STMicroelectronics Reports 2016 Fourth Quarter and Full Year Financial Results

Non-U.S. GAAP(1) (Million US$)	Q4 2016	Q3 2016	Q4 2015	FY 2016	FY 2015
Operating Income before impairment & restructuring charges	153	119	29	307	174
Free cash flow	135	100	148	312	327
Net financial position	513	464	494	513	494

Non-U.S. GAAP measure. 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

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

Fourth Quarter Review

Fourth quarter net revenues increased 3.5% sequentially to $1.86 billion, 30 basis points above the midpoint of the Company’s guidance. Analog and MEMS Group (AMG) revenues increased 8.2% sequentially driven by MEMS and analog products. Microcontrollers and Digital ICs Group (MDG) revenues increased 3.8% on a sequential basis driven by microcontrollers, memories and digital products. Automotive and Discrete Group (ADG) revenues increased 1.7% on a sequential basis driven by automotive microcontrollers and power discrete products.

On a year-over-year basis, fourth quarter net revenues increased 11.5% on strong growth across most product families. Analog and MEMS Group (AMG) revenues increased 17.8% compared to the year-ago period driven by both strong growth in MEMS and recovery in Analog. Automotive and Discrete Group (ADG) revenues increased 12.5% compared to the year-ago period driven by double-digit growth for both automotive and power discrete products. Microcontrollers and Digital ICs Group (MDG) revenues decreased 0.8% mainly due to lower sales of secure microcontrollers and discontinued businesses.

By region of shipment, Asia Pacific and EMEA grew revenues sequentially 5.5% and 1.4%, respectively, while the Americas was lower by 1.1%. On a year-over-year basis, Asia Pacific and EMEA grew 18.2% and 5.7%, respectively, while the Americas decreased by 2.8%.

Fourth quarter gross profit was $698 million. The gross margin was 37.5%, 50 basis points above the midpoint of the Company’s guidance, and included about 20 basis points of unused capacity charges. On a sequential basis, gross margin increased 170 basis points on improved manufacturing efficiencies, lower unused capacity charges and improved product mix partially offset principally by normal price pressure.

Combined R&D and SG&A expenses were $570 million, increasing by $28 million on a sequential basis, mainly due to seasonality and increased level of R&D activity.

Fourth quarter other income and expenses, net, registered income of $25 million compared to $18 million in the prior quarter mainly due to higher R&D funding.

Impairment and restructuring charges in the fourth quarter were $24 million compared to $29 million in the prior quarter, both 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 2016, the restructuring plan was on track and achieved about $110 million of the total $170 million of targeted annualized savings expected upon completion.

Fourth quarter operating income was $129 million compared to $90 million and $25 million in the prior quarter and year-ago quarter.

Fourth quarter operating income and operating margin before impairment and restructuring charges⁽¹⁾ improved sequentially to $153 million and 8.2% of revenues, respectively, from $119 million and 6.6%, respectively, mainly due to higher revenues and gross profit partially offset by higher operating expenses. On a year-over-year basis, operating income before impairment and restructuring charges improved by $124 million mainly due to higher revenues, improved product mix, manufacturing efficiencies and fab loading.

Fourth quarter net income was $112 million, equivalent to $0.13 per share, compared to net income of $71 million in the prior quarter and net income of $2 million in the year-ago quarter.