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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
AMENDMENT NO. 1
TO
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---- ----
COMMISSION FILE NUMBER: 0-27298
BE SEMICONDUCTOR INDUSTRIES N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE NETHERLANDS
(JURISDICTION OF INCORPORATION OR ORGANIZATION)
MARCONILAAN 4
5151 DR DRUNEN
THE NETHERLANDS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Ordinary Shares Nasdaq National Market
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
OF THE ACT:
None
The number of outstanding shares of each of the issuer's classes of capital
or common stock as of December 31, 2002: 30,898,228 Ordinary Shares, nominal
value E0.91 per share (of which amount, 5,000,425 are traded on the Nasdaq
National Market in the form of New York Shares and 25,897,803 are traded on the
Amsterdam Stock Exchange in the form of Bearer Shares).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the Registrant has
elected to follow.
Item 17 [ ] Item 18 [X]
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EXPLANATORY NOTE
This Amendment No. 1 to Form 20-F is being filed for the purposes of filing
the Independent Auditors' Report of BDO Accountants and accompanying financial
statements for the year ended December 31, 2000 and for the period January 1,
2001 to November 15, 2001 of Possehl BESI Electronics N.V. ("PBE"), a joint
venture in which BE Semiconductor Industries N.V. ("BESI") held a 30% equity
interest. BESI sold its equity interest in PBE on November 15, 2001.
In connection with this amendment, the registrant is including the
certifications required by 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, as exhibits 13.3, and 13.4 and
the certifications required by Rule 13a-14(a)/15(d) and 14(a) of the Securities
Exchange Act of 1934, as amended, as exhibits 12.3 and 12.4. The Exhibit Index
is included in this Amendment No. 1 to Form 20-F to reflect such certifications.
PART III
ITEM 18: FINANCIAL STATEMENTS
The following financial statements, together with the report of our
independent auditors are filed as part of the Amendment No. 1 to Form 20-F:
POSSEHL ELECTRONICS N.V
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 2000 and 2001 F-2
Consolidated Statements of Operations for the years ended
December 31, 1999, 2000 and 2001 F-3
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000 and 201 F-4
Consolidated Statements of Shareholders' Equity for the years
Ended December 31, 1999, 2000 and 2001 F-6
Notes to the Consolidated Financial Statements F-7
ITEM 19: EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
NUMBER
8.1 List of Subsidiaries of BE Semiconductor Industries N.V. (previously
filed as Exhibit 8.1 to the Annual Report on Form 20-F for the year
ended December 31, 2002, and incorporated herein by reference)
12.1 Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer
(previously filed in the Annual Report on Form 20-F for the year
ended December 31, 2002, and incorporated herein by reference)
12.2 Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer
(previously filed in the Annual Report on Form 20-F for the year
ended December 31, 2002, and incorporated herein by reference)
12.3 Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer
12.4 Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer
13.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (previously filed as Exhibit 10.1.1 to
Annual Report on Form 20-F for the year ended December 31, 2002, and
incorporated herein by reference)
13.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (previously filed as Exhibit 10.a.2 to
Annual Report on Form 20-F for the year ended December 31, 2002, and
incorporated herein by reference)
13.3 Section 1350 Certification of Chief Executive Officer
13.4 Section 1350 Certification of Chief Financial Officer
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for
filing a Form 20-F and that it has duly caused and authorized the undersigned to
sign this Amendment No. 1 to annual report on Form 20-F on its behalf.
BE SEMICONDUCTOR INDUSTRIES NV
By: /s/ Richard W. Blickman
--------------------------------------------
Name: Richard W. Blickman
Title: President and Chief Executive Officer
Date: February 24, 2004
ITEM 18: FINANCIAL STATEMENTS
Independent Auditors' Report
To the Shareholders and the Board of Management of Possehl Electronics N.V.
We have audited the accompanying consolidated balance sheet of Possehl
Electronics N.V. and subsidiaries as of December 31, 2000 and 2001 and the
related consolidated statement of operations, cash flows, shareholders' equity
and accumulated other comprehensive income, for each of the years in the
three-year period ended December 31, 2001. These consolidated financial
statements are the responsibility of the management of Possehl Electronics N.V.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and The Netherlands. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Possehl Electronics N.V. and subsidiaries at December 31, 2000 and
2001 and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 1, the Company changed its method of accounting for
depreciation on stamping tools in 2001.
BDO Accountants
`s-Hertogenbosch, The Netherlands
February 6, 2002
F-1
Consolidated Balance Sheets
(Amounts in thousands)
Year ended December 31,
2000 2001 2001
EUR EUR USD
--- --- ---
ASSETS
Cash and cash equivalents 3,736 3,276 2,916
Accounts receivable, net 44,626 29,216 26,005
Inventories 38,678 29,897 26,611
Other current assets 7,426 31,450 27,994
Deferred tax assets 3,170 4,906 4,367
------- ------- -------
Total current assets 97,636 98,745 87,893
Property, plant and equipment 108,058 92,527 82,358
Other non-current assets 217 215 191
Deferred tax assets, net 1,672 2,355 2,096
------- ------- -------
Total assets 207,583 193,842 172,538
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable to banks 19,034 57,353 51,050
Current portion of long-term debt 10,001 5,063 4,507
Advances from shareholders 951 37 33
Accounts payable 18,517 13,190 11,740
Accrued liabilities 17,866 16,932 15,071
Deferred tax liabilities 1,092 1,260 1,121
------- ------- -------
Total current liabilities 67,461 93,835 83,522
Long-term debt 25,021 1,034 920
Subordinated loan from shareholders 12,313 37,738 33,591
Other long-term liabilities 2,973 1,361 1,211
Deferred tax liabilities 3,448 1,154 1,027
------- ------- -------
Total non-current liabilities 43,755 41,287 36,749
Minority interest 3,749 4,404 3,920
Ordinary shares 29,327 29,728 26,461
Capital in excess of par value 9,785 9,325 8,300
Retained earnings 49,586 8,084 7,196
Accumulated other comprehensive income (loss) 3,920 7,179 6,390
------- ------- -------
Total shareholders' equity 92,618 54,316 48,347
------- ------- -------
Total liabilities and shareholders' equity 207,583 193,842 172,538
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
Consolidated Statements of Operations
(Amounts in thousands)
Year ended December 31,
-----------------------------------------------------
1999 2000 2001 2001
EUR EUR EUR USD
--- --- --- ---
Net sales 193,055 253,112 178,997 159,325
Cost of sales (1) 145,543 187,037 167,539 149,126
-------- -------- -------- --------
Gross profit 47,512 66,075 11,458 10,199
Selling, general and administrative expenses 26,995 35,991 30,609 27,245
Research and development expenses 2,032 2,007 1,597 1,421
Restructuring charges -- -- 15,493 13,791
Foreign currency (gains) losses (1,400) (1,273) (478) (425)
-------- -------- -------- --------
Total operating expenses 27,627 36,725 47,221 42,032
Operating income 19,885 29,350 (35,763) (31,833)
Interest expense, net 3,295 4,486 4,777 4,252
-------- -------- -------- --------
Income before taxes, investment income from
affiliated companies, minority interest and
cumulative effect of change of accounting
principle 16,590 24,864 (40,540) (36,085)
Income taxes 2,766 3,890 (3,593) (3,198)
-------- -------- -------- --------
Income before investment income from
affiliated companies, minority interest and
cumulative effect of change of accounting
principle 13,824 20,974 (36,947) (32,887)
Investment income from affiliated companies 25 1,983 -- --
Minority interest (3,214) (1,857) (473) (421)
Cumulative effect of change of accounting
principle(1) -- -- (4,082) (3,633)
-------- -------- -------- --------
Net income 10,635 21,100 (41,502) (36,941)
======== ======== ======== ========
(1) In December 2001 the Company changed its depreciation method for stamping
tools, as described in the notes to property, plant and equipment. The
cumulative effect on previous years depreciation included in 2001 is EUR
4,082. The 1999 and 2000 net income on a pro forma basis would have been EUR
7,928 and EUR 19,725, respectively. For this we calculated the actual
accumulated depreciation for 1999 and 2000 on a pro-rata basis. The 2001
effect in depreciation is EUR 1,697.
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year ended December 31,
-------------------------------------------------
1999 2000 2001 2001
EUR EUR EUR USD
--- --- --- ---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 10,635 21,100 (41,502) (36,941)
Adjustments to reconcile net income to net cash
flows from operating activities:
Minority interest 3,214 1,857 473 421
Gain on sale of affiliated companies -- (1,983) --
Revaluation of warrant -- (36) (313) (279)
Interest expense on original issue discount 45 365 425 378
Depreciation of property, plant and equipment 20,663 25,534 36,481 32,472
Restructuring impairment -- -- 9,364 8,335
Deferred income taxes (benefit) 123 (62) (4,545) (4,046)
(Gain) loss on disposal of equipment 257 499 (234) (208)
Translation of debt in foreign currency (1,412) (1,141) (1,351) (1,203)
Effects of changes in assets and liabilities:
(Increase) decrease in accounts receivable (10,641) (5,010) 16,669 14,837
(Increase) decrease in inventories (4,667) (8,759) 10,020 8,919
(Increase) decrease in other current assets (808) (1,568) 494 440
Increase (decrease) in accrued liabilities 5,786 (81) (1,525) (1,357)
Increase (decrease) in accounts payable 4,674 214 (5,855) (5,212)
------- ------- ------- -------
Net cash provided by operating activities 27,869 30,929 18,601 16,556
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,878) (38,632) (27,299) (24,299)
Proceeds from sale of equipment 413 346 1,442 1,284
Proceeds from sale of affiliated companies -- 9,090 -- --
Purchase of subsidiaries -- (3,952) -- --
Cash transferred as part of sale of affiliated
Companies -- (245) -- --
------- ------- ------- -------
Net cash used in investing activities (25,465) (33,393) (25,857) (23,015)
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
Consolidated Statements of Cash Flows
(Amounts in thousands)
Continued Year ended December 31,
-------------------------------------------------
1999 2000 2001 2001
EUR EUR EUR USD
--- --- --- ---
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of advances from shareholders (8,698) (1,022) (659) (587)
Proceeds from subordinated loan from shareholders 13,613 -- 25,000 22,253
Proceeds from long-term debt 409 23,506 5,927 5,276
Payments on deposit with shareholders (24,500) (21,807)
Payments on long-term debt (12,746) (3,180) (6,003) (5,343)
Payments on bank lines of credit (2,531) (28,021) (13,307) (11,845)
Proceeds from bank lines of credit 9,720 13,313 20,066 17,861
Dividend payments to minority shareholders (3,038) (372) -- --
------- ------- ------- -------
Net cash (used in) provided by financing activities (3,271) 4,224 6.524 5,808
Net increase (decrease) in cash and cash equivalents (867) 1,760 (732) (651)
Effect of changes in exchange rates on cash and
cash equivalents 342 87 272 242
Cash and cash equivalents at beginning of the year 2,414 1,889 3,736 3,325
------- ------- ------- -------
Cash and cash equivalents at end of the year 1,889 3,736 3,276 2,916
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest 2,201 5,523 5,528 4,920
Cash paid for income taxes 1,376 4,072 2,902 2,583
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
Consolidated Statements of Shareholders' Equity
(Amounts in thousands except per share data)
Number of Share Capital Retained Accumulated Total
Ordinary capital in excess earnings other share-
Shares at par of par comprehensive holders'
Outstanding value value income equity
EUR EUR EUR EUR EUR
---------- ---------- ---------- ---------- ---------- ----------
Balance December 31, 1998 61,090,239 27,722 11,390 17,851 (9,807) 47,156
Net income -- -- -- 10,635 -- 10,635
Exchange rate changes for
the year -- -- -- -- 9,529 9,529
Issuance of shares related to
the contribution of
Possehl Electronic HK Ltd. 3,536,872 1,605 (1,605) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Balance December 31, 1999 64,627,111 29,327 9,785 28,486 (278) 67,320
Net income -- -- -- 21,100 -- 21,100
Exchange rate changes for
the year -- -- -- -- 4,198 4,198
---------- ---------- ---------- ---------- ---------- ----------
Balance December 31, 2000 64,627,111 29,327 9,785 49,586 3,920 92,618
Net loss -- -- -- (41,502) (41,502)
Exchange rate changes for
the year -- -- -- -- 3,259 3,259
Translation of share capital
into EUR -- 401 (401) -- -- --
Other -- -- (59) -- -- (59)
---------- ---------- ---------- ---------- ---------- ----------
Balance December 31, 2001 64,627,111 29,728 9,325 8,084 7,179 54,316
========== ========== ========== ========== ========== ==========
Per December 31, 2001 the authorized capital is translated from NLG into EUR.
The 200,000,000 ordinary shares of NLG 1.00 each are translated into EUR at a
rate of EUR0.46 per share. A number of 64,627,111 shares are issued and
outstanding.
Consolidated Statements of Comprehensive Income
(Amounts in thousands)
Year ended December 31,
-----------------------------------------------
1999 2000 2001 2001
EUR EUR EUR USD
--- --- --- ---
Net income 10,635 21,100 (41,502) (36,941)
Other comprehensive income (loss):
Foreign currency translation adjustment 9,529 4,198 3,259 2,901
------- ------- ------- -------
Comprehensive income 20,164 25,298 (38,243) (34,040)
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
Notes to the Consolidated Financial Statements
1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
GENERAL
On May 30, 1997, L. Possehl & Co. mbH ("Possehl"), BE Semiconductor Industries
N.V. ("BESI") and Mr Ho Hung Tak ("Mr Ho") contributed all of their ownership
interests relating to the production and plating of leadframes and connectors to
Possehl BESI Electronics N.V. ("PBE N.V.") and its consolidated subsidiaries,
(collectively, the "Company"). The ownership of the Company by Possehl, BESI and
Mr Ho was 50.1%, 30.0% and 19.9%, respectively. The Board of Directors of the
Company consisted of executive officers of each of the founding members of the
Company, of which each one was entitled to cast one vote.
On November 15, 2001, BESI sold its 30% equity interest in PBE N.V. to Possehl.
As a consequence, Possehl increased its interest in PBE N.V. from 50.1% to
80.1%. Mr. R.W. Blickman resigned from the Board of Directors as per November
15, 2001. Consequently, the Board of Directors of the Company consists of
executive officers of each of the two shareholders of the Company, of which each
one is entitled to cast one vote.
Subsequent to the sale of the 30% interest in PBE, BESI no longer had any
representation on the Board of Directors of PBE nor any other rights or
responsibilities regarding PBE.
At December 19, 2001 the name of the Company was changed to Possehl Electronics
N.V. ("PE N.V. or the Company"). Furthermore it was agreed as per November 15,
2001 to adjust the names of the individual subsidiaries within six months after
the transaction date. As per December 31, 2001 no formal name changes for
subsidiaries occurred.
The management of the Company shall adopt resolutions by an absolute majority of
the total number of votes to be cast, except for certain significant resolutions
which must be adopted by unanimity. Furthermore, these significant resolutions
require prior approval of the General Meeting of Shareholders.
As set forth in the Articles of Association and Shareholders Agreement of the
Company, every share of the Company entitles the holder thereof to cast one vote
in the General Meeting of Shareholders. Resolutions voted on at the General
Meeting of Shareholders require a 75% majority of the votes cast for approval.
Significant resolutions which require prior approval of the shareholders at the
General Meeting of Shareholders include:
- - Appointment of Management Board Members of the Company;
- - Appointment of persons with power to represent the Company;
- - Entering into credit agreements in excess of EUR 0.5 million;
- - Approval of annual operating and capital expenditure budgets;
- - Proposing a legal merger;
- - Entering into or terminating a direct or indirect continuing cooperation
with another company or legal person.
On June 30, 1999, Possehl, BESI and Mr. Ho contributed their ownership interest
in Possehl Electronic Hong Kong Ltd. ("PEH") to the Company in return for a
total of 3,536,872 newly issued shares in the Company. The ownership interest of
PEH were substantially the same as the ownership interests of the Company.
F-7
PRESENTATION
The accompanying consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles in the
United States of America. The accompanying consolidated financial statements are
stated in euro ("EUR"). The accompanying consolidated financial statements are,
solely for the convenience of the reader, translated into US dollars ("USD")
using the Noon Buying Rate in effect on December 31, 2001 (EUR 1 = USD 0.8901).
Such translations should not be construed as representations that the EUR
amounts could be converted into US dollars at that or any other date. All EUR
and US dollar amounts are expressed in thousands.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of its
subsidiaries, including those of PEH. Prior to the contribution of PEH on June
30, 1999, PEH was fully controlled by the Company. From May 30, 1997 through
June 30, 1999 the management of PEH was identical to that of the Company and the
management of the Company exerted control over PEH. From the date of
incorporation of the Company on May 30, 1997, the financial statements of PEH
have been consolidated with PBE as if it were a wholly owned subsidiary;
therefore, the contribution of PEH had no effect on the principles of
consolidation.
March 31, 2000 the Company and Sumitomo Metal Mining Asia Pacific Pte.
Ltd., Singapore (SMMAP) dissolved their common participations in the
following companies:
- - Possehl Sumiko Electronics Singapore Pte. Ltd. (PBE share 62.5%)
- - Possehl Electronics Taiwan Ltd. (PBE share 75%)
- - Sumiko Electronics Taiwan Ltd. (PBE share 14.8%)
- - WSP Electro Materials Corporation (PBE share 6%)
PBE acquired the remaining shares in Possehl Sumiko Electronics
Singapore Pte. Ltd. and sold its shares in Possehl Electronics Taiwan
Ltd., Sumiko Electronics Taiwan Ltd. and WSP Electro Materials
Corporation. After the dissolution it was decided to rename the fully
acquired company into Possehl BESI Singapore Pte. Ltd.
As of December 31, 2001 the following subsidiaries and affiliated companies are
included in the accompanying consolidated financial statements:
NAME COUNTRY PERCENTAGE
OF OWNERSHIP
- ---- ------- ------------
Possehl Electronic Nederland BV The Netherlands 100%
Possehl BESI Electronics Hong Kong Ltd. Hong Kong 100%
Possehl Hong Kong Precision Machinery Ltd. Hong Kong 100%
Possehl BESI Laminates Ltd. Hong Kong 100%
Meco Metal Finishing Engineers (Mal) Sdn. Bhd Malaysia 100%
Possehl BESI Electronics (Malaysia) Sdn. Bhd Malaysia 100%
Meco USA, Inc. United States of America 100%
Meco Metal Finishing USA, Inc. United States of America 100%
Meco Metal Finishing Illinois, LLC United States of America 100%
Possehl Electronic GmbH Germany 100%
Nastrojarna Possehl Electronic s.r.o Czech Republic 86%
Possehl Electronic Maroc S.A.R.L Morocco 100%
Possehl Electronic France S.A France 100%
Possehl BESI Electronics Singapore Pte. Ltd. Singapore 100%
Possehl Precision Toolings (Shenzhen) Co., Ltd. China P.R.C. 80%
Shenzhen PBE SEG Electronics Co. Ltd. China P.R.C. 80%
F-8
The balance sheets of the Company's foreign subsidiaries are translated at the
year-end exchange rate and the income statements of the foreign subsidiaries are
translated at the average rate of exchange prevailing during the period.
Translation differences arising from the consolidation of the financial
statements of foreign subsidiaries are recorded directly to shareholders'
equity.
All significant intercompany profits, transactions and balances have been
eliminated in consolidation.
DERIVATIVE FINANCIAL INSTRUMENTS
Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging Activity,"
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. All derivatives, whether or not designated in hedging
relationships, are required to be recorded on the balance sheets at fair value.
If the derivative is designated as a fair value hedge, the changes in the fair
value of the derivative and of the hedged item attributable to the hedged risk
are recognized in earnings. If the derivative is designated as a cash flow
hedge, the effective portions of changes in the fair value of the derivative are
recorded in other comprehensive income and are recognized in the statements of
income when the hedged item affects earnings. Ineffective portions of changes in
the fair value of cash flow hedges are recognized in earnings. The impact of
adopting SFAS 133 was not material.
The Company uses forward exchange contracts to hedge certain firm commitments
denominated in foreign currencies. The terms of the currency instruments used
are generally consistent with the timing of the committed transactions being
hedged. The purpose of the Company's foreign currency management activity is to
protect the Company from the risk that eventual cash flows from foreign currency
denominated transactions may be adversely affected by changes in exchange rates.
The Company does not use derivative financial instruments for trading or
speculative purposes.
FOREIGN CURRENCY
Foreign currency transactions are recorded at the exchange rate of the date of
origin, or at a forward contract rate if hedged through a related forward
exchange contract. Realized and unrealized exchange rate gains and losses are
recorded in the statement of operations. Assets and liabilities denominated in
foreign currencies are translated at year-end exchange rates unless a related or
matching forward exchange contract or currency swap has been entered into, in
which event the rate specified in the contract is used. Exchange rate
differences on assets and liabilities denominated in a foreign currency that are
not covered by hedging arrangements are recorded in the statement of operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid investments with a maturity
date at acquisition of three months or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes net prices paid for materials purchased, charges for
freight and custom duties, production labor costs and factory overhead. Precious
metals are valued at the market price at the balance sheet date. Variances in
market price from balance sheet date to balance sheet date are recorded in gross
profit as gains or losses.
F-9
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method, based on the
following estimated useful lives.
CATEGORY ASSIGNED USEFUL LIFE
- -------- --------------------
Land and buildings 20 - 60 years
Leasehold improvements (1) 5 - 10 years
Machinery and equipment 2 - 5 years
Office furniture and equipment 3 - 5 years
(1) Leasehold improvements are amortized over the shorter of the lease term or
economic life of the asset.
In 2001 the Company revised its depreciation method for stamping tools to focus
appropriate risk management. The new method implies depreciation on units sold
with the condition that it should not be less than the straight-line method of
depreciation of 4 years.
LEASES
Assets acquired under capital leases are included in the balance sheet at the
present value of the minimum future lease payments and are depreciated over the
shorter of the lease term and their useful lives. A corresponding liability is
recorded at the inception of the capital lease and the interest element of
capital leases is charged to interest expense.
INVESTMENT IN AFFILIATED COMPANIES
Investments in unconsolidated affiliated companies, in which the Company does
not have significant influence, are valued at cost or market value, if less. An
estimated realizable value is used in case there is no readily identifiable
market value.
INCOME TAXES
The Company applies Statement of Financial Accounting Standard ("SFAS") No. 109
"Accounting for Income Taxes", which requires the asset and liability method of
accounting for taxes. Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years which these temporary differences are expected to be recovered or settled.
Deferred tax assets are reduced by a valuation allowance to the amount that is
more likely than not to be realized.
RECOGNITION OF REVENUES
The Company's practice is to recognize revenues from sales based on invoiced
value of goods supplied to customers, less discounts and sales returns.
RESEARCH AND DEVELOPMENT
Costs relating to research and development are charged to operating income as
incurred.
PENSION COMMITMENTS
Pension plans are funded with insurance companies based on defined contribution
plans, except for the pension plan of the Company's German subsidiary. The
payments of annual premiums are charged against earnings. This subsidiary has a
defined pension benefit plan for a limited number of employees. The pension
commitments have been calculated according to the actuarial method.
F-10
CONCENTRATION OF CREDIT RISK
A relatively small number of customers account for a significant percentage of
the Company's net sales. The loss of a major customer or any reduction in orders
by such customers, including reductions due to market or competitive conditions,
would have an adverse effect on the Company's business, financial condition and
results of operations. The Company's future success will depend in part upon its
ability to obtain orders from new customers, as well as the financial condition
and success of its customers and the general economy.
The Company's customers consist of semiconductor manufacturers located
throughout the world. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral to secure
accounts receivable. The Company maintains an allowance for doubtful accounts
based on an assessment of the collectibility of such accounts.
USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the balance
sheet dates and the reported amounts of revenue and expense during the reported
periods. Actual results could differ from those estimates.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued Statement No. 141, "Business combinations", and
Statement No. 142, "Goodwill and other intangible assets". SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement No. 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill, noting that any
purchase price allocable to an assembled workforce may not be accounted for
separately. Statement No. 142 will require that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement No.
142. SFAS No. 142 will also require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, "Accounting for the impairment of long-lived assets and for long-lived
assets to be disposed of".
The Company adopted the provisions of Statement No. 141 as at July 1, 2001 and
Statement No. 142 as at January 1, 2002. Any goodwill and any intangible asset
determined to have an indefinite useful life that are acquired in a purchase
business combination completed after June 30, 2001 will not be amortized, but
will continue to be evaluated for impairment in accordance with SFAS No. 142
requirements. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 continued to be amortized prior to January 1,
2002.
Statement No. 141 requires, that a company evaluates its existing intangible
assets and goodwill that were acquired in a prior purchase business combination,
and makes any necessary reclassifications in order to conform with the new
criteria in Statement No. 141 for recognition apart from goodwill. The Company
will reassess the useful lives and residual values of all intangible assets
acquired in purchase business combinations, and make any necessary amortization
period adjustments by the end of the first interim period after adoption. In
addition, to the extent an intangible asset is identified as having an
indefinite useful life, it is required to test the intangible asset for
impairment in accordance with the provisions of Statement No. 142 within the
first interim period. Any impairment loss will be measured as of the date of
adoption and recognized as the cumulative effect of a change in accounting
principle in the first interim period.
F-11
In connection with the transitional goodwill impairment evaluation, Statement
No. 142 will require to perform an assessment of whether there is an indication
that goodwill, and equity-method goodwill, is impaired as of the date of
adoption. To accomplish this a company must identify its reporting units and
determine the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to those
reporting units as of the date of adoption. The company then has up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, an indication exists
that the reporting unit's goodwill may be impaired and the second step of the
transitional impairment test must be performed. In the second step, the implied
fair value of the reporting unit's goodwill, determined by allocating the
reporting unit's fair value to all of its assets (recognized and unrecognized)
and liabilities in a manner similar to a purchase price allocation in accordance
with Statement No. 141, must be compared to its carrying amount, both of which
would be measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the financial statements.
Finally, any unamortized negative goodwill and negative equity-method goodwill
existing at the date Statement No. 142 is adopted, must be written off as the
cumulative effect of a change in accounting principle.
As of December 31, 2001, the Company has unamortized goodwill in the amount of
nil, unamortized indentifiable intangible assets in the amount of nil, and no
unamortized negative goodwill, all of which will be subject to the transition
provisions of Statements No. 141 and No. 142. Amortization expense related to
goodwill was nil for the year ended December 31, 1999, 2000 and 2001,
respectively.
In June 2001, the FASB issued SFAS No. 143, "Accounting for asset retirement
obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated retirement costs. It requires that the fair value of a liability for
an asset retirement obligation is realized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The Company is currently
assessing SFAS No. 143 and the impact that adoption, in 2003, will have on the
consolidated financial statements.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for Impairment or Disposal of Long-Lived Assets to be Disposed
of", and APB Opinion No. 30 "Reporting the Results of Operations - Reporting the
Effects of a Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 144 establishes a
single accounting model for the impairment of long-lived assets and broadens the
presentation of discontinued operations to include more disposal transactions.
SFAS No. 144 is effective for 2002 and adoption will not have a material impact
on our consolidated financial statements.
F-12
2 ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
December 31,
-------------------------
2000 2001
EUR EUR
--- ---
Accounts receivable 45,701 32,214
Allowance for doubtful accounts (1,075) (2,998)
------- -------
Total accounts receivable, net 44,626 29,216
======= =======
3 INVENTORIES
Inventories consist of the following:
December 31,
------------------------
2000 2001
EUR EUR
--- ---
Precious metals 2,710 2,547
Raw materials 10,330 17,520
Work in progress 17,721 6,377
Finished goods and goods for resale 10,469 11,031
Allowance for obsolescence (2,552) (7,578)
------- -------
Total inventories 38,678 29,897
======= =======
4 OTHER CURRENT ASSETS
Other current assets consist of the following:
December 31,
-------------------------
2000 2001
EUR EUR
--- ---
VAT receivables 1,152 722
Income taxes 644 1,092
Tool loan receivables 1,985 1,949
Shipments to be billed 469 255
Shareholder deposit -- 24,500
Other deposits 675 420
Prepaid expenses 1,016 1,378
Other 1,485 1,134
------ ------
Total other receivables 7,426 31,450
====== ======
EUR 24,5 million of the income from the second subordinated Possehl loan of EUR
25 million has been put on short-term deposit with the shareholder, as it has
been agreed with the banks not to reduce the notes payables. The deposit can be
re-claimed at any time and bears the same interest rate as the subordinated
loan.
F-13
5 DEFERRED INCOME TAXES
The items giving rise to deferred tax assets were as follows:
December 31,
--------------------
2000 2001
EUR EUR
------ -------
Deferred tax assets
- - Operating loss carry forwards 3,793 13,032
- - Tangible fixed assets 563 1,233
- - Inventories 765 500
- - Provisions 99 46
- - Restructuring -- 250
- - Other items 381 799
- - Valuation allowance (759) (8,599)
------ -------
Total deferred tax assets, net 4,842 7,261
====== =======
Deferred tax assets
- - current 3,170 4,906
- - non-current 1,672 2,355
------ -------
Total 4,842 7,261
====== =======
The deferred tax asset for operating loss carry forwards is related to the
French, Dutch, German, Hong Kong and Malaysian operations.
PBE N.V. consolidated its Dutch subsidiary for tax purposes effective January 1,
1998. Under applicable Dutch tax law, the Company's Dutch related net operating
losses can be carried back for three years and carried forward without
limitation in duration. The Company has determined that it is more likely than
not that tax losses will not be realized through future fiscal earnings. A 100%
valuation allowance has therefore been recorded.
Under applicable German tax law, the Company's German related net operating
losses can be carried-forward without limitation in duration. The Company has
determined that it is more likely than not that tax losses will not be realized
through future fiscal earnings. A 100% valuation allowance has therefore been
recorded.
Effective 1998, the Hong Kong Inland Revenue Ordinance has effected a new tax
legislation. This legislation allows an immediate 100% tax deduction for capital
expenditures made to acquire manufacturing plant, machinery or computers. As a
result, the Hong Kong operation recorded a fiscal loss in 1998, which can be
carried forward without limitation in duration. On the deferred tax portion,
however, the tax benefit from the tax losses is partly offset by the deferred
tax liabilities arising from the 100% write-off for tax purpose compared to
company depreciation rates. As far as a deferred tax asset remains after
netting, the Company has determined that it is more likely than not that tax
losses will not be realized through future fiscal earnings. A 100% valuation
allowance has therefore been recorded for net deferred tax assets.
The net change in valuation allowance was a (decrease) increase of EUR 772, (EUR
531) and EUR 4,507 for the years ended December 31, 1999, 2000 and 2001,
respectively.
F-14
The items giving rise to deferred tax liabilities were as follows:
December 31,
----------------
2000 2001
EUR EUR
----- -----
Deferred tax liabilities relating to temporary
differences on:
Tangible fixed assets 4,540 2,414
----- -----
Total deferred tax liabilities 4,540 2,414
===== =====
Deferred tax liabilities
- - current 1,092 1,260
- - non-current 3,448 1,154
----- -----
Total 4,540 2,414
===== =====
6 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
December 31,
-----------------------
2000 2001
EUR EUR
-------- --------
Land, buildings and leasehold improvements 28,145 36,119
Machinery and equipment 175,966 209,947
Office furniture and equipment 18,161 19,870
Fixed assets under construction 21,544 1,090
-------- --------
Property, plant and equipment 243,816 267,026
Accumulated depreciation (135,758) (174,499)
-------- --------
Total property, plant and equipment, net 108,058 92,527
======== ========
Leasehold land in Hong Kong, China and Singapore, included in property, plant
and equipment, is being depreciated over a period of 50 years in Hong Kong and
China and 60 years in Singapore due to the fact that land use right will expire
in these countries in 2047 and 2051, respectively.
The Company has obligations under various capital and operating leases,
primarily for equipment. Assets under capital leases included in property, plant
and equipment are as follows:
December 31,
---------------
2000 2001
EUR EUR
---- ----
Machinery, equipment and office furniture 409 980
Accumulated depreciation (251) (341)
---- ----
Total 158 639
==== ====
F-15
7 ADVANCES FROM SHAREHOLDERS
Advances from shareholders consist of the following:
December 31,
------------
2000 2001
EUR EUR
--- ---
Loan Meco Equipment Engineers, Inc., interest
rate fixed at 6.0% 389 --
Other, non interest bearing 562 37
--- --
Total current account shareholders 951 37
=== ==
8 SHORT-TERM DEBT
Short-term debt consists of the following:
December 31,
------------------
2000 2001
EUR EUR
------ ------
Notes payable to banks 19,034 57,353
Current portion of long-term debt 10,001 5,063
------ ------
Total short-term debt 29,035 62,416
====== ======
At December 31, 2001, the credit facilities of PE N.V. amounted to EUR 52,183
consisting of:
- - EUR 9,076 from F. van Lanschot Bankiers N.V.;
- - EUR 6,806 from ING Bank N.V.;
- - EUR 6,806 from HSBC Trinkaus & Burkhardt KGaA;
- - EUR 6,806 from Dresdner Bank AG;
- - EUR 22,689 from Deutsche BanK AG.
These credit facilities are all multi-currency and are for overdraft, guarantee
and revolving credit purposes. The credit facility agreements include covenants
requiring the Company to maintain a certain solvency ratio and interest coverage
ratio. The Company was in compliance with all applicable covenants at December
31, 2000. However, the Company is not meeting the interest coverage ratio as per
December 31, 2001, for which a waiver is received until at least March 15, 2002.
The credit facilities of Dresdner Bank and Deutsche Bank are frozen and the
Company committed to the other banks to abandon further withdrawals under the
facilities.
The Company's subsidiaries have local credit facilities aggregating EUR 17,480,
for which the following security interests are applicable:
Malaysia
First mortgage on the leasehold land and building of Possehl BESI Electronics
(M) Sdn. Bhd. to secure MYR 30,000 (EUR 8,876). The first mortgage is granted
through a priority security sharing agreement with the Bank of Commerce
(Malaysia) Berhad and HSBC Bank (Malaysia) Berhad, amounting to MYR 18,000 (EUR
5,326) and MYR 12,000 (EUR 3,550), respectively.
F-16
Singapore
First mortgage on the Singapore subsidiary's leasehold building to secure
S$ 3,000 (EUR 1,827).
China
First mortgage on the leasehold land and building of Shenzhen PBE SEG
Electronics Co., Ltd., to secure CNY 25,000 (EUR 3,396).
9 LONG-TERM DEBT
December 31,
---------------------
2000 2001
EUR EUR
-------- -------
A. Commerzbank, Pobocka Praha, interest rates fixed
at 6.5% and 5.2%. 1,407 1,263
B. Credit du Maroc, interest rate fixed at 7.5% 683 693
C. Bank of Communication, interest rates fixed at
5.94% and 6.534% 3,249 3.396
D. Bank of Commerce, Berhad 4,727 --
E. HSBC, Labuan 2,151 --
F. HSBC Bank (Malaysia) Berhard 2,548 --
G. F. van Lanschot Bankiers N.V. 6,806 --
H. ING Bank N.V. 6,409 --
I. HSBC Trinkaus & Burkhardt 6,800 --
J. Dresdner Bank AG -- --
Other 242 745
-------- -------
35,022 6,097
Less: current portion of long term debt (10,001) (5,063)
-------- -------
Long term debt 25,021 1,034
======== =======
A. The loans of the Commerzbank to Nastrojarna Possehl Electronic S.R.O.
is secured by ways of a Letter of Comfort from the parent company.
Repayment will take place partly by half year installments with a final
maturity at June 28, 2002 and partly at once at July 29, 2002.
B. The loan of Credit du Maroc to Possehl Electronic Maroc S.A.R.L. is
secured by a pledge of four stamping presses and a Letter of Comfort
from the parent company. Monthly installments amount to EUR 25 with a
final maturity at November, 2003.
C. The loans of the Bank of Communication to Shenzhen PBE SEG Electronics
Co. Ltd. is secured by a mortgage on the first phase building and land
use rights. Repayment will take place in 2002.
D/E/F. These loans matured in 2001.
G/H/I/J. Medium term loans drawn under the bank facility of EUR 6,806 per bank,
in total EUR 27,224, have been restated to notes payable to banks due
to not meeting the interest coverage ratio, for which a waiver is
received until at least March 15, 2002.
F-17
Aggregate required principal payments due on long-term debt are as follows:
Total
EUR
-----
2002 5,063
2003 711
2004 and thereafter 323
-----
Total 6,097
=====
10 ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31,
------------------
2000 2001
EUR EUR
------ ------
Accrual for sales returns 1,114 675
Income taxes 2,699 352
Salaries and payroll related items 7,059 3,789
Accrued capital expenditures 247 738
Tool loan clearance 308 507
Accrued interest 793 209
Goods received 1,171 609
Audit and legal fees 378 217
Accrued commission 91 57
Accrued pension benefit obligation -- 1,346
Restructuring severance and other -- 4.148
Other 4,006 4.285
------ ------
Total accrued liabilities 17,866 16,932
====== ======
The Company and most of its subsidiaries have defined contribution pension
plans, which provide retirement benefits covering substantially all employees.
The Company has no continuing obligations other than the annual contributions.
Aggregate pension plan contributions were EUR 1,870 in 2000 and EUR 2,278 in
2001.
The Company's Malaysian and Singaporean subsidiaries have retirement plans that
are integrated with and supplement the governmental benefits provided in the
laws of Malaysia and Singapore, respectively.
The Company's German subsidiary has a defined benefit pension plan covering a
limited group of its employees. This pension plan provides benefits to all
employees who joined the German subsidiary before December 31, 1984 and who were
between 30 and 55 years old.
The benefits under this plan are based on years of service and final average
compensation levels. The plan is not funded. Expenses under this plan were EUR
75, EUR 104 and EUR 99, consisting of service costs of EUR 23, EUR 47 and EUR
37, interest costs of EUR 52, EUR 57 and EUR 62 for the years ended December 31,
1999, 2000 and 2001, respectively. The aggregate
F-18
accumulated benefit obligation, projected benefit obligation and fair value of
plan assets at December 31, 2001 amounted to EUR 1,346, EUR 1,502 and EUR 0,
respectively.
The accrued pension obligation was calculated using the following assumptions:
Discount rate 4.0%
Expected long-term return on assets --
Average residual active life 14 years
The movement in the aggregated accumulated benefit obligation is as follows:
EUR
------
Balance January 1, 2000 1,231
Service cost 47
Interest cost 57
Payments to employees (36)
------
Balance December 31, 2000 1,299
Service cost 37
Interest cost 62
Payments to employees (52)
------
Balance December 31, 2001 1,346
======
11 SUBORDINATED LOAN FROM SHAREHOLDER
December 31,
------------------
2000 2001
EUR EUR
------ ------
Possehl 12,313 37,738
The first subordinated loan from Possehl was granted to the Company on July 20,
1999 and is subordinated to all senior liabilities of the Company. Possehl
postponed full repayment of the first subordinated loan to the maturity date of
the loan, being July 2004.
The interest rate is based on EURIBOR plus 2.00%. The effective interest rate at
December 31, 2001 was 5.324%.
The Company has granted Possehl warrants exercisable in the event of:
- - a sale of more than 25% of the outstanding share capital;
- - a sale of more than 35% of the Company's business or assets; or
- - on any public offering.
Under the terms of the warrants, the Company will issue new shares to be
acquired by the holder of the warrants, which will give the holder of the
warrants a (combined) share of 5.0% of the ordinary share capital of the
Company, for which a total purchase price of EUR 9.1 million will be paid, thus
valuing the equity of the Company at EUR 181.5 million.
F-19
The holder of the warrants will have the right to sell all shares acquired
through exercise of the warrants, along with any sale of shares by the
shareholders of the Company and/or any public offering. The warrants will have a
life of 10 years.
Upon repayment of the loan in full the Company may cancel the warrants in return
for a cash payment of EUR 2.3 million. A public offering or sale of a
substantial part of the Company's business within a year after such early
cancellation of the warrants will prompt an additional payment to the holder of
the warrant. This payment will be equal to 5% of the positive difference between
the implied equity valuation upon a public offering of equity and the original
EUR 181.5 million equity value minus EUR 2.3 million.
After five years the holder of the warrants will have the right to sell the
warrants to the Company for a price of EUR 1.4 million.
The subordinated debt includes covenants requiring the Company to maintain
certain financial ratios. The Company was not in compliance with all applicable
covenants at December 31, 2001, however Possehl granted the Company a waiver
until January 2003 for any contractual default of financial covenants.
On December 10, 2001 Possehl granted a second subordinated loan of EUR 25
million to the Company. This loan is subordinated in claim on assets to the
other debts, and repayable only after other debts such as to Deutsche Bank AG,
Dresdner Bank AG, HSBC Trinkaus & Burkhardt KGaA, ING Bank N.V. or F. van
Lanschot Bankiers N.V. with a higher ranking claim have been repaid. Repayment
will take place in one amount on December 31, 2004 latest.
The loan is subject to an interest charge of 2.5% in addition to 3-months
EURIBOR. The effective interest rate at December 31, 2001 was 5.839%.
The movement in the balance sheet value of the first subordinated loan is as
follows:
EUR
-------
Original draw down at November 9, 1999 13,613
Original issue discount ("OID") of the warrants (1,710)
Interest expense 835
-------
Balance December 31, 2001 12,738
=======
OID was calculated using the minimum value method with quarterly amortization.
The interest rate of the subordinated loan at December 31, 2000 and 2001 was
7.254% and 5.324%, respectively. The effective interest rate used in the OID
calculation was 9.41%.
The interest expense in 1999, 2000 and 2001 was EUR 45, EUR 365 and EUR 425,
respectively.
F-20
12 OTHER LONG-TERM LIABILITIES
The other long-term liabilities consist of the following:
December 31,
----------------
2000 2001
EUR EUR
----- -----
Warrants 1,674 1,361
Accrued pension benefit obligation 1,299 --
----- -----
Total other long-term liabilities 2,973 1,361
===== =====
Warrants
The OID of the warrants at November 9, 1999 calculated using the minimum value
method amounts to EUR 1,710 and is classified in other long-term liabilities.
The Company periodically revalues the warrants to fair market.
Pension plans
The accrued pension obligation has been restated to current liabilities, and
more in specific to accrued liabilities. The German subsidiary will cease its
operations in 2002. Therefore the benefit obligation has become a short-term
obligation.
13 RESTRUCTURING
In the second quarter of 2001 the Board of Directors decided to restructure the
Company in order to adjust the organization to changed market conditions. It was
decided to stop the production of leadframes in Europe and Hong Kong, whereby 4
production facilities were planned to be sold or shut down by the end of 2001.
The necessary provisions for receivables, obsolete stock, impairment of fixed
assets, termination benefits and estimated relocation costs were recorded per
June 30, 2001 based on judgement of management.
After BESI sold its 30% equity interest in the Company to Possehl, the new Board
of Directors revised its decision concerning the production facilities in France
and The Netherlands. It has been decided not to close these production
facilities.
F-21
The movement in the restructuring provision was:
Inventory Deferred
Severance Impairment write-off tax Other Total
--------- ---------- --------- -------- ----- -----
Balance
January 1, 2001 -- -- -- -- -- --
Provision 7,242 3,776 1,496 (621) 1,857 13,750
Additions to
provision 1,556 6,502 -- -- 769 8,827
Used from provision (1,955) (9,364) (1,496) -- (276) (13,091)
Release of
provision (3,456) (914) -- 371 (1,589) (5,588)
------- ------- ------- ------- ------- -------
Balance
December 31, 2001 3,387 -- -- (250) 761 3,898
======= ======= ======= ======= ======= =======
Restructuring
charges 5,342 9,364 -- (250) 1,037 15,493
======= ======= ======= ======= ======= =======
Cost of sales -- -- 1,496 -- -- 1,496
======= ======= ======= ======= ======= =======
Severance
The provision for the reduction in workforce recorded by the Company as per June
30, 2001, includes severance and other benefits for 353 employees, of which 108
are related to the production facilities in France and The Netherlands.
Additionally, in the second half of 2001 the Company recorded a provision for a
further reduction of 63 employees at the German subsidiary. The number of
employees actually terminated as part of the restructuring is 308, of which 252
will leave the Company early 2002 due to formal procedures.
14 FINANCIAL INSTRUMENTS
Due to the international scope of the Company's operations, the Company is
exposed to the risk of adverse movements in foreign currency exchange rates. The
Company is primarily exposed to fluctuations in the value of the Singapore
dollar, Hong Kong dollar, Malaysian ringgit and EUR against the US dollar, since
approximately 60% of the Company's sales are denominated in US dollar.
The Company's policy has been to hedge only foreign currency exposures resulting
from material contracts. PE has not hedged its currency exposure related to
intercompany payables and external financing of subsidiaries.
The Company has exposure to credit risk to the extent that the counterparty to
the transaction fails to perform according to the terms of the contract. The
amount of such credit risk, measured as the fair value of the forward foreign
currency exchange contract that is in a positive fair value position, was EUR 74
and EUR 21 at December 31, 2000 and 2001 respectively. The Company believes that
the risk of significant loss from credit risk is remote because it deals with
creditworthy financial institutions. The Company does not typically demand
collateral from the counterparties. The cumulative fair value of the contract is
not considered material to these financial statements.
F-22
The following is a summary of the Company's forward foreign currency exchange
contracts:
December 31,
----------------
2000 2001
EUR EUR
----- -----
To sell US dollar for Euro -- 1,373
To sell US dollars for Japanese yen 663 --
To sell US dollars for France francs 968 --
To sell US dollars for Dutch guilders 183 --
15 COMMITMENTS AND CONTINGENCIES
The Company rents buildings, land and leases certain equipment under operating
leases. As of December 31, 2001, the required minimum lease commitments were as
follows:
EUR
-----
2002 1,092
2003 to 2006 504
2007 and thereafter 8,262
-----
Total 9,858
An amount of EUR 8,577 for land rental related to the Singapore subsidiary is
included.
Rental expense was EUR 2.0 million, EUR 2.8 million and EUR 3.1 million in 1999,
2000 and 2001, respectively.
As of December 31, 2001, the minimum commitments in respect of contracts placed
for capital expenditures amounted to EUR 0.1 million.
16 RELATED PARTY TRANSACTIONS
Related party transactions are as follows:
1999 2000 2001
EUR EUR EUR
---- ---- ----
Sales to related companies 32,268 1,368 --
Purchases from related companies 1,506 4,509 2.502
F-23
17 INCOME TAXES
The components of income before income taxes and investment income from
affiliated companies (including the cumulative effect of change of accounting
principle recorded in 2001) are as follows:
Year ended December 31,
-----------------------
1999 2000 2001
EUR EUR EUR
------- ------- -------
Domestic (997) (5,215) (2,446)
Foreign 17,587 30,079 (42,176)
------- ------- -------
Total 16,590 24,864 (44,622)
======= ======= =======
The Netherlands domestic statutory tax rate is 35%. The reconciliation between
the actual income taxes shown in the consolidated statements of operations and
the expense that would be expected based on the application of the domestic tax
rate to income before taxes, investment income from affiliated and minority
interest is as follows:
Year ended December 31,
-----------------------
1999 2000 2001
EUR EUR EUR
------ ------ ------
"Expected" income taxes based on domestic rate 5,807 8,702 (15,618)
Non deductible expenses 256 485 172
Foreign tax rate differential (1,262) (2,137) 3,229
Tax exempt income (2,517) (2,810) 3,069
Increase in valuation allowance 649 176 7,841
Other (167) (526) (2,286)
------ ------ ------
Income taxes shown in statements of operations 2,766 3,890 (3,593)
===== ===== ======
The Company's provision for income taxes consists of the following:
Year ended December 31,
-----------------------
1999 2000 2001
EUR EUR EUR
----- ----- ------
Current:
- - domestic (228) (533) 70
- - foreign 2,871 4,485 883
Deferred:
- - domestic (2) (468) 450
- - foreign 125 406 (4,996)
----- ----- ------
2,766 3,890 (3,593)
===== ===== ======
F-24