- Third quarter net revenues of $1.76 billion and gross margin of 34.8%
- Third quarter net income of $90 million
- Free cash flow of $85 million; $179 million for the first nine months*
GENEVA, Switzerland, Oct. 29, 2015 (GLOBE NEWSWIRE) -- STMicroelectronics (NYSE: STM), a global semiconductor leader serving customers across the spectrum of electronics applications, reported financial results for the third quarter and nine months ended September 26, 2015.
Third quarter net revenues totaled $1.76 billion, gross margin was 34.8%, operating margin excluding impairment and restructuring was 5.8%, net income was $90 million and free cash flow was positive $85 million.
" In the third quarter, ST delivered sequential improvement in gross margin, operating margin, earnings per share and free cash flow. Revenue growth was limited and lower than expected, due to softer market demand as we progressed through the quarter and a manufacturing issue at a subcontractor which affected our sales of microphones," commented Carlo Bozotti, President and CEO of ST.
"On the other hand, three of our five product groups delivered sequential revenue growth. Our Microcontroller group performed well, growing 6.1% and hitting another record billing quarter thanks to the STM32 family. The Automotive group grew revenues by 1.9%, mainly driven by microcontrollers and by demand for advanced driver assistance systems, an area where ST is a leader. Additionally, our Digital Product Group increased revenues by $23 million driven by Imaging.
"During the third quarter, the market progressively deteriorated: the lower consumer spending in China is impacting the dynamics of the distribution channel in the region and the industry more globally, particularly in automotive."
Summary Financial Highlights
|Q3 2015||Q2 2015||Q3 2014|
|Operating Income, as reported||91||12||37|
|Net Income attributable to parent company||90||35||72|
Before impairment and restructuring charges (Million US$)
|Q3 2015||Q2 2015||Q3 2014|
(*)Free cash flow, operating income before impairment and restructuring charges and operating margin before impairment and restructuring charges are non-U.S. GAAP measures. Please refer to Attachment A for additional information explaining why the Company believes this measure is important and for reconciliation to U.S. GAAP.
Third Quarter Review
ST's third quarter net revenues increased 0.3% on a sequential basis to $1.76 billion.
On a sequential basis, net revenues by region of shipment increased 7.2% in the Americas and 1.0% in Greater China & South Asia. Japan & Korea and EMEA decreased by 5.3% and 2.4%, respectively.
On a year-over-year basis, net revenues decreased 6.5%. Net revenues, excluding negative currency effects and mobile legacy products, decreased 3.8% year-over-year.
Third quarter gross profit was $613 million and gross margin was 34.8%. Gross margin improved 100 basis points sequentially, mostly reflecting manufacturing efficiencies, product mix, and favorable currency effects, net of hedging, largely offset by price pressure. On a year-over-year basis, gross margin improved 50 basis points, mainly due to favorable currency effects, net of hedging, manufacturing efficiencies and lower unused capacity charges largely offset by price pressure.
Combined R&D and SG&A expenses totaled $549 million compared to $599 million in the second quarter and $603 million in the year-ago quarter. On a sequential basis, combined R&D and SG&A expenses decreased 8.3% mainly due to seasonality, favorable currency effects, net of hedging, and savings from the EPS restructuring plan.
Other income and expenses, net in the third quarter, was an income of $38 million, compared to $37 million and $32 million in the second and year-ago quarter, respectively, largely comprised of the Nano2017 R&D grants.
Impairment, restructuring and other related closure costs were $11 million in the third quarter, compared to $21 million in the second quarter, and were principally related to the impairment of certain intangible assets. In the year-ago period, impairment, restructuring and other related closure costs were $38 million.
Operating margin before impairment and restructuring charges improved to 5.8% in the third quarter from 1.9% and 4.0%, respectively, in the prior and year-ago quarter*.
Income tax benefit of $8 million in the third quarter includes a one-time income of $14 million related to the positive settlement of a local tax assessment. Reflecting this benefit, third quarter net income was $90 million, or $0.10 per share compared to net income of $35 million, or $0.04 per share in the prior quarter and net income of $72 million, or $0.08 per share in the year-ago quarter. On an adjusted basis, ST reported non-U.S. GAAP net income per share of $0.12 in the third quarter, excluding impairment and restructuring charges, compared to net income of $0.06 and $0.13 per share in the prior and year-ago quarter, respectively.*
For the third quarter of 2015, the effective average exchange rate for the Company was approximately $1.16 to €1.00 compared to $1.17 to €1.00 for the second quarter of 2015 and $1.34 to €1.00 for the third quarter of 2014.
(*)Operating margin before impairment and restructuring charges and adjusted net earnings per share are non-U.S. GAAP measures. For additional information and reconciliation to U.S. GAAP, please refer to Attachment A.
Quarterly Net Revenues Summary
Net Revenues By Product Line and Segment
|Q3 2015||Q2 2015||Q3 2014|
|Analog & MEMS (AMS)||233||273||268|
|Industrial & Power Discrete (IPD)||437||448||486|
|Sense & Power and Automotive Products (SP&A)||1,117||1,159||1,218|
|Digital Product Group (DPG) (a)||230||207||286|
|Microcontroller, Memory & Secure MCU (MMS)||412||388||377|
|Embedded Processing Solutions (EPS)||642||595||663|