By region of shipment, EMEA and the Americas grew revenues sequentially 8.4% and 1.8%, respectively, while Asia Pacific decreased 18.2%. On a year-over-year basis, revenues in Asia Pacific, EMEA and the Americas increased 24.5%, 22.4% and 12.7%, respectively.

First quarter gross profit was $888 million and gross margin was 39.9%, 40 basis points above the midpoint of the Company's guidance. On a sequential basis, gross margin decreased 80 basis points mainly due to normal price pressure and negative currency effects, net of hedging partially offset by improved product mix and increased manufacturing efficiency. Gross margin increased 220 basis points year-over-year largely driven by improved manufacturing efficiency and better product mix partially offset mainly by normal price pressure as well as negative currency effects, net of hedging.
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Combined R&D and SG&A expenses were $614 million compared to $590 million in the prior quarter. On a year-over-year basis, combined R&D and SG&A expenses increased $48 million mainly due to negative currency effects, net of hedging, and inflationary dynamics.

First quarter other income & expenses, net, registered income of $16 million compared to $18 million and $17 million in the prior and year-ago quarter, respectively.

Impairment and restructuring charges in the first quarter were $21 million, compared to $20 million and $5 million in the prior and year-ago quarter, respectively, related to the substantially completed set-top box restructuring plan announced in January 2016.

Operating income in the first quarter was $269 million, equivalent to 12.1% of net revenues, compared to $411 million, equivalent to 16.7% of net revenues, in the 2017 fourth quarter and was up sharply in comparison to the 2017 first quarter operating income of $132 million, equivalent to 7.3% of net revenues. On a year-over-year basis, all product groups improved operating results due to higher revenues and improved gross margin: MDG operating margin increased to 19.5% from 10.3%; ADG operating margin doubled to 11.0% from 5.5%; and AMS operating margin expanded to 9.8% from 7.6%.

First quarter net income was $239 million, equivalent to $0.26 diluted earnings per share, compared to the 2017 fourth quarter net income of $308 million, equivalent to $0.34 per share, and increased significantly compared to 2017 first quarter net income of $108 million, equivalent to $0.12 diluted earnings per share.

Cash Flow and Balance Sheet Highlights

Capital expenditure payments, net of proceeds from sales, were $351 million during the first quarter of 2018 compared to $407 million in the prior quarter and $219 million in the year-ago quarter.

Free cash flow⁽¹⁾ was $95 million, up significantly from $62 million in the year-ago quarter. 

Inventory was $1.43 billion at quarter end. Inventory in the first quarter of 2018 was at 3.7 turns or 97 days.

In the first quarter, the Company paid cash dividends totaling $54 million.

ST's net financial position⁽¹⁾ was $522 million at March 31, 2018 compared to $489 million at December 31, 2017. At March 31, 2018, ST's total financial resources were $2.23 billion; total financial debt was $1.71 billion; and total equity, including non-controlling interest, was $5.77 billion.

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

Second Quarter 2018 Business Outlook

The Company expects second quarter 2018 revenues to increase about 1.5% on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the second quarter is expected to be about 40.0% plus or minus 2.0 percentage points.

Mr. Bozotti commented, "Despite the weak demand we are experiencing for smartphones in the first half of 2018, we anticipate second quarter and first half revenues to grow year-over-year about 17.5% and 19.8%, respectively, at the mid-point of our guidance range. This will be driven by the continued better than seasonal sales trends in Automotive, Industrial and Internet of Things applications.

"For the second half of the year, we see healthy demand, with a strong backlog across all our product groups, end markets, including smartphones, and regions."

This outlook is based on an assumed effective currency exchange rate of approximately $1.21 = €1.00 for the 2018 second quarter and includes the impact of existing hedging contracts. The second quarter will close on June 30, 2018.

Recent Corporate Developments

• On January 25, STMicroelectronics announced Carlo Bozotti's Succession Plan; Deputy CEO Jean-Marc Chery will be proposed as the Sole Member of the Managing Board at the 2018 Annual General Meeting of Shareholders and to become the next President & CEO; A newly-formed Executive Committee will become effective upon shareholder approval of Mr. Chery's appointment. In addition, Carlo Ferro, Chief Financial Officer and President Finance, Legal, Infrastructure and Services, informed the Company about his intention to step down from his position at the same time as ST President and CEO Carlo Bozotti's retirement, which will be effective at the conclusion of the Annual General Shareholders' meeting, to pursue other personal opportunities. Mr. Ferro will remain President of ST's Italian affiliate until the end of 2018.

• On February 5, STMicroelectronics was recognized as among the world's most innovative companies in being named a "2018 Thomson Reuters Top 100 Global Technology Leader

• On March 1, STMicroelectronics announced that it had filed its Annual Report on Form 20-F for the year ended December 31, 2017 with the United States Securities and Exchange Commission (SEC).

• On March 27, STMicroelectronics announced the main resolutions to be submitted for adoption at the Annual General Meeting of Shareholders (AGM), which will be held in Amsterdam, the Netherlands, on May 31, 2018. The main resolutions, proposed by the Supervisory Board, include:
• The adoption of the Company's Statutory Annual Accounts for the year ended December 31, 2017, prepared in accordance with International Financial Reporting Standards (IFRS). The 2017 Statutory Annual Accounts were filed with the Netherlands Authority for the Financial Markets (AFM) on March 27, 2018 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 2018 and first quarter of 2019 to shareholders of record in the month of each quarterly payment;
• The appointment of Mr. Jean-Marc Chery, as sole member of the Managing Board, for a three-year term expiring at the 2021 AGM;
• The reappointment of Mr. Nicolas Dufourcq, as member of the Supervisory Board, for a three-year term expiring at the 2021 AGM; and
• The reappointment of Ms. Martine Verluyten, as member of the Supervisory Board, for a one-year term expiring at the 2019 AGM.

 

The record date for all shareholders to participate at the Annual General Meeting of Shareholders will be May 3, 2018. The complete agenda and all relevant detailed information concerning the 2018 AGM, as well as all related AGM materials, are available on the Company's website ( www.st.com).

Q1 2018 - Product and Technology Highlights

Automotive and Discrete Group (ADG) 

• Won a design with SPC58 32-bit automotive MCU for chassis stability control unit from a major Japanese tier1 for a leading Japanese car maker; 
• Earned multiple design wins for Accordo processor for mid-level car radio systems supporting Car Play(TM) and Android Auto(TM) features from several Asian OEMs;
• Captured an award for U-Chip power supply and drivers for engine-management and battery-management systems from a major Chinese tier1;  
• Received awards for multiple class D and class AB audio power amplifiers for infotainment applications with an important European tier1 for a North America car maker and for telematics for a European car maker; 
• Chosen to supply class D audio amplifiers for an e-call module by a major electric-vehicle maker;
• Landed awards for VIPower family devices for DC motor control in a door-zone application by a worldwide leader; 
• Captured a design win with the latest VIPower family in a high-end body-control module for a European premium car maker;  
• Received multiple design wins for an ASSP from German tier1s for electric power trunk applications; 
• Won sockets for SLLIMM-nano2 intelligent power modules based on IGBT trench technology for washing machine and dishwasher platforms from a market leader; 
• Landed a win for MDmesh power MOSFETS in an implanted cardiovascular defibrillator socket from a top American medical player and in a battery-charger socket from a leading smartphone manufacturer;  
• Maintained strong momentum in SiC diodes with multiple design-wins for electric-vehicle on-board chargers and high-efficiency power-conversion systems in servers, solar energy, and Hi-Fi audio systems from leading tier1s; 
• Earned a major design win for integrated passive device (IPD) filters in 5G base stations.

Analog, MEMS and Sensors Group (AMS)