SGS-THOMSON Microelectronics Reports 19% Increase In Second Quarter Revenues
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St. Genis, France, July 17, 1996.
SGS-THOMSON Microelectronics today announced financial results for the second quarter ended June 29 ,1996.
Net revenues totaled $ 1.05 billion for the three months ended June 29, 1996, up 19.2% from second quarter 1995 net revenues of $ 878.5 million. Net revenues in the second quarter of 1996 were up 1.9% on a sequential quarterly basis when compared to net revenues of $ 1.03 billion for the first quarter of 1996.
Net earnings for the second quarter of 1996 rose 43.6% to $ 176.1 million, up from $122.6 million for the second quarter of 1995. On a per share basis, earnings totaled $1.27 in the 1996 second quarter, compared to $0.95 per share in the year-ago quarter. Earnings were modestly above first quarter 1996 earnings of $1.26 per share, which benefited from a one-time after-tax gain of $ 0.03 per share.
The gross profit margin was 44.4% in the second quarter of 1996, compared to 40.0% in the second quarter of 1995 and 42.9% in the first quarter of 1996. This unusually high gross margin was caused by a very favorable product mix combined with higher utilization of SGS-THOMSON's manufacturing machine. For the three months ended June 29, 1996, operating profit totaled $224.3 million, an increase of 42.2% over second quarter 1995 operating profit of $157.7 million. The operating profit margin in the 1996 second quarter was 21.4%, compared to 18.0% in the year-ago quarter and 21.5% in the first quarter of 1996.
Mr. Pasquale Pistorio, President and Chief Executive Officer of SGS-THOMSON, commented, "As a result of our product portfolio strategy, in the second quarter differentiated products grew 36% and accounted for 57.2% of total revenues."
Mr. Pistorio went on to say, "Second quarter results were achieved during difficult market conditions, a time in which it is forecasted that total industry sales will decline from first quarter 1996 levels. While several of our product families were also affected by industry-wide pricing pressures, particularly in June, the impact was partially offset by the continued strong demand for dedicated ICs and microcontrollers, which comprise the majority of our differentiated product line. This resulted in record market share gains, and we estimate that SGS-THOMSON will represent approximately 3% of the worldwide semiconductor market in the second quarter. "
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.
Looking ahead, Mr. Pistorio stated, "Third quarter results will reflect the seasonality factors in Europe that have historically affected SGS-THOMSON 's revenues, especially in years of difficult market conditions . As a result of these factors, and the current market correction, we expect that while third quarter revenues will be above last year's third quarter revenues of $ 922.6 million they will be below 1996 second quarter revenues. Also, the gross margin could be lower than the gross margin of 40.1% in the third quarter of 1995."
"For the first half of 1996, the Company's capital expenditures totaled $ 660.5 million. This was in line with our plan to front-load our capital expenditures in order to respond to the capacity limitations we experienced in the beginning of the year. Total capital expenditures for 1996 are expected to be approximately $ 1 billion, similar to last year's levels."
Mr. Pistorio continued, "We believe that our strategy of diversification and balance - by product family, by end market application and by geographic reach - are distinguishing characteristics of SGS-THOMSON and have enabled the Company to record above-average performance. We believe that we have the ability to continue to record strong relative performance for the year 1996."
The above statements contained in this outlook are forward-looking statements that involve a number of risks and uncertainties. In addition to factors noted above, among the other factors that could cause actual results to differ materially are the following : the cyclicality of the semiconductor and electronic systems industries; capital requirements and the availability of funding; competition; new product development and technological change; manufacturing risks; order cancellation or reduced bookings by key customers or distributors; intellectual property developments; international events and currency fluctuations; problems in obtaining adequate raw materials on a timely basis; and the loss of key personnel. Unfavorable changes in the above or other factors listed under "Risk Factors" from time to time in the Company's SEC reports, including the Prospectus dated October 18, 1995 (pages 9 through 16) could materially affect the Company.
The results the Company experienced in the second quarter were due in part to the continued efforts and success in each of its new product areas .
SGS-THOMSON's commitment to dedicated products continued during the second quarter, as the Company announced the availability of a complete chipset solution for digital set-top boxes for which consumer demand is growing rapidly. SGS-THOMSON believes it is currently leading the industry in shipping complete solutions for these set-top boxes in high volumes.
Combining its x86 expertise with a differentiated product approach, SGS-THOMSON has developed a semicustom 486 microprocessor with Sichuan Ding Tian Microelectronics Co., Ltd , a Chinese company, to build low-cost, PC-based entertainment systems for the Chinese and Asian markets.
The company's Discrete and Standard Products Group continued its innovative approach during the quarter with the introduction of a new generation of power MOSFET transistors. The Group also expanded its offering in Application Specific Discretes (ASD)Ö products. Both product families have received considerable interest from the market as they enable customers to reduce system-level costs in consumer, telecom, automotive and industrial systems.
For the six months ended June 29, 1996 net revenues increased 25 % to $ 2.1 billion, up from $ 1.7 billion for the 1995 six-month period. Sales to Asia Pacific rose more than 45 % and sales to Japan increased 91 % . From a product standpoint, dedicated products posted the greatest increase rising 44%.
Net earnings rose 53.0% to $ 351.1 million or $ 2.53 per share. The increase in net income primarily reflects higher net sales and higher margins. For the 1996 six-month period, the gross margin was 43.7 %, compared to 40.9 % in the corresponding 1995 period. Further, the operating profit margin increased to 21.5% for the six months ended June 29, 1996, up from 18.1% for the six months ended July 1, 1995.
At June 29, 1996, cash, cash equivalents and marketable securities totaled $ 466.5 million; shareholders' equity was $ 3 billion. Total debt was $ 517.7 million, of which long-term debt equaled $ 198.1 million, representing 6.6 % of total equity.
SGS-THOMSON Microelectronics is a global independent semiconductor company listed on the New York Stock Exchange an on the Bourse de Paris. It designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (ICs) and discrete devices used in a wide variety of microelectronic applications, including telecommunication systems, computer systems, consumer products, automotive products and industrial automation and control systems.