·      Net revenues of $1.82 billion, up 12.9% year-over-year on growth across all product groups
·      Gross margin of 37.6%, up 420 basis points year-over-year
·      Net income of $108 million, year-over-year improvement of $149 million
·      Cash dividend of $0.24 per common share payable in equal quarterly installments to be proposed to the 2017 Annual General Meeting of Shareholders

Geneva, April 27, 2017 – STMicroelectronics (NYSE: STM), a global semiconductor leader serving customers across the spectrum of electronics applications, reported financial results for the first quarter ended April 1, 2017.

First quarter net revenues totaled $1.82 billion, gross margin was 37.6%, and net income was $108 million, or $0.12 per share. 

“The positive momentum we have had over the last quarters has continued entering 2017,” commented Carlo Bozotti, STMicroelectronics President and Chief Executive Officer. 

“In the first quarter, both revenues and gross margin were better than the mid-point of the guidance. Year-over-year, revenues increased 12.9%, with a synchronized and well-balanced growth across product groups, regions and sales channels. Both operating and net income significantly improved year-over-year, increasing to $129 million and $108 million, respectively, in the first quarter. Free cash flow, during a quarter of higher capital spending to support our growth plans, doubled to $62 million on a year-over-year basis.

“Our objective for 2017 is to achieve sustainable revenue growth and margin expansion through our strategic focus on Internet of Things and Smart Driving. Our results in this first quarter are putting us on the right trajectory.”

First Quarter Review

First quarter net revenues decreased 2.1% sequentially; a better than seasonal performance and 30 basis points better than the midpoint of the Company’s guidance. On a sequential basis, both Analog and MEMS Group (AMG) and Automotive and Discrete Group (ADG) performed better than the Company average, with AMG revenues up by 1.6% and ADG down by 1.2%. On a sequential basis, Microcontrollers and Digital ICs Group (MDG) revenues decreased by 2.8% due to lower sales of discontinued businesses partially offset by growth in general purpose microcontrollers. As expected, Imaging Product Division revenues, reported in Others, decreased sequentially reflecting seasonality.

On a year-over-year basis, first quarter net revenues increased by 12.9% on solid growth across all product families. Analog and MEMS Group (AMG) revenues increased 19.9% compared to the year-ago period driven by strong growth in MEMS and analog products. Microcontrollers and Digital ICs Group (MDG) revenues increased year-over-year by 11.4%, or 14.6% excluding discontinued businesses, mainly due to strong growth in general purpose microcontrollers and growth in digital products. Automotive and Discrete Group (ADG) revenues increased year-over-year by 5.6% reflecting growth in automotive and strong growth in power discrete products. Imaging Product Division revenues in the first quarter more than doubled compared to the year-ago quarter driven by ST’s Time-of-Flight technology.

By region of shipment, Asia Pacific, EMEA, and the Americas grew on a year-over-year basis 17.4%, 8.0%, and 5.7%, respectively.

First quarter gross profit was $685 million and gross margin was 37.6%, 60 basis points above the midpoint of the Company’s guidance. On a sequential basis, gross margin increased 10 basis points, above normal seasonality, mainly benefiting from favorable product mix, improved manufacturing efficiencies, and lower unused capacity charges partially offset by normal beginning of year pricing changes for major customers. Gross margin improved 420 basis points year-over-year, benefiting from strongly improved manufacturing efficiencies, favorable product mix, lower unused capacity charges and favorable currency effects, net of hedging partially offset principally by normal price pressure.

Combined R&D and SG&A expenses in the first quarter were $568 million compared to $570 million and $571 million in the sequential and year-ago quarter, respectively.

First quarter other income and expenses, net, registered income of $17 million compared to $25 million and $28 million in the prior and year-ago quarter, respectively, mainly due to lower R&D funding.

Impairment and restructuring charges in the first quarter were $5 million compared to $24 million and $28 million in the prior and year-ago quarter, respectively, mostly related to the set-top box restructuring plan announced in January 2016. The Company continued to make progress on its restructuring of the set-top box business. Exiting the first quarter of 2017, the restructuring plan was on track and achieved a run-rate of about $126 million of the total $170 million of targeted annualized savings expected upon completion.

Operating income in the first quarter of $129 million was stable in comparison to the prior quarter and increased by $162 million on a year-over-year basis.

First quarter operating income before impairment and restructuring charges(1) was $134 million, equivalent to 7.4% of net revenues, decreasing from $153 million, or 8.2% of net revenues in the 2016 fourth quarter mainly due to lower revenues. On a year-over-year basis, operating income before impairment and restructuring charges(1) improved by $139 million reflecting  higher revenues, improved product mix, manufacturing efficiencies, better fab loading and benefits from the set-top box restructuring plan.

First quarter net income was $108 million, equivalent to $0.12 per share, compared to a net income of $112 million, equivalent to $0.13 per share, in the prior quarter. On a year-over-year basis, net income improved by $149 million from the net loss of $41 million in the year-ago quarter. 

Cash Flow and Balance Sheet Highlights

Capital expenditure payments, net of proceeds from sales, were $219 million during the first quarter of 2017 compared to $100 million in the year-ago quarter.

Inventory was $1.20 billion at quarter end, up 2.5% from the prior quarter. Inventory in the first quarter of 2017 was at 3.8 turns or 95 days.

In the first quarter, the Company paid cash dividends totaling $53 million. Today, ST’s Supervisory Board has proposed to the 2017 Annual General Meeting of Shareholders to declare a cash dividend of US$0.24 per outstanding share of the Company’s common stock, to be distributed in quarterly installments of $0.06 in each of the second, third and fourth quarter of 2017 and first quarter of 2018 to shareholders of record in the month of each quarterly payment.

ST’s net financial position(1) was $518 million at April 1, 2017 compared to $513 million at December 31, 2016. ST’s financial resources equaled $1.98 billion and total debt was $1.46 billion at April 1, 2017.

Total equity, including non-controlling interest, was $4.77 billion at quarter end.

(1)    Non-U.S. GAAP measure. See Appendix for additional information and reconciliation to U.S. GAAP.

Second Quarter 2017 Business Outlook

Mr. Bozotti commented, “Entering the second quarter, we continue to see healthy demand, with strong booking trends across all our product groups and regions.

“As a result, we expect second quarter revenues to increase about 5.0% on a sequential basis, representing year-over-year growth of about 12.3% at the mid-point of our guidance range. We anticipate another quarter of margin expansion with second quarter gross margin of about 38.1% at the mid-point, leading to strong year-over-year improvement in operating and net income”.

The Company expects second quarter 2017 revenues to increase about 5.0% on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the second quarter is expected to be about 38.1% plus or minus 2.0 percentage points.

This outlook is based on an assumed effective currency exchange rate of approximately $1.08 = €1.00 for the 2017 second quarter and includes the impact of existing hedging contracts. The second quarter will close on July 1, 2017.

Use of Supplemental Non-U.S. GAAP Financial Information

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 from 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.

Forward-looking information

Some of the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) that are based on management’s current views and assumptions, and are conditioned upon and also involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those anticipated by such statements, due to, among other factors:

·         Uncertain macro-economic and industry trends, which may impact end-market demand for our products;

·         Customer demand that differs from projections;

·         The ability to design, manufacture and sell innovative products in a rapidly changing technological environment;

·         Unanticipated events or circumstances, which may impact our ability to execute the planned reductions in our net operating expenses and / or meet the objectives of our R&D Programs, which benefit from public funding;

·         Changes in economic, social, labor, political, or infrastructure conditions in the locations where we, our customers, or our suppliers operate, including as a result of macro-economic or regional events, military conflicts, social unrest, labor actions, or terrorist activities;

·         The Brexit vote and the perceptions as to the impact of the withdrawal of the U.K. may adversely affect business activity, political stability and economic conditions in the U.K., the Eurozone, the EU and elsewhere. While we do not have material operations in the U.K. and have not experienced any material impact from Brexit on our underlying business to date, we cannot predict its future implications;

·         Financial difficulties with any of our major distributors or significant curtailment of purchases by key customers;

·         The loading, product mix, and manufacturing performance of our production facilities;

·         The functionalities and performance of our IT systems, which support our critical operational activities including manufacturing, finance and sales, and any breaches of our IT systems or those of our customers or suppliers;

·         Variations in the foreign exchange markets and, more particularly, the U.S. dollar exchange rate as compared to the Euro and the other major currencies we use for our operations;

·         The impact of intellectual property (“IP”) claims by our competitors or other third parties, and our ability to obtain required licenses on reasonable terms and conditions;

·         The ability to successfully restructure underperforming business lines and associated restructuring charges and cost savings that differ in amount or timing from our estimates;

·         Changes in our overall tax position as a result of changes in tax laws, the outcome of tax audits or changes in international tax treaties which may impact our results of operations as well as our ability to accurately estimate tax credits, benefits, deductions and provisions and to realize deferred tax assets;

·         The outcome of ongoing litigation as well as the impact of any new litigation to which we may become a defendant;

·         Product liability or warranty claims, claims based on epidemic or delivery failure, or other claims relating to our products,  or recalls by our customers for products containing our parts;

·         Natural events such as severe weather, earthquakes, tsunamis, volcano eruptions or other acts of nature, health risks and epidemics in locations where we, our customers or our suppliers operate;

·         Availability and costs of raw materials, utilities, third-party manufacturing services and technology, or other supplies required by our operations; and

·         Industry changes resulting from vertical and horizontal consolidation among our suppliers, competitors, and customers.

 

Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely from the forward-looking statements. Certain forward-looking statements can be identified by the use of forward looking terminology, such as “believes,” “expects,” “may,” “are expected to,” “should,” “would be,” “seeks” or “anticipates” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions.

Some of these risk factors are set forth and are discussed in more detail in “Item 3. Key Information — Risk Factors” included in our Annual Report on Form 20-F for the year ended December 31, 2016, as filed with the SEC on March 3, 2017. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this release as anticipated, believed, or expected. We do not intend, and do not assume any obligation, to update any industry information or forward-looking statements set forth in this release to reflect subsequent events or circumstances.

STMicroelectronics Conference Call and Webcast Information

 

On April 27, 2017, the management of STMicroelectronics will conduct a live webcast of its conference call to discuss the Company’s operating performance for the first quarter of 2017.

 

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 May 12, 2017.

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