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STMicroelectronics Reports 2017 First Quarter Financial Results

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."

 Quarterly Financial Summary (US$ Million)

U.S. GAAP Q1 2017 Q4 2016 Q1 2016
Net Revenues 1,821 1,859 1,613
Gross Margin 37.6% 37.5% 33.4%
Operating Income (Loss) 129 129 (33)
Net Income (Loss) attributable to parent company 108 112 (41)
Net cash from operating activities 289 378 141


Non-U.S. GAAP (1) Q1 2017 Q4 2016 Q1 2016
Operating Income (Loss) before impairment and restructuring charges 134 153 (5)
Free cash flow 62 135 31
Net financial position 518 513 439

 (1) See Appendix for reconciliation to U.S. GAAP and additional information explaining why the Company believes these measures are important.

Quarterly Financial Summary By Product Group (US$ Million)

Net Revenues By Product Group Q1 2017 Q4 2016 Q1 2016
Automotive and Discrete Group (ADG) 708 716 671
Analog and MEMS Group (AMG) 443 436 369
Microcontrollers and Digital ICs Group (MDG) 593 610 532
Others (a) 77 97 41
Total 1,821 1,859 1,613

(a) Net revenues of "Others" includes revenues from sales of Imaging Product Division, Subsystems, assembly services, and other revenue.

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.

Q1 2017 - Product and Technology Highlights

Automotive and Discrete Group (ADG) 

Analog and MEMS Group (AMG)

Microcontrollers and Digital ICs Group (MDG)

Imaging Product Division (IMD)

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:

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 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.

About STMicroelectronics
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 2016, the Company's net revenues were $6.97 billion, serving more than 100,000 customers worldwide. Further information can be found at www.st.com.

For further information, please contact:

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



STMicroelectronics N.V.    
Consolidated Statements of Income    
(in millions of U.S. dollars, except per share data ($))    
     
  Three Months Ended
  (Unaudited) (Unaudited)
  April 01, April 02,
  2017 2016
     
Net sales   1,818   1,605
Other revenues   3   8
  NET REVENUES   1,821   1,613
Cost of sales   (1,136)   (1,075)
  GROSS PROFIT   685   538
Selling, general and administrative   (234)   (229)
Research and development   (334)   (342)
Other income and expenses, net   17   28
Impairment, restructuring charges and other related closure costs   (5)   (28)
  Total Operating Expenses   (556)   (571)
  OPERATING INCOME (LOSS)   129   (33)
Interest expense, net   (4)   (5)
Income (loss) on equity-method investments   -   -
INCOME (LOSS) BEFORE INCOME TAXES   125   (38)
  AND NONCONTROLLING INTEREST    
Income tax expense   (16)   (2)
  NET INCOME (LOSS)   109   (40)
Net income attributable to noncontrolling interest   (1)   (1)
  NET INCOME (LOSS) ATTRIBUTABLE TO PARENT COMPANY   108   (41)
     
  EARNINGS PER SHARE (BASIC) ATTRIBUTABLE TO PARENT COMPANY STOCKHOLDERS   0.12   (0.05)
  EARNINGS PER SHARE (DILUTED) ATTRIBUTABLE TO PARENT COMPANY STOCKHOLDERS   0.12   (0.05)
     
  NUMBER OF WEIGHTED AVERAGE    
  SHARES USED IN CALCULATING    
  DILUTED EARNINGS PER SHARE 901.9 878.6


 

STMicroelectronics N.V.      
CONSOLIDATED BALANCE SHEETS      
As at April 01, December 31, April 02,
In millions of U.S. dollars 2017 2016 2016
  (Unaudited) (Audited) (Unaudited)
ASSETS      
Current assets:      
Cash and cash equivalents 1,641 1,629 1,697
Marketable securities 335 335 343
Trade accounts receivable, net 946 939 891
Inventories 1,201 1,173 1,302
Other current assets 351 311 468
Total current assets 4,474 4,387 4,701
Goodwill 117 116 79
Other intangible assets, net 188 195 162
Property, plant and equipment, net 2,489 2,287 2,333
Non-current deferred tax assets 534 528 554
Long-term investments 57 57 57
Other non-current assets 467 434 492
  3,852 3,617 3,677
Total assets 8,326 8,004 8,378
       
LIABILITIES AND EQUITY      
Current liabilities:      
Short-term debt 685 117 173
Trade accounts payable 757 620 666
Other payables and accrued liabilities 777 750 692
Dividends payable to stockholders 6 59 10
Accrued income tax 47 42 52
Total current liabilities 2,272 1,588 1,593
Long-term debt 773 1,334 1,428
Post-employment benefit obligations 354 347 367
Long-term deferred tax liabilities 5 5 12
Other long-term liabilities 150 134 161
  1,282 1,820 1,968
Total liabilities 3,554 3,408 3,561
Commitment and contingencies      
Equity      
Parent company stockholders' equity      
Common stock (preferred stock: 540,000,000 shares authorized, not issued; common stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 911,095,420 shares issued, 883,530,762 shares outstanding) 1,157 1,157 1,157
Capital surplus 2,828 2,818 2,790
Retained earnings 538 431 483
Accumulated other comprehensive income 428 371 612
Treasury stock (241) (242) (288)
Total parent company stockholders' equity 4,710 4,535 4,754
Noncontrolling interest 62 61 63
Total equity 4,772 4,596 4,817
Total liabilities and equity 8,326 8,004 8,378


STMicroelectronics N.V.      
       
SELECTED CASH FLOW DATA      
       
Cash Flow Data (in US$ millions) Q1 2017 Q4 2016 Q1 2016
       
Net Cash from operating activities   289   378   141
Net Cash used in investing activities   (227)   (243)   (110)
Net Cash used in financing activities   (53)   (163)   (107)
Net Cash increase (decrease)   12   (46)   (74)
       
Selected Cash Flow Data (in US$ millions) Q1 2017 Q4 2016 Q1 2016
       
Depreciation & amortization   154 161 184
Net payment for Capital expenditures   (219)   (228)   (100)
Dividends paid to stockholders   (53)   (53)   (88)
Change in inventories, net   (22)   35   (22)

Appendix
STMicroelectronics
Supplemental Financial Information

  

  Q1 2017 Q4 2016 Q1 2016
€/$ Effective Rate 1.08 1.10 1.10


Net Revenues By Market Channel(%) Q1 2017 Q4 2016 Q1 2016
Total OEM 66% 67% 67%
Distribution 34% 33% 33%


Product Group Data

(US$ Million) 		Q1 2017 Q4 2016 Q1 2016
Automotive and Discrete Group (ADG)      
 - Net Revenues 708 716 671
 - Operating Income (Loss) 38 53 39
Analog and MEMS Group (AMG)      
 - Net Revenues 443 436 369
 - Operating Income (Loss) 45 41 2
Microcontrollers and Digital ICs Group (MDG)      
 - Net Revenues 593 610 532
 - Operating Income (Loss) 60 59 (3)
Others (a)      
 - Net Revenues 77 97 41
 - Operating Income (Loss) (14) (24) (71)
Total      
 - Net Revenues 1,821 1,859 1,613
 - Operating Income (Loss) 129 129 (33)

 (a) Net revenues of "Others" includes revenues from sales of Imaging Product Division, Subsystems, assembly services, and other revenue. Operating income (loss) of "Others" includes items such as unused capacity charges, impairment, restructuring charges and other related closure costs, phase out and start-up costs, and other unallocated expenses such as: strategic or special research and development programs, certain corporate-level operating expenses, patent claims and litigations, and other costs that are not allocated to product groups, as well as operating earnings of the Imaging Product Division, Subsystems and other products. "Others" includes $1 million, $4 million, and $10 million of unused capacity charges in the first quarter of 2017 and fourth and first quarters of 2016, respectively; and $5 million, $24 million, and $28 million of impairment, restructuring charges, and other related closure costs in the first quarter of 2017 and fourth and first quarters of 2016, respectively.

(Appendix - continued)

STMicroelectronics
Supplemental Non-U.S. GAAP Financial Information
U. S. GAAP - Non-U.S. GAAP Reconciliation
In US$ Million Except Per Share Data ($)

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.

Q1 2017

(US$ million, except per share data ($)) 		Gross Profit Operating Income Net Earnings Corresponding EPS
U.S. GAAP 685 129 108 0.12
Impairment & Restructuring   5 5  
Estimated Income Tax Effect     (1)
Non-U.S GAAP 685 134 112 0.12


Q4 2016

(US$ million, except per share data ($)) 		Gross Profit Operating Income Net Earnings Corresponding EPS
U.S. GAAP 698 129 112 0.13
Impairment & Restructuring   24 24  
Estimated Income Tax Effect     1
Non-U.S GAAP 698 153 137 0.15


Q1 2016

(US$ million, except per share data ($)) 		Gross Profit Operating Income (loss) Net Earnings
(loss) 		Corresponding EPS
U.S. GAAP 538 (33) (41) (0.05)
Impairment & Restructuring   28 28  
Estimated Income Tax Effect     (3)
Non-U.S GAAP 538 (5) (16) (0.02)

(continued)
(Appendix - continued)

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 and management 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.

Net Financial Position (US$ million) April 1, 2017 December 31, 2016 April 2, 2016
Cash and cash equivalents 1,641 1,629 1,697
Marketable securities 335 335 343
Total financial resources 1,976 1,964 2,040
Short-term debt (685) (117) (173)
Long-term debt (773) (1,334) (1,428)
Total financial debt (1,458) (1,451) (1,601)
Net financial position 518 513 439

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.

Free cash flow (US$ million) Q1 2017 Q4 2016 Q1 2016
Net cash from operating activities 289 378 141
Net cash used in investing activities (227) (243) (110)
Payment for purchase and proceeds from sale of marketable securities, investment in short-term deposits, restricted cash and net cash variation for joint ventures deconsolidation - - -
Free cash flow 62 135 31

 

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