Second quarter gross profit was $672 million and gross margin was 32.8%. On a sequential basis, gross margin improved 150 basis points reflecting lower unsaturation charges, manufacturing efficiencies and higher volumes partially offset by price pressure.
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(*)Operating income (loss) before impairment, restructuring and one-time items, operating margin before impairment, restructuring and one-time items and operating margin before impairment, restructuring and one-time items attributable to ST are non-U.S. GAAP measures. Please refer to Attachment A for additional information explaining why the Company believes these measures are important and reconciliation to U.S. GAAP.
R&D expenses were $453 million representing a sequential decrease of $80 million or 15%, benefiting principally from the ongoing restructuring initiatives at ST-Ericsson as well as the charge back to Ericsson of the LTE Modem expenses of $102 million partially offset by seasonality. R&D expenses declined by 27% compared to the year-ago period.
SG&A expenses totaled $285 million in the second quarter, and on a sequential basis, SG&A expenses increased by 2% mainly due to seasonality. SG&A expenses decreased 2% compared to the year-ago period mainly due to cost-reduction initiatives.
Impairment, restructuring and other related closure costs for the second quarter were $43 million compared to $101 million in the prior quarter mainly due to restructuring initiatives within the ST organization.
Operating margin before impairment, restructuring and one-time items attributable to ST was a negative 2.6% in the 2013 second quarter compared to negative 5.3% in the prior quarter.*
In the second quarter of 2013, net loss attributable to non-controlling interest was $21 million, which mainly included the 50% owned by Ericsson in the ST-Ericsson joint venture, as consolidated by ST. In the first quarter of 2013, the corresponding amount was $126 million.
ST recorded in the second quarter a charge of $89 million on equity-method investments largely due to a one-time non-cash charge of $69 million on ST's equity value in 3Sun due to impairment charges reported by the 3Sun joint venture. 3Sun is a joint initiative between Enel Green Power, Sharp and the Company for the manufacture of thin film photovoltaic panels in Catania, Italy. Each partner owns a third of the common shares of the entity.
Second quarter net loss was $152 million or $(0.17) per share, compared to a net loss of $(0.19) and $(0.08) per share in the prior and year-ago quarter, respectively. On an adjusted basis, net of related taxes, ST reported non-U.S. GAAP net loss per share of $(0.06) in the second quarter, excluding impairment and restructuring charges and one-time items, compared to a net loss of $(0.13) and $(0.05) per share in the prior and year-ago quarter, respectively.*
For the second quarter of 2013, the effective average exchange rate for the Company was approximately $1.30 to EUR 1.00 compared to $1.31 to EUR 1.00 for the first quarter of 2013 and $1.32 to EUR 1.00 for the second quarter of 2012.
Net Revenues by Market Channel
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Net Revenues By Market Channel(%) Q2 2013 Q1 2013 Q2 2012
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Total OEM 74% 75% 78%
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Distribution 26% 25% 22%
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(*)Operating margin before impairment, restructuring and one-time items attributable to ST and adjusted net earnings per share are non-U.S. GAAP measures. For additional information and reconciliation to U.S. GAAP, please refer to Attachment A.
Revenues and Operating Results by ST Product Segment
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Operating Segment Q2 2013 Q2 2013 Q1 2013 Q1 2013 Q2 2012 Q2 2012
Million US$) Net Operating Net Operating Net Operating
Revenues Income Revenues Income Revenues Income
(Loss) (Loss) (Loss)
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Sense & Power and
Automotive
Products(SPA) 1,209 42 1,127 58 1,156 97
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Embedded Processing
Solutions
including Wireless
product line
(EPS)(a) 824 (106) 867 (210) 981 (233)
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Others (b)(c) 12 (43) 15 (129) 11 (71)
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TOTAL 2,045 (107) 2,009 (281) 2,148 (207)
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