Elettronica
STMicroelectronics Reports 2016 First Quarter Financial Results
a global semiconductor leader serving customers across the spectrum of electronics applications, reported financial results for the first quarter ended April 2, 2016.
First quarter net revenues totaled $1.61 billion, gross margin was 33.4%, and net loss was $0.05 per share.
commented Carlo Bozotti, STMicroelectronics President and Chief Executive Officer.
In the first quarter of 2016, ST realigned its product families into three product groups to better leverage the product synergies around its strategic focus on Smart Driving and Internet of Things applications: Automotive and Discrete Group (ADG); Analog and MEMS Group (AMG) and Microcontrollers and Digital ICs Group (MDG). MDG includes ST's set-top-box business which is currently undergoing a restructuring targeting annualized savings of $170 million upon completion. All prior-period amounts have been retrospectively aligned to the 2016 reporting segments.
First quarter net revenues decreased 3.3% sequentially, in line with the Company's expectations and reflecting seasonal factors overall. Automotive and Discrete Group (ADG) revenues, representing the largest product group of ST, increased 5.4% on a sequential basis driven by strong demand, especially in Europe, in automotive products partially offset by difficult market conditions and seasonality related to discrete products. Analog and MEMS Group (AMG) revenues were substantially flat on a sequential basis while Microcontrollers and Digital ICs Group (MDG), moving from a strong base of comparison in the prior quarter, decreased 13.4%.
On a year-over-year basis, first quarter net revenues decreased 5.4% or 3.3% excluding negative currency effects and certain businesses undergoing a phase-out including mobile legacy products, camera modules and set-top box. This mainly reflected weaker market conditions. However, certain product families saw an increase in revenues. Automotive and microcontroller revenues, excluding negative currency effects, both increased over 4.0%.
As of the first quarter of 2016, ST has three regional sales organizations: EMEA; Americas; and Asia Pacific. Asia Pacific was created from the merger of the Japan & Korea and Greater China-South Asia regional sales organizations. On a year-over-year basis, EMEA grew 3.0%, while the Americas and Asia Pacific decreased by 8.0% and 8.6%, respectively.
First quarter gross profit was $538 million and gross margin was 33.4%, including a negative impact of about 60 basis points from unused capacity charges. Gross margin improved 20 basis points year-over-year, benefiting from favorable currency effects, net of hedging, lower unused capacity charges and manufacturing efficiencies partially offset by price pressure. Gross margin decreased 10 basis points sequentially due to manufacturing efficiencies and price pressure partially offset by lower unused capacity charges, favorable product mix and favorable currency effects, net of hedging.
Combined R&D and SG&A expenses were $571 million compared to $591 million in the year-ago quarter mainly due to favorable currency effects, net of hedging, as well as the savings plan completed in 2015. On a sequential basis, combined R&D and SG&A expenses decreased by $12 million, benefiting from favorable currency effects, net of hedging, and lower calendar days in the first quarter compared to the fourth quarter.
First quarter other income & expenses, net, registered income of $28 million mainly due to R&D funding.
First quarter operating loss before impairment and restructuring charges was $5 million, equivalent to negative 0.3% of revenues, compared to income of $10 million, equivalent to positive 0.6% of revenues, in the year-ago quarter, reflecting lower revenues and pricing pressure, partially offset by favorable currency effects, net of hedging, improved product mix and manufacturing efficiencies. On a year-over-year basis, ADG and MDG operating results improved while AMG registered lower profitability mainly due to lower revenues.
Impairment and restructuring charges in the first quarter were $28 million principally relating to the initial phase of the Set-top Box restructuring plan.
First quarter net loss was $41 million, equivalent to negative $0.05 per share, compared to a net loss of $22 million in the year-ago quarter and a net income of $2 million in the prior quarter.
For the first quarter of 2016, the effective average exchange rate for the Company was approximately $1.10 to EUR1.00 compared to $1.23 to EUR1.00 for the first quarter of 2015 and $1.11 to EUR1.00 for the fourth quarter of 2015.
Capital expenditure payments, net of proceeds from sales, were $100 million during the first quarter of 2016 compared to $89 million in the year-ago and prior quarter.
Inventory was $1.30 billion at quarter end, up 4% from the prior quarter. Inventory in the first quarter of 2016 was at 3.3 turns or 109 days.
In the first quarter, the Company paid cash dividends totaling $88 million. On April 1, 2016, ST's Supervisory Board, proposed to resolve the distribution of a cash dividend of US$0.24 per outstanding share of the Company's common stock, to be distributed in quarterly installments of US$0.06 in each of the second, third and fourth quarters of 2016 and first quarter of 2017 to shareholders of record in the month of each quarterly payment. The Company's Annual General Meeting of Shareholders will be held on May 25, 2016 in Amsterdam, the Netherlands.
ST's net financial position was $439 million at April 2, 2016 compared to $494 million at December 31, 2015. ST's financial resources equaled $2.04 billion and total debt was $1.60 billion at April 2, 2016.
Total equity, including non-controlling interest, was $4.82 billion at quarter end.
Mr. Bozotti commented,
The Company expects second quarter 2016 revenues to increase about 5.5% on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the second quarter is expected to be about 34.0% plus or minus 2.0 percentage points and reflects unsaturation charges negatively impacting gross margin by about 60 basis points .
This outlook is based on an assumed effective currency exchange rate of approximately $1.12 = EUR1.00 for the 2016 second quarter and includes the impact of existing hedging contracts. The second quarter will close on July 2, 2016.
The complete agenda and all relevant detailed information concerning the 2016 Annual General Meeting of Shareholders, as well as all related AGM materials are available on the Company's website (www.st.com).
This press release contains supplemental non-U.S. GAAP financial information, including operating income (loss) before impairment and restructuring charges, operating margin before impairment and restructuring charges, adjusted net earnings per share, free cash flow and net financial position.
Readers are cautioned that these measures are unaudited and not prepared in accordance with U.S. GAAP and should not be considered as a substitute for U.S. GAAP financial measures. In addition, such non-U.S. GAAP financial measures may not be comparable to similarly titled information by other companies.
See the Appendix of this press release for a reconciliation of the Company's non-U.S. GAAP financial measures to their corresponding U.S. GAAP financial measures. To compensate for these limitations, the supplemental non-U.S. GAAP financial information should not be read in isolation, but only in conjunction with the Company's consolidated financial statements prepared in accordance with U.S. GAAP.
On April 27, 2016, the management of STMicroelectronics will conduct a conference call to discuss the Company's operating performance for the first quarter of 2016.
The conference call will be held at 9:30 a.m. CET / 8:30 a.m. BST / 3:30 a.m. U.S. Eastern Time (ET) / 12:30 a.m. U.S. Pacific Time (PT). The conference call will be available live via the Internet by accessing http://investors.st.com. Those accessing the webcast should go to the Web site at least 15 minutes prior to the call, in order to register, download and install any necessary audio software. The webcast will be available until May 13, 2016.
ST is a global semiconductor leader delivering intelligent and energy-efficient products and solutions that power the electronics at the heart of everyday life. ST's products are found everywhere today, and together with our customers, we are enabling smarter driving and smarter factories, cities and homes, along with the next generation of mobile and Internet of Things devices. By getting more from technology to get more from life, ST stands for life.augmented.
In 2015, the Company's net revenues were $6.90 billion, serving more than 100,000 customers worldwide. Further information can be found at www.st.com
INVESTOR RELATIONS:
Tait Sorensen
Group VP, Investor Relations
STMicroelectronics
Tel: +1 602 485 2064
tait.sorensen@st.com
MEDIA RELATIONS:
Nelly Dimey
Director, Corporate Media and Public Relations
Tel: + 33 1 58 07 77 85
nelly.dimey@st.com
In the first quarter of 2016, ST realigned its product families into three product groups to better leverage the product synergies around its strategic focus on Smart Driving and Internet of Things applications: Automotive and Discrete Group (ADG); Analog and MEMS Group (AMG) and Microcontrollers and Digital ICs Group (MDG). MDG includes ST's set-top-box business which is currently undergoing a restructuring targeting annualized savings of $170 million upon completion. All prior-period amounts have been retrospectively aligned to the 2016 reporting segments.
The supplemental non-U.S. GAAP information presented in this press release is unaudited and subject to inherent limitations. Such non-U.S. GAAP information is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for U.S. GAAP measurements. Also, our supplemental non-U.S. GAAP financial information may not be comparable to similarly titled non-U.S. GAAP measures used by other companies. Further, specific limitations for individual non-U.S. GAAP measures, and the reasons for presenting non-U.S. GAAP financial information, are set forth in the paragraphs below. To compensate for these limitations, the supplemental non-U.S. GAAP financial information should not be read in isolation, but only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP.
Operating income (loss) before impairment and restructuring charges and one-time items is used by management to help enhance an understanding of ongoing operations and to communicate the impact of the excluded items, such as impairment, restructuring charges and other related closure costs. Adjusted net earnings and earnings per share (EPS) are used by management to help enhance an understanding of ongoing operations and to communicate the impact of the excluded items like impairment, restructuring charges and other related closure costs attributable to ST and other one-time items, net of the relevant tax impact.
The Company believes that these non-GAAP financial measures provide useful information for investors and management because they measure the Company's capacity to generate profits from its business operations, excluding the effect of acquisitions and expenses related to the rationalizing of its activities and sites that it does not consider to be part of its on-going operating results, thereby offering, when read in conjunction with the Company's GAAP financials, (i) the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results, (ii) the ability to better identify trends in the Company's business and perform related trend analysis, and (iii) an easier way to compare the Company's results of operations against investor and analyst financial models and valuations, which usually exclude these items.
Net financial position: resources (debt), represents the balance between our total financial resources and our total financial debt. Our total financial resources include cash and cash equivalents, marketable securities, short-term deposits and restricted cash, and our total financial debt includes short-term borrowings, current portion of long-term debt and long-term debt, all as reported in our consolidated balance sheet. We believe our net financial position provides useful information for investors because it gives evidence of our global position either in terms of net indebtedness or net cash position by measuring our capital resources based on cash, cash equivalents and marketable securities and the total level of our financial indebtedness. Net financial position is not a U.S. GAAP measure.
Free cash flow is defined as net cash from operating activities minus net cash from (used in) investing activities, excluding payment for purchases (proceeds from the sale of) marketable securities and short-term deposits, restricted cash and net cash variation for joint ventures deconsolidation. We believe free cash flow provides useful information for investors and management because it measures our capacity to generate cash from our operating and investing activities to sustain our operating activities. Free cash flow is not a U.S. GAAP measure and does not represent total cash flow since it does not include the cash flows generated by or used in financing activities. In addition, our definition of free cash flow may differ from definitions used by other companies.
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