Elettronica
STMicroelectronics Reports 2015 Fourth Quarter and Full Year Financial Results
a global semiconductor leader serving customers across the spectrum of electronics applications, reported financial results for the fourth quarter and full year ended December 31, 2015.
Fourth quarter net revenues totaled $1.67 billion, gross margin was 33.5%, and net income was $2 million. For the full year 2015, net revenues totaled $6.90 billion, gross margin was 33.8%, and net income was $104 million.
commented Carlo Bozotti, STMicroelectronics President and Chief Executive Officer.
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ST's digital business is at the core of the company's strategy. It represents a significant share of ST's revenues and focuses on growing applications, with a portfolio that includes general purpose and secure microcontrollers, digital automotive products, ASICs and specialized imaging sensors.
After an extensive review of external and internal options for the future of the Company's set-top box business, ST will discontinue the development of new platforms and standard products for set-top-box and home gateway. The slower than expected market adoption of leading-edge products and increasing competition on low-end boxes, combined with the required high level of R&D investment, has led this business to generate significant losses in the course of the last years.
As a result of this, the Company announced a global workforce review, including:
Annualized savings are estimated at $170 million upon completion and restructuring costs at about $170 million.
Net revenues in the fourth quarter decreased 5.5% sequentially to $1.67 billion. By region of shipment, EMEA, Greater China & South Asia, Japan & Korea, and the Americas decreased by 2.8%, 5.2%, 7.6%, and 8.6%, respectively, on a sequential basis.
On a year-over-year basis, net revenues decreased 8.8% or 5.5% excluding negative currency effects and mobile legacy products.
Fourth quarter gross profit was $559 million and gross margin was 33.5%. On a sequential basis, gross margin decreased 130 basis points, reflecting the impact of unused capacity charges of about 180 basis points and price pressure partially offset by favorable currency effects, net of hedging, manufacturing efficiencies and favorable product mix. On a year-over-year basis, gross margin decreased by 30 basis points, mainly due to price pressure and lower sales of licenses largely offset by favorable currency effects, net of hedging, manufacturing efficiencies and favorable product mix.
Combined R&D and SG&A in the fourth quarter increased to $583 million from $549 million in the third quarter, principally due to seasonality and a longer calendar partially offset by favorable currency effects, net of hedging. On a year-over-year basis, combined R&D and SG&A expenses decreased by $28 million mainly due to favorable currency effects, net of hedging, and savings from the EPS restructuring plan.
Other income and expenses, net in the fourth quarter, increased to $53 million from $38 million in the prior quarter, with the $15 million increase mainly reflecting a higher level of R&D funding and the gain realized from the sale of a non-strategic asset. Other income and expenses, net was $50 million in the year-ago quarter.
Impairment, restructuring and other related closure costs for the fourth quarter were $4 million, compared to $11 million and $20 million in the prior and year-ago quarter.
Operating margin before impairment and restructuring charges* decreased to 1.7% in the fourth quarter from 5.8% and 3.2% in the prior and year-ago quarter, respectively, mainly due to lower revenues.
Fourth quarter net income was $2 million, compared to a net income of $90 million and $43 million, or $0.10 and of $0.05 per share, in the prior and year-ago quarter, respectively.
For the fourth quarter of 2015, the effective average exchange rate for the Company was approximately $1.11 to EUR1.00, compared to $1.16 to EUR1.00 for the third quarter of 2015 and $1.29 to EUR1.00 for the fourth quarter of 2014.
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SP&A segment fourth quarter net revenues decreased 9.9% sequentially mainly due to weak market conditions and the inventory correction in the channel. On a year-over-year basis, SP&A revenues decreased 13.5% mainly due to lower revenues in all product groups, weak market conditions and the slower than expected ramp of microphones.
SP&A operating margin was 3.6% in the 2015 fourth quarter compared to 9.2% in the prior quarter mainly reflecting lower revenues and $16 million of unused capacity charges. SP&A operating margin was 8.4% in the year-ago quarter.
EPS segment fourth quarter net revenues increased 2.0% on a sequential basis mainly driven by general purpose microcontrollers in MMS offset in part by lower DPG sales. On a year-over-year basis, EPS net revenues decreased 0.9% with strong growth in MMS offset by lower DPG sales.
EPS segment posted an operating loss of $4 million in the fourth quarter compared to break-even in the prior quarter mainly reflecting lower revenues and $14 million of unused capacity charges. EPS operating margin was negative 5.1% in the year-ago quarter.
Free cash flow* was $148 million in the fourth quarter, compared to $85 million and $208 million in the prior and year-ago quarter, respectively. Free cash flow was $327 million in 2015, compared to $197 million in 2014.
Net cash from operating activities was $245 million in the fourth quarter compared to $225 million and $311 million in the prior and year-ago quarter, respectively. For the full year, net cash from operating activities was $842 million in 2015, compared to $715 million in 2014.
Capital expenditure payments, net of proceeds from sales, were $89 million in the fourth quarter, compared to $128 million and $108 million in the prior and year-ago quarter, respectively. Capital expenditure payments, net of proceeds from sales, were $467 million for 2015, compared to $496 million for 2014. The ratio of capital investment spending to net revenues was 6.8% for 2015 compared to 6.7% for 2014.
Inventory was $1.25 billion at quarter end. Inventory in the fourth quarter of 2015 was at 3.5 turns or 103 days, compared to 3.7 turns or 97 days in the prior quarter.
ST paid cash dividends to shareholders of $92 million in the fourth quarter and $350 million for the full year 2015.
The Company's net financial position* improved to $494 million at December 31, 2015 compared to $459 million at September 26, 2015. ST's financial resources equaled $2.11 billion and total debt was $1.61 billion at December 31, 2015.
Total equity, including non-controlling interest, was $4.69 billion at quarter end.
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Net revenues of $6.90 billion for the full year 2015, represented a decrease of 6.8% in total or negative 3.3% excluding unfavorable currency effects and mobile legacy products. MMS revenues increased 7.2%, with all other product lines decreasing.
Gross margin improved 10 basis points to 33.8% of net revenues for the full year 2015, compared to 33.7% of net revenues in 2014, with the margin improvement reflecting manufacturing efficiencies, favorable currency effects, net of hedging, and favorable product mix largely offset by price pressure.
Operating income, as reported, decreased to $109 million in 2015 from $168 million in 2014 principally due to lower revenues. Operating income before impairment and restructuring and excluding $97 million related to R&D funding catch-up recorded in 2014, improved by $13 million compared to the prior year. Combined R&D and SG&A expenses totaled $2.32 billion and were lower by 5.1% compared to 2014.
Sense & Power and Automotive revenues for 2015 totaled $4.40 billion, a decrease of 7.8% compared to 2014 due to lower revenues in all product lines. SP&A operating margin decreased to 6.5% in 2015 from 8.8%, excluding the catch-up of grants in 2014, mainly reflecting lower revenue, price pressure and higher unused capacity charges partially offset by favorable currency effects, net of hedging.
Embedded Processing Solutions revenues were $2.47 billion and reflected mixed results. MMS revenues increased 7.2% to $1.62 billion, while DPG net revenues decreased 21.1% including ST-Ericsson legacy products, commodity camera modules and set-top boxes. EPS operating margin in 2015 was negative 4.5%, improving from a negative 8.6%, excluding the catch-up of grants in 2014, mainly reflecting improved product mix, favorable currency effects, net of hedging, and lower net operating expenses.
Net income, as reported, was $104 million in the full year 2015, or $0.12 per share, compared to $128 million, or $0.14 per share in the full year 2014.
The effective average exchange rate for the Company was approximately $1.17 to EUR1.00 for the full year 2015, compared to $1.34 to EUR1.00 for the full year 2014.
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Full Year Revenue and Operating Results by Product Segment
Mr. Bozotti commented,
The Company expects first quarter 2016 revenues to decrease about 3% on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the first quarter is expected to be about 33.0% plus or minus 2.0 percentage points.
This outlook is based on an assumed effective currency exchange rate of approximately $1.10 = EUR1.00 for the 2016 first quarter and includes the impact of existing hedging contracts. The first quarter will close on April 2, 2016.
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 Attachment A 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 January 27, 2016, the management of STMicroelectronics will conduct a live webcast of its conference call to discuss the Company's operating performance for the fourth quarter and full year of 2015.
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 live webcast and presentation materials will be available 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 February 12, 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
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
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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