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 €1.00 compared to $1.23 to €1.00 for the first quarter of 2015 and $1.11 to €1.00 for the fourth quarter of 2015.
Cash Flow and Balance Sheet Highlights
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(1) 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.
(1) Non-U.S. GAAP measure. See Appendix for additional information and reconciliation to U.S. GAAP.
Second Quarter 2016 Business Outlook
Mr. Bozotti commented, "Following a few quarters of market softness, during the first quarter we started to see signs of a recovery in the industry, with bookings improving across all regions and particularly in automotive and industrial. Based on this, we anticipate a sequential increase in net revenues by about 5.5% at the mid-point, and the gross margin to be about 34.0% at the mid-point."
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 = €1.00 for the 2016 second quarter and includes the impact of existing hedging contracts. The second quarter will close on July 2, 2016.
Recent Corporate Developments
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On April 1, ST announced the main resolutions to be submitted for adoption at the Annual General Meeting of Shareholders that will be held in Amsterdam, the Netherlands, on May 25, 2016. The main resolutions proposed by the Supervisory Board include:
- The adoption of the Company's Statutory Annual Accounts for the year ended December 31, 2015, prepared in accordance with International Financial Reporting Standards (IFRS). The 2015 Statutory Annual Accounts were filed with the Netherlands Authority for the Financial Markets (AFM) on April 1, 2016 and are posted on the Company's website ( www.st.com) and the AFM's website ( www.afm.nl);
- 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 appointment of Mr. Salvatore Manzi as a member of the Supervisory Board, for a three-year term expiring at the 2019 Annual General Meeting of Shareholders, in replacement of Mr. Alessandro Ovi whose mandate will expire as of the 2016 Annual General Meeting of Shareholders; and
- The reappointment of Ms. Janet Davidson as a member of the Supervisory Board for a three-year term, expiring at the 2019 Annual General Meeting of Shareholders.
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).
Q1 2016 - Product and Technology Highlights
Automotive and Discrete Group (ADG)
- Awarded the 32-bit MCU for a 77-GHz radar application from a leading European Tier1 for Japanese and European premium car makers;
- Extended our series of design wins for blind-spot detection with a 24-GHz radar transceiver solution with a top European Tier1 from a leading European car maker;
- Captured a design from a major global Tier1 for a 40nm 32-bit MCU platform for an automotive gateway application for multiple car makers;
- Landed a braking-system platform from a major Japanese Tier1 for a leading car maker;
- Continued to penetrate the American and European markets with multiple design wins for the SPC56 microcontroller from several leading players;
- Won multiple sockets for MOSFETs in SiC technology for electrical traction in fully electric cars;
- Maintained fast expansion of RF solutions for connectivity modules in IoT applications such as wearables, connected watches, connected water meters, and GPSs;
- Recorded important design wins for medium-power ultrafast diodes with industrial, automotive and telecom-infrastructure market leaders;
- Awarded all of the sockets for 160W and 300W supplies at a major Chinese switch-mode power supplier for an important game console;
- Named as an approved supplier in a new computing uninterruptible power supply for a major Chinese telecommunication player.
Analog and MEMS Group (AMG)
- Confirmed 6-axis Inertial Measurement Unit in flagship smartphone and wearable band from a top Chinese brand;
- Won pressure sensor socket in next-generation wearable from a top-tier Chinese manufacturer;
- Captured optical image stabilization, 6-axis inertial measurement unit, and pressure sensor sockets in flagship smartphone from a top manufacturer;
- Began shipping magnetometer and 6-axis inertial measurement unit for a wearable from a European leader in navigation and positioning;
- Confirmed low-power high-performance accelerometer and Bluetooth Low Energy sockets in a new activity tracker from a top player;
- Entered watches from Swiss luxury brand with latest motion MEMS products;
- Started sampling high-efficiency 6-axis MEMS sensor modules with key customers worldwide;
- Consolidated leadership in car navigation and telematics with shipments exceeding 1Mu for automotive gyroscope;
- Ramped production of the accelerometer for airbags for a major European tier1 system maker;
- Expanded customer base in China for Fingertip products with more than 5 design wins while also ramping production for an earlier win;
- Landed first order for next-generation electricity meter from a key European manufacturer;
- Introduced family of ICs that delivers industry's highest power-conversion efficiency for next-generation 48V datacenter architecture presented by Google.
Microcontrollers and Digital ICs Group (MDG)
- Earned STM32F7 socket from an American OEM for their next-generation smart watch;
- Captured a design-in for STM32F0 at a major OEM for HDD-battery smart charging;
- Announced Automotive-grade qualification of 32-bit secure microcontrollers;
- Landed slots for NFC controller and Secure Element to enable secure NFC transactions in ARM mbed wearable reference design;
- Ramped production of embedded SIM based on ST33 for new generation of tablets and watches at leading OEMs;
- Delivered first samples of new contactless ST25TB NFC tag for ticketing applications;
- Introduced world's first 4-ball WLCSP EEPROM with multiple addresses to support connection of two or more 4-pin EEPROMs to the same 2-wire Inter-IC (I 2 C) bus;
- Confirmed selection of Silicon-Photonics transceiver by networking module manufacturer for 100Gbit/sec datacenter upgrades;
- Captured two ASIC projects in Optical Access Network applications for 55nm BiCMOS mixed-signal technology;
- Earned wins for ASIC modules using H9 RF-SOI mixed-signal technology from two Chinese customers for Smartphone antenna applications;
- Demonstrated, together with Fingerprint Cards, Gemalto, and Precise Biometrics, a solution for fingerprint authentication in wearables and consumer devices that uses ST embedded Secure Element and NFC-controller System-in-Package with an STM32F4 MCU;
- Introduced a high-end STM32F7, 3 new STM32L0, and 6 new STM32L4 MCU product lines along with their related comprehensive development ecosystems.
