In the third quarter of 2017, ST issued a $1.5 billion dual-tranche offering of new senior unsecured convertible bonds (Tranche A and Tranche B for $750 million each) due 2022 and 2024. The Company simultaneously launched, and completed in the third quarter, a share buy-back program of 18.6 million shares for $297 million. In the second quarter of 2017, ST issued a redemption notice to inform bondholders of the early redemption of the Tranche A 2019 convertible bonds issued in 2014. As a consequence, in the third quarter of 2017 bondholders exercised their conversion rights for $598 million nominal value on the total of $600 million of the Tranche A. ST elected to net share settle the bonds and as a result the Company delivered $600 million in cash and about 13 million shares from treasury shares and completed the redemption of the full tranche as of the end of August 2017. Between September 13, 2017 and October 10, 2017, bondholders have exercised their conversion rights on Tranche B 2021 convertible bonds for $340 million nominal value. On October 11, 2017, ST issued a notice to inform bondholders of the early redemption of the remaining $60 million of Tranche B 2021 convertible bonds.
In August 2017, ST signed a new medium term credit facility with the European Investment Bank (EIB) for a total of €500 million in relation to ST's R&D and Capex investments in France, Italy and Malta for the years 2017 and 2018. The medium term line is available for drawings in Euro and US$ until Q1 2019 and has terms and conditions substantially in line with previous transactions signed by ST with the EIB.
(1)Non-U.S. GAAP measure. See Appendix for additional information and reconciliation to U.S. GAAP.
Fourth Quarter 2017 Business Outlook
Mr. Bozotti commented, "We see clear opportunities in front of us to continue to drive revenue growth, margin expansion and shareholder value and we are determined to capture this additional potential. Our targeted efforts in technology and products, focusing on high-growth markets, are enabling all of our product groups to strengthen their competitive position with major accounts as well as with the distribution channel.
"Looking at the fourth quarter, we continue to see solid demand across product groups and geographies. Based upon strong booking activity and the expected acceleration of growth of our new program serving wireless applications, we anticipate fourth quarter revenues to increase sequentially by about 10.0% at the mid-point and the gross margin to improve to about 39.9% at the mid-point.
"Looking at the year in total, based upon our nine months results and fourth quarter mid-point revenue guidance, we now expect that 2017 net revenues should grow year-over-year by about 18.0% accompanied by a substantial improvement in operating profitability and net income."
The Company expects fourth quarter 2017 revenues to increase about 10.0% on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the fourth quarter is expected to be about 39.9% plus or minus 2.0 percentage points.
This outlook is based on an assumed effective currency exchange rate of approximately $1.15 = €1.00 for the 2017 fourth quarter and includes the impact of existing hedging contracts. The fourth quarter will close on December 31, 2017.
Recent Corporate Developments
- On August 7, ST announced that it has completed the repurchase of approximately 18.6 million shares of its common stock for an amount of $297 million under its share buy-back program announced on June 22, 2017. The shares were repurchased between June 30, 2017 and August 4, 2017 on the Mercato Telematico Azionario and other venues in open market transactions. The repurchased shares are held as treasury shares and used to meet obligations arising from debt financial instruments that are exchangeable into equity instruments and to meet obligations arising from share award programs.
- On August 23, ST announced that it had posted its IFRS 2017 Semi Annual Accounts for the six-month period ended July 1, 2017, on its website and filed them with the Netherlands Authority for the Financial Markets.
- On September 7, the Euronext Scientific Board on Indices announced its decision to include STMicroelectronics in the CAC 40 index, the primary index of the Paris Stock Exchange, where the Company is listed. This decision took effect after the closing of the Paris Stock Exchange on September 15, 2017.
Q3 2017 - Product and Technology Highlights
Automotive and Discrete Group (ADG)
- Continued strong momentum of Chorus automotive-microcontroller family growth with multiple wins in Body and Gateway applications at leading European and Chinese Tier1s as well as for an on-board charger application at a major Japanese Tier1 and an ignition system at a leading European Tier1;
- Recorded an important win for an ASIC and an ASSP in an ultrasonic-sensor interface application with a top Japanese Tier1;
- Registered a big win with an ASSP product tailored for an engine management system in motorcycles from a leading Chinese Tier1;
- Won an ASIC socket for a hydrostatic braking system at a Japanese leading supplier;
- Landed sockets in a premium sound system with our Class AB and Class D amplifiers for a high-end car maker;
- Captured an important design win with a series of high-side drivers in M07 technology for a heating, ventilation, and air-conditioning system from a key European Tier1;
- Gained several design wins with 650V and 1200V SiC MOSFETs from an important car maker and a German supplier;
- Won an award for an intelligent power module from a leading Chinese air conditioner supplier;
- Landed multiple design-wins for new 1200V SiC diodes in electrical-vehicle charger platforms from leading Chinese and American suppliers;
- Enlarged the range of ESD diodes housed in 0201 chip-scale packages and landed design wins in the US and China;
- Captured a win for our last generation of HDMI port interfaces at a game-station market leader.
Analog and MEMS Group (AMG)
- Ramped production of barometric pressure sensor for new water-resistant Samsung Gear Fit 2 Pro and, for Samsung Note 8, of 6-axis ultra-low-power MEMS inertial measurement unit, optical-image-stabilization gyroscope, barometric pressure sensor, and multifunctional protection switch;
- Captured multiple design wins with touchscreen controller in mobile phones for China with Korean and Chinese AMOLED display makers;
- Ramped power-management ICs for AMOLED displays for many smartphone manufacturers;
- Awarded additional business in Eastern Europe and China with newest STCOMET powerline modem SoC in a smart metering application;
- Named to Top Ten Power Award by Electronic Product China for innovative STSPIN32Fx motion-control SoC platform and Recognized with "Best of Industry" award for smart-metering solutions based on powerline communication SoC during Electronica India 2017 event;
- Continued expansion into mass market through success of ViperPLUS family winning sockets globally in applications including home appliances and metering;
- Qualified a smart meter from a major EMEA manufacturer to start validation in a top European utility company and was selected as a technical partner by E-Distribuzione for its New Smart-Meter Platform;
- Won numerous sockets globally switching regulators and DC/DC converters in a broad range of Automotive and Industrial applications;
- Captured wins for precision op amps in a range of applications including wearable, home, and building automation;
- Began volume shipments of accurate pressure sensor for vacuum cleaner applications to a market leader;
- Maintained momentum in mobile phone market for 6-axis ultra-low-power inertial measurement units with wins of multiple sockets at key players in China;
- Announced a modular Power-Line Communication (PLC) modem chipset that delivers more flexibility to manufacturers of utility meters, smart-grid nodes, streetlamps, and home and industrial controllers. Three top smart-meter manufacturers are already designing solutions based on this new platform;
- Introduced software kit for Bluetooth® Mesh Networking to accelerate development of connected smart-lighting and automation products;
- Launched 300mA, very low quiescent current low-dropout regulator for smartphone and portable applications.