a capex budget of approximately $500 million for 2009, which represents a 50% reduction, approximately, compared to 2008. |
70
Table of Contents
• | The reappointment for a three-year term, expiring at the end of our 2011 Annual General Meeting of Shareholders, of Carlo Bozotti as the sole member of the Managing Board and the Company’s President and Chief Executive Officer; | |
• | The reappointment for a three-year term, expiring at the end of our 2011 Annual General Meeting of Shareholders, for the following members of the Supervisory Board: Mr. Gérald Arbola, Mr. Tom de Waard, Mr. Didier Lombard and Mr. Bruno Steve; | |
• | The appointment for a three-year term, expiring at the end of our 2011 Annual General Meeting of Shareholders, as a member of the Supervisory Board of Mr. Antonino Turicchi; | |
• | The distribution of a cash dividend of $0.36 per share, paid in four equal quarterly installments to shareholders of record in the month of each quarterly payment (our shares traded ex-dividend on May 19, 2008, August 18, 2008, November 24, 2008 and February 23, 2009; | |
• | Authorization to repurchase up to 30 million of our issued share capital under certain limitations and in accordance with applicable law; and | |
• | The reappointment for a two-year term, expiring at the end of our 2010 Annual General Meeting of Shareholders, of PricewaterhouseCoopers Accountants N.V. as our external auditors. |
71
Table of Contents
• | The distribution of a cash dividend of US$0.12 per common share, to be paid in four equal installments, on May 25, 2009, August 24, 2009, November 23, 2009 and February 22, 2010. Payment of an installment will be made to those deriving their rights from our common shares at the aforementioned dates; | |
• | The reappointment for a three-year term, expiring at the 2012 Annual General Meeting, for the following members of the Supervisory Board: Mr. Doug Dunn and Dr. Didier Lamouche; and | |
• | The maximum number of “restricted” Share Awards under our existing5-year Employee Unvested Share Award Plan(2008-2012) of 30,500,000, which includes any Unvested Stock Awards granted to our President and CEO as part of his compensation, with the maximum number of “restricted” shares in 2009 to be 6,100,000. |
• | Application Specific Groups (“ASG”), comprised of four product lines: Home Entertainment & Displays Group (“HED”), Mobile, Multi-media & Communications Group (“MMC”), Automotive Products Group (“APG”) and Computer Peripherals Group (“CPG”); |
• | Industrial and Multi-segment Sector (“IMS”), comprised of the former Micro, Power, Analog (“MPA”) segment, non-Flash memory and Smartcard products and Micro-Electro-Mechanical Systems (“MEMS”); and |
72
Table of Contents
• | Flash Memories Group (“FMG”). As of March 31, 2008, following the creation with Intel of Numonyx, a new independent semiconductor company from the key assets of our and Intel’s Flash memory business (“FMG deconsolidation”), we ceased reporting under the FMG segment. |
• | Automotive, Consumer, Computer and Communication Infrastructure Product Groups (“ACCI”), comprised of three product lines: |
• | Home Entertainment & Displays (“HED”), which now includes the Imaging division; | |
• | Automotive Products Group (“APG”); and, | |
• | Computer and Communication Infrastructure (“CCI”), which now includes the Communication Infrastructure division. |
• | Industrial and Multi-segment Products Sector (“IMS”), comprised of: |
• | Analog Power and Micro-Electro-Mechanical Systems (“APM”); and | |
• | Microcontrollers, non-Flash, non-volatile Memory and Smartcard products (“MMS”). |
• | Wireless Products Sector (“WPS”), comprised of three product lines: |
• | Wireless Multi Media (“WMM”); | |
• | Connectivity & Peripherals (“C&P”); and | |
• | Cellular Systems (“CS”). |
73
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net revenues by product segments: | ||||||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”) | $ | 4,129 | $ | 3,944 | $ | 4,122 | ||||||
Industrial and Multi-segment Products Sector (“IMS”) | 3,329 | 3,138 | 2,842 | |||||||||
Wireless Products Sector (“WPS”)(1) | 2,030 | 1,495 | 1,273 | |||||||||
Others(2) | 55 | 60 | 47 | |||||||||
Net revenues excluding Flash Memories Group (“FMG”) | 9,543 | 8,637 | 8,284 | |||||||||
Flash Memories Group (“FMG”)(3) | 299 | 1,364 | 1,570 | |||||||||
Total consolidated net revenues | $ | 9,842 | $ | 10,001 | $ | 9,854 | ||||||
(1) | WPS revenues in 2008 included a $491 million contribution from the NXP wireless business. | |
(2) | Includes revenues from the sale of subsystems and other products not allocated to product segments. | |
(3) | FMG revenues are related to the first quarter of 2008 only. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net revenues by product lines: | ||||||||||||
Home Entertainment & Displays (“HED”) | $ | 1,585 | $ | 1,402 | $ | 1,602 | ||||||
Automotive Products Group (“APG”) | 1,460 | 1,419 | 1,356 | |||||||||
Computer and Communication Infrastructure (“CCI”) | 1,077 | 1,123 | 1,164 | |||||||||
Others | 7 | — | — | |||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”) | 4,129 | 3,944 | 4,122 | |||||||||
Analog Power and Micro-Electro-Mechanical Systems (“APM”) | 2,393 | 2.313 | 2,085 | |||||||||
Microcontrollers, non-Flash, non-volatile Memory and Smartcard products (“MMS”) | 936 | 825 | 757 | |||||||||
Industrial and Multi-segment Products Sector (“IMS”) | 3,329 | 3,138 | 2,842 | |||||||||
Wireless Multi Media (“WMM”) | 1,293 | 1,288 | 1,210 | |||||||||
Connectivity & Peripherals (“C&P”) | 416 | 207 | 63 | |||||||||
Cellular Systems (“CS”)(1) | 321 | — | — | |||||||||
Wireless Products Sector (“WPS”) | 2,030 | 1,495 | 1,273 | |||||||||
Others | 55 | 60 | 47 | |||||||||
Flash Memories Group (“FMG”) | 299 | 1,364 | 1,570 | |||||||||
Total consolidated net revenues | $ | 9,842 | $ | 10,001 | $ | 9,854 | ||||||
(1) | CS includes the largest part of the revenues contributed by NXP Wireless and, as such, there are no comparable numbers available for 2006 and 2007. C&P also partly benefited from NXP wireless contribution. |
74
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Operating income (loss) by product segments: | ||||||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”) | $ | 107 | $ | 198 | $ | 272 | ||||||
Industrial and Multi-segment Products Sector (“IMS”) | 459 | 469 | 441 | |||||||||
Wireless Products Sector (“WPS”) | (70 | ) | 105 | 167 | ||||||||
Operating income of product segments excluding FMG | 496 | 772 | 880 | |||||||||
Others(1) | (710 | ) | (1,266 | ) | (150 | ) | ||||||
Operating income (loss) excluding FMG | (214 | ) | (494 | ) | 730 | |||||||
Flash Memories Group (“FMG”) | 16 | (51 | ) | (53 | ) | |||||||
Total consolidated operating income (loss) | $ | (198 | ) | $ | (545 | ) | $ | 677 |
(1) | Operating income (loss) of “Others” includes items such as impairment, restructuring charges and other related closure costs,start-up costs, and other unallocated expenses such as: strategic or special R&D programs, acquired IP R&D and other non-recurrent purchase accounting items, certain corporate level operating expenses, certain patent claims and litigation, and other costs that are not allocated to the product segments, as well as operating earnings or losses of the Subsystems and Other Products Group, including, beginning in the second quarter of 2008, the remaining FMG costs. “Others” also included non-recurring purchase accounting items. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(As percentage of net revenues) | ||||||||||||
Operating income (loss) by product segments: | ||||||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”) | 2.6 | % | 5.0 | % | 6.6 | % | ||||||
Industrial and Multi-segment Products Sector (“IMS”) | 13.8 | 14.9 | 15.5 | |||||||||
Wireless Products Sector (“WPS”) | (3.4 | ) | 7.0 | 13.1 | ||||||||
Others(2) | — | — | — | |||||||||
Flash Memories Group (“FMG”)(1) | 5.4 | (3.7 | ) | (3.4 | ) | |||||||
Total consolidated operating income (loss)(3) | (2.0 | )% | (5.4 | )% | 6.9 | % |
(1) | As a percentage of net revenues per product group. | |
(2) | As a percentage of total net revenues. Includes operating income (loss) from sales of subsystems and other income (costs) not allocated to product segments. | |
(3) | As a percentage of total net revenues. |
75
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Reconciliation to consolidated operating income (loss): | ||||||||||||
Operating income of product segments excluding FMG | $ | 496 | $ | 772 | $ | 880 | ||||||
Operating income (loss) of FMG | 16 | (51 | ) | (53 | ) | |||||||
Strategic and other research and development programs | (24 | ) | (20 | ) | (12 | ) | ||||||
Acquired IP R&D and other non-recurring purchase accounting items(1) | (185 | ) | — | — | ||||||||
Start-up costs | (16 | ) | (24 | ) | (57 | ) | ||||||
Impairment, restructuring charges and other related closure costs | (481 | ) | (1,228 | ) | (77 | ) | ||||||
Seniority awards | — | (21 | ) | — | ||||||||
Other non-allocated provisions(2) | (4 | ) | 27 | (4 | ) | |||||||
Total operating loss Others(3) | (710 | ) | (1,266 | ) | (150 | ) | ||||||
Total consolidated operating income (loss) | $ | (198 | ) | $ | (545 | ) | $ | 677 |
(1) | Non-recurring purchase accounting items are related to Genesis business combination, with an IP R&D charge for $21 million, and the wireless business acquisition from NXP with charges for $164 million, composed of $76 million as IP R&D and $88 million as inventorystep-up. | |
(2) | Includes unallocated income and expenses such as certain corporate level operating expenses and other costs that are not allocated to the product segments. | |
(3) | Operating income (loss) of “Others” includes items such as impairment, restructuring charges and other related closure costs,start-up costs, and other unallocated expenses such as: strategic or special R&D programs, acquired IP R&D and other non-recurrent purchase accounting items, certain corporate level operating expenses, certain patent claims and litigation, and other costs that are not allocated to the product segments, as well as operating earnings or losses of the Subsystems and Other Products Group, including, beginning in the second quarter of 2008, the remaining FMG costs. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net Revenues by Location of Order Shipment:(1) | ||||||||||||
Europe | $ | 2,804 | $ | 3,159 | $ | 3,073 | ||||||
North America(2) | 1,160 | 1,176 | 1,232 | |||||||||
Asia Pacific | 2,201 | 1,874 | 2,084 | |||||||||
Greater China | 2,492 | 2,750 | 2,552 | |||||||||
Japan | 512 | 475 | 400 | |||||||||
Emerging Markets(1)(2) | 673 | 567 | 513 | |||||||||
Total | $ | 9,842 | $ | 10,001 | $ | 9,854 |
(1) | Net revenues by location of order shipment are classified by location of customer invoiced. For example, products ordered byU.S.-based companies to be invoiced to Asia Pacific affiliates are classified as Asia Pacific revenues. Furthermore, the comparison among the different periods may be affected by shifts in order shipment from one location to another, as requested by our customers. |
76
Table of Contents
(2) | Emerging Markets include markets such as India, Latin America, the Middle East and Africa, Europe (non-EU and non-EFTA) and Russia. As of January 1, 2009, Emerging Markets has been reallocated to the Europe, North America and Asia Pacific organizations. |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(As percentage of net revenues) | ||||||||||||
Net Revenues by Location of Order Shipment:(1) | ||||||||||||
Europe | 28.5 | % | 31.6 | % | 31.2 | % | ||||||
North America | 11.8 | 11.8 | 12.5 | |||||||||
Asia Pacific | 22.4 | 18.7 | 21.1 | |||||||||
Greater China | 25.3 | 27.5 | 25.9 | |||||||||
Japan | 5.2 | 4.7 | 4.1 | |||||||||
Emerging Markets(2) | 6.8 | 5.7 | 5.2 | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Net Revenues by Market Segment Application(3): | ||||||||||||
Automotive | 14.7 | % | 15.2 | % | 14.9 | % | ||||||
Consumer | 16.6 | 16.9 | 16.5 | |||||||||
Computer | 15.6 | 16.0 | 16.6 | |||||||||
Telecom | 36.5 | 36.6 | 37.6 | |||||||||
Industrial and Other | 16.6 | 15.3 | 14.4 | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % |
(1) | Net revenues by location of order shipment are classified by location of customer invoiced. For example, products ordered byU.S.-based companies to be invoiced to Asia Pacific affiliates are classified as Asia Pacific revenues. Furthermore, the comparison among the different periods may be affected by shifts in order shipment from one location to another, as requested by our customers. | |
(2) | Emerging Markets include markets such as India, Latin America, the Middle East and Africa, Europe (non-EU and non-EFTA) and Russia. As of January 1, 2009, Emerging Markets has been reallocated to the Europe, North America and Asia Pacific organizations. | |
(3) | The above table estimates, within a variance of 5% to 10% in the absolute dollar amount, the relative weighting of each of our target segments. |
77
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(As percentage of net revenues) | ||||||||||||
Net sales | 99.5 | % | 99.7 | % | 99.8 | % | ||||||
Other revenues | 0.5 | 0.3 | 0.2 | |||||||||
Net revenues | 100.0 | 100.0 | 100.0 | |||||||||
Cost of sales | (63.8 | ) | (64.6 | ) | (64.2 | ) | ||||||
Gross profit | 36.2 | 35.4 | 35.8 | |||||||||
Selling, general and administrative | (12.1 | ) | (11.0 | ) | (10.8 | ) | ||||||
Research and development | (21.9 | ) | (18.0 | ) | (16.9 | ) | ||||||
Other income and expenses, net | 0.6 | 0.5 | (0.4 | ) | ||||||||
Impairment, restructuring charges and other related closure costs | (4.8 | ) | (12.3 | ) | (0.8 | ) | ||||||
Operating income (loss) | (2.0 | ) | (5.4 | ) | 6.9 | |||||||
Other-than-temporary impairment charge on financial assets | (1.4 | ) | (0.4 | ) | — | |||||||
Interest income, net | 0.5 | 0.8 | 0.9 | |||||||||
Earnings (loss) on equity investments | (5.6 | ) | 0.1 | (0.1 | ) | |||||||
Unrealized gain on financial assets | 0.1 | — | — | |||||||||
Income (loss) before income taxes and minority interests | (8.4 | ) | (4.9 | ) | 7.7 | |||||||
Income tax (expense) benefit | 0.5 | 0.2 | 0.2 | |||||||||
Income (loss) before minority interests | (7.9 | ) | (4.7 | ) | 7.9 | |||||||
Minority interests | (0.1 | ) | (0.1 | ) | — | |||||||
Net income (loss) | (8.0 | )% | (4.8 | )% | 7.9 | % |
Year Ended December 31, | ||||||||||||
2008 | 2007 | % Variation | ||||||||||
(Audited, in millions) | ||||||||||||
Net sales | $ | 9,792 | $ | 9,966 | (1.8 | )% | ||||||
Other revenues | 50 | 35 | — | |||||||||
Net revenues | $ | 9,842 | $ | 10,001 | (1.6 | )% |
78
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | % Variation | ||||||||||
(Audited, in millions) | ||||||||||||
Cost of sales | $ | (6,282 | ) | $ | (6,465 | ) | 2.8 | % | ||||
Gross profit | $ | 3,560 | $ | 3,536 | 0.7 | % | ||||||
Gross margin (as a percentage of net revenues) | 36.2 | % | 35.4 | % |
Year Ended December 31, | ||||||||||||
2008 | 2007 | % Variation | ||||||||||
(Audited, in millions) | ||||||||||||
Selling, general and administrative expenses | $ | (1,187 | ) | $ | (1,099 | ) | (8.0 | )% | ||||
As a percentage of net revenues | (12.1 | )% | (11.0 | )% | — |
Year Ended December 31, | ||||||||||||
2008 | 2007 | % Variation | ||||||||||
(Audited, in millions) | ||||||||||||
Research and development expenses | $ | (2,152 | ) | $ | (1,802 | ) | (19.5 | )% | ||||
As a percentage of net revenues | (21.9 | )% | (18.0 | )% | — |
79
Table of Contents
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Research and development funding | $ | 83 | $ | 97 | ||||
Start-up/phase-out costs | (17 | ) | (24 | ) | ||||
Exchange gain (loss) net | 20 | 1 | ||||||
Patent litigation costs | (14 | ) | (18 | ) | ||||
Patent pre-litigation costs | (10 | ) | (10 | ) | ||||
Gain on sale of non-current assets | 4 | — | ||||||
Other, net | (4 | ) | 2 | |||||
Other income and expenses, net | $ | 62 | $ | 48 | ||||
As a percentage of net revenues | 0.6 | % | 0.5 | % |
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Impairment, restructuring charges and other related closure costs | $ | (481 | ) | $ | (1,228 | ) |
• | $216 million originated by the FMG assets disposal which required the recognition of $190 million as an additional loss and $26 million as restructuring and other related disposal costs; this additional loss was the result of revised terms of the transaction from those expected at December 31, 2007; | |
• | $164 million incurred as part of our ongoing 2007 restructuring initiatives which include the closure of our fabs in Phoenix and Carrollton (USA) and of our back-end facilities in Ain Sebaa (Morocco); | |
• | $19 million as impairment charges on goodwill and certain financial investments; and | |
• | $82 million for other previously and newly announced restructuring plans, consisting primarily of voluntary termination benefits and early retirement arrangements in some of our European locations. |
80
Table of Contents
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Operating loss | $ | (198 | ) | $ | (545 | ) | ||
As a percentage of net revenues | (2.0 | )% | (5.4 | )% |
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Operating loss, as reported | $ | (198 | ) | $ | (545 | ) | ||
Adding back: | ||||||||
• Cost of sales: NXP inventorystep-up | $ | 88 | 0 | |||||
• Research and development: IP R&D | $ | 97 | 0 | |||||
• Impairment and restructuring charges | 481 | 1,228 | ||||||
Operating result, pro forma | $ | 468 | $ | 683 |
81
Table of Contents
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Interest income, net | $ | 51 | $ | 83 |
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, in millions) | ||||||||
Other-than-temporary impairment charges on financial assets | $ | (138 | ) | $ | (46 | ) |
82
Table of Contents
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Earnings (loss) on equity investments | $ | (553 | ) | $ | 14 |
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Income tax benefit | $ | 43 | $ | 23 |
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Audited, | ||||||||
in millions) | ||||||||
Net loss | $ | (786 | ) | $ | (477 | ) | ||
As a percentage of net revenues | (8.0 | )% | (4.8 | )% |
83
Table of Contents
Year Ended December 31, | ||||||||||||
2007 | 2006 | % Variation | ||||||||||
(In millions) | ||||||||||||
Net sales | $ | 9,966 | $ | 9,838 | 1.3 | % | ||||||
Other revenues | 35 | 16 | — | |||||||||
Net revenues | $ | 10,001 | $ | 9,854 | 1.5 | % | ||||||
Year Ended December 31, | ||||||||||||
2007 | 2006 | % Variation | ||||||||||
(In millions) | ||||||||||||
Cost of sales | $ | (6,465 | ) | $ | (6,331 | ) | (2.1 | )% | ||||
Gross profit | $ | 3,536 | $ | 3,523 | 0.4 | % | ||||||
Gross margin (as a percentage of net revenues) | 35.4 | % | 35.8 | % | — |
84
Table of Contents
Year Ended December 31, | ||||||||||||
2007 | 2006 | % Variation | ||||||||||
(In millions) | ||||||||||||
Selling, general and administrative expenses | $ | (1,099 | ) | $ | (1,067 | ) | (3.0 | )% | ||||
As a percentage of net revenues | (11.0 | )% | (10.8 | )% | —- |
Year Ended December 31, | ||||||||||||
2007 | 2006 | % Variation | ||||||||||
(In millions) | ||||||||||||
Research and development expenses | $ | (1,802 | ) | $ | (1,667 | ) | (8.1 | )% | ||||
As a percentage of net revenues | (18.0 | )% | (16.9 | )% | — |
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Research and development funding | $ | 97 | $ | 54 | ||||
Start-up costs | (24 | ) | (57 | ) | ||||
Exchange gain (loss), net | 1 | (9 | ) | |||||
Patent litigation costs | (18 | ) | (22 | ) | ||||
Patent pre-litigation costs | (10 | ) | (7 | ) | ||||
Gain on sale of Accent subsidiary | — | 6 | ||||||
Gain on sale of non-current assets, net | 2 | 2 | ||||||
Other, net | — | (2 | ) | |||||
Other income and expenses, net | $ | 48 | $ | (35 | ) | |||
As a percentage of net revenues | 0.5 | % | (0.4 | )% |
85
Table of Contents
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Impairment, restructuring charges and other related closure costs | $ | (1,228 | ) | $ | (77 | ) |
• | a pre-tax impairment loss estimated at $1,106 million booked for the planned disposal of the FMG assets held for sale, an additional pre-tax $1 million impairment charge on certain specific equipment that could not be transferred as part of FMG deconsolidation and for which no alternative future use could be found in the Company and an additional pre-tax $5 million of other related disposal costs; | |
• | an amount of $73 million related to the severance costs and impairment charge booked in relation to the 2007 manufacturing restructuring plan of our manufacturing activities which is on-going; | |
• | a charge of $29 million generated by our150-mm restructuring plan which has been completed; | |
• | a charge of approximately $9 million for employee benefits relating to our headcount restructuring plan; | |
• | an impairment charge of $3 million related to an equity investment carried at cost; and | |
• | an impairment charge of $2 million related to certain technologies without alternative future use. | |
• | In 2006, we incurred $77 million of impairment, restructuring charges and other related closure costs, including $45 million relating to our headcount restructuring plan, $22 million relating to our150-mm restructuring plan, and an impairment charge of approximately $10 million recorded pursuant to subsequent decisions to discontinue adoption of Tioga related technologies in certain products. |
Year Ended December 31, | ||||||||||||
2007 | 2006 | % Variation | ||||||||||
(In millions) | ||||||||||||
Operating income (loss) | $ | (545 | ) | $ | 677 | — | ||||||
As a percentage of net revenues | (5.4 | )% | 6.9 | % |
86
Table of Contents
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Interest income (expense), net | $ | 83 | $ | 93 |
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Other-than-temporary impairment charges on marketable securities | $ | (46 | ) | $ | 0 |
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Earning (loss) on equity investments | $ | 14 | $ | (6 | ) |
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Income tax benefit (expense) | $ | 23 | $ | 20 |
87
Table of Contents
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Net income (loss) | $ | (477 | ) | $ | 782 |
88
Table of Contents
Three Months Ended | % Variation | |||||||||||||||||||
Dec 31, 2008 | Sept 27, 2008 | Dec 31, 2007 | Sequential | Year-Over-Year | ||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||
Net sales | $ | 2,264 | $ | 2,687 | $ | 2,733 | (15.7 | )% | (17.2 | )% | ||||||||||
Other revenues | 12 | 9 | 9 | — | — | |||||||||||||||
Net revenues | $ | 2,276 | $ | 2,696 | $ | 2,742 | (15.6 | )% | (17.0 | )% | ||||||||||
89
Table of Contents
Three Months Ended | % Variation | |||||||||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | Sequential | Year-Over-Year | ||||||||||||||||
(Unaudited, in millions) | ||||||||||||||||||||
Cost of sales | $ | (1,454 | ) | $ | (1,737 | ) | $ | (1,731 | ) | 16.3 | % | 16.0 | % | |||||||
Gross profit | 822 | 959 | $ | 1,011 | (14.3 | )% | (18.7 | )% | ||||||||||||
Gross margin (as a percentage of net revenues) | 36.1 | % | 35.6 | % | 36.9 | % |
Three Months Ended | % Variation | |||||||||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | Sequential | Year-Over-Year | ||||||||||||||||
(Unaudited, in millions) | ||||||||||||||||||||
Selling, general and administrative expenses | $ | (304 | ) | $ | (297 | ) | $ | (295 | ) | (2.7 | )% | (3.0 | )% | |||||||
As percentage of net revenue | (13.4 | )% | (11.0 | )% | (10.8 | )% |
Three Months Ended | % Variation | |||||||||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | Sequential | Year-Over-Year | ||||||||||||||||
(Unaudited, in millions) | ||||||||||||||||||||
Research and development expenses | $ | (572 | ) | $ | (602 | ) | $ | (480 | ) | 5.1 | % | (19.2 | )% | |||||||
As percentage of net revenues | (25.1 | )% | (22.3 | )% | (17.5 | )% |
90
Table of Contents
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Research and development funding | $ | 19 | $ | 21 | $ | 36 | ||||||
Start-up/phase-out costs | (7 | ) | (3 | ) | (5 | ) | ||||||
Exchange gain (loss) net | — | 9 | 5 | |||||||||
Patent litigation costs | (3 | ) | (4 | ) | (3 | ) | ||||||
Patent pre-litigation costs | (2 | ) | (3 | ) | (3 | ) | ||||||
Gain on sale of non-current assets | — | — | 2 | |||||||||
Other, net | (1 | ) | (3 | ) | (4 | ) | ||||||
Other income and expenses, net | 6 | 17 | 28 | |||||||||
As a percentage of net revenues | 0.3 | % | 0.6 | % | 1.0 | % |
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Impairment, restructuring charges and other related closure costs | $ | (91 | ) | $ | (22 | ) | $ | (279 | ) | |||
As a percentage of net revenues | (4.0 | )% | (0.8 | )% | (10.2 | )% |
• | $29 million related to one-time termination benefits to be paid at the closure of our Carrollton, Texas and Phoenix, Arizona sites, as well as other charges; | |
• | $2 million impairment costs associated with an investment in a minority participation; | |
• | $9 million charges related to the FMG deconsolidation; and | |
• | $51 million related to other ongoing and newly committed restructuring plans, consisting primarily of voluntary termination benefits and early retirement arrangements in some of our European locations. |
91
Table of Contents
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Operating income (loss) | $ | (139 | ) | $ | 55 | $ | (15 | ) | ||||
In percentage of net revenues | (6.1 | )% | 2.1 | % | (0.6 | )% |
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Operating loss, as reported | $ | (139 | ) | $ | 55 | $ | (15 | ) | ||||
Adding back: | ||||||||||||
• Cost of sales: NXP inventorystep-up | 31 | 57 | 0 | |||||||||
• Research and development: IP R&D | 0 | 76 | 0 | |||||||||
• Impairment and restructuring charges | 91 | 22 | 279 | |||||||||
Operating result, pro forma | $ | (17 | ) | $ | 210 | $ | 264 |
92
Table of Contents
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Interest income, net | $ | 3 | $ | 8 | $ | 25 |
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Other-than-temporary impairment charges on financial assets | $ | (55 | ) | $ | (14 | ) | $ | (46 | ) |
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Earnings (loss) on equity investments | $ | (204 | ) | $ | (344 | ) | $ | 2 |
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Income tax benefit | $ | 9 | $ | 15 | $ | 55 |
93
Table of Contents
Three Months Ended | ||||||||||||
December 31, 2008 | September 27, 2008 | December 31, 2007 | ||||||||||
(Unaudited, in millions) | ||||||||||||
Net income (loss) | $ | (366 | ) | $ | (289 | ) | $ | 20 | ||||
As percentage of net revenues | (16.1 | )% | (10.7 | )% | 0.7 | % |
94
Table of Contents
95
Table of Contents
96
Table of Contents
97
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net cash from operating activities | $ | 1,722 | $ | 2,188 | $ | 2,491 | ||||||
Net cash used in investing activities | (2,417 | ) | (1,737 | ) | (3,057 | ) | ||||||
Net cash from (used) in financing activities | (67 | ) | (296 | ) | 132 | |||||||
Effect of change in exchange rates | (84 | ) | 41 | 66 | ||||||||
Net cash increase (decrease) | $ | (846 | ) | $ | 196 | $ | (368 | ) |
98
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net cash from operating activities | $ | 1,722 | $ | 2,188 | $ | 2,491 | ||||||
Net cash used in investing activities | (2,417 | ) | (1,737 | ) | �� | (3,057 | ) | |||||
Payment for purchase and proceeds from sale of marketable securities (current and non-current), short-term deposits and restricted cash, net | (351 | ) | 389 | 1,232 | ||||||||
Net operating cash flow | $ | (1,046 | ) | $ | 840 | $ | 666 |
99
Table of Contents
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Cash and cash equivalents, net of bank overdrafts | $ | 989 | $ | 1,855 | $ | 1,659 | ||||||
Marketable securities, current | 651 | 1,014 | 764 | |||||||||
Short-term deposits | — | — | 250 | |||||||||
Restricted cash | 250 | 250 | 218 | |||||||||
Marketable securities, non-current | 242 | 369 | — | |||||||||
Total financial resources | 2,132 | 3,488 | 2,891 | |||||||||
Current portion of long-term debt | (123 | ) | (103 | ) | (136 | ) | ||||||
Long-term debt | (2,554 | ) | (2,117 | ) | (1,994 | ) | ||||||
Total financial debt | (2,677 | ) | (2,220 | ) | (2,130 | ) | ||||||
Net financial position | $ | (545 | ) | $ | 1,268 | $ | 761 | |||||
100
Table of Contents
Total | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | ||||||||||||||||||||||
Long-term debt (including current portion) | $ | 2,677 | $ | 123 | $ | 173 | $ | 1,153 | $ | 116 | $ | 816 | $ | 296 |
Moody’s Investors | Standard & | |||||||
Service | Poor’s | |||||||
Zero Coupon Senior Convertible Bonds due 2013 | WR(1 | ) | A- | |||||
Zero Coupon Senior Convertible Bonds due 2016 | Baa1 | A- | ||||||
Floating Rate Senior Bonds due 2013 | Baa1 | A- |
(1) | Rating withdrawn since the redemption in August 2006 of $1.4 billion of our 2013 Convertible Bonds. |
Total | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | ||||||||||||||||||||||
Operating leases(2) | $ | 423 | $ | 89 | $ | 68 | $ | 61 | $ | 52 | $ | 61 | $ | 92 | ||||||||||||||
Purchase obligations(2) | 516 | 409 | 68 | 39 | ||||||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||
Equipment and other asset purchase | 150 | 150 | ||||||||||||||||||||||||||
Foundry purchase | 106 | 106 | ||||||||||||||||||||||||||
Software, technology licenses and design | 260 | 153 | 68 | 39 | ||||||||||||||||||||||||
Other obligations(2) | 359 | 163 | 86 | 53 | 48 | 7 | 2 | |||||||||||||||||||||
Long-term debt obligations (including current portion)(3)(4)(5) of which: | 2,677 | 123 | 173 | 1,153 | 116 | 816 | 296 | |||||||||||||||||||||
Capital leases(3) | 15 | 6 | 6 | 2 | 1 | |||||||||||||||||||||||
Pension obligations(3) | 332 | 35 | 36 | 26 | 31 | 32 | 172 | |||||||||||||||||||||
Other non-current liabilities(3) | 350 | 11 | 57 | 17 | 86 | 8 | 171 | |||||||||||||||||||||
Total | $ | 4,657 | $ | 830 | $ | 488 | $ | 1,349 | $ | 333 | $ | 924 | $ | 733 |
(1) | Contingent liabilities which cannot be quantified are excluded from the table above. | |
(2) | Items not reflected on the Consolidated Balance Sheet at December 31, 2008. | |
(3) | Items reflected on the Consolidated Balance Sheet at December 31, 2008. | |
(4) | See Note 17 to our Consolidated Financial Statements at December 31, 2008 for additional information related to long-term debt and redeemable convertible securities. | |
(5) | Year of payment is based on maturity before taking into account any potential acceleration that could result from a triggering of the change of control provisions of the 2016 Convertible Bonds and the 2013 Senior Bonds. |
101
Table of Contents
102
Table of Contents
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
b. | EITF 07-4,Application of the Two {d208} Class Method under FAS 128 to Master Limited Partnerships |
d. | EITF 07-5,Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock |
f. | EITF 08-5,Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement |
g. | EITF 08-8,Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount that is Based on the Stock of an Entity’s Consolidated Subsidiary |
107
Table of Contents
108
Table of Contents
Statement of Income Information: | ||||
Net sales | 1,165 | |||
Gross profit | 266 | |||
Net income (loss) | (129 | ) | ||
Financial Position Information: | ||||
Current assets | 1,614 | |||
Noncurrent assets | 1,412 | |||
Current liabilities | 512 | |||
Noncurrent liabilities | 860 | |||
Net worth | 1,654 |
109
Table of Contents
Item 6. | Directors, Senior Management and Employees |
110
Table of Contents
Name(1) | Position | Year Appointed(2) | Term Expires | Age | ||||||||||
Antonino Turicchi | Chairman | 2008 | (3) | 2011 | 43 | |||||||||
Gérald Arbola | Vice-Chairman | 2004 | 2011 | 60 | ||||||||||
Raymond Bingham | Member | 2007 | 2010 | 63 | ||||||||||
Douglas Dunn | Member | 2001 | 2009 | 64 | ||||||||||
Didier Lamouche | Member | 2006 | 2009 | 49 | ||||||||||
Didier Lombard | Member | 2004 | 2011 | 67 | ||||||||||
Alessandro Ovi | Member | 2007 | 2010 | 65 | ||||||||||
Bruno Steve | Member | 1989 | 2011 | 67 | ||||||||||
Tom de Waard | Member | 1998 | 2011 | 62 |
(1) | Mr. Matteo del Fante was a Supervisory Board member until the end of our 2008 annual shareholders’ meeting, at which time he was succeeded by Mr. Antonino Turicchi. | |
(2) | As a member of the Supervisory Board. | |
(3) | Mr. Turicchi was also a Supervisory Board member from2005-2007. |
111
Table of Contents
112
Table of Contents
113
Table of Contents
Nomination | ||||||||||||||||||||||||
and | ||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||
Audit | Compensation | Strategic | Governance | Ad Hoc | ||||||||||||||||||||
Number of Meetings Attended in 2008(1) | Full Board | Committee | Committee | Committee | Committee | Committee | ||||||||||||||||||
Antonino Turicchi(2) | 8 | — | 3 | 1 | 1 | 1 | ||||||||||||||||||
Gérald Arbola | 15 | — | 6 | 3 | 3 | |||||||||||||||||||
Raymond Bingham | 15 | 10 | — | 1 | — | |||||||||||||||||||
Matteo del Fante(2) | 7 | 6 | 3 | 2 | 2 | |||||||||||||||||||
Douglas Dunn | 15 | 9 | — | 3 | — | 1 | ||||||||||||||||||
Didier Lamouche | 14 | 10 | — | — | — | 1 | ||||||||||||||||||
Didier Lombard | 15 | — | 5 | 2 | 3 | |||||||||||||||||||
Alessandro Ovi | 15 | — | — | 3 | — | |||||||||||||||||||
Bruno Steve | 15 | 5 | 6 | 2 | 3 | |||||||||||||||||||
Tom de Waard | 15 | 12 | 6 | — | 3 |
(1) | Includes meetings attended by way of conference call. | |
(2) | Mr. Matteo del Fante was a Supervisory Board member until the end of our 2008 annual shareholders’ meeting, at which time he was succeeded by Mr. Antonino Turicchi. |
114
Table of Contents
115
Table of Contents
116
Table of Contents
117
Table of Contents
118
Table of Contents
Years in | ||||||||||||||
Semi- | ||||||||||||||
Years with | Conductor | |||||||||||||
Name | Position | Company | Industry | Age | ||||||||||
Executive Committee | ||||||||||||||
Carlo Bozotti, Chairman | President and Chief Executive Officer | 32 | 32 | 56 | ||||||||||
Alain Dutheil, Vice Chairman | Chief Operating Officer | 25 | 39 | 63 | ||||||||||
Georges Auguste | Executive Vice President, Quality, Education and Sustainable Development | 22 | 34 | 59 | ||||||||||
Orio Bellezza | Executive Vice President and General Manager, Front-End Manufacturing | 25 | 25 | 49 | ||||||||||
Laurent Bosson(1) | Executive Vice President, Front-end Technology and Manufacturing | 25 | 25 | 66 | ||||||||||
Jean-Marc Chery | Executive Vice President and Chief Technology Officer | 24 | 24 | 48 | ||||||||||
Andrea Cuomo | Executive Vice President and General Manager, Sales & Marketing, Europe, Middle East and Africa | 25 | 25 | 54 | ||||||||||
Carlo Ferro | Executive Vice President, Chief Financial Officer | 9 | 9 | 48 | ||||||||||
Otto Kosgalwies | Executive Vice President, Infrastructure and Services | 25 | 25 | 53 | ||||||||||
Philippe Lambinet | Executive Vice President, General Manager, Home Entertainment & Displays Group | 22 | 22 | 51 | ||||||||||
Carmelo Papa | Executive Vice President and General Manager, Industiral Multi-segment Sector | 26 | 26 | 59 | ||||||||||
Jeffrey See | Executive Vice President, Central Packaging and Test Manufacturing | 39 | 39 | 63 | ||||||||||
Tommi Uhari(2) | Executive Vice President, Mobile, Multi-media & Communications | 2 | 16 | 37 | ||||||||||
Enrico Villa(1) | Executive Vice President, Europe Region (and for Sales and Marketing organizations) | 41 | 41 | 67 | ||||||||||
Executive Staff | ||||||||||||||
Gian Luca Bertino | Corporate Vice President, Computer and Communications Infrastructure | 11 | 22 | 49 | ||||||||||
Ugo Carena | Corporate Vice President, Automotive Products Group | 11 | 31 | 65 | ||||||||||
Marco Luciano Cassis | Corporate Vice President, Japan Region | 21 | 21 | 45 | ||||||||||
Patrice Chastagner | Corporate Vice President, Human Resources | 24 | 24 | 61 | ||||||||||
Claude Dardanne | Corporate Vice President, General Manager, Microcontrollers, Memories & Smartcards | 27 | 30 | 56 | ||||||||||
Alisia Grenville | Corporate Vice President, Chief Compliance Officer | 1 | 1 | 41 | ||||||||||
François Guibert | Corporate Vice President, Asia Pacific Region | 28 | 31 | 55 | ||||||||||
Reza Kazerounian(3) | Corporate Vice President, North America Region | 24 | 24 | 51 | ||||||||||
Robert Krysiak | Corporate Vice President and General Manager, Greater China Region | 26 | 26 | 54 |
119
Table of Contents
Years in | ||||||||||||||
Semi- | ||||||||||||||
Years with | Conductor | |||||||||||||
Name | Position | Company | Industry | Age | ||||||||||
Loïc Lietar | Corporate Vice President, Corporate Business Development | 24 | 24 | 46 | ||||||||||
Mario Licciardello(4) | Corporate Vice President, Flash Memory Group | 43 | 43 | 67 | ||||||||||
Pierre Ollivier | Corporate Vice President and General Counsel | 18 | 18 | 53 | ||||||||||
Carlo Ottaviani | Corporate Vice President, Communications | 44 | 44 | 65 | ||||||||||
Thierry Tingaud(5) | Corporate Vice President, Emerging Markets Region | 24 | 24 | 49 |
(1) | Retired in 2008. | |
(2) | Mr. Uhari is now the Senior Vice President, Products, of ST-Ericsson. | |
(3) | As of April 2009, Mr. Kazerounian is no longer with the Company. | |
(4) | Mr. Licciardello is currently the Chief Operating Officer of Numonyx. | |
(5) | As of February 2009, Mr. Tingaud is the Vice-President of Strategic Planning of ST-Ericsson. |
120
Table of Contents
121
Table of Contents
122
Table of Contents
123
Table of Contents
124
Table of Contents
Supervisory Board Member | Directors’ Fees | |||
Antonino Turicchi(1) | € | 144,250 | ||
Gérald Arbola | € | 161,500 | ||
Raymond Bingham | € | 94,625 | ||
Matteo del Fante(1) | € | 23,250 | ||
Douglas Dunn | € | 97,625 | ||
Didier Lamouche | € | 88,500 | ||
Didier Lombard | € | 98,250 | ||
Alessandro Ovi | € | 81,875 | ||
Bruno Steve | € | 109,000 | ||
Tom de Waard(2) | € | 164,750 | ||
Total | € | 1,063,625 | ||
(1) | Mr. Matteo del Fante was a Supervisory Board member until our 2008 annual shareholders’ meeting, at which time he was succeeded by Mr. Antonino Turicchi. | |
(2) | Compensation, including attendance fees of $2,000 per meeting of our Supervisory Board or committee thereof, was paid to Clifford Chance LLP. |
Sole Member of Our Managing Board and President and CEO | Salary(2) | Bonus(1) | Non-cash Benefits(3) | Total | ||||||||||||
Carlo Bozotti | $ | 917,253 | $ | 663,948 | $ | 972,932 | $ | 2,554,133 |
(1) | The bonus paid to the sole member of our Managing Board and President and CEO during the 2008 financial year was approved by the Compensation Committee, and approved by the Supervisory Board in respect of the 2007 financial year, based on fulfillment of a number of pre-defined objectives for 2007. | |
(2) | Our Supervisory Board, upon the recommendation of our Compensation Committee, approved an annual salary for 2008 for our Managing Board and President and CEO of $700,000, with an exchange rate for the salary paid in Euro fixed at €1.00 to $1.20 and an exchange rate for the salary paid in Swiss Francs of approximately CHF 1.00 to $0.90. | |
(3) | Including stock awards, employer social contributions, company car allowance and miscellaneous allowances. |
125
Table of Contents
126
Table of Contents
• | amended grants pursuant to the 2005 stock-based compensation plan for Supervisory Board members and professionals at our 2007 annual shareholders’ meeting; | |
• | adopted our 2006 and 2007 nonvested Stock Award Plan for Executives and Key Employees (the “Employee USA Plan”) with the goal of enhancing our ability to retain key employees and motivate them to work to create shareholder value and, in addition, approved vesting conditions linked to our future performance and continued service with us; and | |
• | approved our 2008 nonvested Stock Award Plan for Executives and Key Employees, under which directors, managers and selected employees may be granted stock awards upon the fulfillment of restricted criteria, such as those linked to our performance and continued service with us. |
127
Table of Contents
October 20, 1995
(outstanding grants)
Special Grant | Tranche 5 | Special Grant | Tranche 6 | Special Grant | Tranche 7 | |||||||
Date of Supervisory Board Meeting | 24-Jan-00 | 16-Jun-00 | 18-Sep-00 | 11-Dec-00 | 18-Dec-00 | 1-Mar-01 | ||||||
Total Number of Shares which may be purchased | 150,000 | 5,331,250 | 70,000 | 2,019,640 | 26,501 | 113,350 | ||||||
Vesting Date | 24-Jan-03 | 16-Jun-02 | 18-Sep-02 | 11-Dec-02 | 18-Dec-02 | 1-Mar-03 | ||||||
Expiration Date | 24-Jan-08 | 16-Jun-08 | 18-Sep-08 | 11-Dec-08 | 18-Dec-08 | 1-Mar-09 | ||||||
Exercise Price | $55.25 | $62.01 | $52.88 | $50.69 | $44.00 | $31.65 | ||||||
Terms of Exercise | 50% on | 32% on | 32% on | 32% on | 32% on | 32% on | ||||||
24-Jan-03 | 16-Jun-02 | 18-Sep-02 | 11-Dec-02 | 18-Dec-02 | 1-Mar-03 | |||||||
50% on | 32% on | 32% on | 32% on | 32% on | 32% on | |||||||
24-Jan-04 | 16-Jun-03 | 18-Sep-03 | 11-Dec-03 | 18-Dec-03 | 1-Mar-04 | |||||||
36% on | 36% on | 36% on | 36% on | 36% on | ||||||||
16-Jun-04 | 18-Sep-04 | 11-Dec-04 | 18-Dec-04 | 1-Mar-05 | ||||||||
Number of Shares to be acquired with Outstanding Options as of March 31, 2009 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||
Held by Managing Board/Executive Officers | 0 | 0 | 0 | 0 | 0 | 0 |
128
Table of Contents
April 25, 2001
(outstanding grants)
Tranche 1 | Tranche 2 | Tranche 3 | Tranche 4 | Tranche 5 | Tranche 6 | Tranche 7 | ||||||||
Date of the grant | 27-Apr-01 | 4-Sep-01 | 1-Nov-01 | 2-Jan-02 | 25-Jan-02 | 25-Apr-02 | 26-Jun-02 | |||||||
Total Number of Shares which may be purchased | 9,521,100 | 16,000 | 61,900 | 29,400 | 3,656,103 | 9,708,390 | 318,600 | |||||||
Vesting Date | 27-Apr-03 | 4-Sep-03 | 1-Nov-03 | 2-Jan-04 | 25-Jan-03 | 25-Apr-04 | 26-Jun-04 | |||||||
Expiration Date | 27-Apr-11 | 4-Sep-11 | 1-Nov-11 | 2-Jan-12 | 25-Jan-12 | 25-Apr-12 | 26-Jun-12 | |||||||
Exercise Price | $39.00 | $29.70 | $29.61 | $33.70 | $31.09 | $31.11 | $22.30 | |||||||
Terms of Exercise | 32% on | 32% on | 32% on | 32% on | 50% on | 32% on | 32% on | |||||||
27-Apr-03 | 4-Sep-03 | 1-Nov-03 | 2-Jan-04 | 25-Jan-03 | 25-Apr-04 | 26-Jun-04 | ||||||||
32% on | 32% on | 32% on | 32% on | 50% on | 32% on | 32% on | ||||||||
27-Apr-04 | 4-Sep-04 | 1-Nov-04 | 2-Jan-05 | 25-Jan-04 | 25-Apr-05 | 26-Jun-05 | ||||||||
36% on 27-Apr-05 | 36% on 4-Sep-05 | 36% on 1-Nov-05 | 36% on 2-Jan-06 | 36% on 25-Apr-06 | 36% on 26-Jun-06 | |||||||||
Number of Shares to be acquired with Outstanding Options as of March 31, 2009 | 7,517,820 | 7,000 | 43,750 | 19,900 | 2,793,151 | 7,888,398 | 135,606 | |||||||
Held by Managing Board/Executive Officers | 339,500 | 0 | 0 | 0 | 133,225 | 351,030 | 0 |
April 25, 2001
(outstanding grants)
Tranche 8 | Tranche 9 | Tranche 10 | Tranche 11 | Tranche 12 | Tranche 13 | Tranche 14 | Tranche 15 | Tranche 16 | Tranche 17 | |||||||||||
Date of the grant | 1-Aug-02 | 17-Dec-02 | 14-Mar-03 | 3-Jun-03 | 24-Oct-03 | 2-Jan-04 | 26-Apr-04 | 1-Sep-04 | 31-Jan-05 | 17-Mar-05 | ||||||||||
Total Number of Shares which may be purchased | 24,500 | 14,400 | 11,533,960 | 306,850 | 135,500 | 86,400 | 12,103,490 | 175,390 | 29,200 | 13,000 | ||||||||||
Vesting Date | 1-Aug-04 | 17-Dec-04 | 14-Mar-05 | 3-Jun-05 | 24-Oct-05 | 2-Jan-06 | 26-Apr-06 | 1-Sep-06 | 31-Jan-07 | 17-Mar-07 | ||||||||||
Expiration Date | 1-Aug-12 | 17-Dec-12 | 14-Mar-13 | 3-Jun-13 | 24-Oct-13 | 2-Jan-14 | 26-Apr-14 | 1-Sep-14 | 31-Jan-15 | 17-Mar-15 | ||||||||||
Exercise Price | $20.02 | $21.59 | $19.18 | $22.83 | $25.90 | $27.21 | $22.71 | $17.08 | $16.73 | $17.31 | ||||||||||
Terms of Exercise | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | ||||||||||
1-Aug-04 | 17-Dec-04 | 14-Mar-05 | 3-Jun-05 | 24-Oct-05 | 2-Jan-06 | 26-Apr-06 | 1-Sep-06 | 31-Jan-07 | 17-Mar-07 | |||||||||||
32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | 32% on | |||||||||||
1-Aug-05 | 17-Dec-05 | 14-Mar-06 | 3-Jun-06 | 24-Oct-06 | 2-Jan-07 | 26-Apr-07 | 1-Sep-07 | 31-Jan-08 | 17-Mar-08 | |||||||||||
36% on | 36% on | 36% on | 36% on | 36% on | 36% on | 36% on | 36% on | 36% on | 36% on | |||||||||||
1-Aug-06 | 17-Dec-06 | 14-Mar-07 | 3-Jun-07 | 24-Oct-07 | 2-Jan-08 | 14-Mar-08 | 1-Sep-08 | 31-Jan-09 | 17-Mar-09 | |||||||||||
Number of Shares to be acquired with Outstanding Options as of March 31, 2009 | 13,100 | 14,400 | 9,542,571 | 173,650 | 119,150 | 15,200 | 10,168,310 | 112,466 | 17,300 | 13,100 | ||||||||||
Held by Managing Board/ Executive Officers | 0 | 0 | 419,700 | 0 | 31,000 | 0 | 507,000 | 0 | 0 | 0 |
129
Table of Contents
(for Supervisory Board Members and Professionals)
(outstanding grants)
Date of Annual | May 31, 1999 | March 27, 2002 | ||||||||
Shareholders’ Meeting | Tranche 2 | Tranche 3 | Tranche 1 | Tranche 2 | Tranche 3 | |||||
Date of the grant | 16-Jun-00 | 27-Apr-01 | 25-Apr-02 | 14-Mar-03 | 26-Apr-04 | |||||
Total Number of Shares which may be purchased | 103,500 | 112,500 | 132,000 | 132,000 | 132,000 | |||||
Vesting Date | 16-Jun-01 | 27-Apr-02 | 25-May-02 | 14-Apr-03 | 26-May-04 | |||||
Expiration Date | 16-Jun-08 | 27-Apr-11 | 25-Apr-12 | 14-Mar-13 | 26-Apr-14 | |||||
Exercise Price | $62.01 | $39.00 | $31.11 | $19.18 | $22.71 | |||||
Terms of Exercise | All exercisable | All exercisable | All exercisable | All exercisable | All exercisable | |||||
after 1 year | after 1 year | after 1 year | after 1 year | after 1 year | ||||||
Number of Shares to be acquired with Outstanding Options as of March 31, 2009 | 0 | 90,000 | 108,000 | 108,000 | 132,000 |
130
Table of Contents
2005 | 2006 | 2007 | ||||||||||
Total number of Shares outstanding | 0 | 14,000 | 90,000 | |||||||||
Expiration date | 25-Oct-15 | 29-Apr-16 | 28-Apr-17 |
At December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
France | 8,920 | 10,560 | 10,660 | |||||||||
Italy | 8,120 | 10,090 | 10,320 | |||||||||
Rest of Europe | 1,070 | 1,730 | 1,580 | |||||||||
United States | 3,020 | 3,120 | 3,280 | |||||||||
Malta and Morocco | 5,760 | 6,990 | 7,330 | |||||||||
Asia | 17,640 | 19,690 | 18,600 | |||||||||
ST-NXP Wireless | 7,280 | — | — | |||||||||
Total | 51,810 | 52,180 | 51,770 | |||||||||
At December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Research and development | 11,900 | 10,570 | 10,300 | |||||||||
Marketing and Sales | 2,670 | 2,870 | 2,850 | |||||||||
Manufacturing | 32,290 | 33,520 | 33,420 | |||||||||
Administration and General Services | 2,470 | 2,570 | 2,600 | |||||||||
Divisional Functions | 2,480 | 2,650 | 2,600 | |||||||||
Total | 51,810 | 52,180 | 51,770 | |||||||||
131
Table of Contents
Item 7. | Major Shareholders and Related Party Transactions |
Common Shares Owned | ||||||||
Shareholders | Number | % | ||||||
STMicroelectronics Holding II B.V. (“ST Holding II”) | 250,704,754 | 27.5 | ||||||
Public | 494,721,710 | 54.3 | ||||||
Brandes Investment Partners(1) | 79,686,369 | 8.8 | ||||||
Capital World Investors | 49,164,000 | 5.4 | ||||||
Treasury shares | 36,030,472 | 3.9 | ||||||
Total | 910,307,305 | 100 | ||||||
(1) | According to information filed February 12, 2009 on Schedule 13G, Brandes Investment Partners’ shares in our company are beneficially owned by the following group of entities: Brandes Investment Partners, L.P., Brandes Investment Partners, Inc., Brandes Worldwide Holdings, L.P., Charles H. Brandes, Glenn R. Carlson and Jeffrey A. Busby. |
132
Table of Contents
Common Shares Owned | ||||||||
Number | % | |||||||
December 31, 2008 | 250,704,754 | 27.5 | ||||||
December 31, 2007 | 250,704,754 | 27.5 | ||||||
December 31, 2006 | 250,704,754 | 27.5 |
![(CHART)](https://capedge.com/proxy/20-F/0000950123-09-008750/y03037y0303703.gif)
(1) | FT1CI owns 50% of ST Holding and indirectly holds 125,352,377 of the Company’s common shares. | |
(2) | CDP and Finmeccanica own 50% of ST Holding and indirectly hold 91,644,941 and 33,707,436 of the Company’s common shares, respectively. CDP owns 30% of ST Holding, while Finmeccanica owns 20% of ST Holding based on voting rights. | |
(3) | ST Holding II owns 27.5% of the Company’s shares, the Public owns 54.3% of the Company’s shares and the Company holds 4.0% as Treasury Shares. |
133
Table of Contents
• | the decision of our French Shareholder and Italian Shareholders to equally align their respective equity participation in our Company, held through STH, through an agreed sale by Finmeccanica to FT1CI of 26,034,141 of our common shares or approximately 2.85% of our share capital; | |
• | the fact that CEA, a company owned and controlled by the French State and the controlling shareholder of Areva financed the acquisition of the shares being purchased by FT1CI from Finmeccanica and, upon such acquisition, also became a party to the STH Shareholders’ Agreement; | |
• | the decision to extend for a further three year period until March 17, 2011 the balancing period as defined under the STH Shareholders’ Agreement (see below under “Corporate Governance”); and | |
• | the decision to increase from 9.5% to 10.5% the minimum voting stakes to be held respectively by our French Shareholder and Italian Shareholders (see below under “Corporate Governance”). |
134
Table of Contents
135
Table of Contents
136
Table of Contents
137
Table of Contents
138
Table of Contents
139
Table of Contents
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Sales & other services | 325 | 272 | 118 | |||||||||
Research and development expenses | (63 | ) | (68 | ) | (43 | ) | ||||||
Other purchases | (77 | ) | (85 | ) | (70 | ) | ||||||
Other income and expenses | (7 | ) | (11 | ) | (21 | ) | ||||||
Accounts receivable | 63 | 44 | 20 | |||||||||
Accounts payable | 65 | 40 | 20 | |||||||||
Other assets | — | 2 | — |
140
Table of Contents
Item 8. | Financial Information |
141
Table of Contents
142
Table of Contents
• | Property damage and business interruption; | |
• | General liability and product liability; | |
• | Directors and officers liability; and | |
• | Transportation risks. |
143
Table of Contents
• | On May 14, 2008, our shareholders adopted the payment of a quarterly cash dividend with respect to the year ended December 31, 2007 of $0.36, which was paid in four equal installments to Dutch Registry Shareholders of record on May 19, 2008, August 18, 2008, November 26, 2008 and February 25, 2009 and New York Registry Shareholders of record on May 21, 2008, August 20, 2008, November 26, 2008 and February 25, 2009. | |
• | On April 26, 2007, our shareholders adopted the payment of a cash dividend with respect to the year ended December 31, 2006 of $0.30 payable to Dutch Registry Shareholders of record on May 21, 2007 and New York Registry Shareholders of record on May 23, 2007. This dividend was approximately 34% of our earnings in 2006. | |
• | On April 27, 2006, our shareholders adopted the payment of a cash dividend with respect to the year ended December 31, 2005 of $0.12 per share payable to Dutch Registry Shareholders of record on May 22, 2006 |
144
Table of Contents
and New York Registry Shareholders of record on May 24, 2006. This dividend was approximately 40% of our earnings in 2005. |
• | On March 18, 2005, our shareholders adopted the payment of a cash dividend with respect to the year ended December 31, 2004 of $0.12 per share payable to Dutch Registry Shareholders of record on May 23, 2005 and New York registry shareholders of record on May 25, 2005. This dividend was approximately 18% of our earnings in 2004. | |
• | On April 23, 2004, our shareholders adopted the payment of a cash dividend with respect to the year ended December 31, 2003 of $0.12 per share payable to Dutch Registry shareholders of record on May 21, 2004 and New York registry shareholders of record on May 26, 2004. This dividend was approximately 42% of our earnings for 2003. |
Item 9. | Listing |
145
Table of Contents
Average Daily Trading Volumes | ||||||||||||||||
Number of | Price Ranges | |||||||||||||||
Calendar Period | Shares | Capital | High | Low | ||||||||||||
(€) | (€) | (€) | ||||||||||||||
Annual Information for the Past Five Years | ||||||||||||||||
2004 | 5,368,569 | 92,993,241 | 23.81 | 13.25 | ||||||||||||
2005 | 5,367,485 | 72,641,065 | 15.81 | 10.83 | ||||||||||||
2006 | 5,748,008 | 78,944,778 | 16.56 | 11.34 | ||||||||||||
2007 | 5,430,551 | 71,352,748 | 15.61 | 9.70 | ||||||||||||
2008 | 7,490,827 | 54,414,076 | 9.89 | 4.52 | ||||||||||||
Quarterly Information for the Past Two Years | ||||||||||||||||
2007 | ||||||||||||||||
First quarter | 5,449,082 | 79,245,186 | 15.31 | 13.57 | ||||||||||||
Second quarter | 5,431,749 | 76,484,553 | 15.61 | 13.82 | ||||||||||||
Third quarter | 5,350,203 | 69,229,782 | 14.64 | 11.58 | ||||||||||||
Fourth quarter | 5,492,462 | 60,666,271 | 12.19 | 9.70 | ||||||||||||
2008 | ||||||||||||||||
First quarter | 7,813,598 | 62,410,156 | 9.89 | 6.21 | ||||||||||||
Second quarter | 8,068,187 | 61,286,480 | 8.70 | 6.55 | ||||||||||||
Third quarter | 8,051,382 | 62,656,909 | 9.49 | 6.17 | ||||||||||||
Fourth quarter | 6,036,775 | 35,239,921 | 7.66 | 4.52 | ||||||||||||
2009 | ||||||||||||||||
First quarter | 4,304,943 | 17,004,198 | 5.29 | 2.97 | ||||||||||||
Monthly Information for the Past 18 Months | ||||||||||||||||
2007 | ||||||||||||||||
December | 4,488,617 | 46,194,961 | 10.83 | 9.70 | ||||||||||||
2008 | ||||||||||||||||
January | 8,385,124 | 71,620,389 | 9.89 | 7.55 | ||||||||||||
February | 7,788,533 | 64,644,823 | 8.73 | 7.74 | ||||||||||||
March | 7,222,249 | 49,966,560 | 7.92 | 6.21 | ||||||||||||
April | 8,119,723 | 57,849,334 | 7.77 | 6.59 | ||||||||||||
May | 7,483,465 | 61,189,803 | 8.70 | 7.64 | ||||||||||||
June | 8,540,402 | 63,441,764 | 8.43 | 6.55 | ||||||||||||
July | 6,991,035 | 47,517,154 | 7.34 | 6.17 | ||||||||||||
August | 7,035,147 | 58,166,264 | 9.10 | 7.07 | ||||||||||||
September | 10,130,095 | 83,418,569 | 9.49 | 6.80 | ||||||||||||
October | 9,212,472 | 60,384,547 | 7.66 | 5.71 | ||||||||||||
November | 4,842,241 | 28,511,117 | 6.97 | 5.00 | ||||||||||||
December | 3,733,636 | 18,051,773 | 5.23 | 4.52 | ||||||||||||
2009 | ||||||||||||||||
January | 4,296,645 | 19,242,628 | 5.29 | 3.92 | ||||||||||||
February | 3,893,448 | 15,709,089 | 4.50 | 3.40 | ||||||||||||
March | 4,724,735 | 16,060,879 | 3.96 | 2.97 | ||||||||||||
April | 5,582,074 | 26,027,536 | 5.24 | 3.67 | ||||||||||||
May (through May 4th, 2009) | 4,540,241 | 4,540,241 | 5.3 | 4.97 |
146
Table of Contents
Average Daily Trading | ||||||||||||||||
Volumes | ||||||||||||||||
Number of | Price Ranges | |||||||||||||||
Calendar Period | Shares | Capital | High | Low | ||||||||||||
(€) | (€) | (€) | ||||||||||||||
Annual Information for the past five years | ||||||||||||||||
2004 | 15,563,346 | 269,570,814 | 23.81 | 13.25 | ||||||||||||
2005 | 15,530,038 | 210,190,100 | 15.82 | 10.82 | ||||||||||||
2006 | 10,316,084 | 141,689,828 | 16.55 | 11.33 | ||||||||||||
2007 | 7,485,654 | 98,885,773 | 15.60 | 9.80 | ||||||||||||
2008 | 7,194,358 | 52,370,415 | 9.90 | 4.52 | ||||||||||||
Quarterly Information for the past two years | ||||||||||||||||
2007 | �� | |||||||||||||||
First quarter | 9,719,941 | 140,442,674 | 15.32 | 13.63 | ||||||||||||
Second quarter | 7,925,067 | 115,156,104 | 15.60 | 13.82 | ||||||||||||
Third quarter | 6,479,636 | 83,424,814 | 14.64 | 11.57 | ||||||||||||
Fourth quarter | 5,785,437 | 63,752,010 | 12.16 | 9.80 | ||||||||||||
2008 | ||||||||||||||||
First quarter | 8,127,085 | 64,600,327 | 9.90 | 6.21 | ||||||||||||
Second quarter | 8,238,711 | 62,326,503 | 8.69 | 6.55 | ||||||||||||
Third quarter | 8,080,320 | 62,475,791 | 9.50 | 6.17 | ||||||||||||
Fourth quarter | 4,271,603 | 24,830,416 | 7.66 | 4.52 | ||||||||||||
2009 | ||||||||||||||||
First quarter | 4,684,540 | 18,251,262 | 5.29 | 2.97 | ||||||||||||
Monthly Information for the past 18 months | ||||||||||||||||
2007 | ||||||||||||||||
December | 4,887,232 | 50,380,846 | 10.81 | 9.80 | ||||||||||||
2008 | ||||||||||||||||
January | 10,071,980 | 86,256,895 | 9.90 | 7.65 | ||||||||||||
February | 6,982,043 | 57,925,024 | 8.73 | 7.75 | ||||||||||||
March | 7,140,553 | 49,413,382 | 7.93 | 6.21 | ||||||||||||
April | 8,308,719 | 59,132,772 | 7.77 | 6.56 | ||||||||||||
May | 8,253,457 | 67,468,476 | 8.70 | 7.64 | ||||||||||||
June | 8,137,962 | 60,473,973 | 8.44 | 6.55 | ||||||||||||
July | 7,589,829 | 51,635,916 | 7.35 | 6.17 | ||||||||||||
August | 7,898,607 | 65,185,228 | 9.11 | 7.08 | ||||||||||||
September | 8,758,459 | 72,107,600 | 9.50 | 6.70 | ||||||||||||
October | 6,327,113 | 41,402,428 | 7.66 | 5.68 | ||||||||||||
November | 3,411,346 | 19,925,492 | 6.95 | 5.00 | ||||||||||||
December | 2,761,473 | 13,391,689 | 5.59 | 4.52 | ||||||||||||
2009 | ||||||||||||||||
January | 3,902,013 | 17,479,162 | 5.29 | 3.92 | ||||||||||||
February | 4,308,788 | 17,383,807 | 4.51 | 3.42 | ||||||||||||
March | 5,842,820 | 19,890,819 | 3.96 | 2.97 | ||||||||||||
April | 7,841,101 | 36,474,844 | 5.26 | 3.67 | ||||||||||||
May (through May 4th, 2009) | 6,328,552 | 6,328,552 | 5.3 | 4.99 |
147
Table of Contents
Average Daily Trading Volumes | ||||||||||||||||
Number of | Price Ranges | |||||||||||||||
Calendar Period | Shares | Capital | High | Low | ||||||||||||
(US$) | (US$) | (US$) | ||||||||||||||
Annual Information for the past five years | ||||||||||||||||
2004 | 1,573,811 | 33,794,900 | 29.90 | 16.36 | ||||||||||||
2005 | 1,087,913 | 18,288,128 | 19.47 | 13.96 | ||||||||||||
2006 | 1,069,476 | 18,428,607 | 19.90 | 14.55 | ||||||||||||
2007 | 1,823,514 | 32,857,113 | 20.84 | 14.22 | ||||||||||||
2008 | 2,615,829 | 28,015,734 | 14.35 | 5.90 | ||||||||||||
Quarterly Information for the past two years | ||||||||||||||||
2007 | ||||||||||||||||
First quarter | 1,749,667 | 33,161,930 | 20.18 | 17.97 | ||||||||||||
Second quarter | 2,131,057 | 41,749,439 | 20.84 | 18.55 | ||||||||||||
Third quarter | 1,954,249 | 34,467,683 | 20.17 | 15.85 | ||||||||||||
Fourth quarter | 1,462,470 | 23,333,942 | 17.36 | 14.22 | ||||||||||||
2008 | ||||||||||||||||
First quarter | 2,820,620 | 33,477,056 | 14.35 | 9.88 | ||||||||||||
Second quarter | 2,644,859 | 31,194,168 | 13.56 | 10.33 | ||||||||||||
Third quarter | 2,836,136 | 32,884,996 | 13.74 | 9.75 | ||||||||||||
Fourth quarter | 2,171,570 | 16,580,957 | 10.46 | 5.9 | ||||||||||||
2009 | ||||||||||||||||
First quarter | 1,766,603 | 9,078,223 | 7.15 | 3.73 | ||||||||||||
Monthly Information for the past 18 months | ||||||||||||||||
2007 | ||||||||||||||||
December | 1,314,994 | 19,640,756 | 15.78 | 14.22 | ||||||||||||
2008 | ||||||||||||||||
January | 2,171,989 | 27,444,626 | 14.35 | 11.42 | ||||||||||||
February | 2,773,272 | 33,843,628 | 12.97 | 11.39 | ||||||||||||
March | 3,549,012 | 38,075,570 | 11.91 | 9.88 | ||||||||||||
April | 2,680,234 | 29,986,950 | 11.93 | 10.39 | ||||||||||||
May | 2,926,867 | 37,098,732 | 13.56 | 11.41 | ||||||||||||
June | 2,324,903 | 26,857,054 | 12.86 | 10.33 | ||||||||||||
July | 3,002,264 | 32,229,307 | 11.63 | 10.02 |
148
Table of Contents
• | compartment A comprises the companies with market capitalizations above €1 billion; | |
• | compartment B comprises the companies with market capitalizations from €150 million and up to and including €1 billion; and | |
• | compartment C comprises the companies with market capitalizations below €150 million. |
149
Table of Contents
150
Table of Contents
151
Table of Contents
Item 10. | Additional Information |
152
Table of Contents
153
Table of Contents
• | power to vote on proposals, arrangements or contracts in which such member is directly interested; | |
• | power, in the absence of an independent quorum, to vote on compensation to themselves or any members of the Supervisory Board; or | |
• | borrowing powers exercisable by the directors and how such borrowing powers can be varied. |
154
Table of Contents
• | our operational and financial objectives; | |
• | our strategy designed to achieve the objectives; and | |
• | the parameters to be applied in relation to our strategy,inter alia,regarding financial ratios. |
155
Table of Contents
156
Table of Contents
157
Table of Contents
158
Table of Contents
159
Table of Contents
160
Table of Contents
Cumulative | Nominal Value | Amount of | ||||||||||||||||||||||||||||
Nominal | Amount of | Cumulative | of Increase/ | Issue | Cumulative — | |||||||||||||||||||||||||
Number of | Value | Capital | Number of | Reduction in | Premium | Issue Premium | ||||||||||||||||||||||||
Year | Transaction | Shares | (Euro) | (Euro) | Shares | Capital | (Euro) | (Euro) | ||||||||||||||||||||||
March 29, 2003 | Exercise of options | 91,146 | 1.04 | 937,055,288 | 901,014,700 | 94,792 | 404,011 | 1,676,187,762 | ||||||||||||||||||||||
June 28, 2003 | Exercise of options and employee stock purchases | 217,490 | 1.04 | 937,281,478 | 901,232,190 | 226,190 | 2,075,922 | 1,678,263,684 | ||||||||||||||||||||||
September 27, 2003 | Exercise of options | 903,283 | 1.04 | 938,220,892 | 902,135,473 | 939,414 | 10,857,587 | 1,689,121,271 | ||||||||||||||||||||||
December 31, 2003 | Exercise of options | 634,261 | 1.04 | 938,880,523 | 902,769,734 | 659,631 | 4,458,391 | 1,693,579,662 | ||||||||||||||||||||||
March 27, 2004 | Exercise of options | 1,964,551 | 1.04 | 940,923,656 | 904,734,285 | 2,043,133 | 9,048,811 | 1,702,628,473 | ||||||||||||||||||||||
June 26, 2004 | Exercise of options | 84,740 | 1.04 | 941,011,786 | 904,819,025 | 88,130 | 1,640,712 | 1,704,269,185 | ||||||||||||||||||||||
September 25, 2004 | Exercise of options | 65,990 | 1.04 | 941,080,416 | 904,885,015 | 68,630 | 605,542 | 1,704,874,727 | ||||||||||||||||||||||
September 25, 2004 | Bonds conversion | 101 | 1.04 | 941,080,521 | 904,885,116 | 105 | 7,006 | 1,704,881,733 | ||||||||||||||||||||||
December 31, 2004 | Exercise of options | 422,120 | 1.04 | 941,519,525 | 905,307,236 | 439,005 | 4,021,536 | 1,708,903,269 | ||||||||||||||||||||||
December 31, 2004 | LYONs conversion | 1,761 | 1.04 | 941,521,357 | 905,308,997 | 1,831 | 46,225 | 1,708,949,494 | ||||||||||||||||||||||
April 2, 2005 | Exercise of options | 63,270 | 1.04 | 941,587,158 | 905,372,267 | 65,801 | 571,525 | 1,709,521,019 | ||||||||||||||||||||||
April 2, 2005 | LYONs conversion | 59 | 1.04 | 941,587,219 | 905,372,326 | 61 | 1,448 | 1,709,522,467 | ||||||||||||||||||||||
June 2, 2005 | Exercise of options | 145,454 | 1.04 | 941,738,491 | 905,517,780 | 151,272 | 1,436,236 | 1,710,958,703 | ||||||||||||||||||||||
October 1, 2005 | Exercise of options | 2,079,369 | 1.04 | 943,901,035 | 907,597,149 | 2,162,544 | 21,629,617 | 1,732,651,320 | ||||||||||||||||||||||
December 31, 2005 | Exercise of options | 227,130 | 1.04 | 944,137,250 | 907,824,279 | 236,215 | 2,062,234 | 1,734,713,554 | ||||||||||||||||||||||
April 1, 2006 | Exercise of options | 201,340 | 1.04 | 944,346,644 | 908,025,619 | 209,394 | 2,360,525 | 1,737,074,079 | ||||||||||||||||||||||
July 1, 2006 | Exercise of options | 1,398,210 | 1.04 | 945,800,782 | 909,423,829 | 1,454,138 | 9,009,053 | 1,746,083,132 | ||||||||||||||||||||||
September 30, 2006 | Exercise of options | 731,904 | 1.04 | 946,561,962 | 910,155,733 | 761,180 | 8,447,102 | 1,754,530,234 | ||||||||||||||||||||||
December 31, 2006 | Exercise of options | 2,200 | 1.04 | 946,564,250 | 910,157,933 | 2,288 | 2,420 | 1,754,532,654 | ||||||||||||||||||||||
March 31, 2007 | Exercise of options | 26,050 | 1.04 | 946,591,342 | 910,183,983 | 27,092 | 352,478 | 1,754,885,132 | ||||||||||||||||||||||
June 30, 2007 | Exercise of options | 105,117 | 1.04 | 946,700,664 | 910,289,100 | 109,322 | 1,315,306 | 1,756,200,438 | ||||||||||||||||||||||
September 29, 2007 | Exercise of options | 4,320 | 1.04 | 946,705,157 | 910,293,420 | 4,493 | 54,544 | 1,756,254,982 | ||||||||||||||||||||||
December 31, 2007 | Exercise of options | 0 | 1.04 | 946,705,157 | 910,293,420 | 0 | 0 | 1,756,254,982 | ||||||||||||||||||||||
March 30, 2008 | Exercise of options | 4,885 | 1.04 | 946,710,237 | 910,298,305 | 5,080 | 0 | 1,756,254,982 | ||||||||||||||||||||||
June 28, 2008 | Exercise of options | 9,000 | 1.04 | 946,719,597 | 910,307,305 | 9,360 | 0 | 1,756,254,982 | ||||||||||||||||||||||
September 27, 2008 | Exercise of options | 0 | 1.04 | 946,719,597 | 910,307,305 | 0 | 0 | 1,756,254,982 | ||||||||||||||||||||||
December 31, 2008 | Exercise of options | 0 | 1.04 | 946,719,597 | 910,307,305 | 0 | 0 | 1,756,254,982 |
161
Table of Contents
Nominal | ||||||||||||||||||||||||||||||||
Cumulative | Value of | Amount of | ||||||||||||||||||||||||||||||
Nominal | Amount of | Cumulative | Increase/ | Issue | Cumulative | |||||||||||||||||||||||||||
Number of | Value | Capital | Number of | Reduction | Premium | Issue Premium | ||||||||||||||||||||||||||
Year | Transaction | Shares | (Euro) | (Euro) | Shares | in Capital | (Euro) | (Euro) | ||||||||||||||||||||||||
December 31, 2005 | Conversion of bonds | 59 | 1.04 | 941,521,418 | 905,309,056 | 61 | 1,448 | �� | 1,708,950,942 | |||||||||||||||||||||||
December 31, 2005 | Exercise of options | 2,515,223 | 1.04 | 944,137,250 | 907,824,279 | 2,615,832 | 25,762,612 | 1,734,713,554 | ||||||||||||||||||||||||
December 31, 2006 | Exercise of options | 2,333,654 | 1.04 | 946,564,250 | 910,157,933 | 2,427,000 | 19,819,100 | 1,754,532,654 | ||||||||||||||||||||||||
December 31, 2007 | Exercise of options | 135,487 | 1.04 | 946,705,147 | 910,293,420 | 140,907 | 1,722,328 | 1,756,254,982 | ||||||||||||||||||||||||
December 31, 2008 | Exercise of options | 13,885 | 1.04 | 946,719,597 | 910,307,305 | 14,440 | 0 | 1,756,254,982 | ||||||||||||||||||||||||
March 28, 2009 | Exercise of options | — | 1.04 | 946,719,597 | 910,307,305 | — | — | 1,756,254,982 |
162
Table of Contents
1995 Plan | 2001 Plan | Total | ||||||||||
Remaining amount authorized to be granted | 0 | 0 | 0 | |||||||||
Amount exercised | 14,523,601 | 141,537 | 14,665,138 | |||||||||
Amount cancelled and expired | 17,038,340 | 8,997,874 | 26,036,214 | |||||||||
Amount outstanding | 0 | 38,594,772 | 38,594,772 |
2005 Plan | 2006 Plan | 2007 Plan | 2008 Plan | Total | ||||||||||||||||
Remaining amount authorized to be granted | 0 | 0 | 0 | 326,295 | 326,295 | |||||||||||||||
Amount vested | 2,580,034 | 3,171,320 | 1,189,335 | 0 | 6,940,689 | |||||||||||||||
Amount cancelled | 1,579,881 | 308,676 | 1,192,641 | 89,250 | 3,170,448 | |||||||||||||||
Amount outstanding | 0 | 1,651,644 | 3,529,864 | 5,684,455 | 10,865,963 |
Supervisory Board and Professionals | ||||||||||||
1999 | 2002 | Total | ||||||||||
Remaining amount authorized to be granted | 0 | 0 | 0 | |||||||||
Amount exercised | 18,000 | 0 | 18,000 | |||||||||
Amount cancelled and expired | 315,000 | 48,000 | 363,000 | |||||||||
Amount outstanding | 90,000 | 348,000 | 438,000 |
Supervisory Board and Professionals | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | Total | ||||||||||||||||
Remaining amount authorized to be granted | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Amount vested and/or exercised | 51,000 | 37,000 | 52,500 | 0 | 140,500 | |||||||||||||||
Amount cancelled | 15,000 | 15,000 | 22,500 | 22,500 | 75,000 | |||||||||||||||
Amount outstanding | 0 | 14,000 | 90,000 | 142,500 | 246,500 |
163
Table of Contents
164
Table of Contents
165
Table of Contents
• | distributions in cash or in kind, deemed and constructive distributions and repayments of capital not recognized as paid-in for Dutch dividend withholding tax purposes; | |
• | liquidation proceeds and proceeds of repurchase or redemption of shares in excess of the average capital recognized as paid-in for Dutch dividend withholding tax purposes; | |
• | the par value of shares issued by us to a holder of common shares or an increase of the par value of shares, as the case may be, to the extent that it does not appear that a contribution, recognized for Dutch dividend withholding tax purposes, has been made or will be made; and | |
• | partial repayment of capital, recognized as paid-in for Dutch dividend withholding tax purposes, if and to the extent that there are net profits (zuivere winst), unless (a) the general meeting of our shareholders has |
166
Table of Contents
resolved in advance to make such repayment and (b) the par value of the shares concerned has been reduced by an equal amount by way of an amendment to our articles of association. |
167
Table of Contents
• | 3% of the dividends paid by us in respect of which Dutch dividend withholding tax is withheld; and | |
• | 3% of the qualifying profit distributions grossed up by the foreign tax withheld on such distributions received from foreign subsidiaries and branches prior to the distribution of the dividend by us during the current calendar year and the two preceding calendar years (to the extent such distributions have not been taken into account previously when applying this test). |
• | the donor is, or the deceased was, resident or deemed to be resident in the Netherlands for purposes of gift or inheritance tax (as the case may be); or | |
• | the common shares are or were attributable to an enterprise or part of an enterprise that the donor or deceased carried on through a permanent establishment or a permanent representative in the Netherlands at the time of the gift or of the death of the deceased; or | |
• | the donor made a gift of common shares, then became a resident or deemed resident of the Netherlands, and died as a resident or deemed resident of the Netherlands within 180 days of the date of the gift. |
• | that is, for U.S. federal income tax purposes, (a) a citizen or individual resident of the United States, (b) a U.S. domestic corporation or a domestic entity taxable as a corporation, (c) an estate the income of which is |
168
Table of Contents
subject to U.S. federal income taxation regardless of its source, or (d) a trust if a court within the United States can exercise primary supervision over the administration of the trust and one or more U.S. persons are authorized to control all substantial decisions of the trust; |
• | that owns, directly, indirectly or by attribution, less than 10% of our voting power or outstanding share capital; | |
• | that holds the common shares as capital assets; | |
• | whose functional currency for U.S. federal income tax purposes is the U.S. dollar; | |
• | that is a resident of the United States and not also a resident of the Netherlands for purposes of the U.S./NL Income Tax Treaty; | |
• | that is entitled, under the “limitation on benefits” provisions contained in the U.S./NL Income Tax Treaty, to the benefits of the U.S./NL Income Tax Treaty; and | |
• | that does not have a permanent establishment or fixed base in the Netherlands. |
169
Table of Contents
170
Table of Contents
Item 11. | Quantitative and Qualitative Disclosures About Market Risk |
171
Table of Contents
172
Table of Contents
Fair Value at | ||||||||||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||||||||||
Total | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | 2008 | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,009 | $ | 1,009 | ||||||||||||||||||||||||||||
Average interest rate | 1.23 | % | ||||||||||||||||||||||||||||||
Current marketable securities | $ | 651 | $ | 651 | ||||||||||||||||||||||||||||
Average interest rate | 3.97 | % | ||||||||||||||||||||||||||||||
Non current marketable securities | $ | 242 | $ | 242 | ||||||||||||||||||||||||||||
Average interest rate | 4.46 | % | ||||||||||||||||||||||||||||||
Short-term deposits | ||||||||||||||||||||||||||||||||
Average interest rate | ||||||||||||||||||||||||||||||||
Restricted Cash | $ | 250 | $ | 250 | ||||||||||||||||||||||||||||
Average interest rate | 6.06 | % | ||||||||||||||||||||||||||||||
Long-term debt: | $ | 2,677 | 123 | 173 | 1,153 | 116 | 816 | 296 | $ | 2,435 | ||||||||||||||||||||||
Average interest rate | 2.38 | % |
Amounts in Millions | ||||
of U.S. Dollars | ||||
Long-term debt by currency as of December 31, 2008: | ||||
U.S. dollar | 1,139 | |||
Euro | 1,538 | |||
Total in U.S. dollars | $ | 2,677 | ||
Amounts in Millions | ||||
of U.S. Dollars | ||||
Long-term debt by currency as of December 31, 2007: | ||||
U.S. dollar | 1,313 | |||
Euro | 907 | |||
Total in U.S. dollars | $ | 2,220 | ||
173
Table of Contents
Notional Amount | Average Rate | Fair Value | ||||||||||||||||
Buy | EUR | Sell | USD | 1,031 | 1.4 | 23 | ||||||||||||
Buy | USD | Sell | EUR | 2 | 1.4 | 0 | ||||||||||||
Buy | USD | Sell | CAD | 8 | 1.3 | 0 | ||||||||||||
Buy | JPY | Sell | EUR | 3 | 120.7 | 0 | ||||||||||||
Buy | INR | Sell | USD | 24 | 49.5 | 0 | ||||||||||||
Buy | USD | Sell | JPY | 37 | 90.5 | 0 | ||||||||||||
Buy | SGD | Sell | USD | 96 | 1.5 | 3 | ||||||||||||
Buy | MYR | Sell | USD | 12 | 3.5 | 0 | ||||||||||||
Buy | GBP | Sell | USD | 23 | 1.5 | (1 | ) | |||||||||||
Buy | SEK | Sell | USD | 3 | 8.2 | 0 | ||||||||||||
Buy | CZK | Sell | USD | 1 | 18.8 | 0 | ||||||||||||
Buy | CHF | Sell | USD | 5 | 1.1 | 0 | ||||||||||||
Buy | USD | Sell | CHF | 6 | 1.0 | 0 | ||||||||||||
Buy | CNY | Sell | USD | 16 | 6.8 | 0 | ||||||||||||
1,268 | 25 | |||||||||||||||||
Notional Amount | Average Rate | Fair Value | ||||||||||||||||
Buy | EUR | Sell | USD | 483 | 1.4 | 12 | ||||||||||||
Buy | USD | Sell | CAD | 8 | 1.0 | 0 | ||||||||||||
Buy | JPY | Sell | EUR | 9 | 163.0 | 0 | ||||||||||||
Buy | INR | Sell | USD | 28 | 39.7 | 0 | ||||||||||||
Buy | USD | Sell | JPY | 19 | 112.7 | 0 | ||||||||||||
Buy | JPY | Sell | USD | 1 | 112.5 | 0 | ||||||||||||
Buy | SGD | Sell | USD | 108 | 1.4 | 0 | ||||||||||||
Buy | MYR | Sell | USD | 30 | 3.3 | 0 | ||||||||||||
Buy | GBP | Sell | USD | 41 | 2.0 | 0 | ||||||||||||
Buy | SEK | Sell | USD | 8 | 6.4 | 0 | ||||||||||||
Buy | CZK | Sell | USD | 1 | 18 | 0 | ||||||||||||
Buy | TND | Sell | USD | 1 | 1.2 | 0 | ||||||||||||
737 | 12 | |||||||||||||||||
Item 12. | Description of Securities Other Than Equity Securities |
174
Table of Contents
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
Item 15. | Controls and Procedures |
175
Table of Contents
Item 16A. | Audit Committee Financial Expert |
Item 16B. | Code of Ethics |
176
Table of Contents
Item 16C. | Principal Accountant Fees and Services |
Percentage of | Percentage of | |||||||||||||||
2008 | Total Fees | 2007 | Total Fees | |||||||||||||
Audit Fees | ||||||||||||||||
Statutory audit, certification, audit of individual and Consolidated Financial Statements | $ | 5,384,962 | 99 | % | $ | 5,758,230 | 97 | % | ||||||||
Audit-related fees | $ | 15,360 | 0.2 | % | 194,940 | 3 | % | |||||||||
Non-audit Fees | ||||||||||||||||
Tax compliance fees | $ | 40,880 | 0.8 | % | — | |||||||||||
Other fees | — | — | ||||||||||||||
Total | $ | 5,441,202 | 100 | % | $ | 5,953,170 | 100 | % | ||||||||
177
Table of Contents
Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
Maximum Number | ||||||||||||||||
Total Number of | of Securities that | |||||||||||||||
Total Number of | Securities Purchased | May yet be | ||||||||||||||
Securities | Average Price Paid | as Part of Publicly | Purchased Under | |||||||||||||
Period | Purchased | per Security | Announced Programs | the Programs | ||||||||||||
2008-01-01 to2008-01-31 | — | — | — | — | ||||||||||||
2008-02-01 to2008-02-29 | — | — | — | — | ||||||||||||
2008-03-01 to2008-03-31 | — | — | — | — | ||||||||||||
2008-04-01 to2008-04-30 | — | — | — | — | ||||||||||||
2008-05-01 to2008-05-31 | — | — | — | — | ||||||||||||
2008-06-01 to2008-06-30 | — | — | — | — | ||||||||||||
2008-07-01 to2008-07-31 | — | — | — | — | ||||||||||||
2008-08-01 to2008-08-31 | — | — | — | — | ||||||||||||
2008-09-01 to2008-09-30 | — | — | — | — | ||||||||||||
2008-10-01 to2008-10-31 | — | — | — | — | ||||||||||||
2008-11-01 to2008-11-30 | — | — | — | — | ||||||||||||
2008-12-01 to2008-12-31 | — | — | — | — |
Item 16F. | Change in Registrant’s Certifying Accountant |
Item 16G. | Corporate Governance |
• | Our corporate organization under Dutch law that entrusts our management to a Managing Board acting under the supervision and control of a Supervisory Board totally independent from the Managing Board. |
178
Table of Contents
Members of our Managing Board and of our Supervisory Board are appointed and dismissed by our shareholders. |
• | Our early adoption of policies on important issues such as “business ethics” and “conflicts of interest” and strict policies to comply with applicable regulatory requirements concerning financial reporting, insider trading and public disclosures. | |
• | Our compliance with Dutch securities laws, because we are a company incorporated under the laws of the Netherlands, as well as our compliance with American, French and Italian securities laws, because our shares are listed in these jurisdictions, in addition to our compliance with the corporate, social and financial laws applicable to our subsidiaries in the countries in which we do business. | |
• | Our broad-based activities in the field of corporate social responsibility, encompassing environmental, social, health, safety, educational and other related issues. | |
• | Our implementation of a non-compliance reporting channel (managed by a third party) for issues regarding accounting, internal controls or auditing. A special ombudsperson has been appointed by the ST Supervisory Board, following the proposal of its Audit Committee, to collect all complaints, whatever their source, regarding accounting, internal accounting controls or auditing matters, as well as the confidential, anonymous submission by ST employees of concerns regarding questionable accounting or auditing matters. | |
• | Our Principles for Sustainable Excellence (“PSE”), which we distributed to all employees in 2007 and which require us to integrate and execute all of our business activities, focusing on our employees, customers, shareholders and global business partners; | |
• | Our Ethics Committee, also set up in 2007, whose mandate is to provide advice to management and employees about our PSE and other ethical issues; and | |
• | Our Chief Compliance Officer, who reports directly to the Managing Board, acts as Executive Secretary to our Supervisory Board and chairs our Ethics Committee. |
179
Table of Contents
180
Table of Contents
181
Item 17. | Financial Statements |
Item 18. | Financial Statements |
Page | ||||
Financial Statements: | ||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-88 | ||||
Financial Statement Schedule: | ||||
S-1 |
Item 19. | Exhibits |
1.1 | Amended and Related Articles of Associations of STMicroelectronics N.V., dated May 15, 2007, as approved by the annual general meeting of Shareholders on April 26, 2007 (incorporated by reference toForm 20-F of STMicroelectronics N.V. filed on March 3, 2008). | |
4.1 | The master agreement by and between STMicroelectronics N.V., Intel Corporation, Redwood Blocker S.A.R.L., and Francisco Partners II (Cayman) L.P. dated May 22, 2007 (incorporated by reference toForm 6-K of STMicroelectronics N.V. filed on August 3, 2007). | |
4.2 | Form of ST Asset Contribution Agreement (incorporated by reference toForm 6-K of STMicroelectronics N.V. filed on August 3, 2007). | |
4.3 | Sale and Contribution Agreement between STMicroelectronics N.V. and NXP B.V. dated April 10, 2008. | |
4.4 | Framework Agreement by and between STMicroelectronics N.V. and Telefonaktiebolaget L.M. Ericsson dated August 19, 2008. | |
8.1 | Subsidiaries and Equity Investments of the Company. | |
12.1 | Certification of Carlo Bozotti, President and Chief Executive Officer of STMicroelectronics N.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
12.2 | Certification of Carlo Ferro, Executive Vice President and Chief Financial Officer of STMicroelectronics N.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
13.1 | Certification of Carlo Bozotti, President and Chief Executive Officer of STMicroelectronics N.V., and Carlo Ferro, Executive Vice President and Chief Financial Officer of STMicroelectronics N.V., pursuant to 18 U.S.C. §1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. | |
15.1 | Consent of Independent Registered Public Accounting Firm. | |
15.2 | Consent of Independent Registered Public Accounting Firm for Numonyx Holdings B.V. |
182
Table of Contents
ADSL | Asymmetrical digital subscriber line | |
ASD | application-specific discrete technology | |
ASIC | application-specific integrated circuit | |
ASSP | application-specific standard product | |
BCD | bipolar, CMOS and DMOS process technology | |
BiCMOS | bipolar and CMOS process technology | |
CAD | computer aided design | |
CMOS | complementary metal-on silicon oxide semiconductor | |
CODEC | audio coding and decoding functions | |
CPE | customer premises equipment | |
DMOS | diffused metal-on silicon oxide semiconductor | |
DRAMs | dynamic random access memory | |
DSL | digital subscriber line | |
DSP | digital signal processor | |
EMAS | Eco-Management and Audit Scheme, the voluntary European Community scheme for companies performing industrial activities for the evaluation and improvement of environmental performance | |
EEPROM | electrically erasable programmable read-only memory | |
EPROM | erasable programmable read-only memory | |
EWS | electrical wafer sorting | |
G-bit | gigabit | |
GPRS | global packet radio service | |
GPS | global positioning system | |
GSM | global system for mobile communications | |
GSM/GPRS | European standard for mobile phones | |
HCMOS | high-speed complementary metal-on silicon oxide semiconductor | |
IC | integrated circuit | |
IGBT | insulated gate bipolar transistors | |
IPAD | integrated passive and active devices | |
ISO | International Organization for Standardization | |
K-bit | kilobit | |
LAN | local area network | |
M-bit | megabit | |
MEMS | micro-electro-mechanical system | |
MOS | metal-on silicon oxide semiconductor process technology |
183
Table of Contents
MOSFET | metal-on silicon oxide semiconductor field effect transistor | |
MPEG | motion picture experts group | |
ODM | original design manufacturer | |
OEM | original equipment manufacturer | |
OTP | one-time programmable | |
PDA | personal digital assistant | |
PFC | power factor corrector | |
PROM | programmable read-only memory | |
PSM | programmable system memories | |
RAM | random access memory | |
RF | radio frequency | |
RISC | reduced instruction set computing | |
ROM | read-only memory | |
SAM | serviceable available market | |
SCR | silicon controlled rectifier | |
SLIC | subscriber line interface card | |
SMPS | switch-mode power supply | |
SoC | system-on-chip | |
SRAM | static random access memory | |
SNVM | serial nonvolatile memories | |
TAM | total available market | |
USB | universal serial bus | |
VIPpowertm | vertical integration power | |
VLSI | very large scale integration | |
XDSL | digital subscriber line |
184
Table of Contents
STMICROELECTRONICS N.V. | ||||
Date: May 13, 2009 | By: | /s/ Carlo Bozotti | ||
Carlo Bozotti President and Chief Executive Officer |
185
Page | ||||
Financial Statements: | ||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-88 | ||||
Financial Statement Schedule: | ||||
S-1 |
F-1
Table of Contents
F-2
Table of Contents
/s/ Travis Randolph | /s/ Felix Roth | |
Travis Randolph | Felix Roth |
F-3
Table of Contents
Twelve Months Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Net sales | 9,792 | 9,966 | 9,838 | |||||||||
Other revenues | 50 | 35 | 16 | |||||||||
Net revenues | 9,842 | 10,001 | 9,854 | |||||||||
Cost of sales | (6,282 | ) | (6,465 | ) | (6,331 | ) | ||||||
Gross profit | 3,560 | 3,536 | 3,523 | |||||||||
Selling, general and administrative | (1,187 | ) | (1,099 | ) | (1,067 | ) | ||||||
Research and development | (2,152 | ) | (1,802 | ) | (1,667 | ) | ||||||
Other income and expenses, net | 62 | 48 | (35 | ) | ||||||||
Impairment, restructuring charges and other related closure costs | (481 | ) | (1,228 | ) | (77 | ) | ||||||
Operating income (loss) | (198 | ) | (545 | ) | 677 | |||||||
Other -than-temporary impairment charge on financial assets | (138 | ) | (46 | ) | — | |||||||
Interest income, net | 51 | 83 | 93 | |||||||||
Earnings (loss) on equity investments | (553 | ) | 14 | (6 | ) | |||||||
Unrealized gain on financial assets | 15 | — | — | |||||||||
Income (loss) before income taxes and minority interests | (823 | ) | (494 | ) | 764 | |||||||
Income tax benefit | 43 | 23 | 20 | |||||||||
Income (loss) before minority interests | (780 | ) | (471 | ) | 784 | |||||||
Minority interests | (6 | ) | (6 | ) | (2 | ) | ||||||
Net income (loss) | (786 | ) | (477 | ) | 782 | |||||||
Earnings (loss) per share (Basic) | (0.88 | ) | (0.53 | ) | 0.87 | |||||||
Earnings (loss) per share (Diluted) | (0.88 | ) | (0.53 | ) | 0.83 | |||||||
![(ST LOGO)](https://capedge.com/proxy/20-F/0000950123-09-008750/y03037y0303701.gif)
F-4
Table of Contents
As at | ||||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Assets | ||||||||
Current assets : | ||||||||
Cash and cash equivalents | 1,009 | 1,855 | ||||||
Marketable securities | 651 | 1,014 | ||||||
Trade accounts receivable, net | 1,064 | 1,605 | ||||||
Inventories, net | 1,840 | 1,354 | ||||||
Deferred tax assets | 252 | 205 | ||||||
Assets held for sale | — | 1,017 | ||||||
Other receivables and assets | 685 | 612 | ||||||
Total current assets | 5,501 | 7,662 | ||||||
Goodwill | 958 | 290 | ||||||
Other intangible assets, net | 863 | 238 | ||||||
Property, plant and equipment, net | 4,739 | 5,044 | ||||||
Long-term deferred tax assets | 373 | 237 | ||||||
Equity investments | 510 | — | ||||||
Restricted cash | 250 | 250 | ||||||
Non-current marketable securities | 242 | 369 | ||||||
Other investments and other non-current assets | 477 | 182 | ||||||
8,412 | 6,610 | |||||||
Total assets | 13,913 | 14,272 | ||||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Bank overdrafts | 20 | — | ||||||
Current portion of long-term debt | 123 | 103 | ||||||
Trade accounts payable | 847 | 1,065 | ||||||
Other payables and accrued liabilities | 996 | 744 | ||||||
Dividends payable to shareholders | 79 | — | ||||||
Deferred tax liabilities | 28 | 11 | ||||||
Accrued income tax | 125 | 154 | ||||||
Total current liabilities | 2,218 | 2,077 | ||||||
Long-term debt | 2,554 | 2,117 | ||||||
Reserve for pension and termination indemnities | 332 | 323 | ||||||
Long-term deferred tax liabilities | 27 | 14 | ||||||
Other non-current liabilities | 350 | 115 | ||||||
3,263 | 2,569 | |||||||
Total liabilities | 5,481 | 4,646 | ||||||
Minority interests | 276 | 53 | ||||||
Common stock (preferred stock: 540,000,000 shares authorized, not issued; common stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 910,307,305 shares issued, 874,276,833 shares outstanding) | 1,156 | 1,156 | ||||||
Capital surplus | 2,324 | 2,097 | ||||||
Accumulated result | 4,064 | 5,274 | ||||||
Accumulated other comprehensive income | 1,094 | 1,320 | ||||||
Treasury stock | (482 | ) | (274 | ) | ||||
Shareholders’ equity | 8,156 | 9,573 | ||||||
Total liabilities and shareholders’ equity | 13,913 | 14,272 | ||||||
![(ST LOGO)](https://capedge.com/proxy/20-F/0000950123-09-008750/y03037y0303702.gif)
F-5
Table of Contents
Twelve Months Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | (786 | ) | (477 | ) | 782 | |||||||
Items to reconcile net income and cash flows from operating activities: | ||||||||||||
Depreciation and amortization | 1,366 | 1,413 | 1,766 | |||||||||
Amortization of discount on convertible debt | 18 | 18 | 18 | |||||||||
Other-than-temporary impairment charge on financial assets | 138 | 46 | — | |||||||||
Unrealized gain on financial assets | (15 | ) | — | — | ||||||||
Other non-cash items | 159 | 109 | 50 | |||||||||
Minority interest in net income of subsidiaries | 6 | 6 | 2 | |||||||||
Deferred income tax | (69 | ) | (148 | ) | (74 | ) | ||||||
(Earnings) loss on equity investments | 553 | (14 | ) | 6 | ||||||||
Impairment, restructuring charges and other related closure costs, net of cash payments | 371 | 1,173 | 1 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Trade receivables, net | 565 | 2 | (104 | ) | ||||||||
Inventories, net | (299 | ) | 24 | (161 | ) | |||||||
Trade payables | (34 | ) | 19 | 36 | ||||||||
Other assets and liabilities, net | (251 | ) | 17 | 169 | ||||||||
Net cash from operating activities | 1,722 | 2,188 | 2,491 | |||||||||
Cash flows from investing activities: | ||||||||||||
Payment for purchase of tangible assets | (983 | ) | (1,140 | ) | (1,533 | ) | ||||||
Payment for purchase of marketable securities | — | (708 | ) | (864 | ) | |||||||
Proceeds from sale of marketable securities | 351 | 101 | 100 | |||||||||
Investment in short-term deposits | — | — | (903 | ) | ||||||||
Proceeds from matured short-term deposits | — | 250 | 653 | |||||||||
Restricted cash | — | (32 | ) | (218 | ) | |||||||
Investment in intangible and financial assets | (91 | ) | (208 | ) | (86 | ) | ||||||
Proceeds from the sale of Accent subsidiary | — | — | 7 | |||||||||
Capital contributions to equity investments | — | — | (213 | ) | ||||||||
Payment for business acquisitions, net of cash and cash equivalents acquired | (1,694 | ) | — | — | ||||||||
Net cash used in investing activities | (2,417 | ) | (1,737 | ) | (3,057 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long-term debt | 663 | 102 | 1,744 | |||||||||
Repayment of long-term debt | (187 | ) | (125 | ) | (1,522 | ) | ||||||
Increase (decrease) in short-term facilities | 20 | — | (12 | ) | ||||||||
Capital increase | — | 2 | 28 | |||||||||
Repurchase of common stock | (313 | ) | — | — | ||||||||
Dividends paid | (240 | ) | (269 | ) | (107 | ) | ||||||
Dividends paid to minority interests | (10 | ) | (6 | ) | — | |||||||
Other financing activities | — | — | 1 | |||||||||
Net cash from (used in) financing activities | (67 | ) | (296 | ) | 132 | |||||||
Effect of changes in exchange rates | (84 | ) | 41 | 66 | ||||||||
Net cash increase (decrease) | (846 | ) | 196 | (368 | ) | |||||||
Cash and cash equivalents at beginning of the period | 1,855 | 1,659 | 2,027 | |||||||||
Cash and cash equivalents at end of the period | 1,009 | 1,855 | 1,659 | |||||||||
Supplemental cash information: | ||||||||||||
Interest paid | 63 | 52 | 29 | |||||||||
Income tax paid | 154 | 133 | 117 |
![(ST LOGO)](https://capedge.com/proxy/20-F/0000950123-09-008750/y03037y0303702.gif)
F-6
Table of Contents
Accumulated | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Common | Capital | Treasury | Accumulated | Comprehensive | Shareholders’ | |||||||||||||||||||
Stock | Surplus | Stock | Result | income (loss) | Equity | |||||||||||||||||||
Balance as of December 31, 2005 | 1,153 | 1,967 | (348 | ) | 5,427 | 281 | 8,480 | |||||||||||||||||
Capital increase | 3 | 25 | 28 | |||||||||||||||||||||
Stock-based compensation expense | 29 | 16 | (16 | ) | 29 | |||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||
Net Income | 782 | 782 | ||||||||||||||||||||||
Other comprehensive income, net of tax | 535 | 535 | ||||||||||||||||||||||
Comprehensive income | 1,317 | |||||||||||||||||||||||
Dividends, $0.12 per share | (107 | ) | (107 | ) | ||||||||||||||||||||
Balance as of December 31, 2006 | 1,156 | 2,021 | (332 | ) | 6,086 | 816 | 9,747 | |||||||||||||||||
Cumulative effect of FIN 48 adoption | (8 | ) | (8 | ) | ||||||||||||||||||||
Capital increase | 2 | 2 | ||||||||||||||||||||||
Stock-based compensation expense | 74 | 58 | (58 | ) | 74 | |||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||
Net Loss | (477 | ) | (477 | ) | ||||||||||||||||||||
Other comprehensive income, net of tax | 504 | 504 | ||||||||||||||||||||||
Comprehensive income | 27 | |||||||||||||||||||||||
Dividends, $0.30 per share | (269 | ) | (269 | ) | ||||||||||||||||||||
Balance as of December 31, 2007 | 1,156 | 2,097 | (274 | ) | 5,274 | 1,320 | 9,573 | |||||||||||||||||
Repurchase of common stock | (313 | ) | (313 | ) | ||||||||||||||||||||
Issuance of shares by subsidiary | 152 | 152 | ||||||||||||||||||||||
Stock-based compensation expense | 75 | 105 | (105 | ) | 75 | |||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||
Net loss | (786 | ) | (786 | ) | ||||||||||||||||||||
Other comprehensive loss, net of tax | (226 | ) | (226 | ) | ||||||||||||||||||||
Comprehensive loss | (1,012 | ) | ||||||||||||||||||||||
Dividends, $0.36 per share | (319 | ) | (319 | ) | ||||||||||||||||||||
Balance as of December 31, 2008 | 1,156 | 2,324 | (482 | ) | 4,064 | 1,094 | 8,156 | |||||||||||||||||
F-7
Table of Contents
(in millions of U.S. dollars, except per share amounts)
1. | THE COMPANY |
2. | ACCOUNTING POLICIES |
F-8
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-9
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-10
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-11
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-12
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-13
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-14
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-15
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-16
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-17
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Buildings | 33 years | |||
Facilities & leasehold improvements | 5-10 years | |||
Machinery and equipment | 3-10 years | |||
Computer and R&D equipment | 3-6 years | |||
Other | 2-5 years |
F-18
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-19
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-20
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(a) | Pension obligations |
F-21
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(b) | Other post-employment obligations |
(c) | Termination benefits |
(d) | Profit-sharing and bonus plans |
(e) | Other long-term employee benefits |
F-22
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(f) | Share-based compensation |
(a) | Convertible debt |
F-23
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(b) | Bank loans and senior bonds |
F-24
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(a) | Accounting pronouncements effective in 2008 |
F-25
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(b) | Accounting pronouncements expected to impact the Company’s operations that are not yet effective and have not been adopted early by the Company |
F-26
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-27
Table of Contents
(in millions of U.S. dollars, except per share amounts)
(c) | Accounting pronouncements that are not yet effective and are not expected to impact the Company’s operations: |
• | EITF 07-1,Accounting for Collaborative Arrangements | |
• | EITF 07-4,Application of the Two-Class Method under FAS 128 to Master Limited Partnerships | |
• | FAS 163,Accounting for Financial Guarantee Insurance Contracts | |
• | EITF 07-5,Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock |
F-28
Table of Contents
(in millions of U.S. dollars, except per share amounts)
• | EITF 08-3,Accounting by Lessees for Maintenance Deposits under Lease Agreements | |
• | EITF 08-5,Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement. | |
• | EITF 08-8,Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount that is Based on the Stock of an Entity’s Consolidated Subsidiary |
3. | BUSINESS COMBINATIONS |
F-29
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Twelve Months Ended | Twelve Months Ended | |||||||
December 31, | December 31, | |||||||
Pro Forma Statements of Income (Unaudited) | 2008 | 2007 | ||||||
In millions of U.S. dollars, | ||||||||
except per share amounts | ||||||||
Net revenues | 10,650 | 11,654 | ||||||
Gross profit | 3,880 | 4,109 | ||||||
Operating expenses | (4,185 | ) | (4,891 | ) | ||||
Operating loss | (306 | ) | (782 | ) | ||||
Net loss | (896 | ) | (737 | ) | ||||
Loss per share (basic) | (1.00 | ) | (0.82 | ) | ||||
Loss per share (diluted) | (1.00 | ) | (0.82 | ) |
F-30
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Twelve Months Ended | Twelve Months Ended | |||||||
December 31, | December 31, | |||||||
Statements of Income, as Reported | 2008 | 2007 | ||||||
In millions of U.S. dollars, | ||||||||
except per share amounts | ||||||||
Net revenues | 9,842 | 10,001 | ||||||
Gross profit | 3,560 | 3,536 | ||||||
Operating expenses | (3,758 | ) | (4,081 | ) | ||||
Operating loss | (198 | ) | (545 | ) | ||||
Net loss | (786 | ) | (477 | ) | ||||
Loss per share (basic) | (0.88 | ) | (0.53 | ) | ||||
Loss per share (diluted) | (0.88 | ) | (0.53 | ) |
4. | EQUITY INVESTMENTS |
F-31
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Statement of Income Information: | ||||
Net sales | 1,165 | |||
Gross profit | 266 | |||
Net income (loss) | (129 | ) | ||
Financial Position Information: | ||||
Current assets | 1,614 | |||
Noncurrent assets | 1,412 | |||
Current liabilities | 512 | |||
Noncurrent liabilities | 860 | |||
Net worth | 1,654 |
F-32
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-33
Table of Contents
(in millions of U.S. dollars, except per share amounts)
5. | TRADE ACCOUNTS RECEIVABLE, NET |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Trade accounts receivable | 1,089 | 1,626 | ||||||
Less valuation allowance | (25 | ) | (21 | ) | ||||
Total | 1,064 | 1,605 | ||||||
6. | INVENTORIES, NET |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Raw materials | 76 | 72 | ||||||
Work-in-process | 1,124 | 808 | ||||||
Finished products | 640 | 474 | ||||||
Total | 1,840 | 1,354 | ||||||
7. | ASSETS HELD FOR SALE |
F-34
Table of Contents
(in millions of U.S. dollars, except per share amounts)
8. | OTHER RECEIVABLES AND ASSETS |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Receivables from government agencies | 125 | 143 | ||||||
Taxes and other government receivables | 238 | 258 | ||||||
Advances to suppliers | 3 | 5 | ||||||
Advances to employees | 11 | 9 | ||||||
Advances to State and government agencies | 69 | 9 | ||||||
Insurance prepayments | 6 | 5 | ||||||
Rental prepayments | 2 | 3 | ||||||
License and technology agreement prepayments | 21 | 17 | ||||||
Other prepaid expenses | 35 | 17 | ||||||
Loans and deposits | 18 | 15 | ||||||
Accrued income | 14 | 11 | ||||||
Interest receivable | 16 | 28 | ||||||
Receivables for sale of long-lived assets | 1 | 8 | ||||||
Purchased currency options | 27 | 12 | ||||||
Foreign exchange forward contracts | 10 | 1 | ||||||
Held-for-trading cancellable swaps | 34 | — | ||||||
Sundry debtors within cooperation agreements | 29 | 30 | ||||||
Receivables for payments on behalf of Numonyx | — | 26 | ||||||
Other current assets | 26 | 15 | ||||||
Total | 685 | 612 | ||||||
F-35
Table of Contents
(in millions of U.S. dollars, except per share amounts)
9. | GOODWILL |
Automotive | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Computer and | ||||||||||||||||||||
Communication | Industrial and | |||||||||||||||||||
Infrastructure | Wireless | Multisegment | ||||||||||||||||||
Product | Products | Products | ||||||||||||||||||
Groups | Sector | Sector | ||||||||||||||||||
(‘‘ACCI”) | (‘‘WPS”) | (‘‘IMS”) | Other | Total | ||||||||||||||||
December 31, 2006 | 41 | 89 | 91 | 2 | 223 | |||||||||||||||
Business Combination | — | 58 | — | — | 58 | |||||||||||||||
Foreign currency translation | — | — | 9 | — | 9 | |||||||||||||||
December 31, 2007 | 41 | 147 | 100 | 2 | 290 | |||||||||||||||
Business Combination | 15 | 669 | — | — | 684 | |||||||||||||||
PGI goodwill impairment | (4 | ) | — | — | (2 | ) | (6 | ) | ||||||||||||
Incard goodwill impairment | — | — | (7 | ) | — | (7 | ) | |||||||||||||
Foreign currency translation | (1 | ) | — | (2 | ) | — | (3 | ) | ||||||||||||
December 31, 2008 | 51 | 816 | 91 | — | 958 | |||||||||||||||
F-36
Table of Contents
(in millions of U.S. dollars, except per share amounts)
10. | OTHER INTANGIBLE ASSETS |
Gross | Accumulated | Net | ||||||||||
December 31, 2008 | Cost | Amortization | Cost | |||||||||
Technologies & licences | 707 | (365 | ) | 342 | ||||||||
Contractual customer relationships | 436 | (22 | ) | 414 | ||||||||
Purchased software | 253 | (200 | ) | 53 | ||||||||
Internally developed software | 125 | (71 | ) | 54 | ||||||||
Total | 1,521 | (658 | ) | 863 | ||||||||
Gross | Accumulated | Net | ||||||||||
December 31, 2007 | Cost | Amortization | Cost | |||||||||
Technologies & licences | 431 | (303 | ) | 128 | ||||||||
Contractual customer relationships | 4 | (4 | ) | — | ||||||||
Purchased software | 230 | (179 | ) | 51 | ||||||||
Internally developed software | 124 | (65 | ) | 59 | ||||||||
Total | 789 | (551 | ) | 238 |
F-37
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Year | ||||
2009 | 231 | |||
2010 | 208 | |||
2011 | 185 | |||
2012 | 123 | |||
2013 | 65 | |||
Thereafter | 51 | |||
Total | 863 | |||
11. | PROPERTY, PLANT AND EQUIPMENT |
Gross | Accumulated | Net | ||||||||||
December 31, 2008 | Cost | Depreciation | Cost | |||||||||
Land | 89 | — | 89 | |||||||||
Buildings | 1,001 | (264 | ) | 737 | ||||||||
Capital leases | 68 | (53 | ) | 15 | ||||||||
Facilities & leasehold improvements | 3,153 | (2,115 | ) | 1,038 | ||||||||
Machinery and equipment | 13,700 | (11,037 | ) | 2,663 | ||||||||
Computer and R&D equipment | 528 | (440 | ) | 88 | ||||||||
Other tangible assets | 187 | (127 | ) | 60 | ||||||||
Construction in progress | 49 | — | 49 | |||||||||
Total | 18,775 | (14,036 | ) | 4,739 | ||||||||
Gross | Accumulated | Net | ||||||||||
December 31, 2007 | Cost | Depreciation | Cost | |||||||||
Land | 91 | — | 91 | |||||||||
Buildings | 1,036 | (344 | ) | 692 | ||||||||
Capital leases | 71 | (49 | ) | 22 | ||||||||
Facilities & leasehold improvements | 3,205 | (1,975 | ) | 1,230 | ||||||||
Machinery and equipment | 13,938 | (11,183 | ) | 2,755 | ||||||||
Computer and R&D equipment | 554 | (458 | ) | 96 | ||||||||
Other tangible assets | 185 | (128 | ) | 57 | ||||||||
Construction in progress | 101 | — | 101 | |||||||||
Total | 19,181 | (14,137 | ) | 5,044 | ||||||||
F-38
Table of Contents
(in millions of U.S. dollars, except per share amounts)
12. | AVAILABLE-FOR-SALE FINANCIAL ASSETS |
F-39
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-40
Table of Contents
(in millions of U.S. dollars, except per share amounts)
13. | SHORT-TERM DEPOSITS |
14. | OTHER INVESTMENTS AND OTHER NON-CURRENT ASSETS |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Investments carried at cost | 32 | 25 | ||||||
Available-for-sale equity securities | 5 | 5 | ||||||
Long-term notes from equity investment | 168 | — | ||||||
Held-for-trading equity securities | 7 | 9 | ||||||
Long-term receivables related to funding | 8 | 46 | ||||||
Long-term receivables related to tax refund | 206 | 34 | ||||||
Debt issuance costs, net | 7 | 11 | ||||||
Cancellable swaps designated as fair value hedge | — | 8 | ||||||
Deposits and other non-current assets | 44 | 44 | ||||||
Total | 477 | 182 | ||||||
F-41
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-42
Table of Contents
(in millions of U.S. dollars, except per share amounts)
15. | OTHER PAYABLES AND ACCRUED LIABILITIES |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Taxes other than income taxes | 91 | 91 | ||||||
Accrued payroll | 319 | 300 | ||||||
Accrued social charges | 146 | 143 | ||||||
Advances received on government funding | 44 | 28 | ||||||
Advances from customers | 7 | 10 | ||||||
Accounts payable from Numonyx, net | 7 | — | ||||||
Obligations for capacity rights granted to third parties | 29 | — | ||||||
Foreign exchange forward contracts | 1 | 1 | ||||||
Purchased currency options | 4 | — | ||||||
Current portion of provision for restructuring | 197 | 43 | ||||||
Pension and termination benefits | 21 | 23 | ||||||
Warranty and product guarantee provisions | 4 | 4 | ||||||
Accrued interest | 8 | 6 | ||||||
Royalties | 14 | 20 | ||||||
Acquisition-related expenses | 17 | — | ||||||
Other | 87 | 75 | ||||||
Total | 996 | 744 | ||||||
16. | POST-RETIREMENT AND OTHER LONG-TERM EMPLOYEES BENEFITS |
F-43
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Pension Benefits | Other Long-Term Benefits | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of year | 590 | 572 | 42 | 3 | ||||||||||||
Service cost | 20 | 19 | 4 | 3 | ||||||||||||
Interest cost | 32 | 28 | 3 | 2 | ||||||||||||
Employee contributions | 3 | 3 | — | — | ||||||||||||
Benefits paid | (35 | ) | (26 | ) | (8 | ) | (1 | ) | ||||||||
Effect of settlement | (5 | ) | (1 | ) | — | — | ||||||||||
Effect of curtailment | (1 | ) | (7 | ) | — | — | ||||||||||
Actuarial (gain) loss | 15 | (41 | ) | 1 | (4 | ) | ||||||||||
Transfer in | 70 | — | 8 | — | ||||||||||||
Transfer out | (53 | ) | — | (5 | ) | — | ||||||||||
Plan amendment | (3 | ) | 2 | — | 31 | |||||||||||
Foreign currency translation adjustment | (46 | ) | 38 | (3 | ) | 8 | ||||||||||
Other | — | 3 | — | — | ||||||||||||
Benefit obligation at end of year | 587 | 590 | 42 | 42 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Plan assets at fair value at beginning of year | 278 | 241 | — | — | ||||||||||||
Expected return on plan assets | 18 | 15 | — | — | ||||||||||||
Employer contributions | 16 | 16 | — | — | ||||||||||||
Employee contributions | 2 | 2 | — | — | ||||||||||||
Benefits paid | (11 | ) | (9 | ) | — | — | ||||||||||
Effect of settlement | (2 | ) | (1 | ) | — | — | ||||||||||
Actuarial gain (loss) | (59 | ) | 7 | — | — | |||||||||||
Transfer in | 54 | — | — | — | ||||||||||||
Transfer out | (5 | ) | — | — | ||||||||||||
Foreign currency translation adjustments | (28 | ) | 7 | — | — | |||||||||||
Other | (1 | ) | — | — | — | |||||||||||
Plan assets at fair value at end of year | 262 | 278 | — | — | ||||||||||||
Funded status | (325 | ) | (312 | ) | (42 | ) | (42 | ) | ||||||||
Net amount recognized in the balance sheet consisted of the following: | ||||||||||||||||
Non current assets | 1 | 4 | — | — | ||||||||||||
Current liabilities | (5 | ) | (6 | ) | (2 | ) | (13 | ) | ||||||||
Non Current liabilities | (321 | ) | (310 | ) | (40 | ) | (29 | ) | ||||||||
Net amount recognized | (325 | ) | (312 | ) | (42 | ) | (42 | ) | ||||||||
F-44
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Before tax | Foreign | Net of tax | ||||||||||||||
amount as at | currency | amount as at | ||||||||||||||
December 31, | Tax (expense or | translation | December 31, | |||||||||||||
2008 | benefit) | adjustment | 2008 | |||||||||||||
Net actuarial loss generated in current year | (75 | ) | 14 | 7 | (54 | ) | ||||||||||
Amortization of actuarial loss | 2 | 2 | ||||||||||||||
Net prior service cost arising during period | 3 | (1 | ) | 2 | ||||||||||||
Amortization of prior service cost | 2 | 2 | ||||||||||||||
Changes in Other comprehensive income | (68 | ) | 13 | 7 | (48 | ) | ||||||||||
Before tax | Foreign | Net of tax | ||||||||||||||
amount as at | currency | amount as at | ||||||||||||||
December 31, | Tax (expense or | translation | December 31, | |||||||||||||
2007 | benefit) | adjustment | 2007 | |||||||||||||
Net actuarial gain generated in year | 48 | (9 | ) | (2 | ) | 37 | ||||||||||
Amortization of actuarial gain | (3 | ) | — | — | (3 | ) | ||||||||||
Effect of curtailment, net | 6 | — | — | 6 | ||||||||||||
Net prior service cost arising during period | (2 | ) | — | — | (2 | ) | ||||||||||
Amortization of prior service cost | 2 | — | — | 2 | ||||||||||||
Changes in Other comprehensive income | 51 | (9 | ) | (2 | ) | 40 | ||||||||||
Pension Benefits | Other Long-term Benefits | |||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
Service cost | 20 | 19 | 38 | 4 | 3 | 1 | ||||||||||||||||||
Interest cost | 32 | 28 | 25 | 3 | 2 | — | ||||||||||||||||||
Expected return on plan assets | (18 | ) | (15 | ) | (13 | ) | — | — | — | |||||||||||||||
Amortization of unrecognized transition obligation | — | — | — | — | — | — | ||||||||||||||||||
Amortization of actuarial net loss (gain) | 2 | (3 | ) | 4 | 1 | (4 | ) | — | ||||||||||||||||
Amortization of prior service cost | 2 | 2 | (4 | ) | — | 31 | — | |||||||||||||||||
Effect of settlement | (3 | ) | — | 6 | — | — | — | |||||||||||||||||
Effect of curtailment | (1 | ) | (1 | ) | — | — | — | — | ||||||||||||||||
Net periodic benefit cost | 34 | 30 | 56 | 8 | 32 | 1 | ||||||||||||||||||
F-45
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | December 31, | ||||||||||
Assumptions | 2008 | 2007 | 2006 | |||||||||
Discount rate | 5.23 | % | 5.43 | % | 4.86 | % | ||||||
Salary increase rate | 3.46 | % | 3.24 | % | 2.95 | % | ||||||
Expected long-term rate of return on funds for the pension expense of the year | 5.69 | % | 6.34 | % | 6.05 | % |
Percentage of Plan Assets at | ||||||||||||
Target allocation | December | |||||||||||
Asset Category | 2008 | 2008 | 2007 | |||||||||
Equity securities | 36 | % | 36 | % | 54 | % | ||||||
Bonds securities remunerating regular interest | 37 | % | 37 | % | 27 | % | ||||||
Real estate | 6 | % | 6 | % | 9 | % | ||||||
Other | 21 | % | 21 | % | 10 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
Years | Pension Benefits | Other Long-term Benefits | ||||||
2009 | 35 | 2 | ||||||
2010 | 36 | 2 | ||||||
2011 | 26 | 2 | ||||||
2012 | 31 | 2 | ||||||
2013 | 32 | 3 | ||||||
From 2014 to 2018 | 188 | 17 | ||||||
F-46
Table of Contents
(in millions of U.S. dollars, except per share amounts)
17. | LONG-TERM DEBT |
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Bank loans: | ||||||||
5.21% due 2008, floating interest rate at Libor + 0.40% | — | 43 | ||||||
4.42% due 2009, floating interest rate at Libor + 0.40% | 50 | 50 | ||||||
4.09% due 2010, floating interest rate at Libor + 1.0% | 50 | — | ||||||
Funding program loans: | ||||||||
1.47% (weighted average), due 2009, fixed interest rate | 4 | 13 | ||||||
0.89% (weighted average), due 2010, fixed interest rate | 24 | 38 | ||||||
2.77% (weighted average), due 2012, fixed interest rate | 10 | 12 | ||||||
0.50% (weighted average), due 2013, fixed interest rate | 2 | — | ||||||
0.50% (weighted average), due 2014, fixed interest rate | 10 | 9 | ||||||
3.24% (weighted average), due 2017, fixed interest rate | 72 | 80 | ||||||
1.54% due 2014, floating interest rate at Libor + 0.017% | 120 | 205 | ||||||
3.56% due 2015, floating interest rate at Libor + 0.026% | 65 | — | ||||||
3.24% due 2016, floating interest rate at Libor + 0.052% | 136 | — | ||||||
1.74% due 2016, floating interest rate at Libor + 0.277% | 180 | — | ||||||
3.20% due 2016, floating interest rate at Libor + 0.173% | 200 | — | ||||||
Capital leases: | ||||||||
5.08% (weighted average), due 2011, fixed interest rate | 15 | 22 | ||||||
Senior Bonds: | ||||||||
3.64%, due 2013, floating interest rate at Euribor + 0.40% | 703 | 736 | ||||||
Convertible debt: | ||||||||
-0.50% convertible bonds due 2013 | — | 2 | ||||||
1.5% convertible bonds due 2016 | 1,036 | 1,010 | ||||||
Total long-term debt | 2,677 | 2,220 | ||||||
Less current portion | (123 | ) | (103 | ) | ||||
Total long-term debt, less current portion | 2,554 | 2,117 | ||||||
F-47
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
U.S. dollar | 1,139 | 1,313 | ||||||
Euro | 1,538 | 907 | ||||||
Other | — | — | ||||||
Total | 2,677 | 2,220 | ||||||
December 31, | ||||
2008 | ||||
2009 | 123 | |||
2010 | 173 | |||
2011 | 1,153 | |||
2012 | 116 | |||
2013 | 816 | |||
Thereafter | 296 | |||
Total | 2,677 | |||
F-48
Table of Contents
(in millions of U.S. dollars, except per share amounts)
18. | SHAREHOLDERS’ EQUITY |
F-49
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-50
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Price Per Share | ||||||||||||
Weighted | ||||||||||||
Number of Shares | Range | Average | ||||||||||
Outstanding at December 31, 2005 | 60,558,567 | $ | 12.03 - $62.01 | $ | 29.80 | |||||||
Options granted: | ||||||||||||
2001 Plan | — | — | — | |||||||||
Supervisory Board Plan | — | — | — | |||||||||
Options expired | (16,832 | ) | $ | 12.03 | $ | 12.03 | ||||||
Options forfeited | (1,912,584 | ) | $ | 12.03 - $62.01 | $ | 30.66 | ||||||
Options exercised | (2,303,899 | ) | $ | 12.03 - $17.08 | $ | 12.03 | ||||||
Outstanding at December 31, 2006 | 56,325,252 | $ | 12.03 - $62.01 | $ | 30.50 | |||||||
Options granted: | ||||||||||||
2001 Plan | — | — | — | |||||||||
Supervisory Board Plan | — | — | — | |||||||||
Options expired | (7,566,170 | ) | $ | 24.88 | $ | 24.88 | ||||||
Options forfeited | (1,861,960 | ) | $ | 16.73- $62.01 | $ | 31.19 | ||||||
Options exercised | (131,487 | ) | $ | 17.08 - $19.18 | $ | 18.90 | ||||||
Outstanding at December 31, 2007 | 46,765,635 | $ | 16.73 - $62.01 | $ | 31.42 | |||||||
Options granted: | ||||||||||||
2001 Plan | — | — | — | |||||||||
Supervisory Board Plan | — | — | — | |||||||||
Options expired | (5,923,552 | ) | $ | 44.00 - $62.01 | $ | 59.1 | ||||||
Options forfeited | (1,410,650 | ) | $ | 16.73 - $62.01 | $ | 27.9 | ||||||
Options exercised | — | — | — | |||||||||
Outstanding at December 31, 2008 | 39,431,433 | $ | 16.73 - $39.00 | $ | 27.3 | |||||||
F-51
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Options exercisable | 39,431,433 | 46,765,635 | 56,325,252 | |||||||||
Weighted average exercise price | $ | 27.35 | $ | 31,42 | $ | 30.50 | ||||||
Weighted | ||||||||||||||
Weighted | average | |||||||||||||
Option price | average | remaining | ||||||||||||
Number of shares | range | exercise price | contractual life | |||||||||||
142,766 | $ | 16.73 - $17.31 | $ | 17.1 | 5.8 | |||||||||
20,453,245 | $ | 19.18 - $24.88 | $ | 21.0 | 4.8 | |||||||||
194,750 | $ | 25.90 - $29.70 | $ | 27.2 | 4.2 | |||||||||
18,640,672 | $ | 31.09 - $44.00 | $ | 34.4 | 2.9 |
F-52
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-53
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-54
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-55
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Nonvested Shares | Number of Shares | Exercise price | ||||||
Outstanding as at December 31, 2006 | 6,876,654 | $ | 0-€1.04 | |||||
Awards granted: | ||||||||
2006 Employee Plan | 215,000 | $ | 0 | |||||
2007 Employee Plan | 5,776,290 | $ | 0 | |||||
2007 Supervisory Board Plan | 165,000 | € | 1.04 | |||||
Awards forfeited: | ||||||||
2005 Employee Plan | (42,619 | ) | $ | 0 | ||||
2006 Employee Plan | (120,295 | ) | $ | 0 | ||||
2007 Employee Plan | (73,490 | ) | $ | 0 | ||||
2007 Supervisory Board Plan | (22,500 | ) | € | 1.04 | ||||
Awards vested: | ||||||||
2005 Employee Plan | (1,039,544 | ) | $ | 0 | ||||
2005 Supervisory Board Plan | (17,000 | ) | € | 1.04 | ||||
2006 Employee Plan | (1,190,466 | ) | $ | 0 | ||||
2006 Supervisory Board Plan | (17,000 | ) | € | 1.04 | ||||
Outstanding as at December 31, 2007 | 10,510,030 | $ | 0-€1.04 | |||||
Awards granted: | ||||||||
2007 Employee Plan | 135,550 | $ | 0 | |||||
2008 Employee Plan | 5,723,305 | $ | 0 | |||||
2008 Supervisory Board Plan | 165,000 | € | 1.04 | |||||
Awards forfeited: | ||||||||
2005 Employee Plan | (7,900 | ) | $ | 0 | ||||
2006 Employee Plan | (62,162 | ) | $ | 0 | ||||
2007 Employee Plan | (141,201 | ) | $ | 0 | ||||
2008 Employee Plan | (56,185 | ) | $ | 0 | ||||
2008 Supervisory Board Plan | (22,500 | ) | € | 1.04 | ||||
Awards cancelled on failed vesting conditions: | ||||||||
2007 Employee Plan | (962,703 | ) | $ | 0 | ||||
Awards vested: | ||||||||
2005 Employee Plan | (903,381 | ) | $ | 0 | ||||
2005 Supervisory Board Plan | (17,000 | ) | € | 1.04 | ||||
2006 Employee Plan | (1,937,618 | ) | $ | 0 | ||||
2006 Supervisory Board Plan | (20,000 | ) | € | 1.04 | ||||
2007 Employee Plan | (1,181,630 | ) | $ | 0 | ||||
2007 Supervisory Board Plan | (52,500 | ) | € | 1.04 | ||||
Outstanding as at December 31, 2008 | 11,169,105 | $ | 0-€1.04 | |||||
F-56
Table of Contents
(in millions of U.S. dollars, except per share amounts)
2005 | ||
Employee Plan | ||
Historical share price volatility | 27.74% | |
Historical volatility of reference index | 25.5% | |
Three-year average dividend yield | 0.55% | |
Risk-free interest rates used | 4.21%-4.33% |
F-57
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Cost of sales | 15 | 14 | 6 | |||||||||
Selling, general and administrative | 37 | 37 | 14 | |||||||||
Research and development | 24 | 22 | 8 | |||||||||
Loss on equity investment | 2 | — | — | |||||||||
Total pre-payroll tax and social contribution compensation | 78 | 73 | 28 | |||||||||
Unrealized | Minimum | |||||||||||||||||||||||
Foreign | gain (loss) on | Unrealized | pension | FAS 158 | Accumulated | |||||||||||||||||||
currency | available-for-sale | gain (loss) on | liability | adoption | other | |||||||||||||||||||
translation | financial assets, | derivatives, | adjustment, | adjustment, | comprehensive | |||||||||||||||||||
income (loss) | net of tax | net of tax | net of tax | net of tax | income (loss) | |||||||||||||||||||
Balance as of December 31, 2005 | 328 | 0 | (13 | ) | (34 | ) | — | 281 | ||||||||||||||||
Other comprehensive income (loss) | 532 | — | 26 | 34 | (57 | ) | 535 | |||||||||||||||||
Balance as of December 31, 2006 | 860 | 0 | 13 | — | (57 | ) | 816 | |||||||||||||||||
Other comprehensive income (loss) | 467 | (2 | ) | (1 | ) | — | 40 | 504 | ||||||||||||||||
Balance as of December 31, 2007 | 1,327 | (2 | ) | 12 | — | (17 | ) | 1,320 | ||||||||||||||||
Other comprehensive income (loss) | (163 | ) | (14 | ) | (1 | ) | — | (48 | ) | (226 | ) | |||||||||||||
Balance as of December 31, 2008 | 1,164 | (16 | ) | 11 | — | (65 | ) | 1,094 | ||||||||||||||||
F-58
Table of Contents
(in millions of U.S. dollars, except per share amounts)
19. | EARNINGS (LOSS) PER SHARE |
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Basic EPS | ||||||||||||
Net income (loss) | (786 | ) | (477 | ) | 782 | |||||||
Weighted average shares outstanding | 891,955,940 | 898,731,154 | 896,136,969 | |||||||||
Basic EPS | (0.88 | ) | (0.53 | ) | 0.87 | |||||||
Diluted EPS | ||||||||||||
Net income (loss) | (786 | ) | (477 | ) | 782 | |||||||
Convertible debt interest, net of tax | — | — | 17 | |||||||||
Net income (loss) adjusted | (786 | ) | (477 | ) | 799 | |||||||
Weighted average shares outstanding | 891,955,940 | 898,731,154 | 896,136,969 | |||||||||
Dilutive effect of stock options | — | — | 211,770 | |||||||||
Dilutive effect of nonvested shares | — | — | 1,252,996 | |||||||||
Dilutive effect of convertible debt | — | — | 60,941,995 | |||||||||
Number of shares used in calculating diluted EPS | 891,955,940 | 898,731,154 | 958,543,730 | |||||||||
Diluted EPS | (0.88 | ) | (0.53 | ) | 0.83 |
F-59
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Research and development funding | 83 | 97 | 54 | |||||||||
Start-up and phase-out costs | (17 | ) | (24 | ) | (57 | ) | ||||||
Exchange gain (loss), net | 20 | 1 | (9 | ) | ||||||||
Patent litigation costs | (14 | ) | (18 | ) | (22 | ) | ||||||
Patent pre-litigation costs | (10 | ) | (10 | ) | (7 | ) | ||||||
Gain on sale of Accent | — | — | 6 | |||||||||
Gain on sale of long-lived assets, net | 4 | 2 | 2 | |||||||||
Other, net | (4 | ) | — | (2 | ) | |||||||
Total | 62 | 48 | (35 | ) | ||||||||
F-60
Table of Contents
(in millions of U.S. dollars, except per share amounts)
21. | IMPAIRMENT, RESTRUCTURING CHARGES AND OTHER RELATED CLOSURE COSTS |
F-61
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Total impairment, | ||||||||||||||||
restructuring | ||||||||||||||||
charges and other | ||||||||||||||||
Restructuring | Other related | related closure | ||||||||||||||
Year ended December 31, 2008 | Impairment | charges | closure costs | costs | ||||||||||||
2007 restructuring plan | (77 | ) | (79 | ) | (8 | ) | (164 | ) | ||||||||
FMG deconsolidation | (190 | ) | (2 | ) | (24 | ) | (216 | ) | ||||||||
Goodwill annual impairment test | (13 | ) | — | — | (13 | ) | ||||||||||
Other restructuring initiatives | (10 | ) | (75 | ) | (3 | ) | (88 | ) | ||||||||
Total | (290 | ) | (156 | ) | (35 | ) | (481 | ) | ||||||||
Total impairment, | ||||||||||||||||
restructuring | ||||||||||||||||
charges and other | ||||||||||||||||
Restructuring | Other related | related closure | ||||||||||||||
Year ended December 31, 2007 | Impairment | charges | closure costs | costs | ||||||||||||
2007 restructuring plan | (11 | ) | (62 | ) | — | (73 | ) | |||||||||
FMG deconsolidation | (1,107 | ) | — | (5 | ) | (1,112 | ) | |||||||||
Other restructuring initiatives | (5 | ) | (8 | ) | (30 | ) | (43 | ) | ||||||||
Total | (1,123 | ) | (70 | ) | (35 | ) | (1,228 | ) | ||||||||
Total impairment, | ||||||||||||||||
restructuring | ||||||||||||||||
charges and other | ||||||||||||||||
Restructuring | Other related | related closure | ||||||||||||||
Year ended December 31, 2006 | Impairment | charges | closure costs | costs | ||||||||||||
150mm fab plan | (1 | ) | (7 | ) | (14 | ) | (22 | ) | ||||||||
2005 restructuring initiatives | (1 | ) | (36 | ) | (8 | ) | (45 | ) | ||||||||
Other | (10 | ) | — | — | (10 | ) | ||||||||||
Total | (12 | ) | (43 | ) | (22 | ) | (77 | ) | ||||||||
• | $190 million loss on FMG deconsolidation, consisting of a $164 million impairment charge recorded upon disposal in the first quarter of 2008 and an additional loss of $26 million, which was recorded after disposal as a consequence of additional charges borne by the Company in relation to the contributed assets. The total loss of the FMG deconsolidation amounted to $1,296 million, of which $1,106 million was recorded in the year ended December 31, 2007. | |
• | $77 million impairment charge on long-lived assets of the Company’s manufacturing sites in Carrollton, Texas and in Phoenix, Arizona, of which $75 million on Phoenix site which had previously been designated for closure as part of the 2007 restructuring plan and that the Company decided in the second quarter of 2008 to sell as a going concern. The assets are primarily property and other long-lived assets that satisfied, as at June 28, 2008, all of the criteria required for the “held-for-sale” status as set forth in FAS 144. Consequently, the Company reclassified as current assets on the consolidated balance sheet as at June 28, 2008 these long-lived assets, which generated an impairment charge of $114 million recorded in the first half of 2008. Fair value less costs to sell was based on the consideration to be received upon the sale, which was expected to occur within one year. In the second half of 2008, pursuant to a corporate restructuring of |
F-62
Table of Contents
(in millions of U.S. dollars, except per share amounts)
the potential buyer, the sale was no longer deemed to be probable. The Company ceased to apply the FAS 144 held-for-sale model to the Phoenix assets and reclassified the assets as held for use as at December 31, 2008. Therefore the assets were revalued based on the discounted cash flows expected from their use, estimated at $99 million, which was higher than the consideration to be received upon the sale. An adjustment of $39 million was accordingly recorded in the second half of 2008 as a credit to the original impairment charge. |
• | $13 million impairment on goodwill, pursuant to the impairment test on goodwill and indefinite long-lived assets performed annually by the Company. This impairment charge includes $7 million on goodwill recorded in 2003 on Incard smart card business acquisition and $6 million recorded on goodwill related to Portland Group Inc. (“PGI”), an entity the Company acquired in 2000 and dedicated to compilers & tools for standalone or embedded processing platforms; | |
• | $6 million other-than-temporary impairment charges on certain equity investments carried at cost. For one investment the impairment loss was based on the valuation for the underlying investment of a new round of third party financing and for the other the impairment loss was based on the value of the investment upon liquidation. | |
• | $4 million impairment charge on certain specific equipment with no alternative future use within the Company; |
• | $1,106 million impairment as a result of the signing of the definitive agreement for the FMG deconsolidation and upon meeting FAS 144 criteria for assets held for sale, to adjust the value of the to-be-contributed assets to fair value less costs to sell. Fair value less costs to sell was based on the net consideration provided for in the agreement and significant estimates. | |
• | $1 million impairment charge on certain specific equipment that could not be transferred as part of FMG deconsolidation and for which no alternative future use could be found in the Company; | |
• | $11 million impairment charge on certain tangible assets, mainly equipment, that the Company identified without alternative future use following its commitment to the closure of two front-end sites and one back-end site as part of the 2007 restructuring plan; | |
• | $2 million impairment on technologies without any alternative future use based on the Company’s products’ roadmap; | |
• | $3 million other-than-temporary impairment charge on an equity investment carried at cost. The impairment loss was based on the valuation for the underlying investment of a new round of third party financing. |
• | $6 million impairment of goodwill pursuant to the decision of the Company to cease product development from technologies inherited from Tioga business acquisition. The Company reported Tioga business as part of the former Application Specific Product Groups (“ASG”) product segment. Following this decision, the Company recorded the full write-off of Tioga goodwill carrying amount. | |
• | $4 million impairment on technologies purchased as part of Tioga business acquisition, which were determined to be without any alternative use; | |
• | $1 million impairment on equipment and machinery pursuant to the decision of the Company to discontinue a production line in one of its back-end sites; | |
• | $1 million impairment on equipment and machinery identified without any alternative use in one of the Company’s European 150mm fab sites. |
F-63
Table of Contents
(in millions of U.S. dollars, except per share amounts)
2007 | Other | |||||||||||||||
restructuring | FMG | restructuring | ||||||||||||||
plan | disposal | initiatives | Total | |||||||||||||
Provision as at December 31, 2006 | — | — | 32 | 32 | ||||||||||||
Charges incurred in 2007 | 62 | 5 | 40 | 107 | ||||||||||||
Reversal of provision | — | — | (2 | ) | (2 | ) | ||||||||||
Amounts paid | (2 | ) | (3 | ) | (50 | ) | (55 | ) | ||||||||
Provision as at December 31, 2007 | 60 | 2 | 20 | 82 | ||||||||||||
Charges incurred in 2008 | 87 | 51 | 78 | 216 | ||||||||||||
Provision on business combinations | — | — | 46 | 46 | ||||||||||||
Amounts paid | (34 | ) | (33 | ) | (43 | ) | (110 | ) | ||||||||
Provision as at December 31, 2008 | 113 | 20 | 101 | 234 | ||||||||||||
• | $75 million primarily related to accrued one-time termination benefits for employees who provide services beyond the legal retention period until the complete closure of the manufacturing sites of Carrollton, Texas and Phoenix, Arizona; | |
• | $10 million for the transfer of employees and equipment from Ain Sebbaa back-end site to Bouskoura site in Morocco; | |
• | $3 million related to the closure of one of the Company’s design center in France. |
F-64
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-65
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Income | 132 | 156 | 143 | |||||||||
Expense | (81 | ) | (73 | ) | (50 | ) | ||||||
Total | 51 | 83 | 93 | |||||||||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Income (loss) recorded in The Netherlands | (1,232 | ) | (54 | ) | (12 | ) | ||||||
Income (loss) from foreign operations | 409 | (440 | ) | 776 | ||||||||
Income (loss) before income tax expense | (823 | ) | (494 | ) | 764 | |||||||
F-66
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
The Netherlands taxes — current | (1 | ) | (4 | ) | (7 | ) | ||||||
Foreign taxes — current | (25 | ) | (121 | ) | (47 | ) | ||||||
Current taxes | (26 | ) | (125 | ) | (54 | ) | ||||||
Foreign deferred taxes | 69 | 148 | 74 | |||||||||
Income tax benefit | 43 | 23 | 20 | |||||||||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Income tax benefit (expense) computed at statutory rate | 210 | 126 | (226 | ) | ||||||||
Non-deductible, non-taxable and other permanent differences, net | — | (20 | ) | (27 | ) | |||||||
Loss on equity investment | (139 | ) | — | — | ||||||||
Valuation allowance adjustments | (18 | ) | (1 | ) | (8 | ) | ||||||
Impact of prior years adjustments | 48 | (17 | ) | 63 | ||||||||
Effects of change in enacted tax rate on deferred taxes | — | (21 | ) | — | ||||||||
Current year credits | 66 | 63 | 49 | |||||||||
Other tax and credits | 2 | (3 | ) | (1 | ) | |||||||
Benefits from tax holidays | 34 | 122 | 134 | |||||||||
Current year tax risk | (31 | ) | — | — | ||||||||
Impact of FMG deconsolidation | (77 | ) | (113 | ) | — | |||||||
Earnings of subsidiaries taxed at different rates | (52 | ) | (113 | ) | 36 | |||||||
Income tax benefit (expense) | 43 | 23 | 20 | |||||||||
F-67
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Tax loss carryforwards and investment credits | 442 | 213 | ||||||
Inventory valuation | 29 | 38 | ||||||
Impairment and restructuring charges | 102 | 76 | ||||||
Fixed asset depreciation in arrears | 64 | 61 | ||||||
Receivables for government funding | 189 | 169 | ||||||
Tax risk | 21 | — | ||||||
Tax allowances granted on past capital investments | 1,086 | 1,054 | ||||||
Pension service costs | 39 | 24 | ||||||
Stock awards | 26 | 19 | ||||||
Commercial accruals | 9 | 10 | ||||||
Other temporary differences | 42 | 48 | ||||||
Total deferred tax assets | 2,049 | 1,712 | ||||||
Valuation allowances | (1,283 | ) | (1,123 | ) | ||||
Deferred tax assets, net | 766 | 589 | ||||||
Accelerated fixed asset depreciation | (86 | ) | (110 | ) | ||||
Acquired intangible assets | (61 | ) | (11 | ) | ||||
Advances of government funding | (17 | ) | (24 | ) | ||||
Other temporary differences | (32 | ) | (27 | ) | ||||
Deferred tax liabilities | (196 | ) | (172 | ) | ||||
Net deferred income tax asset | 570 | 417 | ||||||
Year | ||||
2009 | 10 | |||
2010 | 7 | |||
2011 | 21 | |||
2012 | 53 | |||
Thereafter | 351 | |||
Total | 442 | |||
F-68
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Balance at December 31, 2007 | $ | 99 | ||
Additions based on tax positions related to the current year | 20 | |||
Additions for tax positions of prior years | 58 | |||
Reductions for tax positions of prior years | (18 | ) | ||
Settlements | (3 | ) | ||
Reductions for lapse of statute of limitations | — | |||
Foreign currency translation | (3 | ) | ||
Balance at December 31, 2008 | $ | 153 | ||
F-69
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Balance at December 31, 2006 | $ | 82 | ||
Additions based on tax positions related to the current year | 4 | |||
Additions for tax positions of prior years | 72 | |||
Reductions for tax positions of prior years | (25 | ) | ||
Settlements | (6 | ) | ||
Reductions for lapse of statute of limitations | (28 | ) | ||
Balance at December 31, 2007 | $ | 99 | ||
Total | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | ||||||||||||||||||||||
In million US$ | ||||||||||||||||||||||||||||
Operating leases | $ | 423 | $ | 89 | $ | 68 | $ | 61 | $ | 52 | $ | 61 | $ | 92 | ||||||||||||||
Purchase obligations | 516 | 409 | 68 | 39 | ||||||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||
Equipment purchase | 150 | 150 | ||||||||||||||||||||||||||
Foundry purchase | 106 | 106 | ||||||||||||||||||||||||||
Software, technology licenses and design | 260 | 153 | 68 | 39 | ||||||||||||||||||||||||
Other obligations | 359 | 163 | 86 | 53 | 48 | 7 | 2 | |||||||||||||||||||||
Total | $ | 1,298 | $ | 661 | $ | 222 | $ | 153 | $ | 100 | $ | 68 | $ | 94 | ||||||||||||||
F-70
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-71
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-72
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-73
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-74
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-75
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||
December 31, | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
2008 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Description | ||||||||||||||||
In millions of U.S. dollars Available-for-sale marketable debt securities | 640 | — | 253 | |||||||||||||
Available-for-sale long term subordinated notes | — | — | 168 | |||||||||||||
Available-for-sale equity securities | 5 | — | — | |||||||||||||
Equity securities held for trading | 7 | — | — | |||||||||||||
Derivative instruments held for trading | — | 34 | — | |||||||||||||
Derivative instruments designated as cash flow hedge | 23 | — | — | |||||||||||||
Derivative instruments not designated as hedge | 9 | — | — | |||||||||||||
Total | 684 | 34 | 421 |
F-76
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Fair Value | ||||
Measurements Using | ||||
Significant | ||||
Unobservable Inputs | ||||
(Level 3) | ||||
In millions of U.S. dollars | ||||
January 1, 2008 | 369 | |||
Subordinated notes received in Numonyx transaction | 156 | |||
Transfer-in Level 3 category: Lehman Brothers senior unsecured bonds following Lehman Brothers Chapter 11 filing | 22 | |||
Other-than-temporary impairment charge on Lehman Brothers senior unsecured bonds included in earnings on the line “Other-than-temporary impairment charge on financial assets” | (11 | ) | ||
Other-than-temporary impairment charge on auction-rate securities included in earnings on the line “Other-than-temporary impairment charge on financial assets” | (127 | ) | ||
Paid-in-Kind interest on Numonyx subordinated notes | 11 | |||
Change in fair value on Numonyx subordinated notes — pre-tax | 1 | |||
Settlements and redemptions | — | |||
December 31, 2008 | 421 | |||
Amount of total losses for the period included in earnings attributable to assets still held at the reporting date | 138 |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||
December 31, | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
2008 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Description | ||||||||||||||||
In millions of U.S. dollars | ||||||||||||||||
Investments in equity securities carried at cost | — | — | 32 | |||||||||||||
Numonyx equity investment | — | — | 496 | |||||||||||||
Total | — | — | 528 |
F-77
Table of Contents
(in millions of U.S. dollars, except per share amounts)
Fair Value | ||||
Measurements Using | ||||
Significant | ||||
Unobservable Inputs | ||||
(Level 3) | ||||
In millions of U.S. dollars | ||||
January 1, 2008 | 25 | |||
Investments in equity securities carried at cost | 15 | |||
Other-than-temporary impairment charge on equity securities carried at cost included in earnings on the line “Impairment, restructuring charges and other related closure costs” | (6 | ) | ||
Liquidation of investments carried at cost | (2 | ) | ||
Equity investment received in Numonyx transaction | 966 | |||
Debt guarantee granted to Numonyx | 69 | |||
Other-than-temporary impairment charge included in earnings on the line “Earnings (loss) on equity investments” | (480 | ) | ||
Equity share in Numonyx loss | (59 | ) | ||
December 31, 2008 | 528 | |||
Amount of total losses for the period included in earnings attributable to assets still held at the reporting date | 486 |
2008 | 2007 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Description | Amount | Fair Value | Amount | Fair Value | ||||||||||||
In millions of U.S. dollars | ||||||||||||||||
Long-term debt | ||||||||||||||||
— Bank loans (including current portion) | 938 | 937 | 472 | 465 | ||||||||||||
— Senior Bonds | 703 | 580 | 736 | 734 | ||||||||||||
— Convertible debt | 1,036 | 918 | 1,012 | 965 | ||||||||||||
Total | 2,677 | 2,435 | 2,220 | 2,164 |
F-78
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-79
Table of Contents
(in millions of U.S. dollars, except per share amounts)
28. | RELATED PARTY TRANSACTIONS |
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Sales & other services | 325 | 272 | 118 | |||||||||
Research and development expenses | (63 | ) | (68 | ) | (43 | ) | ||||||
Other purchases | (77 | ) | (85 | ) | (70 | ) | ||||||
Other income and expenses | (7 | ) | (11 | ) | (21 | ) | ||||||
Accounts receivable | 63 | 44 | 20 | |||||||||
Accounts payable | 65 | 40 | 20 | |||||||||
Other assets | — | 2 | — |
F-80
Table of Contents
(in millions of U.S. dollars, except per share amounts)
29. | SEGMENT INFORMATION |
• | Application Specific Product Groups (“ASG”) segment; | |
• | Industrial and Multisegment Sector (“IMS”) segment; and | |
• | Flash Memory Group (“FMG”) segment (until March 30, 2008). |
F-81
Table of Contents
(in millions of U.S. dollars, except per share amounts)
• | Automotive Consumer Computer and Communication Infrastructure Product Groups (“ACCI”), comprised of three product lines: |
• | Home Entertainment & Displays (“HED”), which now includes the Imaging division; | |
• | Automotive Products Group (“APG”); and, | |
• | Computer and Communication Infrastructure (“CCI”), which now includes the Communication Infrastructure division. |
• | Industrial and Multisegment Products Sector (“IMS”), comprised of: |
• | Analog Power and Micro-Electro-Mechanical Systems (“APM”); and | |
• | Micro, non-Flash, non-volatile Memory and Smart Card products (“MMS”). |
• | Wireless Products Sector (“WPS”), comprised of three product lines: |
• | Wireless Multi Media (“WMM”); | |
• | Connectivity & Peripherals (“C&P”); and | |
• | Cellular Systems (“CS”). |
F-82
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
In million of U.S dollars | ||||||||||||
Net revenues by product segment: | ||||||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (ACCI) | 4,129 | 3,944 | 4,122 | |||||||||
Industrial and Multisegment Products Sector (IMS) | 3,329 | 3,138 | 2,842 | |||||||||
Wireless Products Sector (WPS) | 2,030 | 1,495 | 1,273 | |||||||||
Flash Memory Group segment | 299 | 1,364 | 1,570 | |||||||||
Others(1) | 55 | 60 | 47 | |||||||||
Total consolidated net revenues | 9,842 | 10,001 | 9,854 | |||||||||
(1) | Includes revenues from sales of subsystems and other products not allocated to product segments. |
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
In million of U.S dollars | ||||||||||||
Net revenues by product lines: | ||||||||||||
Home Entertainment & Displays (“HED”) | 1,585 | 1,402 | 1,602 | |||||||||
Automotive Products Group (“APG”) | 1,460 | 1,419 | 1,356 | |||||||||
Computer and Communication Infrastructure (“CCI”) | 1,077 | 1,123 | 1,164 | |||||||||
Others | 7 | — | — | |||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (ACCI) | 4,129 | 3,944 | 4,122 | |||||||||
Analog Power and Micro-Electro-Mechanical Systems (“APM”) | 2,393 | 2.313 | 2,085 | |||||||||
Micro, non-Flash, non-volatile Memory and Smartcard products (“MMS”) | 936 | 825 | 757 | |||||||||
Industrial and Multisegment Products Sector (IMS) | 3,329 | 3,138 | 2,842 | |||||||||
Wireless Multi Media (“WMM”) | 1,293 | 1,288 | 1,210 | |||||||||
Connectivity & Peripherals (“C&P”) | 416 | 207 | 63 | |||||||||
Cellular Systems (“CS”)(1) | 321 | — | — | |||||||||
Wireless Products Sector (WPS) | 2,030 | 1,495 | 1,273 | |||||||||
Others | 55 | 60 | 47 | |||||||||
Flash Memories Group (FMG) | 299 | 1,364 | 1,570 | |||||||||
Total consolidated net revenues | $ | 9,842 | $ | 10,001 | $ | 9,854 | ||||||
(1) | Cellular Systems includes the largest part of the revenues contributed by NXP Wireless and, as such, there are no comparable numbers available for 2006 and 2007. |
F-83
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Automotive Consumer Computer and Communication Infrastructure Product Groups (ACCI) | 107 | 198 | 272 | |||||||||
Industrial and Multisegment Products Sector (IMS) | 459 | 469 | 441 | |||||||||
Wireless Products Sector (WPS) | (70 | ) | 105 | 167 | ||||||||
Flash Memory Group segment | 16 | (51 | ) | (53 | ) | |||||||
Total operating income of product groups | 512 | 721 | 827 | |||||||||
Others(1) | (710 | ) | (1,266 | ) | (150 | ) | ||||||
Total consolidated operating income (loss) | (198 | ) | (545 | ) | 677 | |||||||
(1) | Operating income (loss) of “Others” includes items such as impairment, restructuring charges and other related closure costs,start-up costs, and other unallocated expenses such as: strategic or special research and development programs, acquired In-Process R&D, certain corporate level operating expenses, certain patent claims and litigation, and other costs that are not allocated to the product segments, as well as operating earnings or losses of the Subsystems and Other Products Group, including, beginning in the second quarter of 2008, the remaining FMG costs. The 2008 “Others” also includes non-recurring purchase accounting items. |
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Total operating income of product groups | 512 | 721 | 827 | |||||||||
Strategic R&D and other R&D programs | (24 | ) | (20 | ) | (12 | ) | ||||||
Start-up costs | (16 | ) | (24 | ) | (57 | ) | ||||||
Impairment & restructuring charges | (481 | ) | (1,228 | ) | (77 | ) | ||||||
Subsystems and Other Products Group | 3 | 6 | (1 | ) | ||||||||
Acquired In-Process R&D and other non-recurring purchase accounting(1) | (185 | ) | — | — | ||||||||
Seniority awards | — | (21 | ) | — | ||||||||
Other non-allocated provisions(2) | (7 | ) | 21 | (3 | ) | |||||||
Total operating loss Others(3) | (710 | ) | (1,266 | ) | (150 | ) | ||||||
Total consolidated operating income (loss) | (198 | ) | (545 | ) | 677 | |||||||
(1) | Non-recurring purchase accounting items are related to Genesis business combination with In-Process R&D charge for $21 million and to the Wireless business acquisition from NXP for $164 million, composed of $76 million as In-Process R&D charge and $88 million as inventorystep-up charge. | |
(2) | Includes unallocated expenses such as certain corporate level operating expenses and other costs. | |
(3) | Operating income (loss) of “Others” includes items such as impairment, restructuring charges and other related closure costs,start-up costs, and other unallocated expenses such as: strategic or special research and development programs, acquired In-Process R&D, certain corporate level operating expenses, certain patent claims and litigation, and other costs that are not allocated to the product segments, as well as operating earnings or losses of the Subsystems and Other Products Group, including, beginning in the second quarter of 2008, the remaining FMG costs. |
F-84
Table of Contents
(in millions of U.S. dollars, except per share amounts)
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
The Netherlands | 2,737 | 3,123 | 3,114 | |||||||||
France | 178 | 223 | 240 | |||||||||
Italy | 185 | 220 | 230 | |||||||||
USA | 1,032 | 1,027 | 1,030 | |||||||||
Singapore | 4,939 | 4,795 | 4,698 | |||||||||
Japan | 492 | 483 | 400 | |||||||||
Other countries | 279 | 130 | 142 | |||||||||
Total | 9,842 | 10,001 | 9,854 | |||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
The Netherlands | 14 | 7 | 4 | |||||||||
France | 1,728 | 1,885 | 1,763 | |||||||||
Italy | 1,000 | 1,216 | 1,701 | |||||||||
Other European countries | 229 | 175 | 188 | |||||||||
USA | 217 | 361 | 436 | |||||||||
Singapore | 675 | 731 | 1,635 | |||||||||
Malaysia | 306 | 287 | 355 | |||||||||
Other countries | 570 | 382 | 344 | |||||||||
Total | 4,739 | 5,044 | 6,426 | |||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
The Netherlands | 5 | 4 | 1 | |||||||||
France | 462 | �� | 396 | 467 | ||||||||
Italy | 138 | 279 | 292 | |||||||||
Other European countries | 66 | 53 | 96 | |||||||||
USA | 2 | 47 | 116 | |||||||||
Singapore | 106 | 180 | 380 | |||||||||
Malaysia | 104 | 99 | 115 | |||||||||
Other countries | 100 | 82 | 66 | |||||||||
Total | 983 | 1,140 | 1,533 | |||||||||
F-85
Table of Contents
(in millions of U.S. dollars, except per share amounts)
30. | SUBSEQUENT EVENTS |
Consideration transferred: | ||||
Equity interest in the Company’s business contributed | $ | 1,105 | ||
Equity interest in EMP business acquired | 306 | |||
Cash received by the Company | (700 | ) | ||
Equity investment in JVD | (99 | ) | ||
Total consideration transferred | $ | 612 | ||
Assets acquired and liabilities assumed: | ||||
Cash in JVS | $ | 445 | ||
Goodwill | 173 | |||
Customer relationships | 48 | |||
Property, plant and equipment | 8 | |||
Other current assets and liabilities — net | (62 | ) | ||
Total assets acquired and liabilities assumed | $ | 612 | ||
F-86
Table of Contents
(in millions of U.S. dollars, except per share amounts)
F-87
Table of Contents
FOR THE PERIOD MARCH 30, 2008 THROUGH DECEMBER 31, 2008
F-88
Page | ||||
F-90 | ||||
F-91 | ||||
F-92 | ||||
F-93 | ||||
F-94 | ||||
F-95 |
Page | ||
F-96 | ||
F-96 | ||
F-102 | ||
F-103 | ||
F-104 | ||
F-104 | ||
F-104 | ||
F-104 | ||
F-106 | ||
F-106 | ||
F-107 | ||
F-107 | ||
F-110 | ||
F-111 | ||
F-111 | ||
F-112 | ||
F-112 | ||
F-113 | ||
F-113 | ||
F-116 | ||
F-117 | ||
F-117 |
F-89
Table of Contents
/s/ Robert P. Muir Robert P. Muir | /s/ Kenneth Postal Kenneth Postal |
F-90
Table of Contents
CONSOLIDATED STATEMENT OF OPERATIONS
For the period March 30, 2008 through December 31, 2008
In thousands of US dollars
Net sales | $ | 1,623,189 | ||
Other revenues | 456 | |||
Net revenues | 1,623,645 | |||
Cost of sales | (1,280,463 | ) | ||
Gross profit | 343,182 | |||
Selling, general, and administrative expenses | (223,984 | ) | ||
Research and development expenses | (207,685 | ) | ||
Impairment and restructuring charges | (74,350 | ) | ||
Other income and expenses, net | (37,547 | ) | ||
Operating loss | (200,384 | ) | ||
Interest expense, net | (57,060 | ) | ||
Income from equity investment | 5,748 | |||
Loss before income taxes | (251,696 | ) | ||
Income tax expense | (19,125 | ) | ||
Net loss | $ | (270,821 | ) | |
F-91
Table of Contents
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
For the period March 30, 2008 through December 31, 2008
In thousands of US dollars
Net loss | $ | (270,821 | ) | |
Other comprehensive income, net of tax: | ||||
Foreign currency translation adjustments | 6,720 | |||
Defined benefit pension plans: | ||||
Actuarial loss during the period | (414 | ) | ||
Other comprehensive income | 6,306 | |||
Comprehensive Loss | $ | (264,515 | ) | |
F-92
Table of Contents
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 476,810 | ||
Restricted cash | 4,991 | |||
Trade accounts receivable, net | 230,901 | |||
Inventories | 582,140 | |||
Deferred tax assets | 5,386 | |||
Other receivables and assets | 159,058 | |||
Total current assets | 1,459,286 | |||
Intangible assets, net | 208,322 | |||
Property, plant and equipment, net | 563,725 | |||
Restricted cash | 24,795 | |||
Deferred tax assets | 79,100 | |||
Equity investment | 303,371 | |||
Other non-current assets | 132,819 | |||
1,312,132 | ||||
Total assets | 2,771,418 | |||
Liabilities and shareholders’ equity | ||||
Current liabilities: | ||||
Trade accounts payable | 245,645 | |||
Other payables and accrued liabilities | 146,091 | |||
Deferred tax liabilities | 3,995 | |||
Total current liabilities | 395,731 | |||
Long-term debt | 450,000 | |||
Debt obligations to related parties | 341,822 | |||
Pension liability | 28,941 | |||
Long-term deferred tax liabilities | 3,640 | |||
Other non-current liabilities | 40,423 | |||
Total Liabilities | 1,260,557 | |||
Commitments and contingencies (Note 21) | ||||
Share Capital: | ||||
Common stock (ordinary shares: 250,000,000 shares authorized, 210,700,758 shares issued) | 1,644,221 | |||
Preferred stock (Preferred A shares: 14,204,545 shares authorized and issued, PreferredA-1 shares: 142,045 shares authorized) | 131,155 | |||
1,775,376 | ||||
Accumulated deficit | (270,821 | ) | ||
Accumulated other comprehensive income | 6,306 | |||
Shareholders’ equity | 1,510,861 | |||
Total liabilities and shareholders’ equity | $ | 2,771,418 | ||
F-93
Table of Contents
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period March 30, 2008 through December 31, 2008
In thousands of US dollars
Cash flows from operating activities: | ||||
Net loss | $ | (270,821 | ) | |
Adjustments to reconcile net loss to cash flows used in operating activities: | ||||
Depreciation and amortization | 171,349 | |||
Amortization of debt guarantees | 27,750 | |||
Non cash interest expense | 22,734 | |||
Changes in deferred income taxes | (18,446 | ) | ||
Income from equity investment | (5,748 | ) | ||
Impairment and restructuring charges, net of cash payments | 70,541 | |||
Gain on sale of other non-current assets | (2,770 | ) | ||
Other non-cash items | (8,965 | ) | ||
Changes in assets and liabilities, net of effects from business combination of contributed assets of shareholder companies: | ||||
Trade accounts receivable, net | (230,901 | ) | ||
Inventories | (1,035 | ) | ||
Trade accounts payable | 58,052 | |||
Other assets and liabilities, net | 171,738 | |||
Net cash used in operating activities | (16,522 | ) | ||
Cash flows from investing activities: | ||||
Payment for purchase of tangible assets | (78,100 | ) | ||
Proceeds from sales of tangible assets | 4,579 | |||
Investments in intangible assets | (48,600 | ) | ||
Changes in restricted cash | (29,786 | ) | ||
Net cash used in investing activities | (151,907 | ) | ||
Cash flows from financing activities: | ||||
Proceeds from borrowings, net of issuance costs | 444,410 | |||
Proceeds from issuance of preference shares | 131,155 | |||
Proceeds from issuance of related party loan note | 19,087 | |||
Cash received as part of business combination | 50,587 | |||
Net cash provided by financing activities | 645,239 | |||
Net cash increase | $ | 476,810 | ||
Cash and cash equivalents at beginning of the period | — | |||
Cash and cash equivalents at end of the period | $ | 476,810 | ||
Supplemental disclosure of cash flow information: | ||||
Interest paid | (11,847 | ) | ||
Income taxes paid | (12,300 | ) | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Upon formation, Numonyx Holdings B.V. acquired the contributed assets of Intel Corporation’s NOR flash business. Details of the transaction were as follows: | ||||
Value of non cash assets contributed by Intel Corporation | 771,313 | |||
Common stock issued | (677,472 | ) | ||
Related party note issued | (144,428 | ) |
F-94
Table of Contents
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the period March 30, 2008 through December 31, 2008
In thousands of US dollars
Accumulated | ||||||||||||||||||||||||||||
Common | Preferred | Other | Total | |||||||||||||||||||||||||
Common | Stock | Preferred | Stock | Accumulated | Comprehensive | Shareholders’ | ||||||||||||||||||||||
Stock | (Shares) | Stock | (Shares) | Deficit | income | Equity | ||||||||||||||||||||||
Balance at March 30, 2008 | $ | 966,749 | 109,263,907 | $ | 966,749 | |||||||||||||||||||||||
Issuance of common stock | 677,472 | 101,436,851 | 677,472 | |||||||||||||||||||||||||
Issuance of preferred stock | $ | 131,155 | 14,204,545 | 131,155 | ||||||||||||||||||||||||
Net loss | $ | (270,821 | ) | (270,821 | ) | |||||||||||||||||||||||
Other comprehensive income | $ | 6,306 | 6,306 | |||||||||||||||||||||||||
Balance at December 31, 2008 | $ | 1,644,221 | 210,700,758 | $ | 131,155 | 14,204,545 | $ | (270,821 | ) | $ | 6,306 | $ | 1,510,861 | |||||||||||||||
F-95
Table of Contents
F-96
Table of Contents
F-97
Table of Contents
Buildings | 33 years | |||
Facilities and Leasehold Improvements | 5-10 years | |||
Machinery and Equipment | 6 years | |||
Computer and Research & Development Equipment | 3-7 years |
F-98
Table of Contents
F-99
Table of Contents
Loan guarantees | 4 years | |||
Loan arrangement fees | 4 years | |||
Contributed technology | 3-7 years | |||
Software and licenses | 3 years |
F-100
Table of Contents
F-101
Table of Contents
F-102
Table of Contents
2008 | ||||
At March 30, 2008 (In Millions) | ||||
Cash | $ | 51 | ||
Inventory | 239 | |||
Fixed assets | 356 | |||
Intangible assets | 114 | |||
Fair value of favorable operating lease | 70 | |||
Liabilities assumed | (8 | ) | ||
Total | $ | 822 | ||
F-103
Table of Contents
2008 | ||||
Trade accounts receivable | $ | 233,340 | ||
Less allowance for doubtful accounts | (2,439 | ) | ||
Total | $ | 230,901 | ||
2008 | ||||
Raw materials | $ | 39,759 | ||
Work in process | 390,996 | |||
Finished goods | 151,385 | |||
Total | $ | 582,140 | ||
2008 | ||||
Receivables from related parties | $ | 2,491 | ||
Receivables from government agencies | 65,716 | |||
Prepayments, advances and other debtors | 90,851 | |||
Total | $ | 159,058 | ||
Accumulated | ||||||||||||
Gross Value | Amortization | Net Value | ||||||||||
Loan guarantees | $ | 148,000 | $ | (27,750 | ) | $ | 120,250 | |||||
Loan arrangement fees | 6,750 | (1,266 | ) | 5,484 | ||||||||
Product and process technology | 10,800 | (1,608 | ) | 9,192 | ||||||||
Software development and licenses | 76,256 | (2,860 | ) | 73,396 | ||||||||
Supply agreement | 18,982 | (18,982 | ) | — | ||||||||
Total | $ | 260,788 | $ | (52,466 | ) | $ | 208,322 | |||||
F-104
Table of Contents
Amortization | ||||
Year | Expense | |||
2009 | $ | 60,322 | ||
2010 | 60,000 | |||
2011 | 56,000 | |||
2012 | 21,000 | |||
2013 | 11,000 | |||
Total | $ | 208,322 | ||
F-105
Table of Contents
2008 | ||||
Land | $ | 2,515 | ||
Buildings, facilities and leasehold improvements | 89,582 | |||
Machinery and Equipment | 597,187 | |||
Computer and R&D Equipment | 16,951 | |||
Other Tangible Assets | 2,123 | |||
Construction in progress | 2,000 | |||
Total Gross Cost | $ | 710,358 | ||
Total Accumulated Depreciation | $ | (146,633 | ) | |
Total Net Cost | $ | 563,725 | ||
2008 | ||||
Fair value of the favorable operating lease | $ | 67,420 | ||
Long term receivable related to tax refund | 40,423 | |||
Related party receivable | 24,527 | |||
Deposits | 449 | |||
Total | $ | 132,819 | ||
F-106
Table of Contents
2008 | ||||
Taxes other than income tax | $ | 33,360 | ||
Salaries, wages and social charges | 37,747 | |||
Provision for restructuring | 8,541 | |||
Deferred income on shipments to distributors | 4,525 | |||
Current portion of pension liability | 2,155 | |||
Accrued income tax | 13,035 | |||
Other accrued liabilities | 46,728 | |||
Total | $ | 146,091 | ||
F-107
Table of Contents
2008 | ||||
Change in projected benefit obligation: | ||||
Benefit Obligation at beginning of period | $ | 30,175 | ||
Service cost | 4,149 | |||
Interest cost | 2,703 | |||
Plan participant contributions | 278 | |||
Actuarial loss/(gain) | (119 | ) | ||
Benefits Paid | (5,375 | ) | ||
Benefit Obligation of acquired business | 38,203 | |||
Currency exchange impact | (9,849 | ) | ||
Ending projected benefit obligation | $ | 60,165 | ||
2008 | ||||
Change in plan assets: | ||||
Fair Value of the Assets at beginning of the period | $ | — | ||
Actual return on plan assets | 176 | |||
Employer contributions | 7,925 | |||
Plan participants’ contributions | 278 | |||
Benefits paid | (5,375 | ) | ||
Plan assets of acquired business | 31,161 | |||
Currency impact | (5,096 | ) | ||
Ending fair value of plan assets | $ | 29,069 | ||
2008 | ||||
Funded status at year end | $ | (30,679 | ) | |
Unrecognized transition asset | — | |||
Unrecognized prior service cost | — | |||
Accumulated other comprehensive loss/(gain) | (417 | ) | ||
Net amount recognized in consolidated balance sheet | $ | (31,096 | ) | |
F-108
Table of Contents
2008 | ||||
Plans with accumulated benefit obligations in excess of plan assets: | ||||
Accumulated benefit obligations | $ | 56,950 | ||
Fair Value of plan assets | $ | 28,863 | ||
Plans with projected benefit obligations in excess of plan assets: | ||||
Projected benefit obligations | $ | 60,165 | ||
Fair Value of plan assets | $ | 29,069 |
2008 | ||||
Discount rate | 5.19 | % | ||
Average increase in compensation | 3.24 | % |
2008 | ||||
Discount rate | 5.64 | % | ||
Expected Long term rate on plan assets | 5.35 | % | ||
Average increase in compensation | 4.30 | % |
2008 | ||||
Service cost | $ | 4,149 | ||
Interest cost | 2,703 | |||
Expected return on plan assets | (1,322 | ) | ||
Other | 678 | |||
Net periodic pension cost | $ | 6,208 | ||
F-109
Table of Contents
Asset Category | 2008 | Target Allocation | ||||||
Equity securities | 21 | % | 21 | % | ||||
Debt securities | 55 | % | 55 | % | ||||
Other | 24 | % | 24 | % |
Years | Pension Benefits | |||
2009 | 3,761 | |||
2010 | 3,016 | |||
2011 | 3,808 | |||
2012 | 3,326 | |||
2013 | 3,828 | |||
From 2014 to 2018 | 21,287 |
F-110
Table of Contents
2008 | ||||
Related party payable | $ | 40,423 | ||
• | 250,000,000 ordinary shares of one Euro each; | |
• | 14,204,545 convertible preferred shares ‘A’ of one Euro each; and | |
• | 142,045 preferred shares ‘A-1’ of one eurocent (EUR 0.01) each. |
F-111
Table of Contents
2008 | ||||
Start up costs | $ | 39,433 | ||
Foreign exchange gains | (986 | ) | ||
Gain on sale of other non-current assets, net | (2,770 | ) | ||
Other | 1,870 | |||
Total | $ | 37,547 | ||
2008 | ||||
Impairment charges | $ | 62,000 | ||
Restructuring charges | 12,350 | |||
Total | $ | 74,350 | ||
2008 | ||||
Charges incurred during the period | $ | 12,350 | ||
Amounts paid | (3,809 | ) | ||
Provision as at December 31, 2008 | $ | 8,541 | ||
F-112
Table of Contents
2008 | ||||
Amortization of loan guarantees | $ | 27,750 | ||
Interest on debt obligations to related parties | 22,734 | |||
Interest on long-term debt | 11,847 | |||
Amortization of loan arrangement fees | 1,266 | |||
Total interest expense | 63,597 | |||
Interest income | 6,537 | |||
Total interest expense, net | $ | 57,060 | ||
2008 | ||||
Current: | ||||
Netherlands | $ | — | ||
Foreign | 22,229 | |||
Total current | 22,229 | |||
Deferred: | ||||
Netherlands | — | |||
Foreign | (3,104 | ) | ||
Total deferred | (3,104 | ) | ||
Total provision for income taxes | $ | 19,125 | ||
2008 | ||||
Provision computed at Dutch statutory rate | $ | (64,182 | ) | |
Foreign rate differential | 171 | |||
Permanent differences | 3,534 | |||
Research and development tax credits | (3,427 | ) | ||
Current year losses not benefited | 69,072 | |||
Change in beginning of year valuation allowance | 15,112 | |||
Others | (1,155 | ) | ||
Provision for income taxes | $ | 19,125 | ||
Effective tax rate | (7.6 | )% | ||
F-113
Table of Contents
2008 | ||||
Deferred tax assets: | ||||
Accrued compensation | $ | 5,106 | ||
Other reserves and accruals | 658 | |||
Fixed assets | 118,280 | |||
Unrealized foreign exchange loss | 660 | |||
Research and development credit carryover | 987 | |||
Net operating loss carryover | 96,678 | |||
Others | 5,332 | |||
Total deferred tax assets | 227,701 | |||
Less: valuation allowance | (142,229 | ) | ||
Net deferred tax assets | 85,472 | |||
Deferred tax liabilities: | ||||
Fixed assets | (3,640 | ) | ||
Inventory | (1,776 | ) | ||
Accounts receivable | (3,205 | ) | ||
Total deferred tax liabilities | (8,621 | ) | ||
Total net deferred tax assets | $ | 76,851 | ||
F-114
Table of Contents
2008 | ||||
Balance as at March 30, 2008 | — | |||
Gross amount of the increases in unrecognized tax benefits of tax positions taken during a prior year | — | |||
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year | $ | 2,369 | ||
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities | — | |||
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations | — | |||
Balance as at December 31, 2008 | $ | 2,369 | ||
F-115
Table of Contents
F-116
Table of Contents
Total | 2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | ||||||||||||||||||||||
Operating Leases | $ | 16,493 | $ | 8,511 | $ | 1,563 | $ | 1,288 | $ | 1,129 | $ | 1,095 | $ | 2,907 | ||||||||||||||
Purchase Commitments | 304,016 | 277,558 | 25,058 | 700 | 700 | — | — | |||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||
Equipment and other asset purchase | 61,884 | 61,884 | — | — | — | — | — | |||||||||||||||||||||
Transition Service and Supply Agreement Fees | 126,720 | 126,720 | — | — | — | — | — | |||||||||||||||||||||
Other operational expenses | 115,412 | 88,954 | 25,058 | 700 | 700 | — | — | |||||||||||||||||||||
Total | $ | 320,509 | $ | 286,069 | $ | 26,621 | $ | 1,988 | $ | 1,829 | $ | 1,095 | $ | 2,907 | ||||||||||||||
F-117
Table of Contents
2008 | ||||
Net Sales to Intel | $ | 664 | ||
Supply Agreement(1) | 141,596 | |||
Service Agreement(2) | 28,561 | |||
Transition Service Agreement Fees(3) | 49,664 | |||
Period Costs(4) | 413,164 |
(1) | Numonyx purchases wafers from Intel’s facility in Ireland. These costs are recorded within cost of sales. | |
(2) | Intel’s Pudong facility performs research and development and assembly/test services for Numonyx. These costs are primarily recorded within cost of sales. | |
(3) | As described in Note 1, ‘The Company’, these expenses include supply chain, procurement, site manufacturing, information technology, human resource, and finance and accounting services. These costs are primarily recorded within cost of sales and selling, general and administrative expenses. | |
(4) | Intel incurs facility-related expenses on Numonyx’ behalf for the Israel and Philippines sites. These costs are recorded within cost of sales. |
2008 | ||||
Trade Accounts Receivable from Intel, net(1) | $ | 80,105 | ||
Prepaid operating lease with Intel(2) | 67,420 | |||
Other receivables from Intel(3) | 4,700 | |||
Accounts payable to Intel(4) | 149,188 | |||
Other accrued liabilities to Intel | 5,717 |
(1) | Trade accounts receivable from Intel, net represents monies outstanding from customers to Intel, and therefore not yet remitted to Numonyx, relating to revenues generated by Intel on behalf of Numonyx. | |
(2) | See Note 10, ‘Other Investments and Non Current assets’ for an explanation of the prepaid operating lease. | |
(3) | Other receivables from Intel relates to funding for a joint research and development program between Intel and Numonyx. | |
(4) | Accounts payable and other accrued liabilities to Intel relate principally to amounts payable by Numonyx for supply agreement, service agreement and other services provided by Intel under the Transition Services Agreement. |
2008 | ||||
Transition Services Agreement Fees | $ | 29,108 | ||
Cost sharing arrangement(1) | 54,879 |
F-118
Table of Contents
(1) | The cost sharing arrangement is an agreement with STM in relation to the Company’s facility in Agrate, Italy, under which facilities and certain costs are shared between STM and Numonyx. The number disclosed above is the net costs paid by Numonyx to STM during the period. |
2008 | ||||
Trade accounts receivable from STM, net(1) | $ | 111,682 | ||
Other current receivables from STM(2) | 13,200 | |||
Other long term receivable from STM(3) | 24,527 | |||
Accounts payable to STM(4) | 9,890 | |||
Other long term payable to STM(5) | 40,423 |
(1) | Trade accounts receivable from STM, net represents monies outstanding from customers to STM, and therefore not yet remitted to Numonyx, relating to revenues generated by STM on behalf of Numonyx. | |
(2) | Other current receivables from STM relate to non-trade receivables. | |
(3) | The long term receivable from STM relates to the end of employment fund in Italy (see Note 10, ‘Other Investments and Non-Current Assets’). | |
(4) | Accounts payable to STM relate to Transition Services Agreements fees and the Cost Sharing Arrangement in Italy. | |
(5) | The long term payable to STM relates to a tax refund in Italy (see Note 10, ‘Other Investments and Non-Current Assets’ and Note 14, ‘Other Non Current Liabilities’. |
2008 | ||||
Purchases of semi-finished product | $ | 77,470 |
2008 | ||||
Prepayment for additional equity interest | $ | 50,000 | ||
Accounts payable to Hynix Numonyx Semiconductor Ltd. | 9,635 | |||
Other accrued liabilities to Hynix Numonyx Semiconductor Ltd | 4,053 |
F-119
Table of Contents
Balance at | Charged to | Balance | ||||||||||||||||||
Valuation and Qualifying Accounts Deducted | Beginning | Translation | Costs and | Additions/ | at End of | |||||||||||||||
from the Related Asset Accounts | of Period | Adjustment | Expenses | (Deductions) | Period | |||||||||||||||
(Currency— millions of U.S. dollars) | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Inventories | 39 | 108 | (75 | ) | 72 | |||||||||||||||
Accounts Receivable | 21 | 1 | 3 | 25 | ||||||||||||||||
Deferred Tax Assets | 1,123 | (6 | ) | 170 | (4 | ) | 1283 | |||||||||||||
2007 | ||||||||||||||||||||
Inventories | 47 | 72 | (80 | ) | 39 | |||||||||||||||
Accounts Receivable | 31 | 1 | (11 | ) | 21 | |||||||||||||||
Deferred Tax Assets | 1,039 | 6 | 79 | (1 | ) | 1,123 | ||||||||||||||
2006 | ||||||||||||||||||||
Inventories | 51 | 78 | (82 | ) | 47 | |||||||||||||||
Accounts Receivable | 27 | 1 | 7 | (4 | ) | 31 | ||||||||||||||
Deferred Tax Assets | 854 | 101 | 135 | (51 | ) | 1,039 |
S-1