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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] Registration Statement pursuant to Section 12(b) or (g) of the Securities
Exchange Act of 1934
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 31, 2000
[ ] 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: 0-13355
ASM INTERNATIONAL N.V.
fka ADVANCED SEMICONDUCTOR MATERIALS INTERNATIONAL N.V.
(Exact name of Registrant as specified in its charter)
The Netherlands
(Jurisdiction of incorporation or organization)
Jan van Eycklaan 10, 3723 BC Bilthoven, 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: Common Shares
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report: 48,797,346 common shares; no preferred shares.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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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Part I.
Item 1. Identity of Directors, Senior Management and Advisors
Not Applicable
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Item 2. Offer Statistics and Expected Timetable
Not Applicable
Item 3. Key Information
A. Selected Consolidated Financial Data
You should read the following selected financial data in conjunction with
"Operating and Financial Review and Prospectus" and our financial statements and
the notes thereto included elsewhere in this report. The selected consolidated
financial data presented below as of December 31, 1999 and 2000 and for each of
the three years ended December 31, 2000 have been derived from the audited
consolidated financial statements of ASM International included elsewhere
herein. The selected consolidated financial data presented below as of December
31, 1996, 1997 and 1998 and for each of the two years in the period ended
December 31, 1997 have been derived from the audited consolidated financial
statements of ASM International which are not included herein.
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(Euros in thousands, except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Net sales ....................................... E 298,695 E 321,582 E 288,111 E 414,495 E 935,212
Costs of sales .................................. (164,833) (182,259) (179,326) (244,485) (518,027)
--------- --------- --------- --------- ---------
Gross profit .................................... 133,862 139,323 108,785 170,010 417,185
Operating expenses:
Selling, general and administrative ........... (62,744) (74,675) (59,924) (83,170) (147,318)
Research and development, net ................. (26,137) (39,000) (36,277) (47,145) (73,800)
Amortization of Goodwill ...................... -- -- (93) (340) (4,295)
Litigation settlement ......................... -- (79,669) -- -- --
--------- --------- --------- --------- ---------
Total operating expenses ................... (88,881) (193,344) (96,294) (130,655) (225,413)
--------- --------- --------- ---------
Earnings (loss) from operations ................. 44,981 (54,021) 12,491 39,355 191,772
--------- --------- --------- --------- ---------
Net interest and other financial income
(expenses) .................................... (3,236) (3,239) (5,350) (8,608) (1,595)
Income taxes .................................... (2,032) (2,761) (648) (1,274) (22,830)
Minority interest ............................... (8,674) (10,455) (6,261) (18,374) (69,285)
--------- --------- --------- --------- ---------
Net earnings (loss) before cumulative effect
of change in accounting principle .............. E 31,039 E (70,476) E 232 E 11,099 E 98,062
Cumulative effect of change in accounting
principle, net of tax .......................... -- -- -- -- (3,790)
--------- --------- --------- --------- ---------
Net earnings (loss) ............................. E 31,039 E (70,476) E 232 E 11,099 E 94,272
--------- --------- --------- --------- ---------
Basic net earnings (loss) per share .............
Before cumulative change of accounting principle E 0.98 E (2.12) E 0.01 E 0.30 E 2.09
Cumulative change of accounting principle ...... -- -- -- -- (0.08)
--------- --------- --------- --------- ---------
Net earnings per share .......................... E 0.98 E (2.12) E 0.01 E 0.30 E 2.01
========= ========= ========= ========= =========
Diluted net earnings (loss) per share
Before cumulative change of accounting principle E 0.92 E (2.12) E 0.01 E 0.29 E 2.02
Cumulative change of accounting principle ...... -- -- -- -- (0.08)
--------- --------- --------- --------- ---------
Net earnings per share .......................... E 0.92 E (2.12) E 0.01 E 0.29 E 1.94
========= ========= ========= ========= =========
Basic weighted average number of shares ......... 31,566 33,232 33,794 37,301 46,810
Diluted weighted average number of
shares ........................................ 33,717 33,232 34,743 40,664 48,703
Proforma amounts assuming the new accounting
principle is applied retroactively(1) 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Net earnings (loss) E30,103 E(70,720) E 585 E 8,881 E98,062
Net earnings (loss) per share:
Basic E 0.95 E (2.13) E0.02 E 0.24 E 2.09
Diluted E 0.89 E (2.13) E0.02 E 0.23 E 2.02
(1) The cumulative effect of the change in the accounting principle relates to
the effect on prior years of the impact of the adoption of Staff Accounting
Bulletin 101. This Bulletin is effective as of January 1, 2001 and sets forth
guidelines on the timing of revenue recognition of sales. The proforma amounts
presented assumes that the new accounting principles have been applied
retroactively.
DECEMBER 31,
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1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(Euros in thousands)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ 26,028 27,446 11,724 14,153 106,805
Total assets..................................... 277,704 328,589 282,950 425,035 777,940
Total debt....................................... 80,145 167,417 148,756 119,893 76,280
Total shareholders equity........................ 80,808 16,020 20,464 65,552 308,322
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Exchange Rate Information
The following table sets forth, for each period indicated, the high and
low exchange rates based on the noon buying rate in the city of New York for
cable transfers payable in Euros as certified for customs purposes by the
Federal Reserve Bank of New York, which is often referred to as the "noon buying
rate." On February 20, 2001, the noon buying rate was 0.9096 Euros per United
States dollar.
US Dollar Equivalent of Euro
(except where noted)
Months of
- --------------------------------------------------------------------------------------------------------------
8/00 9/00 10/00 11/00 12/00 1/01
High 0.9228 0.8993 0.8806 0.8694 0.9388 0.9535
Low 0.8878 0.8462 0.8270 0.8382 0.8755 0.9181
Years ended December 31,
- --------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
Average High/Low
exchange rate (1) 1.6889(2) 1.9585(2) 1.9825(2) 1.0588 0.9207
(1) Average high/low exchange rate calculation is based on the average of
the exchange rates on the last day of each month during the year.
(2) Exchange rate is given in dollar equivalents of Netherlands guilders,
or "NLG," for 1996, 1997 and 1998.
B. Capitalization And Indebtedness
Not applicable.
C. Reasons For The Offer And Use Of Proceeds
Not applicable.
D. Risk Factors
Some of the information in this report contains forward-looking statements
within the meaning of the United States federal securities laws. These
statements include, among others, statements regarding future expenditures,
sufficiency of cash generated from operations, maintenance of majority interest
in ASM Pacific Technology, business strategy, product development, product
acceptance, market penetration, market demand, return on investment in new
products, facility completion dates and product shipment dates. These statements
may be found under "Operating and Financial Review and Prospects," and elsewhere
in this report. Forward-looking statements typically are identified by use of
terms such as "believe," "anticipate," "estimate," "expect," "intend," "plan,"
"will," "may" and similar words, although some forward-looking statements are
expressed differently. You should be aware that our actual results could differ
materially from those contained in the forward-looking statements due to a
number of factors, including the matters discussed in "Item 4. Information on
the Company" and below.
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OUR REVENUES AND OPERATING RESULTS FLUCTUATE DUE TO A VARIETY OF FACTORS, WHICH
MAY RESULT IN VOLATILITY OR A DECREASE IN THE PRICE OF OUR COMMON SHARES. Our
revenues and operating results have varied significantly due to a number of
factors, including:
- Cyclicality. The semiconductor industry is subject to sudden,
extreme, cyclical variations in product supply and demand. In
some cases, these cycles have lasted more than a year.
- The Length and Variability of the Sales Cycle and
Implementation Periods for Our Products. Our products are
technologically complex. Customers often require a significant
number of product presentations and demonstrations, in some
instances evaluating equipment on site, before reaching a
sufficient level of confidence in the product's performance
and compatibility with the customer's requirements to place an
order. As a result, our sales process is often subject to
delays associated with lengthy approval processes that
typically accompany the design and testing of new products.
The sales cycles of our products often last for many months or
even years. The long sales cycle also subjects us to the risk
of making expenditures for anticipated orders long into the
future.
- The Timing of Customer Orders, Cancellations and Shipments.
The industry's long sales cycles and the complexity of our
products subject us to risks involving customers' budgetary
constraints, internal acceptance reviews and cancellations.
Consequently, orders expected in one quarter could shift to
another because of the timing of customers' purchase
decisions.
- Technological Changes. The semiconductor industry and the
semiconductor equipment industry are subject to rapid
technological change and frequent introductions of
enhancements to existing products. Technological trends have
had and will continue to have a significant impact on our
business. Our results of operations and ability to remain
competitive are largely based upon our ability to accurately
anticipate customer and market requirements. Some competitors
may be further along or better funded in their research and
development of new technology.
- Disruptions in Sources of Supply. We are currently outsourcing
a substantial majority of the manufacturing of our front-end
furnace and epitaxial reactors to a single supplier. If our
contractor becomes unable to deliver products, we could have
a disruption of our operations.
- Competition. We face competition or potential competition from
companies with greater resources than ours, and if we are
unable to compete effectively with these companies, our
ability to fund capital requirements and our market share may
decline.
- Exchange Rate Fluctuations. Our assets, liabilities and
operating expenses and those of our subsidiaries are to a
large extent denominated in the currency of the country where
each entity is established. Our financial statements are
expressed in Euros. The translation exposures that result from
the inclusion of financial statements of our subsidiaries that
are expressed in the currencies of those subsidiaries are not
hedged. As a result, our operational results are exposed to
fluctuations of various exchange rates versus the Euro.
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WE DERIVE A SIGNIFICANT PERCENTAGE OF OUR REVENUE FROM SALES TO A SMALL NUMBER
OF LARGE CUSTOMERS, AND IF WE ARE NOT ABLE TO RETAIN THESE CUSTOMERS, OR THEY
RESCHEDULE, REDUCE OR CANCEL ORDERS, OUR REVENUES WOULD BE REDUCED AND OUR
FINANCIAL RESULTS WOULD SUFFER.
Our largest customers account for a significant percentage of our revenues. Our
largest customer accounted for approximately 14.2% of our net sales in 2000. Our
ten largest customers accounted for approximately 45.2% of our net sales in
2000. Sales to these large customers have varied significantly from year to year
and will continue to fluctuate in the future.
These sales also may fluctuate significantly from quarter to quarter. We may not
be able to retain our key customers or these customers may cancel purchase
orders or reschedule or decrease their level of purchases from us. Any
substantial decrease or delay in sales to one or more of our key customers could
harm our sales and financial results. In addition, any difficulty in collecting
amounts due from one or more key customers could harm our financial results.
WE DEPEND ON KEY PERSONNEL, ESPECIALLY MANAGEMENT AND TECHNICAL PERSONNEL, WHO
MAY BE DIFFICULT TO ATTRACT AND RETAIN IN THE CURRENT MARKET WHERE COMPETITION
FOR PERSONNEL IS INTENSE. OUR OPERATIONS COULD BE NEGATIVELY AFFECTED IF WE LOSE
KEY EMPLOYEES OR ARE UNABLE TO ATTRACT AND RETAIN SKILLED EMPLOYEES.
We have historically encountered operational difficulties arising from our
having an insufficient number of key personnel, particularly management and
technical personnel. Our business and future operating results depend in part
upon our ability to attract and retain qualified management, technical, sales
and support personnel for our operations on a worldwide basis. Competition for
qualified personnel is intense, and we cannot guarantee that we will be able to
continue to attract and retain qualified personnel. Availability of qualified
technical personnel varies from country to country, and may affect the
operations of our subsidiaries in some parts of the world. Our operations could
be negatively affected if we lose key executives or employees or are unable to
attract and retain skilled executives and employees as needed. In particular, if
our growth strategies are successful, we may not have sufficient operational
personnel to manage that growth and may not be able to attract the personnel
needed. We do not maintain insurance to protect against the loss of key
executives or employees. Further, we have agreements with some, but not all,
employees, restricting their ability to compete with us after their employment
terminates. Our future growth and operating results will depend on:
- our ability to continue to broaden our senior management
group;
- our ability to attract, hire and retain skilled employees; and
- the ability of our officers and key employees to continue to
expand, train and manage our employee base.
WE ARE DEPENDENT UPON OUR WORLDWIDE SALES AND OPERATIONS; ECONOMIC, POLITICAL,
MILITARY, REGULATORY, NATURAL DISASTER OR OTHER EVENTS IN A COUNTRY WHERE WE
MAKE SIGNIFICANT SALES OR HAVE SIGNIFICANT OPERATIONS COULD INTERFERE WITH OUR
SUCCESS OR OPERATIONS THERE AND HARM OUR BUSINESS.
We market and sell our products and services throughout the world. We have
assembly facilities in the Netherlands, Finland, the United States, Japan, Hong
Kong and Singapore, and manufacturing facilities in China and Malaysia.
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We are subject to the risks inherent in doing business internationally,
including:
- - unexpected changes in regulatory requirements;
- - fluctuations in exchange rates and currency controls;
- - political and economic conditions and instability;
- - imposition of trade barriers and restrictions, including changes in
tariff and freight rates;
- - the difficulty of coordinating our management and operations in several
different countries;
- - limited intellectual property protection in some countries;
- - longer accounts receivable payment cycles in some countries;
- - in the case of our operations in Asia, the risk of business
interruption and damage from earthquakes; and
- - the burdens of complying with a variety of foreign laws.
In particular, our operations in China and Taiwan are subject to the economic
and political uncertainties affecting that country. For example, the Chinese
economy has experienced significant growth in the past decade, but such growth
has been uneven across geographic and economic sectors and has recently been
slowing. This growth may continue to decrease and any slowdown may have a
negative effect on our business.
OUR ABILITY TO COMPETE COULD BE JEOPARDIZED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM CHALLENGES BY THIRD PARTIES, PARTICULARLY IF
OUR INTELLECTUAL PROPERTY RIGHTS ARE CHALLENGED UNDER THE LAW OF FOREIGN
JURISDICTIONS WHICH DO NOT HAVE STRONG INTELLECTUAL PROPERTY RIGHTS LAWS. THESE
TYPES OF CLAIMS COULD SERIOUSLY HARM OUR BUSINESS OR REQUIRE US TO INCUR
SIGNIFICANT COSTS.
Our success and ability to compete depend in large part upon protecting our
proprietary technology. We rely on a combination of patent, trade secret,
copyright and trademark laws, non-disclosure and other contractual agreements
and technical measures to protect our proprietary rights. These agreements and
measures may not be sufficient to protect our technology from third-party
infringements, or to protect us from the claims of others. In addition, patents
issued to us may be challenged, invalidated or circumvented, our rights granted
under those patents may not provide competitive advantages to us, and third
parties may assert that our products infringe their patents, copyrights or trade
secrets. Third parties could also independently develop similar products or
duplicate our products.
In addition, monitoring unauthorized use of our products is difficult and we
cannot be certain that the steps we have taken will prevent unauthorized use of
our technology. The laws of some foreign countries in which our products are or
may be developed, manufactured or sold, including various countries in Asia, may
not protect our products or intellectual property rights to the same extent as
do the laws of the United States and thus make the possibility of piracy of our
technology and products more likely in these countries. If competitors are able
to use our technology, our ability to compete effectively could be harmed.
There has been substantial litigation regarding patent and other intellectual
property rights in semiconductor-related industries. In the future, additional
litigation may be necessary to enforce patents issued to us, to protect trade
secrets or know-how owned by us or to defend us against claimed infringement of
the rights of others and to determine the scope and validity of the proprietary
rights of others. Any such litigation could result in substantial cost and
diversion of effort by us, which could have a material adverse effect on our
business, financial condition and operating results. Furthermore, adverse
determinations in this litigation could result in our loss of proprietary
rights, subject us to significant liabilities to third parties, require us to
seek licenses from third parties or prevent us from manufacturing or selling
our products, any of which could have a material adverse effect on our
business, financial condition and operating results.
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OUR STOCK PRICE HAS FLUCTUATED AND MAY CONTINUE TO FLUCTUATE WIDELY.
The market price of our common shares has fluctuated substantially in the past.
Between January 1, 1999 and December 31, 2000, the sales price of our common
shares, as reported on the Nasdaq National Market, ranged from a low of $3.625
to a high of $37.625. The market price of our common shares will continue to be
subject to significant fluctuations in the future in response to a variety of
factors, including the risk factors discussed in this report.
Furthermore, stock prices for many companies, and high technology companies in
particular, fluctuate widely for reasons that may be unrelated to their
operating results.
Those fluctuations and general economic, political and market conditions, such
as recessions or international currency fluctuations, may adversely affect the
market price of our common shares.
MEMBERS OF OUR MANAGEMENT CONTROL APPROXIMATELY 24.0% OF OUR VOTING POWER AND
THEREFORE HAVE SIGNIFICANT INFLUENCE OVER MATTERS DETERMINED BY OUR
SHAREHOLDERS.
Our directors and officers control approximately 24% of our voting power as of
December 31, 2000. Accordingly, in the event they vote together in connection
with matters submitted to a shareholder vote, such as the appointment of our
management board by the shareholders, they will have significant influence on
the outcome of those matters and on our direction and future operations.
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS THAT MAY EXPOSE US TO
LIABILITIES FOR NONCOMPLIANCE. WE ARE SUBJECT TO A VARIETY OF GOVERNMENTAL
REGULATIONS RELATING TO THE USE, STORAGE, DISCHARGE, HANDLING, MANUFACTURE AND
DISPOSAL OF THE TOXIC OR OTHER HAZARDOUS CHEMICAL BY-PRODUCTS OF, AND WATER USED
IN, OUR MANUFACTURING PROCESSES.
OUR FUTURE NET INCOME AND CASH FLOW WILL BE AFFECTED BY OUR ABILITY TO APPLY OUR
CUMULATIVE NET OPERATING LOSS CARRY FORWARDS, WHICH TOTALED APPROXIMATELY E260
MILLION FOR TAX REPORTING PURPOSES AS OF DECEMBER 31, 2000, AGAINST TAXABLE
INCOME IN FUTURE PERIODS. CHANGES IN TAX LAWS IN THE JURISDICTIONS IN WHICH WE
OPERATE MAY LIMIT OUR ABILITY TO UTILIZE OUR NET OPERATING LOSSES.
ASM PACIFIC TECHNOLOGY IS A CONSOLIDATED SUBSIDIARY WHICH GENERATES A
SIGNIFICANT PORTION OF OUR NET SALES, EARNINGS FROM OPERATIONS AND NET EARNINGS;
ALTHOUGH WE CURRENTLY ARE A MAJORITY SHAREHOLDER, WE MAY NOT BE ABLE TO MAINTAIN
OUR MAJORITY INTEREST, IN WHICH CASE THERE IS A SIGNIFICANT RISK THAT WE WOULD
NO LONGER BE ABLE TO CONSOLIDATE ITS RESULTS OF OPERATIONS WITH OURS, WHICH
WOULD HAVE A SIGNIFICANT NEGATIVE EFFECT ON OUR CONSOLIDATED EARNINGS FROM
OPERATIONS. ALTHOUGH WE ARE A MAJORITY SHAREHOLDER, ASM PACIFIC TECHNOLOGY IS
NOT OBLIGATED TO PAY DIVIDENDS TO US AND MAY TAKE ACTIONS OR ENTER INTO
TRANSACTIONS THAT ARE DETRIMENTAL TO US.
OUR AFFAIRS ARE GOVERNED BY OUR ARTICLES OF ASSOCIATION AND BY THE LAWS
GOVERNING LIMITED LIABILITY COMPANIES FORMED IN THE NETHERLANDS. AS A RESULT, IT
MAY BE DIFFICULT FOR INVESTORS TO SERVE PROCESS WITHIN THE UNITED STATES UPON US
OR ENFORCE UNITED STATES COURT JUDGMENTS AGAINST US.
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Item 4. Information on the Company
Except for historical information, the information in this report
contains forward-looking statements which are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve risks and uncertainties that could cause our
actual results to differ materially from those contained in any forward-looking
statements. Factors which could cause or contribute to such differences include,
but are not limited to, those discussed in Item 3 under "Risks Factors."
As used in this report, the terms "we," "us," "our," and ASM
International mean ASM International N.V. and its subsidiaries, unless the
context indicates another meaning, and the term "common shares" means our common
shares, par value NLG. 0.01 per share. Since we are a Netherlands company, the
par value of our common shares is expressed in Netherlands guilders, or "NLG."
A. History and Development of the Company.
ASM International, N.V. was incorporated on March 4, 1968 as a
Netherlands naamloze vennootschap, or public limited liability company, and was
known as Advanced Semiconductor Materials International N.V. until November
1996. Our principal executive offices are located at Jan van Eycklaan 10, 3723
BC Bilthoven, the Netherlands. Our telephone number at that location is (011)
(31) 30 229 84 11. Our authorized agent in the United States is our subsidiary
ASM America, Inc., a Delaware corporation, located at 3440 East University
Drive, Phoenix, Arizona 85034.
In April of 2000, we sold 4,250,000 shares of our common stock in the
United States in a registered public offering. Our net proceeds, after we paid
the underwriting discount and other estimated expenses, for the offering were
approximately $114.6 million (or approximately E 119.7 million). We used the
proceeds raised in the offering to repay debt of E76.8 million, releasing assets
used to secure these loans. The remainder of the funds raised were used to fund
our working capital needs.
In early July 2000, we acquired 4.7% of the outstanding shares of ASM
Pacific Technology Ltd., our back-end subsidiary, for cash. The financing of
this acquisition came from our own cash resources and from the loan facility we
received from Canadian Imperial Bank of Commerce ("CIBC") of which we used $69
million. The loan is collateralized with all of our shareholding in ASM Pacific
Technology. In order to make these shares available, we canceled the bank
facilities with our Dutch bankers, as these facilities were secured by our
shareholding in ASM Pacific Technology.
In connection with this loan facility, we entered into an equity line
of credit with Canadian Imperial Holdings, Inc. ("CIHI"), an affiliate of CIBC,
pursuant to which we have the right to sell up to an aggregate of $65 million of
newly issued shares to CIHI from time to time over a two year period. We are
entitled, subject to certain restrictions and limitations, to sell up to $10
million in common shares to CIHI as often as every five business days. If there
is an uncured shortfall in the cash and stock collateral pledged to CIBC to
secure the outstanding loans under our credit facility with CIBC, however, we
may sell up to an amount (subject to an aggregate maximum limit of the aggregate
principal amount of loans outstanding under the credit facility, which amount is
currently $41 million) which is sufficient to cure such shortfall.
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The purchase price of the shares will be equal to 95.5% of the simple
average of the daily volume weighted average sale price during the five trading
days preceding the date of sale, except that in the case of an issuance and sale
by us of more than $10 million to cure a collateral value shortfall under the
credit facility, the volume weighted average trading price will be measured over
a period of time 10 to 25 trading days preceding the date of sale, based on the
size of the issuance. CIHI, however, is under no obligation to purchase if such
a purchase would cause the aggregate number of our common shares beneficially
owned by CIHI and its affiliates, to exceed 9.9% of all of our issued and
outstanding common shares.
Pursuant to the equity line, we are required to register with the U.S.
Securities and Exchange Commission $65 million of our common shares for offer
and sale pursuant to the equity line. The registration statement must remain in
effect for the duration of the equity line. CIHI is under no obligation to
purchase our newly issued common shares under the equity line if effectiveness
of our registration statement is withdrawn, certain conditions precedent to the
equity line are not satisfied or certain covenants are not complied with. We
must pay to CIHI a monthly fee of 3/4% of the outstanding CIBC loan amount if
the registration statement is not effective by April 23, 2001, which fee
increases to 1% per month if effectiveness is not achieved by June 8, 2001. We
have filed the registration statement. However, we can give no assurance that
the registration statement will be declared effective by April 23, 2001. Failure
to obtain registration of the newly issued shares may have an adverse affect on
our cash flows because of the fees we will be obligated to pay to our lender.
Effective in July 1999, we purchased all of the outstanding shares of
Microchemistry, a company located in Finland, for an approximately E3.9 million
promissory note convertible at $10.00 per share into our common shares and
renamed the company ASM Microchemistry. Prior to our purchase, Microchemistry
developed the process to grow or deposit films one layer at a time by means of a
process called Atomic Layer Chemical Vapor Deposition ("ALCVD"), and marketed
ALCVD processes to manufacturers of flat panel displays and tape magnetic head
products. Following our acquisition, ASM Microchemistry is shifting its focus to
manufacturers of semiconductor devices.
In December 1999, we purchased a 24% interest in NanoPhotonics AG, a
German supplier of precision thin film metrology equipment for E338,000. The
technology supplied by NanoPhotonics allows for the integration of
high-resolution, ellipsometric thin film metrology directly in a
wafer-processing tool. We believe that this investment will enable us to equip
our batch and single wafer equipment with integrated thin film metrology.
There have been no public takeover offers by third parties during or
since the end of the 2000 fiscal year.
B. Business Overview.
Introduction
We are a leader in the design, manufacture and sale of equipment and
solutions used to produce semiconductor devices, or integrated circuits. We
enable our customers to lower their production costs by providing leading-edge
technology solutions and efficient manufacturing processes. Our production
equipment and solutions are used by both the front-end and back-end segments of
the semiconductor market. Front-end equipment performs various fabrication
processes in which multiple thin films, or layers, of electronically insulating
or conductive material are grown or deposited onto a round slice of silicon,
called a wafer. Back-end
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equipment separates these processed wafers into numerous individual dies, each
containing the circuitry of a single semiconductor device, and assembles,
packages and tests the dies in order to create semiconductor devices. We believe
that the front-end and back-end react to different market forces in the highly
cyclical semiconductor industry and that operating in both segments reduces the
impact of business cycles on our operations.
Our front-end facilities in the Netherlands, the United States and
Japan enable us to adapt our products to local specifications and to interact
closely with customers in the world's major semiconductor design and wafer
processing markets: Europe, North America and Asia. Our products in the
front-end market segment grow or deposit thin films onto wafers primarily using
a process called chemical vapor deposition, or CVD. CVD deposits films on the
wafer's surface through chemical reactions using gases at high temperatures.
Front-end operations accounted for approximately 41% of our net sales in 2000.
Our back-end business is conducted through our facilities in Hong Kong,
Singapore, Malaysia and China, close to where most assembly and packaging
operations are located. Our products in the back-end market assemble and package
individual dies into finished semiconductor devices using stand alone and
automated lines of equipment. We also manufacture leadframes, copper carriers on
which dies are mounted as part of the back-end assembly process. Back-end
operations accounted for approximately 59% of our net sales in 2000.
Our front-end business is conducted through wholly-owned subsidiaries,
the most significant of which are ASM Europe, B.V., located in the Netherlands,
ASM America, Inc., located in the United States, ASM Microchemistry Ltd.,
located in Finland, and ASM Japan K.K., located in Japan. Our back-end business
is conducted through a majority-owned subsidiary, ASM Pacific Technology Ltd.,
with principal operations in Hong Kong, Singapore, Malaysia and China. As of
December 31, 2000, we owned 54.62% of the outstanding equity of ASM Pacific
Technology.
Industry and Products
A. GENERAL.
Semiconductor equipment sales depend significantly upon the level of
capital expenditures by semiconductor manufacturers, which in turn depends
significantly upon the current and anticipated market supply and demand for
semiconductor devices and products using semiconductor devices. Growth in the
semiconductor market is being fueled by rapidly expanding end-user demand for
smaller, less-expensive and better-performing electronic products which has led
to an increased concentration of semiconductor devices in electronic products.
B. SEMICONDUCTOR MANUFACTURING PROCESS
The semiconductor equipment market is composed of two segments: the
front-end and the back-end.
Front-end Processes. During front-end wafer processing, multiple thin
films of either electronically insulating material, also called dielectrics, or
conductive material are grown or deposited on a wafer measuring 100 mm, or four
inches, to 300mm, or twelve inches, in diameter. A finished wafer may contain a
few dozen to several thousand individual dies. Each die consists of a series of
layers which together form the millions of microscopic transistors and
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11
other components which interact to perform specific electronic functions.
Front-end processes are performed either one wafer at a time in single wafer
processing systems or many wafers at a time in batch processing systems.
Multiple processes are repeated on each layer as the wafer is processed. The
number and precise order of the process steps varies depending upon the
complexity and design of the device. The performance of the device is determined
in part by the various electrical characteristics of the materials used in the
layers of the device and the wafer. The front-end production phase is capital
intensive, generally requiring multiple units and a range of different types of
processing equipment in a fabrication line. The various steps involved in
front-end processing are described below.
- - Epitaxy involves the deposition of silicon or silicon compounds on the
wafer, continuing and perfecting the crystal structure of the bare wafer
underneath. Epitaxy improves the electrical characteristics of the wafer
surface, making it suitable for highly complex microprocessors and memory
devices.
- - Ion Implantation is a process in which wafers are bombarded with ions to
introduce dopant atoms, or impurities, into the wafer to improve its
electrical characteristics. Silicon conducts little or no electricity. In
order to have electrical current within a layer, it is necessary to place
small amounts of impurities into the layer.
- - Diffusion and Oxidation are high-temperature processes which change the
electrical characteristics of layers. Diffusion is used to make impurities
introduced by ion implantation electrically active. Oxidation forms a
silicon oxide layer on the wafer's surface, which acts as an insulative or
protective layer over the wafer's surface.
- - Chemical Vapor Deposition or CVD is a technique in which one or more
gaseous reactors are used to form a solid insulating or conducting layer on
the surface of a wafer. Several forms of CVD exist, each used for a
particular application.
- - Low Pressure Chemical Vapor Deposition, or LPCVD, performs CVD under high
temperature, low pressure conditions to deposit insulating or conductive
layers.
- - Rapid Thermal Chemical Vapor Deposition or RTCVD is a technique similar to
LPCVD, but deposits a film on one single wafer at a time.
- - Plasma Enhanced Chemical Vapor Deposition, or PECVD, performs CVD enhanced
by the use of a vapor containing electrically charged particles, or plasma,
at lower temperatures. After the first metal layer has been deposited on
the wafer, LPCVD and diffusion can no longer be used because they will melt
the metal. Any subsequent deposition must be performed at low temperatures
with PECVD.
- - Atomic Layer Deposition, or ALD, is an advanced CVD technology which
deposits single atomic layers on wafers one at a time at low temperatures.
This process is used to create ultra-thin films of exceptional quality and
flatness.
- - Rapid Thermal Processing, or RTP, is used to expose single wafers to heat
over a short period of time.
- - Physical Vapor Deposition, or PVD, deposits a thin layer of metal on the
wafer surface for electrical contacts and wires through a process called
"sputtering," or "electroplating."
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12
- - Lithography is used to print the various layer patterns of the
semiconductor device on the uppermost layer of the wafer. These patterns
determine the functions of the semiconductor device.
- - Etch reproduces the pattern imprinted by lithography by removing excess
material from the uppermost layer of the wafer.
- - Clean removes undesirable contaminants from the wafer's surface.
- - Chemical Mechanical Polishing, or CMP, planarizes, or levels, layers
deposited on wafers by polishing them with a chemical solution called
slurry. Planarization reduces the vertical height differences of the
various layers. This increases the number of layers which can be processed
without introducing reliability problems.
- - Metrology is used to measure the width of lines on semiconductor devices,
the thickness of layers, the surface profiles of layers, and certain
electrical properties of layers.
- - Probing is a process in which electrical and functional tests are performed
on each die and defective ones are marked.
Back-end Processes. The back-end manufacturing process consists of cutting the
processed wafer into individual dies, mounting them on carriers such as
leadframes and connecting them to the appropriate electrical leads. Wire bonding
onto leadframes is the most common interconnection method, although alternative
interconnection techniques and materials, such as ceramic packages, flip chips
and different chip-scale packaging methods, are available. After the assembly
process, the dies are packaged to protect them from environmental influences and
prepare them for use, resulting in completed semiconductor devices. Every die is
inspected for proper performance before the next steps are undertaken. Each of
these steps is described below.
Materials:
- - Leadframes are produced by stamping or etching a pattern through a strip of
copper or iron-nickel alloy. For high precision (and fast turn-around
purposes), leadframes are usually produced by an etching process. This is
required when the space between the lead is finer than the thickness of the
material. Before bonding the dies, the leadframes are plated with silver or
gold on appropriate places for good electrical contact.
Assembly:
- - Die Separation separates the dies on the wafer into individual units using
wafer saws.
- - Die Bonding mounts the dies onto carriers such as leadframes using a die
bonder.
- - Wire Bonding attaches extremely thin gold or aluminum wires between the die
and the leadframe for electrical connections using a wire bonder.
- - Unit Inspection inspects each die throughout the assembly process and prior
to packaging.
Packaging:
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- - Encapsulation or Molding encases the dies in a protective housing, often
epoxy, using transfer molds.
- - Packaging deals with the housing of the chip to protect it from
environmental influences and to finalize the product for industrial use.
- - Trim and Form cuts away the excess portion of the leadframe and bends the
leads into the desired shape, resulting in the completed semiconductor
device.
- - Final Testing tests the performance of the completed semiconductor device.
C. INDUSTRY TRENDS
To create increased demand for semiconductor devices, semiconductor
manufacturers have sought to enhance the performance or speed, decrease the
size, and lower the cost of semiconductor devices. These goals are being
achieved by shrinking transistor size and reducing line widths, increasing wafer
size and introducing new materials and technologies.
Technology shrinking the size of transistors, the building block of the
semiconductor device, has made it possible to decrease the line widths in
semiconductor devices. Decreasing the line widths in semiconductor devices makes
the devices both faster and smaller. The result is that more of the compact
devices with smaller line widths can be placed on a wafer, decreasing the cost
per unit. Currently, line widths of 0.18 microns are moving into production and
the industry is preparing to transition to 0.13 and sub 0.10 microns levels. A
micron is 1/25,000 of an inch.
But, as linewidths get smaller, layer thickness must also decrease.
With each generation, this can lead to the introduction of new materials and
technologies such as ALD, and rapid thermal processing (RTP). Historically, a
change in the linewidth of 0.7x, meaning above twice as many transistors can be
placed on a given wafer surface, occurred every three years. Recently, however,
the introduction of a new technology generator, has been accelerating, occurring
every two years. The industry is responding by introducing new materials and
technologies at a faster rate. Today, ASMI is leveraging its capabilities to
support 130nm technology equipment and 70nm equipment and beta testing for 100nm
technology. ASMI has positioned itself to work within a two-year generation
cycle.
Semiconductor manufacturers are also seeking to reduce the cost of
producing semiconductor devices by increasing the diameter of the wafers on
which the semiconductor devices are being layered. The maximum diameter of
wafers is in the process of increasing from 200mm, or eight inches, the current
industry standard, which was introduced in the early 1990s, to 300mm, or twelve
inches. The move toward larger wafer sizes is driven by cost efficiency, since a
300mm wafer holds approximately 2.4 times more dies than a conventional 200mm
wafer. Presently, all large semiconductor companies have committed to 300 mm
facilities with about 25 plants already announced for startup over the next two
years. ASMI participates in at least two out of every three 300 mm startups.
Furthermore, in order to increase performance, new materials are being
used to produce semiconductor devices, such as copper interconnects for better
conductivity, which in turn require new isolation layers. Semiconductor
equipment manufacturers are using existing as well as new manufacturing methods
of deposition, cleaning and lithography to enable the use of such new materials.
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To achieve improved yield, semiconductor devices must be manufactured
in environments with very low levels of contaminants. Semiconductor equipment
manufacturers have responded to this requirement by offering equipment that
isolates, within a controlled mini-environment, several chambers corresponding
to different steps of the semiconductor manufacturing process and by developing
factory automation which reduces human involvement. Developments in metrology
are also contributing to improvements in yield. The measurements conducted by
metrology equipment are becoming a more integral part of the semiconductor
manufacturing process. Semiconductor manufacturers are requiring equipment that
can make more precise and new kinds of measurements, and provide results of
these measurements faster by integration of the measurement tools into the
processing equipment.
Technological developments in the front-end have resulted in the need
for new solutions in the back end. For example, shrinking dies and line widths
require wire bonders that are capable of attaching finer wires in smaller
spaces. In addition, semiconductor manufacturers are looking to automation and
integration of back-end equipment as ways to reduce costs and increase
productivity.
D. PRODUCTS.
We design, manufacture and sell products used in both front-end wafer
processing and back-end assembly, packaging and materials. The following table
sets forth the main manufacturing processes used in the front-end and back-end
market segments and indicates the markets in which we participate.
FRONT-END BACK-END
--------- --------
DEPOSITION OTHER PROCESSES TESTING MATERIALS ASSEMBLY PACKAGING
- -------------- --------------- ----------- --------------- --------------- ---------------
Diffusion
Epitaxy* and Metrology* Leadframe Die Separation Encapsulation*
Oxidation* Manufacture*
- -------------- --------------- ----------- --------------- --------------- ---------------
Low Pressure Ion Probing Manufacture of Die Bonding* Package
CVD* and Rapid Implantation Other Materials Plating
Thermal CVD*
- -------------- --------------- ----------- --------------- --------------- ---------------
Plasma Lithography Wire Bonding* Trim and Form*
Enhanced CVD*
- -------------- --------------- --------------- ---------------
Atomic Etch Unit* Product Testing
Layer CVD* Inspection
- -------------- --------------- --------------- ---------------
Physical
Vapor Clean**
Deposition
(PVD)
- -------------- ---------------
Rapid Thermal Chemical
Processing* Mechanical
(RTP) Polishing
(CMP)
- --------------- -----------------
*Indicates markets in which we participate.
**We participate in advanced cleaning technologies integrated with our
deposition equipment.
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Front-end Products
The following table lists our principal front-end equipment and the
years in which initial production units were first made available to customers.
- -------------------------------------------------------------------------------------------------------
KEY YEAR
PRODUCT FAMILY PROCESSES PRODUCTS INTRODUCED
- -------------------------------------------------------------------------------------------------------
Epsilon One(1) 1988
Epsilon Two(1) 1990
Single Wafer Thermal - Epitaxy Epsilon 2000 1997
CVD Systems - CVD Epsilon 2500 1997
Epsilon 3000 (300mm) 1997
- -------------------------------------------------------------------------------------------------------
Vertical Batch - LPCVD Advance 400 series 1994
Processing Systems - Diffusion Advance 600 UHV 1996
- Oxidation Advance 412 (200 and 300mm) 1998
- -------------------------------------------------------------------------------------------------------
Single Wafer Plasma Eagle 10 (2 chambers) 1993
Enhanced CVD - PECVD Eagle 10 Trident (3 chambers) 1997
Systems Eagle 12 Rapid Fire (300mm) 1998
- -------------------------------------------------------------------------------------------------------
F 120(3) 1998
Single Wafer Atomic - ALCVD F 450 and F 950(3) 1997
Layer CVD Systems Pulsar 2000 (200 and 300mm) 1999
- -------------------------------------------------------------------------------------------------------
Single Wafer RTP - Anneal
Systems - Oxidation Levitor 1999(2)
- -------------------------------------------------------------------------------------------------------
Polygon 8200 1997
Single Wafer Cluster - Cluster Vapor Clean Module 1999
Systems and Modules Processes Epsilon 2500 Module(4) 1997
Pulsar 2000 Module(4) 1999
- -------------------------------------------------------------------------------------------------------
- ----------
(1) This product has been replaced by the Epsilon 2000 and Epsilon 2500.
Although it is no longer sold, it still forms an important part of our
installed base and generates service and spare parts revenue.
(2) We have introduced this product and expect to ship the first commercial
unit sometime in 2001
(3) Used for non-wafer applications such as flat panel displays and magnetic
heads.
(4) The Epsilon and Pulsar modules share the same reactor section as the
Epsilon and Pulsar single wafer stand-alone systems.
Single Wafer Thermal CVD Systems. Our Epsilon products heat wafers to
high temperatures using infrared lamps, forming a film on the surface of the
wafer by applying CVD. The main current use of the Epsilon is for epitaxy of
silicon and silicon-germanium alloys. Silicon-germanium alloys are used in the
telecommunications market.
Vertical Batch Processing Systems. The Advance 400 series and Advance
412 vertical batch processing systems process up to 150 wafers at a time at high
temperatures. These reactors load wafers into a carrier, which is pushed into
the heated reactor for diffusion, oxidation or LPCVD processing. The Advance
reactors feature dual carriers and a large work in process wafer storage
station. The Advance 600 is an ultra-high vacuum, or UHV, vertical batch
reactor. The Advance 600 processes up to 100 wafers per carrier. Wafers are
handled and processed in an extremely clean UHV atmosphere to guarantee
cleanliness of the deposited material. Up to two reactors can be clustered on a
single UHV wafer handler. The Advance 600 is mainly used in a process to enhance
the surface area in a DRAM capacitor structure. This product enables our
customers to make smaller memory cells, and therefore smaller semiconductor
devices.
Single Wafer Plasma Enhanced CVD Systems. The Eagle 10 and Eagle 12
series reactors are single wafer systems which deposit films on wafers using
PECVD. The Eagle systems are mostly used for depositing insulators, such as
silicon oxide and silicon nitride, used in interconnect circuits. The Eagle 10
Trident and Eagle 12 Rapidfire (300mm) have three chambers configured for
enhanced productivity. The simplicity of these systems results in low cost, high
reliability and low maintenance requirements.
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Single Wafer Atomic Layer CVD Systems. Our Pulsar ALCVD product is
already in commercial production in the markets for flat panel displays and
magnetic heads. It is currently being evaluated for advanced (less than 100nm)
device manufacturing. We offer both stand alone equipment and modules that can
be integrated with our cluster systems.
Single Wafer RTP Systems. In our new RTP product, the Levitor, the
wafer floats on a cushion of gas and does not require lamps for heating.
Compared to existing lamp-based RTP systems, we believe the Levitor allows very
fast heating and cooling of the wafers and offers an efficient and
cost-effective solution. The product is currently being evaluated by two
European research and development labs. We intend to offer both stand-alone
systems and modules for the polygon cluster platform. We expect to make
commercial sales of RTP before the end of 2001.
Single Wafer Cluster Systems and Modules. For selected new processes
such as gate stacks and barrier and seed layers for dual damascene, several
layers have to be deposited on the wafer without allowing them to be
contaminated by air. Our polygon single wafer systems, (Polygon 8200 and Polygon
8300 for 300mm) allow the integration of up to four modules on a single vacuum
handler. We currently have available the Epsilon 2500 module, based on the
Epsilon 2500 reaction chamber, the Pulsar 2000 ALCVD module, and a vapor clean
module to clean unwanted oxide from the incoming wafer with a patented process.
Back-end Products.
The following table lists our principal back-end products, and the
years in which initial production units were first made available to customers.
- ------------------------------------------------------------------------------------------------------------
KEY YEAR
PRODUCT FAMILY PROCESSES PRODUCTS INTRODUCED
- ------------------------------------------------------------------------------------------------------------
AD809 1990
------------------------------------
AD829A 1999
------------------------------------
Die Bonding AD819 1998
------------------------------------
AD889A 1999
-----------------------------------------------------------------------
Assembly Epoxy Curing CO139 1999
-----------------------------------------------------------------------
AB356 1995
------------------------------------
Wire Bonding AB510 1997
------------------------------------
AB559A 1997
------------------------------------
AB339 Eagle 1997
------------------------------------
AB339 Eagle 2000
- ------------------------------------------------------------------------------------------------------------
AB339 1997
-----------------------------------------------------------------------
EM649 1997
------------------------------------
Encapsulation PMC139 1999
------------------------------------
Packaging IDEALmold 2000
-----------------------------------------------------------------------
MP209 1996
------------------------------------
Trim and Form
BGA289 1998
------------------------------------
CS500 1999
------------------------------------
CS800 2000
------------------------------------
DS500 2000
- ------------------------------------------------------------------------------------------------------------
Full integration of the above
Automated Systems assembly and packaging steps IDEALine 1999
into one system
- ------------------------------------------------------------------------------------------------------------
Manufacture of carriers on which
Materials dies Are mounted Leadframes 1980
- ------------------------------------------------------------------------------------------------------------
Die bonding. We manufacture several die bonding models to address
several markets including semiconductor and optoelectronic devices. The AD889A
features an automatic wafer handling system, programmable epoxy dispensing
system and sophisticated inspection and pattern recognition systems. The AD889A
has a high throughput at relatively low cost. The AD829A and AD809 models
address the large market for die sizes under 30 mils square. A mil is
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1/1000 of an inch. In addition to the simple semiconductor device market, the
small die category includes optoelectronic devices. The model AD819 is a high
precision machine designed for laser diode optoelectronic devices. Machines may
be configured to operate stand-alone or connected to epoxy curing ovens and wire
bonders.
Wire bonding. We introduced our Eagle gold wire bonder in 2000. This is
the successor to our AB339 generation bonder. The Eagle offers significant
output increase over existing models. We believe it has the industry leading
fine pitch capability and favorable price/performance ratio as well as an
ultralight bond head, advanced pattern recognition software and automatic wire
bonder inspection capability. The AB510 and AB559A are ultrasonic wedge bonders
used for aluminum wire bonding at room temperature on printed circuit boards.
The AB356 is a gold wire bonder that serves the large substrate/hybrid device
market.
Encapsulation. The EM649 features a fast load/unload time, and uses
modular components for rapid product conversion and adaptable system
configuration, which makes it very flexible. The EM649 is offered in stand alone
and in-line configurations. In 2000 we introduced the IDEALmold, specifically
designed to be manufactured in a modular format allowing customers to specify
the system capacity from two to eight leadframes. This product specifically
addresses the in-line market which requires molding systems of varying
capacities to allow for proper line balancing. The PMC109 allows customers to
directly transfer encapsulated semiconductor devices to a high capacity
multi-chamber oven for continuous automatic post mold curing of epoxy molding
compound.
Trim and Form. Our MP209 is a high speed, motorized trim and form
equipment catering to different packages. The modular set-up of the system
allows integration of third party testing, marking and inspection functions,
which in turn allows more cost efficient production for our customers. These
systems may also be integrated into our IDEALine.
Automated Systems. The IDEALine integrates back-end assembly and
packaging equipment. These lines integrate serial process steps with mechanical
and software linkages. Offered in a modular format, customers may integrate some
or all of the following processes that we supply: die bonding and inspection,
epoxy curing, wire bonding and inspection, encapsulation, post mold curing and
trimming and forming. In addition we work with third party suppliers to offer
various additional processes.
Manufacturing and Suppliers.
Our manufacturing operations consist of the fabrication and assembly of
various critical components, product assembly, quality control and testing.
In the front-end, we outsource the manufacture of major subsystems and
subassemblies and some design, assembly and testing functions to specialized
companies. We believe that outsourcing enables us to minimize our fixed costs
and capital expenditures while also providing the ability to rapidly increase
production capacity. We also work closely with our suppliers to achieve mutual
cost reduction through joint design efforts.
A single supplier supplies a substantial majority of the major
subassemblies used in the manufacture of the Advance 400 and Advance 412 and of
the major subassemblies used in the manufacturing of our Epsilon products.
Although we work with a limited number of suppliers, we seek not to rely on a
sole supplier, and have back-up suppliers for all subsystems and subassemblies
that are outsourced.
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In addition, we purchase the metrology equipment that we integrate into
some of our front-end products from NanoPhotonics. We have a 24% equity interest
in NanoPhotonics and our President has a 44.5% interest. See "Item 5. Operating
and Financial Review and Prospects" and "Item 7. Related Party Transactions."
Our back-end operations are vertically integrated to insure quality
production of component parts where the quality of subassemblers does not
otherwise meet our standards. The manufacturing activities in Hong Kong and
Singapore consist primarily of assembling and testing components and
subassemblies manufactured at our main manufacturing facility in China. In 2000,
we opened two new manufacturing plants in China and Malaysia.
Marketing and Sales
We sell and market our products with the objective of developing and
maintaining an ongoing, highly interactive service and support relationship with
our customers. Our marketing strategy includes advertising and participating in
various industry trade shows. We provide prospective customers with extensive
process and product data, provide opportunities for tests on demonstration
equipment and, if required, make evaluation equipment available at the
customer's site. Once equipment has been installed, we support our customers
with, among other things, extensive training, on-site service, spare parts and
process support. All of this is further supported by in-house development to
enhance the productive life of existing equipment. We make hardware improvements
available in the form of retrofit kits as well as joint development with our
customers of new applications. We encourage our engineers to submit technical
papers in relevant magazines and to give lectures in symposia.
We also install our equipment with semiconductor manufacturers for
evaluation in order to strengthen our existing customer relationships as well as
develop new customers.
Because of the significant investment required to purchase our systems
and their highly technical nature, the sales process is complex, requiring
interaction with several levels of a customer's organization and extensive
technical exchanges, product demonstrations and commercial negotiations. As a
result, the full sales cycle can be as long as 12 to 18 months for sales of
front-end equipment and three to six months for sales of back-end equipment.
Purchase decisions are generally made at a high level within a customer's
organization, and the sales process involves broad participation across our
organization, from senior executive management to the engineers who designed the
product.
Our sales process usually starts with high-level introduction meetings.
Early in the process we also meet with operational personnel to discuss the
intended uses of our equipment, technical requirements, solutions, and the
overall production process of the customer. Demonstrations and evaluation of
test results take time. Once we agree upon the technological terms of the sale,
the process continues with price and delivery negotiations and, when completed
successfully, with the issuance by the customer of a letter of intent to secure
a slot in the manufacturing and assembly planning schedule, followed by a
purchase order.
To market our products, we operate demonstration and training centers
where customers can examine our equipment in operation and can, if desired,
process their wafers or individual dies for further in-house evaluation.
Customers are also trained to properly use purchased equipment.
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Each of our major product lines has a dedicated product manager,
responsible for positioning the product in the market, developing it over time
and evaluating its relative performance compared to the competition. Each
product manager sets priorities in terms of technical development and sales
support.
To execute the sales and service functions, we have established a
direct sales force for front-end products reporting on a geographical basis to
the managers in charge of Europe, North America, Southeast Asia and Japan. At
the end of 2000, the front-end units had 87 employees fully dedicated to sales
and marketing, representing 8.3% of total front-end staff. Dedicated support and
sales forces are maintained for our various geographic units, enabling us to
serve our global customers with an equally global organization. Each of our
geographic front-end units is responsible for sales of all of our front-end
products in its region.
In addition to the sales activities undertaken at the principal offices
of our various manufacturing units, we have sales offices located in Europe in
the United Kingdom, France, Italy and Germany, and in the United States in
California, Texas and Pennsylvania. In Japan, our sales offices are located in
Tokyo and Osaka.
We use sales agents in Malaysia and China for front-end products and to
support our sales efforts for ALCVD in the non-semiconductor markets, such as
flat panel displays and magnetic heads.
Sales of back-end equipment and materials are provided by our principal
offices in Hong Kong and Singapore, through direct sales offices in Taiwan, the
Philippines, Malaysia, Thailand, Japan, Europe and North America, and through
sales representatives in Korea and some parts of the United States. There are
331 staff members employed in sales and marketing of back-end products,
representing 5.5% of total back-end staff.
Customers
We sell our products predominantly to manufacturers of semiconductor
devices and manufacturers of silicon wafers. Our customers include most leading
semiconductor and wafer manufacturers. Our customers vary from independent
semiconductor manufacturers that sell their products on the open market, to
large electronic system companies that manufacture semiconductor devices for
their own use. While some semiconductor manufacturers have consolidated in
recent years, the number of foundries and semiconductor assemblers has been
expanding rapidly.
The following table lists customers accounting for E2.5 million or more
of our net sales in 2000:
- -------------------------------------------------------------------------------------------------------------------
TYPE OF
SEGMENT CUSTOMER CUSTOMERS
- -------------------------------------------------------------------------------------------------------------------
Infineon Motorola* Seiko Epson Corp.
Technologies*
Semiconductor Device Nan-ya ST Microelectronics*
Front-end Manufacturers Maxim* NEC*
Mitsubishi* Philips* UMC Group*
VLSI Technology
Samsung Fairchild Fujitsu
Nippon Sony * Matsusita
Sanyo Siliconix Trecent 1
-------------------------------------------------------------
Oki IC TSMC
Okmetic Micron Toshiba
Micrel Hitachi
Wafer Manufacturers Wacker
- ------------------------------------------------
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- -------------------------------------------------------------------------------------------------------------------
Fairchild* Linear OT Optoelectronics
Semiconductor Device Agilent* Unisem Vishay*
Manufacturers Cypress
Back-end
Lite-On Lucent* Philips*
Microchip ST Microelectronics*
----------------------------------------------------------------------------------------
ASE* NS Electronics*
Assemblers Alphatec Carsem OSE*
Amkor Anam* Hana*
ST Assembly Test Services
* > 1% OF TOTAL SALES
Our largest customer accounted for approximately 14.2% of our net sales
in 2000. Our ten largest customers accounted for approximately 45.2% of our net
sales in 2000. Historically, a significant percentage of our net sales in each
year has been attributable to a limited number of customers; however, the
largest customers for our products may vary from year to year depending upon,
among other things, a customer's budget for capital expenditures, plans for new
fabrication facilities and new product introductions.
The following table shows the distribution of net sales according to
geographic destination of the product and segment:
- --------------------------------------------------------------------------------------------------
SEGMENT PERCENTAGE OF NET GEOGRAPHIC PERCENTAGE OF NET SALES
SALES DESTINATION
- --------------------------------------------------------------------------------------------------
FRONT END BACK END
- --------------------------------------------------------------------------------------------------
Front-End 40.6% S.E. Asia 7.8% 54.2%
------------------------------------------------
2000 Europe 9.3% 2.4%
------------------------------------------------------------------------------------------
Back End 59.4% North and South 11.8% 1.8%
America
------------------------------------------------
Japan 11.7% 1.0%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
SEGMENT PERCENTAGE OF NET GEOGRAPHIC PERCENTAGE OF NET SALES
SALES DESTINATION
- --------------------------------------------------------------------------------------------------
FRONT END BACK END
- --------------------------------------------------------------------------------------------------
Front-End 43.8% S.E. Asia 11.4% 50.9%
------------------------------------------------
1999 Europe 9.8% 1.5%
------------------------------------------------------------------------------------------
Back End 56.2% North and South 12.5% 2.4%
America
------------------------------------------------
Japan 10.1% 1.4%
- --------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------
SEGMENT PERCENTAGE OF NET GEOGRAPHIC PERCENTAGE OF NET SALES
SALES DESTINATION
- --------------------------------------------------------------------------------------------------
FRONT END BACK END
- --------------------------------------------------------------------------------------------------
Front-End 46.1% S.E. Asia 6.0% 45.0%
------------------------------------------------
Europe 15.0% 1.7%
------------------------------------------------------------------------------------------
1998
Back End 53.9% North and South 12.7% 5.1%
America
------------------------------------------------
Japan 12.4% 2.1%
- --------------------------------------------------------------------------------------------------
Customer Service
We provide responsive customer technical assistance to support our
marketing and sales. Technical assistance is becoming an increasingly important
factor in our business as most of our equipment is used in critical phases of
semiconductor manufacturing. Field engineers install the systems, perform
preventive maintenance and repair services, and are available for assistance in
solving customer problems. Our global presence permits us to provide these
functions in proximity to our customers. We also maintain local spare part
supply centers to facilitate quick support.
We provide maintenance during the product warranty period, usually one
to two years, and thereafter perform maintenance pursuant to individual orders
issued by the customer. In addition to providing ongoing service, our customer
service operations are responsible for customer training programs, spare parts
sales and technical publications. In appropriate circumstances, we will send
technical personnel to customer locations to support the customers for extended
periods of time to optimize the use of the equipment for the customer's specific
processes. For front-end, where the availability of field support is
particularly important for a sale, there are approximately 279 support staff
employees, or 26.22% of our total front-end employees.
Competition
The semiconductor equipment industry is intensely competitive, and is
fragmented among companies of varying size, each with a limited number of
products serving a particular segment of the semiconductor process. Technical
specifications of the individual products are an important competitive factor,
especially concerning capabilities for manufacturing of new generations of
semiconductor devices. As each product category encompasses a specific blend of
different technologies, our competitive position from a technology standpoint
may vary within each category. Customers are evaluating manufacturing equipment
based on a mixture of technical performance and cost of ownership over the life
of the product. Main competitive factors include overall product performance,
yield, reliability, maintainability, service, support and price. We believe that
we are competitive with respect to each of these factors, and that our products
are cost effective.
As the variety and complexity of available machinery increases, some
semiconductor manufacturers are looking to limit their suppliers. In addition,
semiconductor manufacturers are located throughout the world, and expect their
equipment suppliers to have offices worldwide to meet their supply and service
needs. Semiconductor equipment manufacturers with a more
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limited local presence are finding it increasingly difficult to compete in an
increasingly global industry.
Our primary competitors in the front-end business are from the United
States and Japan. Our primary competitors in the back-end business are from the
United States, Europe and Japan. In each of our product lines, we compete
primarily with two or three companies which vary from small to large firms in
terms of the size of their net sales and range of products. Our primary
competitors in the front-end business include Applied Materials, Novellus, Tokyo
Electron and Kokusai. Our primary competitors in the back-end business include
Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor, Towa, Shinko and
Mitsui.
Patents and Trademarks
Because of the rapid technological advances in the microelectronics
field, we believe that our products will be subject to continuing change and
enhancement. Accordingly, we believe that our success will depend upon the
technical competence and creative ability of our personnel and the ownership of
patents.
We have patents some of which cover key technologies, features and
operations of our major front-end products, with many patents registered in
every major country where semiconductor devices or equipment are manufactured.
We own a number of patents and patent applications for semiconductor wafer
processing equipment. We also own patents and patent applications for LPCVD,
PECVD, ALCVD and epitaxial technology. The total number of United States and
foreign patents on our front-end products was approximately 200 at the end of
2000, of which 90 patents are in force in the United States.
We have entered into worldwide, non-exclusive, non-transferable and
non-assignable licenses with Applied Materials for patents related to epitaxy
and some chemicals used to deposit insulating layers for PECVD. To maintain
these licenses, we pay Applied Materials a royalty on sales of equipment that
use the patented technology. Upon expiration of the patents, the technology may
be used royalty-free by the public, including us.
In the back-end industry, companies generally compete on their
cumulative expertise in applying well known technologies to improve productivity
and cost-efficiency. As a result, we file fewer patents related to our back-end
business but where possible, we also aggressively file for protection of
innovations made by our back-end subsidiary. We also own certain trademarks and
other proprietary information that we consider important to our business.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. In the future,
additional litigation may be necessary to enforce patents issued to us, to
protect trade secrets or know-how owned by us or to defend us against claimed
infringement of the rights of others and to determine the scope and validity of
the proprietary rights of others. Any such litigation could result in
substantial cost and diversion of effort by us, which could have a material
adverse effect on our business, financial condition and operating results.
Furthermore, adverse determinations in this litigation could result in our loss
of proprietary rights, subject us to significant liabilities to third parties,
require us to seek licenses from third parties or prevent us from manufacturing
or selling our products, any of which could have a material adverse effect on
our business, financial condition and operating results.
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Research and Development
We believe that our future success depends to a large extent upon our
ability to develop new products and to add improved features to existing
products. Accordingly, our centralized product development policies and local
activities are directed toward expanding and improving present product lines to
incorporate technological advances and enable timely penetration of new markets
for automated semiconductor processing, assembly and packaging equipment. These
activities require the application of physics, chemistry, process technology,
electrical engineering, precision mechanical engineering and software
development. We are also continuing to develop new applications as well as
software and hardware for our back-end products.
Our net research and development expenses were 7.9% of net sales during
2000, 11.4% of net sales during 1999, 12.6% of net sales during 1998 and 12.1%
of net sales during 1997. We expect to continue investing significant resources
in research and development to enhance our product solutions.
Our research and development activities are conducted in the principal
semiconductor markets of the world, which enables us to draw on innovation and
technical capabilities on an international basis. Each geographic center
provides expertise for specific products or technologies. This approach,
combined with interactions between the individual centers, permits efficient
allocation of technical resources and allows for customer orientation combined
with the necessary product specialization.
- --------------------------------------------------------------------------------------------
NUMBER OF R & D
BUSINESS SEGMENT LOCATION EMPLOYEES
- --------------------------------------------------------------------------------------------
-----------------------------------------------------------
Bilthoven, the Netherlands 53
Front-end -----------------------------------------------------------
Leuven, Belgium (IMEC) 23
-----------------------------------------------------------
Espoo, Finland 19
-----------------------------------------------------------
Phoenix, Arizona, United States 62
-----------------------------------------------------------
Tama, Japan 38
- --------------------------------------------------------------------------------------------
Back-end Hong Kong 293
-----------------------------------------------------------
Singapore 199
- --------------------------------------------------------------------------------------------
As part of our research and development activities, we are engaged in
various formal and informal arrangements with customers and institutes. These
arrangements are made on a development program basis and allow us to develop
products that meet customer requirements and obtain access to new technology and
expertise. We currently are engaged in a development program with several
customers for 300mm applications of our Eagle products. The Eagle 10 was
developed in close collaboration with Japanese customers, while the Advance 400
product performance was enhanced in cooperation with a number of customers. The
A-600 UHV was further upgraded in cooperation with a major Japanese customer. In
cooperation with Semitool Inc., a United States supplier of copper plating
equipment, and IMEC, we are developing production solutions for copper
applications.
We participate in European programs focusing on developing the
production technology for semiconductor devices with line widths of 0.13, 0.10
and 0.07 microns. We are the project manager in a number of projects that were
awarded under the European Strategic Program for Research and Development in
Information Technology, or ESPRIT, an initiative of the European Union.
Furthermore, since 1990, the board of Micro Electronics Development for European
Applications, or MEDEA, an initiative of the European Union, and its predecessor
approved extensive development programs in which we are a leading partner. We
are currently working on
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a project with MEDEA in connection with possible uses of our ALCVD technology.
Mr. Arthur H. del Prado, our President and Chief Executive Officer, is a member
of the board of MEDEA.
The integration of new product solutions into process modules is done
in ASM Europe's application lab, which shares IMEC's clean rooms in Leuven,
Belgium. This integration within the IMEC facilities gives us access to all
additional process steps needed to create sub-micron devices, including
sub-micron patterning. Development programs on process for a customer
application are usually done with active participation of IMEC, suppliers of
complementary and non-critical equipment, and end-users of our products.
In addition to cooperating with third parties such as customers and
other equipment companies in research and development projects, we enter into
projects with technical universities, in particular in the Netherlands, Japan
and Finland. As part of these projects, we may sell our equipment to customers
who will use grants or research loans to acquire these products or we may
receive grants or research loans directly. We have received such loans in the
past from the Netherlands government, of which E12.0 million was outstanding at
December 31, 2000, and are repaying these loans from the sales proceeds of the
products developed with their assistance up to one hundred percent of the
amounts of the loans. Our subsidiary, ASM Microchemistry, received similar loans
from the Finnish government.
C. Organizational Structure.
As of February 20, 2001, the following chart presents the jurisdiction
of incorporation of our significant subsidiaries and our percentage of ownership
interest in those subsidiaries:
- -----------------------------------------------------------------------------------------------------
Subsidiary Name and Location Country of Incorporation Percentage Owned by
ASM International, N.V.
- -----------------------------------------------------------------------------------------------------
ASM Europe, B.V. The Netherlands 100%
Bilthoven, the Netherlands
- -----------------------------------------------------------------------------------------------------
ASM Microchemistry, Ltd. Belgium 100%
Espoo, Finland
- -----------------------------------------------------------------------------------------------------
ASM America, Inc. State of Delaware, United States 100%
Phoenix, Arizona, United States
- -----------------------------------------------------------------------------------------------------
ASM Japan, KK Japan 100%
Tama, Japan
- -----------------------------------------------------------------------------------------------------
ASM Pacific Technology Ltd. Hong Kong, China 54.62%
Hong Kong, China
- -----------------------------------------------------------------------------------------------------
D. Property, Plants and Equipment.
To develop and manufacture products to local specifications and to
market and service products more effectively in the worldwide semiconductor
market, our front-end manufacturing
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facilities are located in Europe, the United States and Japan and our back-end
facilities are located in Hong Kong, China and Singapore. The principal
facilities are summarized below:
- ---------------------------------------------------------------------------------------------------------------
APPROXIMATE
BUSINESS AGGREGATE
SEGMENT LOCATION PRIMARY USES SQUARE FOOTAGE
- ---------------------------------------------------------------------------------------------------------------
Bilthoven, the Wafer processing equipment manufacturing, 151,000
Netherlands marketing, research and executive offices
-------------------------------------------------------------------------------------
Phoenix, Arizona Wafer processing equipment manufacturing, 204,000
marketing, research and offices
Front-end
-------------------------------------------------------------------------------------
Tama and Niigata, Wafer processing equipment manufacturing, 331,000
Japan marketing, research and offices
-------------------------------------------------------------------------------------
Espoo, Finland Wafer processing equipment manufacturing, 35,000
marketing, research and offices
-------------------------------------------------------------------------------------
Almere, Wafer processing equipment manufacturing
Netherlands and offices 77,000
- ---------------------------------------------------------------------------------------------------------------
Assembly and encapsulation equipment
Hong Kong manufacturing, leadframe plating,
marketing, research and offices 247,000
-------------------------------------------------------------------------------------
Back-end Singapore Assembly equipment and etched leadframe 330,000
manufacturing, marketing, research and
offices
-------------------------------------------------------------------------------------
Shenzhen, China Precision metal part and subassembly 692,000
fabrication, stamped leadframe
manufacturing and offices
-------------------------------------------------------------------------------------
Johor Bahru, Precision metal part and subassembly
Malaysia fabrication, and offices 34,000
- ---------------------------------------------------------------------------------------------------------------
Our Bilthoven facilities are constructed on leased land with the earliest leases
expiring in the year 2029. Our principal facilities in Arizona, Hong Kong,
Singapore and China are subject to leases expiring at various times from 2000 to
2020. The facilities we own are subject to mortgages. We believe that our
facilities are maintained in good operating condition and are adequate for our
present level of operations.
Item 5: Operating and Financial Review and Prospects.
OVERVIEW
We are a leader in the design, manufacture and sale of equipment and solutions
used to produce semiconductor devices. Our production equipment and solutions
are used by both the front-end and back-end segments of the semiconductor
market. We were incorporated under the laws of the Netherlands in 1968.
Throughout our history, we have conducted business through subsidiaries located
worldwide. We established our operations in Hong Kong in 1975, in the United
States in 1976, in Japan in 1982, and in Finland in 1999 through the acquisition
of Microchemistry Ltd. We completed our initial public offering in the United
States in 1981 and in The Netherlands in 1996. We completed subsequent public
offerings in the United States in 1983 and in the United States and The
Netherlands in 2000. Our common shares are listed on the Euronext Amsterdam in
the Netherlands and the Nasdaq National Market in the United States.
We conduct our back-end operations through ASM Pacific Technology,
which was our wholly-owned subsidiary until 1988, when we completed an initial
public offering of 25% of its shares, which are listed on the Hong Kong Stock
Exchange. We have since sold and purchased shares of ASM Pacific Technology on
the open market, and as of December 31, 2000, we owned
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54.62% of its outstanding shares. ASM Pacific Technology expanded operations
with significant new production facilities in Shenzhen, China in 1989, Singapore
in 1990, and completed new plants in China and Malaysia in 2000.
The sales cycle from quotation to shipment for our front-end equipment
generally ranges from five to nine months, depending on capacity utilization and
the urgency of the order. The acceptance period after installation may be as
short as four to five weeks. If customers are unfamiliar with our equipment or
are receiving new product models, the acceptance period may take as long as ten
weeks. The sales cycle is longer for equipment which is installed at the
customer's site for evaluation prior to sale. The typical trial period ranges
from six months to one year after installation.
The sales cycle for back-end products typically is shorter than for
front-end. Generally, the majority of our back-end equipment is built in
standard configurations. We build back-end products that are approximately 85%
complete in anticipation of customer orders. Upon receipt of a customer's order
and specifications, the remaining 15% of the manufacturing is completed. This
allows us to complete the assembly of our equipment in a short period of time.
We therefore require between two to six weeks for final manufacturing, testing,
crating, and shipment of our back-end equipment. Our back-end customers'
acceptance periods generally are shorter than those for front-end equipment. We
provide installation, training and technical support to our customers with local
staff in all of our major markets.
Effective January 1, 2000 the Company adopted new guidance on revenue
recognition as is described in Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" ("SAB 101"), issued by the staff of the
Securities and Exchange Commission (the "SEC") in December 1999. See Note A to
the Consolidated Financial Statements.
Net revenues include product revenues derived primarily from sales of
front-end and back-end equipment used by both segments of the semiconductor
market. The Company recognizes revenue from equipment sales upon shipment of its
products when it is proven prior to shipment that the equipment has met all of
the customers' criteria and specifications. The installation process is not
believed to be essential to the functionality of the Company's products.
However, since under most of the Company's sales contracts, the timing of
payment of a portion of the sales price is coincident with installation, such
installation is not considered to be inconsequential or perfunctory under the
guidance of SAB 101. Therefore, at the time of shipment, the Company defers that
portion of the sales price related to the fair value of installation. The
Company believes it has an enforceable claim for that portion of the sales price
not related to the fair value of the installation should it not fulfill its
installation obligation. The fair value of the installation process is measured
based upon the per-hour amounts charged by third parties for similar
installation services. When the Company can only satisfy the customer acceptance
criteria or specifications at the customer's location, revenue is deferred until
final acceptance by the customer or until contractual conditions lapse.
The Company provides training and technical support to customers.
Revenue related to such services are recognized when the service is completed.
Revenue from the sale of spare parts and materials is recognized when the goods
are shipped.
The Company previously recognized revenue from the sale of all
equipment including installation services at the time of transfer of title, and
when no significant contractual
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obligations remained. Revenue recognition for sale of spare parts and services
has not been changed.
The adoption of the new accounting principle for revenue recognition
as of January 1, 2000 based on the new guidance of SAB 101 has an effect on the
amounts of revenue and net earnings reported in previous periods. The effect of
this change as of January 1, 2000 was to defer E12.2 million net sales and E3.8
million net earnings to future periods. The effect on net earnings as of January
1, 2000 has been recorded as a cumulative effect of the change in accounting
principle in the Statement of Operations for the year ended December 31, 2000.
Our front-end sales are primarily concentrated in the United States,
Europe, Japan and Southeast Asia. During 2000, equipment shipped to destinations
in these regions accounted for sales of E110.4 million, E87.0 million, E108.7
million, and E73.2 million, respectively. Our back-end sales, which approximated
E555.9 million, are concentrated in Asia. Our ten largest customers in 2000
accounted for approximately 45.2% of total sales.
We invested approximately E73.8 million in research and development
during 2000. As part of our research and development activities, we are engaged
in various development programs with customers and institutes that allow us to
develop products that meet customer requirements and to obtain access to new
technology and expertise. We expense rather than capitalize our research and
development expenses. We charge to costs of sales the costs which relate to
prototype and experimental models which we subsequently sell to customers.
Our reported research and development expenses are after research and
development credits, which approximated E2.2 million in 2000. Our Netherlands,
Belgium, Finnish and Singapore operations receive research and development
grants and credits from various governmental sources. The research and
development grants we received in the Netherlands are contingently repayable to
the extent we recognize sales of products to which the credit was related. These
repayments vary and range from 1.0% to 4.0% of the realized sales, depending on
the products sold. Our actual and contingent repayments accrue at interest rates
ranging from 5.0% to 8.0% per annum. Our contingent liability related to these
possible repayments approximated E12.0 million at December 31, 2000.
During the first quarter of 1999, the Company decided to close its
manufacturing activities for wafer processing equipment in the United States and
in combination therewith to outsource to third parties the manufacturing of
substantially all parts previously manufactured in-house. Concurrently, the
United States assembly and test activities were combined with those in Europe.
This resulted in a reduction in the Company's number of employees in the United
States by approximately 75 and in the vacating of certain facilities.
Approximately 50 new positions were created in Europe. The Company incurred a
one-time restructuring charge, covering employee terminations, write-offs and
occupancy costs of E3.9 million associated with these decisions.
The Company's intention was to begin implementing the steps necessary
to complete the 1999 restructuring program immediately on formalization thereof
and to substantially complete all necessary steps by the end of 1999. At
December 31, 1999, however, there was a remaining accrual associated with the
restructuring program of E2.5 million; implementation of certain elements of the
program had been delayed due to longer than anticipated time taken to transfer
certain operations to Europe where plant modifications were required. At
December 31, 1999, the revised schedule for completion of the program was mid
2000.
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In the first half of 2000, the global demand for wafer processing
equipment and, as a consequence, the assembly and final testing activities of
such equipment, increased sharply when compared to the same period in 1999. The
Company's European facilities and the Company's third party subcontractors had
difficulty in coping with the much higher volumes. Consequently, the Company
decided to partially reverse its earlier decision and reopened facilities that
were vacated under the 1999 restructuring program. As a consequence, part of the
restructuring provision mainly related to legal contractual obligations for
leased properties in the amount of E1.6 million was taken into the Consolidated
Statement of Operations in the second quarter of 2000 as a credit to selling,
general and administrative expenses.
Effective in July 1999, we purchased all of the outstanding shares of
Microchemistry, a company located in Finland, for approximately E3.9 million. In
September 1999 Microchemistry was renamed ASM Microchemistry. Prior to our
purchase, Microchemistry developed the process to grow or deposit films one
layer at a time by means of ALCVD, and marketed ALCVD processes to manufacturers
of flat panel displays and tape magnetic head products. Following our
acquisition, ASM Microchemistry is shifting its focus to manufacturers of
semiconductor devices.
In December 1999, we purchased a 24% interest in NanoPhotonics AG, a
German supplier of precision thin film metrology equipment for E338,000. The
technology supplied by NanoPhotonics allows for the integration of
high-resolution, ellipsometric thin film metrology directly in a
wafer-processing tool. We believe that this investment will enable us to equip
our batch and single wafer equipment with integrated thin film metrology.
In April 2000, the Company completed a public offering of 4,250,000
common shares at a price of US $ 29.00 per share. The net proceeds amounted to
E119.7 million, which were used to repay outstanding loans and fund the
Company's working capital needs.
Following the issuance of common shares under the ASM Pacific
Technology Ltd. Employee Incentive Scheme in March 2000, the Company's
shareholding in ASM Pacific Technology Ltd. ("ASMPT") dropped slightly below
50%. In various transactions in April and June, the Company acquired 0.3% of the
outstanding common shares of ASMPT, thereby restoring its total share holding in
that company to over 50%. Throughout this entire period, the Company maintained
control over ASMPT. On July 6, 2000, the Company completed a purchase of
approximately 4.7% of the outstanding common shares in ASMPT from one
institutional investor. At December 31, 2000, the shareholding in ASMPT amounts
to 54.62 % of the outstanding common shares.
As of December 31, 2000, we had net operating loss tax carryforwards of
E260 million which we can mainly apply against earnings reported in the United
States and The Netherlands.
The market value of our investment in ASM Pacific Technology at the end
of 2000 was approximately E318.4 million, which is lower than the market value
at the end of 1999, which was approximately E333.9 million.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
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29
Net Sales. The market for semiconductor equipment was strong in the first three
quarters of the year and started to become weaker at the end of the year.
Consolidated net sales increased by 125.6 % to E935.2 in 2000 compared to E
414.5 in 1999. Front-end sales increased 108.8% from E 181.7 million in 1999 to
E 379.3 million in 2000. Back-end sales increased 138.8% from E 232.8 million in
1999 to E 555.9 million in 2000. The front-end sales increase was over all
product lines. The back-end sales increase was primarily due to increased sales
of equipment and, to a lesser extent, leadframes.
Gross Profit. Our consolidated gross profit increased from 41.0% of net sales in
1999 to 44.6% of net sales in 2000. The front-end business gross profit
decreased slightly from 40.5% of net sales in 1999 to 40.3% of net sales in
2000, while the back-end division gross profit grew from 41.4% of net sales in
1999 to 47.6% of net sales in 2000. The decrease in gross profit as a percentage
of sales in front-end is, despite efficiency improvements in the manufacturing
of existing product lines, caused by initial lower margins on the introduction
of new technology in ALCVD and 300 mm equipment. The improvement by our back-end
segment was achieved through manufacturing efficiencies related to the increased
volumes and partly through better pricing conditions for our products.
Selling, General and Administrative. Our selling, general and administrative
expenses increased from E83.2 million in 1999 to E147.3 million in 2000.
Front-end and back-end selling, general and administrative expenses increased
from E48.6 million and E34.6 million in 1999 to E66.2 million and E81.1 million
in 2000. Throughout this year, we have been investing in the expansion of our
support and overhead departments in order to handle increased product and order
volumes. Staff levels increased from 2,387 as of December 31, 1999 to 2,895 as
of December 31, 2000. Our Front-end selling, general and administrative expenses
in 2000 includes E4.3 million related to amortization of goodwill resulting from
the acquisition of an additional 5% shares in ASM Pacific Technology as compared
to E0.3 million in 1999. As a percentage of net sales, selling, general and
administrative expenses decreased from 20.1% for 1999 to 15.8% for 2000.
Amortization of Goodwill. The amortization of goodwill increased from E0.3
million in 1999 to E4.3 million in 2000. This increase relates to the
amortization of goodwill resulting from the acquisition of an additional 5.0% in
ASMPT in 2000 and the acquisition of Microchemistry and NanoPhotonics in 1999.
Research and Development. Research and development expenses increased by 56.5%
from E47.1 million in 1999 to E73.8 million in 2000. Front-end research and
development expenses increased by 63.4% from E29.3 million in 1999 to E47.9
million in 2000 while back-end research and development expenses increased 45.2%
from E17.8 million in 1999 to E25.9 million in 2000. Net research and
development expenses declined from 11.4% of net sales in 1999 to 7.9% of net
sales in 2000. The amounts of research and development credits offset against
research and development expenses amounted to E3.3 million in 1999 and E2.2
million in 2000. Investments in research and development have been concentrated
on the products that have pushed our growth in the last three years. In
front-end the concentration was on high-k dielectrics, low-k dielectrics, ALD,
RTP and 300 mm process applications while in back-end our concentration was on
performance improvements and the release of new or upgraded products.
Net Interest and Other Financial Income (Expenses). Net interest and other
financial income (expenses) decreased by 81.5% from a net expense of E8.6
million in 1999 to a net expense of E1.6 million in 2000 due principally to the
repayment of short-term loans with the proceeds of
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30
the public offering of common shares we completed in April 2000 and with cash
generated from operations. The strength of the US Dollar, the Hong Kong Dollar
versus the Euro, our reporting currency, resulted in transaction exchange gains.
Income Taxes. We incurred E22.8 million in income taxes during 2000, compared to
E1.3 million in 1999. As of December 31, 2000, we have a E260 million net
operating loss carryforward which we mainly can apply against future earnings
reported in the United States and The Netherlands.
Net Earnings. Our net earnings in 2000 were approximately E94.3 million compared
to E11.1 million in 1999. These 2000 net earnings were influenced by a
cumulative effect of change in accounting principle of E3.8 million due to the
adoption of new accounting guidelines for revenue recognition. Our front-end
operation reported net earnings before the cumulative effect of change in
accounting principle of E16.8 million in 2000 compared to a net loss of E7.8
million in 1999. Our portion of our back-end operation's net earnings before the
cumulative effect of change in accounting principle was E81.3 million compared
to E18.9 million in 1999.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Sales. While the market for semiconductor equipment was still weak in the
first quarter of 1999, net sales increased in both front-end and back-end
segments during the second through fourth quarters of 1999 and consolidated
sales increased by 43.9% in 1999 compared to 1998. Front-end sales increased
36.8% from E132.9 million in 1998 to E181.7 million in 1999. Back-end sales
increased 49.9% from E155.2 million in 1998 to E232.8 million in 1999. The
front-end sales increase was primarily due to higher sales of our Eagle 10
products. The back-end sales increase was primarily due to increased sales of
equipment and to a lesser extent, leadframes. Pricing in the leadframe market,
which was depressed in 1998, improved in 1999.
Gross Profit. Our consolidated gross profit increased from 37.8% of net sales in
1998 to 41.0% of net sales in 1999. The front-end business gross profit
increased from 39.4% of net sales in 1998 to 40.5% of net sales in 1999, while
the back-end division gross profit grew from 36.4% of net sales in 1998 to 41.4%
of net sales in 1999. Semiconductor equipment market growth in the second half
of 1999 led to an easing of pricing pressures experienced during 1998. In
addition, our introduction of new process technology helped improve our margins.
Selling, General and Administrative. To keep pace with the general semiconductor
market expansion and to meet increasing customer orders in 1999, selling,
general and administrative expenses increased from E60.0 million in 1998 to
E83.2 million in 1999. Front-end and back-end selling, general and
administrative expenses increased from E30.2 million and E29.8 million in 1998
to E48.9 million and E34.6 million in 1999. Increased costs primarily reflected
expansion in personnel and the restructuring of the ASM America manufacturing
related operations. However, selling, general and administrative expenses as a
percentage of net sales declined from 20.8% in 1998 to 20.1% in 1999.
Research and Development. Research and development expenses increased by 30.0%
from E36.3 million in 1998 to E47.1 million in 1999. Front-end research and
development expenses increased by 23.4% from E23.7 million in 1998 to E29.3
million in 1999 while back-end research and development expenses increased 42.3%
from E12.6 million in 1998 to E17.8 million in 1999. Net research and
development expenses declined from 12.6% of net sales in 1998 to 11.4% of net
sales in 1999. The amounts of research and development credits offset against
research and development expenses amounted to E5.2 million in 1998 and E3.3
million in 1999.
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Net Interest and Other Financial Income (Expenses). Net interest and other
financial income (expenses) increased by 60.9% from E5.4 million in 1998 to E8.6
million in 1999 due to the repayment of a non-interest bearing short-term loan
which became due in November 1998 with an interest-bearing, longer term loan
with warrants. In addition, in October 1999 we issued a zero-coupon $14.9
million debenture with a maturity value of $20.0 million which accrued interest
at 6% per annum, and which had warrants attached. We also borrowed more
frequently on our revolving lines of credit to finance receivables and
work-in-process which, on average, were larger in 1999 than in 1998.
Income Taxes. We paid E1.3 million in income taxes during 1999, compared to E0.6
million in 1998. As of December 31, 1999, we had a E275 million net operating
loss carryforward which we can apply against future earnings reported in the
United States and The Netherlands.
Net Earnings. Our net earnings in 1999 were approximately E11.1 million compared
to E0.2 million in 1998. Our front-end operation reported a net loss
approximating E7.8 million in 1999, including the E3.9 million restructuring
charge incurred in connection with moving manufacturing operations from ASM
America to ASM Europe. Our front-end operation's net loss in 1999 was larger
than its net loss in 1998 approximating E6.6 million. Our portion of our
back-end operation's net earnings approximated E18.9 million compared to E6.8
million in 1998.
BACKLOG
Our backlog of orders booked increased from approximately E183.7
million at December 31, 1999 to approximately E345.6 million at December 31,
2000, of which a substantial majority was for deliveries in the first and second
quarter of 2001. Our backlog consists of orders of products by purchase orders
or letters of intent for future periods, typically for up to the next twelve
months. In markets such as Japan it is common practice for letters of intent to
be used in place of firm purchase orders. We sometimes allow customers to cancel
or reschedule deliveries. In addition, purchase orders are subject to price
negotiations and changes in quantities of products ordered as a result of
changes in customers' requirements. Depending on the complexity of an order, we
generally ship our products from one to six months after receipt of an order. We
include in the backlog only orders for which a delivery schedule has been
specified and to which the customer has assigned an order number.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity is affected by many factors, some of which are related to
our ongoing operations and others of which are related to the semiconductor and
semiconductor equipment industries and to the economies of the countries in
which we operate. Although our cash requirements will fluctuate based on the
timing and extent of these factors, we believe that cash generated by
operations, together with the liquidity provided by our existing cash resources
and the arrangements governing our current indebtedness, will be sufficient to
fund working capital, capital expenditures and other ongoing business
requirements. In addition, we have equipment in the field that is being
evaluated by customers. This `seeding' of new equipment is an important tool for
us to enlarge our customer base and our installed base, requiring significant
capital during the evaluation period.
At December 31, 2000 our principal sources of liquidity consisted of
E106.8 million in cash and cash equivalents and E68.5 million in undrawn bank
lines. Our E89.7 million of cash
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and cash equivalents and E48.8 million of the undrawn bank lines are restricted
to use in our back-end operations.
During 2000, operating activities generated a net cash inflow of E153.1
million as compared to E46.9 million during 1999. The increase was primarily due
to higher cash flow from operations, which was partially offset by a net outflow
of E72.7 million in other assets and liabilities in 2000 compared to a E7.9
million outflow in 1999. These outflows resulted primarily from an increase in
accounts receivable and inventories due to the increase in business activities
in 2000. Cash flow used in investment activities amounted to E136.4 million
during 2000, an increase compared to E26.8 million in 1999. Those investments
were made to increase our manufacturing and assembly capacity, particularly to
complete new plants in Malaysia and China.
In April 2000, we completed a public offering of common shares, which
gave us net proceeds of approximately E 119.7 million. We used E76.8 million of
these proceeds for repayment of loans. Following the repayment, the assets
securing these loans have been released from their liens.
In July 2000, we completed the purchase of approximately 4.7% of the
outstanding shares in ASMPT, bringing our total shareholding in this company to
54.88% at that date. The investment, including some smaller purchases of shares
in April and June of this year, amounted to E75.5 million. The purchase was
funded with cash and with the proceeds of a two-year loan facility with Canadian
Imperial Bank of Commerce ("CIBC"). We borrowed $69.0 million on that loan
facility. The loan is secured by our shareholding in ASMPT. The excess of the
purchase price over the fair market value of the underlying share holdings
acquired in the amount of E65.0 million has been recorded as goodwill and is
amortized net assets over a period of ten years, on a straight line basis. The
fair market value approximates the book value of such net assets of ASMPT.
On October 6, 2000 the Company repaid $10 million in principal amount
under the CIBC loan facility consisting of $5.5 million installment and US$4.5
million partial prepayment. On December 21, 2000 a second partial prepayment of
US$13.0 million was made. The outstanding balance of the loan facility as of
December 31, 2000 was $46.0 million.
In connection with the CIBC loan facility, we entered into an equity
line of credit with Canadian Imperial Holdings, Inc. ("CIHI"), an affiliate of
CIBC, pursuant to which we have the right to sell up to an aggregate of $65
million of newly issued shares to CIHI from time to time over a two-year period.
Pursuant to the equity line, we are required to register with the U.S.
Securities and Exchange Commission ("SEC") $65 million of our common shares for
offer and sale pursuant to the equity line. The registration statement must
remain in effect for the duration of the equity line. CIHI is under no
obligation to purchase our newly issued common shares under the equity line if
effectiveness of our registration statement is withdrawn, certain conditions
precedent to the equity line are not satisfied or certain covenants are not
complied with.
We have filed a registration statement with the SEC for these shares on
March 9, 2001. Until the registration statement is declared effective by the
SEC, we are unable to issue shares under this equity line of credit.
Registration must be effective by April 23, 2001. If it is not effective by that
date, we must pay CIHI a monthly fee of 3/4% of the outstanding CIBC loan amount
and 1% per month if the registration statement is not effective by June 8, 2001.
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In April 2000 we repaid a term loan of E25.0 million to the Nationale
Investeringsbank N.V. (`NIB') from the proceeds of the share offering and during
2000 we repaid the remaining installments of a subordinated loan to the NIB in
the amount of E 2.0 million and a E1.4 million subordinated loan to a related
party.
During 2000 we negotiated an increase of the term loans with our banks
in Japan and increased our loans with our bank in Finland and repaid outstanding
bank loans in Hong Kong.
During 1998, we negotiated an extension of an original $80.0 million
convertible note provided by Applied Materials following the settlement of the
patent dispute in 1997. After paying Applied Materials $15.0 million in 1997 and
$20.0 million in 1998, the remaining balance of $45.0 million of the initial
interest-free subordinated convertible loan was replaced by an interest-bearing
note for which we provided security. In addition, we issued a warrant to Applied
Materials to purchase 1.5 million of our common shares at a price of $5.375 per
share. The note was repayable in two installments: $10.0 million was paid in
1999 and the remaining $35.0 million was due in 2000 which was repaid from the
proceeds of the exercise of the 1.5 million warrants in March 2000 and from the
proceeds of the share offering in April 2000.
On October 1, 1999, we placed 6% zero-coupon debentures with a maturity
value of $20.0 million with a group of United States institutional investors.
The debentures had a five year maturity. The debentures were discounted by 6%
annual interest for a net purchase value of approximately $14.9 million. As part
of the debenture agreement, the investors received 2,037,957 non-detachable
warrants and 200,000 supplemental warrants on common shares of the Company with
an exercise price of $9.81 per share, a premium to market at the date of
issuance of 20%. In February 2000, 2,037,957 warrants were exercised and the
debentures were cancelled in partial payment of the exercise price of the
warrants. The remaining portion of the exercise price of the warrants was
fulfilled by the investors contributing $4.8 million in cash.
In 1998 we entered into a E20.4 million, 6% subordinated convertible
loan with three lenders. During 1999, all three lenders converted their loan
into common shares.
The front-end business finances its operations from the cash flows
derived from its business activities and from collateralization of fixed and
current assets.
Back-end operations are entirely self-financed by ASM Pacific
Technology. The cash resources and borrowing capacity of ASM Pacific Technology
are not available to our front-end operations.
We support borrowings of our front-end subsidiaries with guarantees. We
have also mortgaged certain land and buildings to secure our front-end
borrowings. We have also pledged all of our shareholding in ASM Pacific
Technology. The market value of our investment in ASM Pacific Technology at the
end of 2000 was approximately E318.4 million, which is slightly lower than the
market value at the end of 1999, which was approximately E333.9 million.
Item 6: Directors, Senior Management and Employees
A. Directors and Senior Management
The names of our directors and senior management and those of our significant
subsidiaries and the years of their birth are as follows:
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NAME YEAR OF BIRTH POSITION
---- ------------- --------
Paul C. van den Hoek* 1939 Chairman of the Supervisory Board (Expiring 2001)
Jacobus den Hoed RA* 1937 Supervisory Director (Expiring 2003)
Ferdinand C. Rauwenhoff* 1930 Supervisory Director (Expiring 2002)
Johan M.R. Danneels 1950 Supervisory Director (Expiring 2004)
Arthur H. del Prado 1931 Chairman of Management Board, President and Chief
Executive Officer
Patrick Lam See-Pong 1948 Member of the Management Board, Vice President Asian
Operations and Managing Director of ASM Pacific
Technology
Daniel Queyssac 1940 Chief Operating Officer of Front-end Operations and
President of ASM America
Rinse de Jong 1948 Vice President of Finance and Chief Financial
Officer (through January 1, 2001)
Robert L. de Bakker 1950 Chief Financial Officer (as of January 1, 2001)
Fukumi Tomino 1949 Vice President Japanese Operations and Managing
Director of ASM Japan
Hans Wunderl 1951 General Manager and Executive Vice President of ASM
America
Ernst Granneman 1946 Business Unit Manager for Rapid Thermal Processing
Ivo Raaijmakers 1957 Director of Research and Development and Chief
Technology Officer of Front-end Operations
Han Westendorp 1956 General Manager of ASM Europe
* Member of Audit Committee
Paul C. van den Hoek became a Supervisory Director in March 1981 and is
now Chairman of the Supervisory Board. Mr. van den Hoek is a partner in the
European law firm of Stibbe, which is our general legal counsel. Mr. van den
Hoek has been with Stibbe since 1965. Mr. van den Hoek also serves on the boards
of directors of various European companies.
Jacobus den Hoed RA became a Supervisory Director in June 1999. Mr. den
Hoed is a certified accountant. He joined AKZO Nobel N.V., a global chemical
company in 1969, and served in various financial management positions, most
recently as Vice President and Chief Financial Officer from 1996 to 1998 when he
retired. Mr. den Hoed serves on the boards of directors of various European
companies and since 1998 as a member of the board of directors of the
International Accounting Standards Committee, or IASC.
Ferdinand C. Rauwenhoff became a Supervisory Director in October 1991
and Vice-Chairman in 1999. Mr. Rauwenhoff holds an Engineering degree in physics
from Delft Technical University as well as a law degree from Leiden University.
He joined Philips in 1958 and served in various executive capacities worldwide.
In 1984 he was appointed chairman of the senior management committee of the
Netherlands Philips Companies, and retired in October 1990. Mr. Rauwenhoff
further serves on the boards of directors of various European companies.
Johan M.R. Danneels was elected to the Supervisory Board at our May 30,
2000 annual meeting. Mr. J. Danneels spent most of his career with Alcatel, most
recently as Director of Industrial Coordination and Chief Executive Officer of
Alcatel Microelectronics.
Arthur H. del Prado, our founder, has served as a Managing Director,
President and Chief Executive Officer since our formation in 1968. Mr. del Prado
is also a founder of ASM Lithography N.V. through a joint venture with Philips
Electronics N.V. He serves as a director of MEDEA, and previously served for
many years as a director of its predecessor, JESSI. Mr. del Prado also serves on
the board of directors of various European companies and on the board of the
Netherlands-Japanese Trade Federation.
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Patrick Lam See-Pong became Vice President of our Asian Operations in
March 1981 and a Managing Director in June 1995. Mr. Lam has been employed in
various capacities with us since 1975. He holds a B.Sc. degree in electrical
engineering from the University of Manitoba in Canada and an MBA from the
Chinese University of Hong Kong.
Daniel Queyssac joined us as Chief Operating Officer for front-end
operations and President of ASM America in November 1996. Mr. Queyssac joined us
after a career at Motorola and SGS Thomson, now STMicroelectronics. His previous
positions included Vice President and Assistant General Manager of the New
Venture Group of SGS Thomson Microelectronics from 1993 to 1996, and President
of SGS Thomson Microelectronics in Phoenix, Arizona from 1980 to 1991.
Rinse de Jong served as Vice President of Finance and Chief Financial
Officer from February 1997 until he retired on January 1, 2001. Mr. de Jong is a
registered accountant.
Robert L. de Bakker, joined us as Chief Financial Officer in January
2001, filling the position left by the retirement of Mr. Rinse de Jong. Prior to
his joining ASM International, Mr. de Bakker was Chief Financial Officer of NKF
Holding N.V., a Netherlands multinational public company, where he continued his
activities after its merger at the end of 1999 with Draka Holding N.V., another
Dutch multinational public company in the same sector of activity, industrial
cables.
Fukumi Tomino became Vice President Japanese Operations and Managing
Director of ASM Japan in 1994 after having held roles in sales, marketing,
engineering and process development since the founding of ASM Japan in 1982. He
holds a Bachelor's Degree in electro-communication from the University of
Electro-Communication (Tokyo).
Hans Wunderl joined us in January 1991 as Director-Technical Operations
of the A-600 business unit. Mr. Wunderl started his international career at Data
General in the United States, France and the Netherlands and worked previously
at IBM in the Netherlands. In November 1992, Mr. Wunderl became General Manager
of ASM Europe located in Bilthoven, the Netherlands and in July 1999 he became
General Manager and Executive Vice President of ASM America. Mr. Wunderl holds
an engineering degree in electronics from the Technical University in Eindhoven.
Ernst Granneman became Business Unit Manager for Rapid Thermal
Processing in July 1999. He previously served as Director of Research and
Development and Chief Technology Officer for our front-end businesses from May
1992 to July 1999. Mr. Granneman joined us in October 1984 as Director of
Research and Development for ASM Europe, and previously was employed at the
Institute of Atomic and Molecular Physics in Amsterdam, the Netherlands. Mr.
Granneman also serves as a part-time professor at the Technical University at
Delft, the Netherlands. Mr. Granneman holds an engineering degree in physics
from the Technical University at Delft and a doctorate degree in physics from
the University of Amsterdam.
Ivo Raaijmakers became Director of Research and Development and Chief
Technology Officer of Front-end Operations in July 1999. He served as Vice
President of Development for ASM America from July 1996 to July 1999. He
previously held various positions of increasing responsibility in technology
development and management at Philips Research Labs, Novellus and Applied
Materials since 1982, most recently with Applied Materials from 1993 to 1996.
Mr. Raaijmakers holds a Ph.D and Master's Degree in Physics from Eindhoven
University of Technology in the Netherlands.
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Han Westendorp joined us as General Manager of ASM Europe in July 1999.
Mr. Westendorp worked in various management capacities at Tokyo Electron
Massachusetts from 1991 to mid-1999, most recently as Vice President of Metal
CVD and Administration General Manager. Before joining Tokyo Electron, he worked
with us on the development of our ion implantation technology. Mr. Westendorp
holds a Ph.D. in Physics and Mathematics from the University of Utrecht in the
Netherlands.
Under Netherlands law, supervisory directors have the duty to supervise
and advise the managing directors. The supervisory directors are appointed by
our shareholders generally for terms of four years. The supervisory directors
can be re-elected twice, but are subject to mandatory retirement under
Netherlands law at the age of 72.
The managing directors are entrusted with our management under the
supervision of the supervisory board and have the general authority to enter
into binding agreements with third parties. Managing directors serve for
indefinite terms and are appointed and dismissed by the shareholders, but they
may also be suspended by the supervisory board. Compensation of managing
directors is determined by the supervisory board. Currently, our managing
directors are Arthur H. del Prado and Patrick Lam See-Pong.
Our other officers serve at the discretion and under the direction of
the managing directors.
B. Compensation
The following table sets forth as to all executive officers and
directors as a group information concerning all remuneration from us (including
our subsidiaries) for services in all capacities during the fiscal year ended
December 31, 2000:
CASH AND CASH-EQUIVALENT FORMS OF REMUNERATION
Salaries, Bonuses, and Insurance Benefits or Reimbursement,
Directors' Fees Personal Benefits(1)
--------------- --------------------
All directors and officers as a E3,502,777 E460,100
group (13 persons)
- -------------------------
(1) Includes payments for personal pension plans.
(2) Excludes Mr. de Bakker because he began working with us on January 1, 2001.
We generally contribute pension payments to investment funds managed by
outside fund managers on behalf of all of our employees. None of the funds so
contributed are separately earmarked for directors or senior management.
We have granted stock options to certain key employees. For information
regarding such options see Note P to the Consolidated Financial Statements.
Options to purchase 737,000 common shares are held by our executive officers and
directors at December 31, 2000. As of February 20, 2001, options to acquire
737,000 common shares were held by executive officers and directors at exercise
prices ranging from $0.25 to $15.4375, with expiration dates from December 31,
2002 to December 20, 2010.
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37
We have not entered into any service contracts providing for benefits
upon termination of employment with our directors.
We have an audit committee composed of are Mssrs. Van den Hoek, den
Hoed RAY and Rauwen Loff.
The audit committee meets periodically to recommend a firm to be
appointed as independent auditors to audit financial statements and to perform
services related to the audit, review the scope and results of the audit with
the independent auditors, review with management and the independent auditors
our annual operating results and consider the adequacy of the internal
accounting procedures and the effect of the procedures relating to the auditors'
independence.
C. Board Practices
The supervisory directors are elected by the shareholders of common
stock at the annual general meeting of the shareholders and serve for a term of
four years. The supervisory directors may be re-elected twice, but by
Netherlands law the supervisory director must resign at the end of the term in
which he or she attains the age of 72.
A managing director is nominated by the supervisory directors and
elected by the shareholders of common stock at the general meeting of
shareholders. The shareholders may reject a binding nomination at the general
meeting of the shareholders by a super majority vote of 2/3 of the total issued
and outstanding shares eligible to vote. The shareholders may at any time
suspend and dismiss managing directors by a super majority vote of 2/3 of the
total issued and outstanding shares eligible to vote. A managing director can be
suspended at any time by the supervisory board. There is no statutory term of
office for managing directors.
D. Employees
As of December 31, 2000 we had 7,091 employees, including 687 employees
primarily involved in research and development activities, 418 in marketing and
sales, 366 in customer service, 301 in finance and administration, and 5,319 in
manufacturing.
Our Netherlands operation, which employs approximately 296 persons, is
subject to standardized industry bargaining under Netherlands law, and is
required to pay wages and meet conditions established as a result of
negotiations between all Netherlands employers in their industry and unions
representing employees of those employers. Additionally, management personnel in
the Netherlands facilities meet as required by Netherlands law with a works
council consisting of elected representatives of the employees to discuss
working conditions and personnel policies as well as to explain major corporate
decisions and to solicit their advice on major issues.
Many of our employees are highly skilled, and our continued success
will depend in part upon our ability to continue to attract and retain these
employees, who are in great demand. We believe that our employee relations are
good. As a consequence of our decision to merge the manufacturing operations of
ASM America with those of ASM Europe in 1999, our number of employees in the
United States was reduced by approximately 75, whereas the number of employees
in the Netherlands was increased by approximately 50. The Company incurred a
restructuring charge covering employee terminations, write-offs and occupancy
costs of E3,854 associated with these decisions.
The Company's intention was to begin implementing the steps necessary
to complete the 1999 restructuring program immediately on formalization thereof
and to substantially complete all necessary steps by the end of 1999. At
December 31, 1999, however, there was a remaining accrual associated with the
restructuring program of E2,504; in implementation of the certain elements of
the program had been delayed due to longer than anticipated time taken to
transfer certain operations to Europe where plant modifications were required.
At December 31, 1999, the revised schedule for completion of the program was mid
2000.
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In the first half of 2000, the global demand for wafer processing
equipment and, as a consequence, the assembly and final testing activities of
such equipment, increased sharply when compared to the same period in 1999. The
Company's European facilities and the Company's third party subcontractors had
difficulty in coping with the much higher volumes. Consequently, the Company
decided to partially reverse its earlier decision and reopened facilities that
were vacated under the 1999 restructuring program. As a consequence, part of the
restructuring provision mainly related to legal contractual obligations for
leased properties in the amount of E 1,572,000 was reversed and credited to
selling, general and administrative expenses in the Consolidated Statement of
Operations in the second quarter of 2000.
Year Front-end Back-end Total
1998 756 3,680 4,436
----------------------------------------------------------
1999 798 4,628 5,426
----------------------------------------------------------
2000 1,064 6,027 7,091
E. Share Ownership.
The following table presents information regarding the share ownership
and option ownership of our share capital stock as of February 20, 2001 by our
directors and senior management:
NAME SHARES OWNED OPTIONS FOR SHARES PERCENTAGE OF
OUTSTANDING
Paul C. van den Hoek * - *
Jacobus den Hoed RA - - -
Ferdinand C. Rauwenhoff - - -
Johan M.R. Danneels - - -
Arthur H. del Prado 11,454,292 25,000 23.52%
Patrick Lam See-Pong 507,300 92,000 1.23%
Daniel Queyssac * * *
Rinse de Jong * * *
Robert L. de Bakker * * *
Fukumi Tomino - * *
Hans Wunderl * * *
Ernst Granneman * * *
Ivo Raaijmakers * * *
Han Westendorp - * *
* Less than 1%.
Item 7. Major Shareholders and Related Party Transactions.
A. Major Shareholders
The following table sets forth information with respect to the
ownership of our common shares as of February 20, 2001 certain information with
respect to the ownership of our outstanding common shares by each beneficial
owner of more than 5% of our common shares and by all of our officers and
directors as a group:
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NUMBER OF SHARES PERCENT
Stichting Administratiekantoor ASMI
Jan van Eycklaan 10,
3723 BC Bilthoven,
the Netherlands(1)............. 7,692,039 15.8%
- ----------
(1) Trust controlled by our President, Arthur H. del Prado.
On May 28, 1997, we entered into an agreement with Stichting
Continuiteit ASMI, or Stichting, pursuant to which Stichting was granted an
option to acquire up to that number of our preferred shares that has a total par
value equal to 50% of the par value of our common shares issued and outstanding
at the date of the exercise. Stichting is a non-membership organization
organized under Netherlands law. The objective of Stichting is to own and vote
our preferred shares in order to maintain our continuity in case of a takeover
attempt. Toward that objective, Stichting will evaluate, when called for,
whether a takeover offer is in our best interests. The Euronext Amsterdam Market
in Amsterdam requires that a majority of the board members of Stichting be
unrelated to us. As of December 31, 2000, the members of the board of Stichting
are:
Arthur H. del Prado President and Chief Executive Officer, ASM
International
Paul C. van den Hoek Chairman of the Supervisory Board, ASM
International
Michiel J.C. van Galen Managing Director, Breevast N.V.
Rinze Veenenga Kingma Consultant to the Executive Board, Delft
Instruments N.V.
Laurus Traas Emeritus Professor, Amsterdam University
ASM is unaware of any arrangement which it anticipates will result in a
change in its control.
Of our 48,797,346 outstanding Common Shares at February 20, 2001,
28,196,554 shares are registered with a transfer agent in the Netherlands, and
20,600,792 are registered with a transfer agent in the United States. Our common
shares registered with Citibank, N.A., New York in the United States are quoted
on the Nasdaq National Market under the symbol "ASMI". As of February 20, 2001
there were approximately 215 record holders in the United States. The common
shares registered with ABN AMRO Bank, Breda, the Netherlands, are in bearer form
and are traded on the Euronext Amsterdam Market in Amsterdam under the symbol
"ASM."
B. Related Party Transactions
In August 1994, we borrowed NLG 3.0 million from our President. This
note was repaid in full in April 2000. In December 1999 we acquired 24% and our
President acquired 44.5% of the outstanding equity of NanoPhotonics, a German
supplier of precision metrology equipment. We have a five-year option to
purchase our President's 44.5% interest at the price he paid in the initial
transaction. In exchange for this option, we granted him a five-year option to
purchase 25,000 of our common shares at fair market value at the date the option
was granted. Our President entered into this transaction at our request in order
to enable NanoPhotonics to retain certain beneficial financing arrangements.
In December of 1997, we loaned Mr. Daniel G. Queyssac $200,000. This
interest-bearing loan is repayable upon the exercise of stock options.
We also made a loan of approximately E2.2 million to our President in
connection with the exercise of stock options. The loan is secured by the shares
received in the stock option exercise. We have custody of the shares until the
loan is paid.
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Item 8. Financial Information
See pages F-1 through F-24
FINANCIAL HIGHLIGHTS AND SELECTED COMPARATIVE FINANCIAL DATA
IN US DOLLARS AND EUROS(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(millions, except per share data and
full-time equivalents) 1996 1997 1998 1999 2000 2000
- ------------------------------------------------------------------------------------------------------------------------------------
EUR EUR EUR EUR EUR US$
- ------------------------------------------------------------------------------------------------------------------------------------
Operations:
Net sales: 298.7 321.6 288.1 414.5 935.2 867.2
----- ----- ----- ----- ----- -----
Front-End 163.9 152.6 132.9 181.7 379.3 351.7
Back-End 134.8 169.0 155.2 232.8 555.9 515.5
Earnings (loss) from operations, before
unusual items: 45.0 25.7 12.5 39.4 191.8 177.8
Front-End 24.9 - (1.6) (0.8) 34.5 32.0
Back-End 20.1 25.7 14.1 40.2 157.3 145.8
Unusual items (2) - (79.7) - - - -
Earnings (loss) from operations 45.0 (54.0) 12.5 39.4 191.8 177.8
Net earnings (loss) before cumulative effect of change
in accounting principle 31.0 (70.5) 0.2 11.1 98.1 90.9
Cumulative effect of change in accounting principle,
net of tax (3) - - - - (3.8) (3.5)
Net earnings (loss) 31.0 (70.5) 0.2 11.1 94.3 87.4
- ------------------------------------------------------------------------------------------------------------------------------------
Balance sheet:
Net working capital (4) 79.8 98.7 99.9 110.2 190.9 177.0
Total assets 277.7 328.6 282.9 425.0 777.9 721.4
Long-term debt (5) 39.9 46.6 84.7 8.0 31.7 29.4
- ------------------------------------------------------------------------------------------------------------------------------------
Backlog: 79.1 110.5 52.8 183.7 345.6 320.5
Front-End 52.5 54.5 27.0 72.5 211.6 196.2
Back-End 26.6 56.0 25.8 111.2 134.0 124.3
- ------------------------------------------------------------------------------------------------------------------------------------
Number of staff:
Full-time equivalents: 4,140 4,514 4,436 5,426 7,091 7,091
Front-End 898 860 756 798 1,064 1,064
Back-End 3,242 3,654 3,680 4,628 6,027 6,027
Staff costs: 79.0 93.3 94.4 108.4 188.1 174.4
Front-End 42.5 49.4 42.8 51.5 78.1 72.4
Back-End 36.5 43.9 51.6 56.9 110.0 102.0
- ------------------------------------------------------------------------------------------------------------------------------------
Per share data:
Net earnings (loss) per share:
Basic 0.98 (2.12) 0.01 0.30 2.01 1.86
Diluted 0.92 (2.12) 0.01 0.29 1.94 1.80
Earnings (loss) per share from operations:
Basic 1.42 (1.62) 0.37 1.06 4.10 3.80
Diluted 1.34 (1.62) 0.36 0.98 3.95 3.66
Weighted average number outstanding (in thousands):
Basic 31,566 33,232 33,794 37,301 46,810 46,810
Diluted 33,717 33,232 34,743 40,664 48,703 48,703
- ------------------------------------------------------------------------------------------------------------------------------------
Proforma amounts assuming the new accounting
principle is applied retroactively (3)
Net earnings (loss) 30.1 (70.7) 0.6 8.9 98.1 90.9
Net earnings (loss) per share:
Basic 0.95 (2.13) 0.02 0.24 2.09 1.94
Diluted 0.89 (2.13) 0.02 0.23 2.02 1.88
- ------------------------------------------------------------------------------------------------------------------------------------
(1) For the convenience of the reader, Financial Highlights and Selected
Comparative Financial Data for 2000 have been converted into US Dollars
using the exchange rate as of December 31, 2000 (US$ 1.00 = EUR 1.0784).
Balances prior to January 1, 1999 were restated from Netherlands guilders
into Euros using the fixed exchange rate as of January 1, 1999 (EUR 1.00 =
NLG 2.20371).
(2) Unusual items reflect litigation settlement.
(3) The cumulative effect of change in accounting principle relates to the
effect on prior years of the impact of the adoption of Staff Accounting
Bulletin 101. This Bulletin is effective as of January 1, 2000 and set
forth guidelines on the timing of revenue recognition of sales. See Note A
to Consolidated Financial Statements.
(4) Accounts receivable, inventories, other current assets, accounts payable,
accrued expenses, advance payments from customers and deferred revenue.
(5) Long-term debt includes subordinated long-term debt.
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SCHEDULE I
CONDENSED FINANCIAL STATEMENTS ASM INTERNATIONAL N.V., HOLDING COMPANY
(Thousands of Euro)
Condensed Balance Sheets of ASM International, N.V.
December 31,
1998 1999 2000
------- ------- -------
Assets:
Total current assets 14,235 21,865 98,173
Investment in subsidiaries 66,895 90,707 264,970
Total noncurrent assets 30,991 42,800 13,114
------- ------- -------
112,121 155,372 376,257
------- ------- -------
Liabilities & shareholders' equity:
Total current liabilities 19,670 87,947 46,467
Total noncurrent liabilities 71,987 1,873 21,468
------- ------- -------
Total liabilities 91,657 89,820 67,935
Shareholders' equity 20,464 65,552 308,322
------- ------- -------
112,121 155,372 376,257
------- ------- -------
Condensed Statement of Earnings ASM International N.V
Year ended December 31,
1998 1999 2000
------- ------- -------
Earnings subsidiaries 4,871 18,786 97,460
Losses ASM International (4,639) (7,687) (3,188)
------- ------- -------
Net earnings (loss) 232 11,099 94,272
------- ------- -------
Condensed Cash Flow Statement ASM International N.V.
Year ended December 31,
1998 1999 2000
------ ------ ------
Net cash provided by (used in) operating, financing or
investing activities 623 1,565 43,654
------ ------ ------
Cash and cash equivalents at the beginning of the year 20 643 2,208
------ ------ ------
Cash and cash equivalents at the end of the year 643 2,208 45,862
------ ------ ------
Notes to condensed Financial Statements of ASM International N.V.:
Restrictions which limit the availability of retained earnings, net
income for dividend purposes and other funds transfers from subsidiaries to ASM
International N.V. ("ASMI"):
ASM Pacific Technology Limited ("ASMPT")
Subject to the availability of adequate funds, all the retained
earnings of ASMPT group can be distributed to its shareholders, including ASMI,
on a basis proportional to shareholdings of each shareholder. Such retained
earnings at December 31, 2000 according to Hong Kong GAAP amounts to
approximately HK$ 496.7 million. Other than the above, ASMPT group is prohibited
from making loans or advances, other than trade receivables in the normal course
of business, to ASMI under the Hong Kong Listing Rules.
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SCHEDULE II - VALUATION RESERVES
(Thousands of Euro)
Column A Column B Column C Column D Column E Column F
Class of valuation reserve Balance at Additions Deductions Currency Balance at the
Beginning of charged to translation end of period
period cost and effect
expenses
Allowance for doubtful
Accounts
Year ended 12/31/00 1,432 7,868 (428) (138) 8,734
Year ended 12/31/99 1,839 14 (569) 148 1,432
Year ended 12/31/98 3,331 1,715 (3,188) (19) 1,839
Provision for inventory
Obsolescence
Year ended 12/31/00 13,079 10,295 (3,814) 715 20,275
Year ended 12/31/99 10,131 2,029 (362) 1,281 13,079
Year ended 12/31/98 9,369 3,275 (2,067) (446) 10,131
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Item 9. The Offer and Listing.
A. Offer And Listing Details
The following tables set forth, for the periods indicated, the high ask and low
bid prices of our common shares as reported on the Nasdaq National Market and
the high and low closing price as reported on Euronext Amsterdam Market:
Years ended December 31,
1996 1997 1998 1999 2000
Nasdaq High $16.667 $20.125 $12.875 $24.375 $ 37.625
Low $ 6.000 $ 4.438 $ 2.5000 $ 3.625 $ 9.250
Euronext High 18.500 NLG 40.800 NLG 27.800 NLG E 24.000 E 38.250
Low 17.400 NLG 16.000 NLG 4.400 NLG E 3.550 E 10.500
Nasdaq High Ask and Low Bid Prices
2000: High Low
First Quarter $37.000 $19.875
Second Quarter $37.625 $21.87
Third Quarter $31.000 $16.750
Fourth Quarter $18.125 $ 9.250
1999:
First Quarter $ 6.750 $ 3.625
Second Quarter $ 7.875 $ 3.688
Third Quarter $ 9.000 $ 7.000
Fourth Quarter $24.375 $ 7.500
Euronext Closing Sales Prices
2000: High Low
First Quarter E 36.600 E 18.750
Second Quarter E 38.250 E 25.900
Third Quarter E 32.450 E 19.700
Fourth Quarter E 20.950 E 10.550
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1999:
First Quarter E 5.60 E 3 .55
Second Quarter E 7.60 E 3.55
Third Quarter E 8.40 E 6.75
Fourth Quarter E 24.00 E 7.00
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SALES PRICE IN U.S. $ SALES PRICE IN EUROS
(high ask and low bid) (high and low closing)
Nasdaq Euronext
High Low High Low
August 2000 27.250 21.6250 30.00 24.50
September 2000 26.562 16.750 29.85 19.70
October 2000 18.125 13.125 20.95 16.50
November 2000 17.250 11.250 20.00 12.95
December 2000 15.500 9.250 11.10 10.55
January 2001 19.250 9.437 18.30 9.80
Item 10. Additional Information.
B. Memorandum of Articles of Association
Incorporated by reference to our Registration Statement on Form F-3
filed with the United States Securities and Exchange Commission on December 15,
1997.
C. Material Contracts
For a description of the material contracts we entered into in the last
two fiscal years, please see "Item 4. Information on the Company" and "Item 5.
Operating and Financial Review and Prospects."
D. Exchange Controls
There are no foreign exchange controls or other governmental laws,
decrees or regulations in the Netherlands restricting the import or export of
capital or affecting the remittance of dividends, interest or other payments to
non-resident shareholders. Neither the laws of the Netherlands nor the Articles
of Association of ASM International restrict remittances to non-resident
shareholders or the right to hold or vote such securities.
E. Taxation
SUMMARY OF NETHERLANDS TAX PROVISIONS APPLICABLE TO UNITED STATES SECURITY
HOLDERS
The following statements below represent a brief summary of the current
Netherlands tax laws, based on the law as in force at January 1, 2001. The
description is limited to the tax implications for a shareholder who neither is,
nor is deemed to be, a resident of the Netherlands for purposes of the relevant
tax codes. The description does not address special rules that may apply to
special classes of holders of shares and is not to be read as extending by
implication to matters not specifically referred to herein. As to individual tax
consequences, each shareholder should consult his own tax counsel.
Withholding Tax
In general, a dividend distributed by a company resident in the Netherlands is
subject to a withholding tax imposed by the Netherlands at a statutory rate of
25%. Dividends include dividends in cash or in kind, constructive dividends,
repayment of paid-in capital not recognized for Netherlands tax purposes and
liquidation proceeds in excess of paid-in capital recognized for Netherlands tax
purposes. Share dividends paid out of our paid-in-share premium, recognized as
capital for Netherlands tax purposes, are not subject to the above withholding
tax.
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Any individual or corporation or any entity for Netherlands tax purposes, which
does not reside and is not deemed to reside in the Netherlands, owning, or
deemed to own, common shares may be eligible for a partial or complete exemption
from or a refund of the above withholding tax under a tax convention that is in
effect between the country of residence of such individual or corporation and
the Netherlands. The Netherlands has concluded such tax conventions with several
countries, including the United States, Canada, Switzerland, Japan, all European
Union member states, except Portugal, and many other countries. For residents of
the Netherlands Antilles and Aruba, the tax arrangements of the Kingdom of the
Netherlands may be applicable.
Under the Tax Convention of December 18, 1992 concluded between the Netherlands
and the United States, or the U.S. Tax Treaty, dividends paid by us to a
resident of the United States, other than an exempt organization or exempt
pension trust, as discussed below, are generally eligible for a reduction of the
25% Netherlands withholding tax to 15%, or to 5% in the case of certain U.S.
corporate shareholders owning at least 10% of the voting power, provided that
such shareholder does not have an enterprise or an interest in an enterprise
that is, in whole or in part, carried on through a permanent establishment or
permanent representative in the Netherlands and to which enterprise or part of
an enterprise the common shares are attributable. The U.S. Tax Treaty provides
for a complete exemption from Netherlands withholding tax for dividends received
by exempt pension trusts and exempt organizations, as defined therein. Except in
the case of exempt organizations, such reduced dividend withholding rate, or
exemption from withholding for exempt pension trusts, can be applied at the
source upon payment of the dividends, provided that the proper forms have been
filed in advance of the payment. Exempt organizations remain subject to the
statutory withholding rate of 25% and are required to file for a refund of such
withholding.
A person may not claim the benefits of the U.S. Tax Treaty unless (i) he or she
is a resident of the United States as defined therein and (ii) such person's
entitlement to such benefits is not limited by the provisions of Article 26
("limitation on benefits") of the U.S. Tax Treaty.
No withholding tax applies to the sale or disposition of common shares to
persons other than us or our affiliates, as defined for purposes of Netherlands
tax law.
Income Tax and Corporation Income Tax on Dividends
In the case of common shares held by a Netherlands-resident entity, any gains
derived from the transfer of common shares are subject to Netherlands
corporation tax, unless the entity in question qualifies for the participation
exemption. A non-resident individual or corporate shareholder will not be
subject to Netherlands income tax with respect to dividends distributed by us on
the or with respect to capital gains derived from the sale or disposition of our
common shares, provided that:
- - the non-resident shareholder does not have an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in the Netherlands to which or
to whom the common shares are attributable;
- - the non-resident shareholder does not have a direct or indirect substantial
or deemed substantial interest in our share capital as defined in the
Netherlands tax code or, in the event the shareholder does have such a
substantial interest, such interest is a business asset; and
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- - the non-resident shareholder is not entitled to a share in the profits of
an enterprise effectively managed in the Netherlands other than by way of
securities or through an employment contract to which enterprise the common
shares are attributable.
In general terms, a substantial interest in our share capital does not exist if
the shareholder alone or together with certain relatives does not own, and has
not owned in the preceding five years, 5% or more of the aggregate paid-in
capital or of the paid-in capital of any class of our shares.
The Net Wealth Tax ("vermogensbelasting") was abolished with effect from January
1, 2001.
Gift and Inheritance Tax
In principle, liability for Netherlands gift tax or inheritance tax arises in
respect of any gifts of common shares by, or inheritance of common shares from
any person who resides at the time of the gift or death in the Netherlands.
A gift or inheritance of common shares from a non-resident shareholder will not
be subject to Netherlands gift and inheritance tax, provided that;
- - the non-resident shareholder does not have an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in the Netherlands to which or
to whom the common shares are attributable;
- - the non-resident shareholder is not entitled to a share in the profits of
an enterprise effectively managed in the Netherlands other than by way of
securities or through an employment contract, the common shares being
attributable to that enterprise; and
- - the non-resident shareholder makes a gift of shares and dies within 180
days after the date of the gift, while being resident or deemed to be
resident in the Netherlands at the moment of his death.
For the purposes of Netherlands gift and inheritance tax, a Netherlands national
is deemed to be a resident of the Netherlands if he has been a resident thereof
at any time during the ten years preceding the date of the gift or death, as the
case may be. In addition, for the purposes of Netherlands gift tax, a person not
possessing Netherlands nationality is also deemed to be a Netherlands resident,
irrespective of his nationality, if he was a Netherlands resident therein at any
time in the twelve months preceding the time on which the gift was made.
SUMMARY OF US FEDERAL TAX PROVISIONS APPLICABLE TO UNITED STATES SECURITY
HOLDERS
The following is a general description of the material United States ("U.S.")
federal income tax consequences of the ownership and disposition of the common
shares. This discussion does not purport to deal with all aspects of U.S.
federal income taxation that may be relevant to holders of shares in view of
their particular circumstances (for example, persons subject to the alternative
minimum tax provisions of the Internal Revenue Code). This summary, for example,
generally considers only holders that hold their shares as capital assets. In
addition, this summary does not deal with holders subject to special rules, such
as dealers in securities or currencies, traders in securities that elect to use
a mark-to-market method of accounting, financial institutions, tax exempt
organizations, insurance companies, persons that actually or constructively own
10% or more of our voting stock, persons holding common shares as part of a
hedging or conversion transaction or a straddle or holders of common shares
whose "functional currency" is not
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the U.S. dollar. Furthermore, this discussion is based on current provisions of
the Internal Revenue Code of 1986, Treasury Department regulations promulgated
thereunder, and administrative and judicial interpretations thereof as of the
date hereof, all of which are subject to change, possibly with retroactive
effect. There can be no assurance that the Internal Revenue Service will not
challenge one or more of the tax consequences described herein, and we have not
obtained, nor do we intend to obtain, a ruling from the Internal Revenue Service
or an opinion of counsel with respect to the U.S. federal income tax
consequences of acquiring or holding shares. Prospective holders of shares
should consult their own tax advisors as to the application of the U.S. federal
income tax laws to their particular situation as well as any state, local and
foreign tax consequences and federal estate or gift taxation of the ownership
and disposition of the shares.
The following discussion is a summary of the tax rules applicable to U.S.
Holders of shares and does not consider any U.S. federal income tax consequences
to non-U.S. Holders. As used herein, "U.S. Holder" means a beneficial owner of
shares that is (i) an individual who is a citizen or resident of the U.S., (ii)
a corporation, partnership or other entity created or organized in the U.S. or
under the laws of the U.S. or of any political subdivision thereof, (iii) an
estate the income of which may be included in gross income for U.S. federal
income tax purposes regardless of its source, (iv) a trust if a court within the
U.S. is able to exercise primary supervision over the administration of the
trust and one or more U.S. persons have the authority to control all substantial
decisions of the trust, or some trusts in existence on August 20, 1996 that were
treated as U.S. persons under the law in effect immediately prior to that date
and that make a valid election to be treated as a U.S. person, or (v) any other
person or entity that would be subject to U.S. federal income tax on a net
income basis in respect of the common shares.
Taxation of Dispositions
A U.S. Holder will recognize gain or loss for U.S. federal income tax purposes
upon the sale or other disposition of the shares in an amount equal to the
difference between the amount realized and the U.S. Holder's adjusted tax basis
in the shares. For these purposes, a U.S. Holder's adjusted tax basis in the
shares generally will equal the U.S. dollar cost of such shares to such U.S.
Holder. Subject to the passive foreign investment company rules described below,
gain or loss realized by a U.S. Holder on such sale or other disposition
generally will be treated as capital gain or loss, and will be long-term capital
gain or loss if the shares were held for more than one year. Any such gain
generally would be treated as U.S. source income for U.S. foreign tax credit
purposes. Net long-term capital gain recognized by a U.S. Holder who is an
individual generally is subject to reduced rates of taxation. The deduction of
capital losses is subject to certain limitations. Prospective investors should
consult their own tax advisors in this regard.
If we repurchase shares, the repurchase generally will be treated as a sale or
exchange of the shares subject to the rules discussed above. However, under
certain circumstances as provided in Section 302 of the Internal Revenue Code,
the repurchase may be treated fully or partially as a dividend taxable as
ordinary income to a U.S. Holder. U.S. Holders should consult their own tax
advisors concerning the U.S. federal income tax consequences of a repurchase of
their shares.
Taxation of Dividends
Subject to the passive foreign investment company rules described below, the
gross amount of any distribution paid (including amounts withheld to pay
Netherlands taxes) with respect to the shares generally should be included in
the gross income of a U.S. Holder as foreign source dividend income to the
extent paid out of our current or accumulated earnings and profits, as
determined under U.S. federal income tax principles. Such dividends will be
foreign source
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income and will be either "passive income" or "financial services" income for
U.S. foreign tax credit purposes. To the extent that the amount of any
distribution exceeds our current and accumulated earnings and profits for a
taxable year, the distribution will first be treated as a tax-free return of
capital to the extent of the U.S. Holder's adjusted tax basis in the shares
(thereby increasing the amount of gain and decreasing the amount of loss to be
recognized on the subsequent disposition of the shares), and to the extent that
such distribution exceeds the U.S. Holder's adjusted tax basis in the shares
such excess will be taxed as capital gain.
To the extent such distributions are treated as capital gains, such gain would
be U.S. source. Accordingly, a U.S. Holder would not be able to use the foreign
tax credit arising from any Netherlands withholding taxes imposed on such
distribution unless such credit can be applied (subject to applicable
limitations) against U.S. tax due on other foreign source income in the
appropriate category for foreign tax credit purposes. Distributions treated as
dividends will not be eligible for the dividends received deduction generally
allowed to corporations under the Internal Revenue Code. If a U.S. Holder
receives a dividend in Netherlands guilders or in Euros, the amount of the
dividend for U.S. federal income tax purposes will be the U.S. dollar value of
the dividend, determined at the spot rate in effect on the date of such payment,
regardless of whether the payment is later converted into U.S. dollars. In the
case of such later conversion, the U.S. Holder may recognize U.S. source
ordinary income or loss as a result of currency fluctuations between the date on
which the dividend is paid and the date the dividend amount is converted to U.S.
dollars.
Credit for Foreign Taxes Withheld
Subject to certain conditions and limitations set forth in Sections 901 and 904
of the Internal Revenue Code, including certain holding period requirements,
foreign tax withheld or paid with respect to dividends on common shares
generally will be eligible for credit against a U.S. Holder's U.S. federal
income tax liability. Alternatively, a U.S. Holder may claim a deduction for
such amount of withheld foreign taxes, but only for a year for which such U.S.
Holder elects to do so with respect to all foreign income taxes. The overall
limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. U.S. Holders should consult their own tax
advisors with respect to the availability of a foreign tax credit or deduction
for foreign, including Netherlands, taxes withheld.
Anti-Deferral Tax Rules
The Internal Revenue Code contains various provisions that impose current U.S.
federal income tax on certain foreign corporations or their U.S. shareholders if
such corporations derive certain types of passive income and fail to make
adequate distribution of profits to their U.S. shareholders. These provisions
include the controlled foreign corporation rules, passive foreign investment
company, foreign investment company, foreign personal holding company and the
personal holding company rules. While we do not believe that any of these rules
will likely apply to us, we are not certain that we can avoid these tax rules
because we cannot predict with any degree of certainty the amount and character
of our future income or the amount of our shares any particular U.S. Holder will
own. Accordingly, we will only briefly summarize those provisions and then only
the rules that we believe would have the greatest likelihood of applying to us
in the future.
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Passive Foreign Investment Company
The passive foreign investment company ("PFIC") provisions of the Internal
Revenue Code can have significant tax effects on U.S. Holders. In general, a
foreign corporation will be a PFIC if:
- - 75% or more of its gross income (including the foreign corporation's pro
rata share of the gross income of any U.S. or foreign company in which the
corporation owns or is considered to own 25% or more of the shares by
value) in a taxable year is passive income; or
- - at least 50% of the corporation's assets in a taxable year (averaged over
the year and ordinarily determined based on fair market value and including
the pro rata share of the assets of any U.S. or foreign company in which
the corporation owns or is considered to own 25% or more of the shares by
value) are held for the production of, or produce, passive income.
If we were a PFIC for a taxable year during which a U.S. Holder owned our
shares, and the U.S. Holder did not make an election either to treat us as a
qualified electing fund (within the meaning of the Internal Revenue Code) for
the first taxable year in the U.S. Holder's holding period that we were a PFIC
or to mark our shares to market, then:
- - Excess distributions paid to a U.S. Holder would be taxed in a special way.
Excess distributions are amounts received by a U.S. Holder with respect to
our shares in any taxable year that exceed 125% of the average
distributions received by the U.S. Holder from us in the three previous
years before the current taxable year (or, if shorter, the U.S. Holder's
holding period for the shares). Excess distributions must be allocated
ratably to each day that a U.S. Holder has held our shares. A U.S. Holder
must report amounts allocated to the current taxable year (and to prior
taxable years during which we were not a PFIC) as ordinary income for the
current taxable year. A U.S. Holder must also pay tax in the current year
on amounts allocated to each prior taxable year for which we were a PFIC at
the highest rate in effect for that year on ordinary income and the tax is
subject to an interest charge (as if the amounts were actually received by
the holder in that prior year) at the rate applicable to income tax
deficiencies.
- - the entire amount of gain that is recognized by a U.S. Holder upon a sale
or other disposition of shares will also be considered an excess
distribution and will be subject to tax as described above.
If a U.S. Holder makes a qualified electing fund election for all taxable years
during which the U.S. Holder owned our shares and we were a PFIC, the PFIC rules
described above will not apply to that U.S. Holder. Instead, such U.S. Holder of
a qualified electing fund is required for each taxable year to include in income
a pro rata share of the ordinary earnings of the qualified electing fund as
ordinary income and a pro rata share of the net capital gain of the qualified
electing fund as long-term capital gain, subject to a separate election to defer
payment of taxes and incur an interest charge. The qualified electing fund
election is made on a shareholder-by-shareholder basis and can be revoked only
with the consent of the Internal Revenue Service. If we are or become a PFIC, we
may not be able or willing to satisfy the record keeping requirements that would
enable a U.S. Holder to make a qualified election fund election.
In lieu of making a qualified electing fund election, a U.S. Holder of publicly
traded PFIC shares could elect to mark the shares to market annually, in which
case if the fair market value of the
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U.S. Holder's PFIC shares exceeds the U.S. Holder's adjusted tax basis in those
shares as of the close of the U.S. Holder's taxable year, the U.S. Holder will
recognize the amount of the excess as ordinary income. Likewise, if the fair
market value of the U.S. Holder's PFIC shares is less than the U.S. Holder's
adjusted tax basis in those shares as of the close of the U.S. Holder's taxable
year, the U.S. Holder may recognize the difference as ordinary loss. Losses are
allowed only for the amount of net gain previously included by the U.S. Holder
under the election for prior taxable years. Provided that if the U.S. Holder has
elected to mark our shares to market for all taxable years during which (i) the
U.S. Holder owned our shares and (ii) we were a PFIC, the PFIC rules generally
will not apply to such U.S. Holder. We believe that we are not a PFIC, and we do
not expect to become a PFIC. However, we cannot assure you that we will not
qualify as a PFIC in the future.
If U.S. Holders own shares during any year in which we are a PFIC, the U.S
Holders must file Internal Revenue Service Form 8621.
Foreign Personal Holding Company Rules
Special U.S. tax rules apply to a shareholder of a foreign personal holding
company ("FPHC"). A foreign corporation will be classified as a FPHC for U.S.
federal income tax purposes if the following two tests are satisfied:
- - five or fewer individuals who are U.S. citizens or residents actually or
constructively own, under attribution rules, more than 50% of all classes
of the corporation's shares measured by voting power or value at any time
during the corporation's taxable year; and
- - the corporation receives at least 60% (50% if the corporation has qualified
as a foreign personal holding corporation in a prior taxable year) of its
gross income regardless of source, as specifically adjusted, from passive
sources (e.g., dividends, interest, gains from the sale or exchange of
shares or securities, rents and royalties).
If a corporation is classified as a FPHC, a portion of its undistributed FPHC
income, as defined for U.S. federal income tax purposes, would be imputed to all
of its shareholders who are U.S. Holders on the last taxable day of the
corporation's taxable year, or, if earlier, the last day on which it is
classifiable as a FPHC. The imputed income would be taxable as a dividend, even
if no cash dividend is actually paid. We believe that we are not a FPHC, and we
do not expect to become a FPHC. However, we can not assure you that we will not
qualify as a FPHC in the future.
Personal Holding Company Rules
A foreign corporation may be classified as a personal holding company for U.S.
federal income tax purposes if the following two tests are satisfied:
- - If at any time during the last half of the corporation's taxable year, five
or fewer individuals (without regard to their citizenship or residency)
actually or constructively own, under attribution rules, more than 50% of
the shares of the corporation by value; and
- - 60% or more of the foreign corporation's gross income derived from U.S.
sources or effectively connected with a U.S. trade or business, as
specifically adjusted, is from passive sources like interest, dividends and
royalty payments.
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A personal holding company generally is taxed currently at a rate of 39.6% on
its undistributed personal holding company income, which is calculated based
generally on the corporation's taxable income after deducting dividends paid and
making certain other adjustments. Even if we were to become a PHC, we do not
expect to have material undistributed PHC income. However, we cannot assure you
that we will not become a PHC because of uncertainties regarding the application
of the constructive ownership rules and the possibility of changes in our
shareholder base and income or other circumstances that could change the
application of the PHC rules to us. In addition, if we become a PHC we cannot
assure that the amount of our PHC income will be immaterial.
Controlled Foreign Corporation Rules
If more than 50% of the voting power or total value of all classes of our shares
is owned, directly or indirectly, by U.S. shareholders, each of which owns 10%
or more of the total combined voting power of all classes of our shares, we
could be treated as a controlled foreign corporation ("CFC") under Subpart F of
the Internal Revenue Code. This classification would require such 10% or greater
shareholders to include in income their pro rata shares of our "Subpart F
Income," as defined in the Internal Revenue Code. In addition, under Section
1248 of the Internal Revenue Code, gain from the sale or exchange of shares by
an U.S. Holder who is or was a 10% or greater shareholder at any time during the
five year period ending with the sale or exchange will be ordinary dividend
income to the extent of our earnings and profits attributable to the shares sold
or exchanged. We believe that we are not a CFC and we will not become a CFC,
however, we can not assure you that we will not become a CFC in the future.
Backup Withholding
In general, information reporting requirements will apply to certain payments
made in respect of the shares and the proceeds received on the disposition of
the shares paid within the U.S. (and in certain cases, outside the U.S.) to U.S.
Holders. Such amounts may be subject to a 31% U.S. backup withholding tax unless
the U.S. Holder otherwise establishes an exemption. For example, backup
withholding will not apply to a U.S. Holder who (1) is a corporation or comes
within certain other exempt categories and, when required, demonstrates that
fact, or (2) furnishes a correct taxpayer identification number or certificate
of foreign status and makes certain other required certifications as provided by
the backup withholding rules.
The amount of any backup withholding from a payment to a U.S. Holder will be
allowed as a credit against the U.S. Holder's U.S. federal income tax liability
provided that the required information is furnished to the Internal Revenue
Service.
The discussion set forth above is included for general information only and may
not be applicable depending upon a holder's particular situation. Holders should
consult their tax advisors with respect to the tax consequences to them of the
purchase, ownership and disposition of shares including the tax consequences
under state, local and other tax laws and the possible effects of changes in
U.S. federal and other tax laws.
H. Documents on Display
Whenever a reference is made in this Form 20-F to any contract, agreement or
other document, the reference may not be complete and you should refer to the
copy of that contract, agreement or other document filed as an exhibit to one of
our previous SEC filings.
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We file annual and special reports and other information with the SEC. You may
read and copy all or any portion of the registration statement and any other
document we file with the SEC at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room. Commencing with filings
made this year, such material may also be obtained at the Internet site the SEC
maintains at http://www.sec.gov which contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC.
I. Subsidiary Information
See the financial statements to this Form 20-F.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
MARKET RISK DISCLOSURE
We are exposed to currency fluctuations, most notably fluctuations of the United
States dollar, the Hong Kong dollar and the Japanese yen against the Euro. To
the extent that these fluctuations affect the value of our investments in our
affiliates, they are not hedged. The cumulative effect of these fluctuations are
separately reported in shareholders' equity and 2000 showed a negative movement
of E0.9 million.
CURRENCY
Currency fluctuations that affect operating cash flows are hedged as a policy.
We view exposures on a consolidated basis and sell off or cover excess or short
positions, using spot or forward contracts which are entered into with
commercial banks of good standing. At December 31, 2000 we had outstanding
forward exchange contracts in which we agreed to buy foreign currencies in the
amount of E5,495 and to sell foreign currencies in the amount of E7,549. At
December 31, 2000 the fair market value of these exchange contracts were E5,761
and E7,141 respectively.
The operations of our subsidiaries are generally financed with debt issued in
our subsidiaries' respective functional currencies. Thus, we believe we do not
have significant currency exposure related to our borrowings.
INTEREST RATES
A considerable percentage of our outstanding debt bears interest which are
typically variable in nature. We are exposed to interest rate risk primarily
through our borrowing activities. We do not enter into financial instrument
transactions for trading or speculative purposes or to manage interest rate
exposure. Therefore, a 1% adverse change in interest rates on the portion of our
debt bearing interest at variable rates would result in an annual increase in
interest expense of approximately E0.8 million at December 31, 2000 borrowing
levels.
EURO
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The Netherlands, our country of domicile, is one of the countries that
participates in the use of the Euro, the new currency unit that has been
available since January 1, 1999. Until 2002, the participating countries will
allow both the Euro and local currencies as legal tender. Our European
operations will therefore use the Euro as their functional currency as soon as
possible after its introduction. The actual introduction is not critical for our
business but will depend on availability of reliable software for accounting,
payroll and other internal functions and will be achieved over a period of time,
but before 2002. The introduction of the Euro will not significantly affect our
currency profile or risk as the Euro has a fixed exchange risk against the
Netherlands guilder.
Effective beginning of fiscal year 1999, we changed our reporting currency from
Netherlands guilders to Euros. Prior year balances have been restated based on
the fixed exchange rate of E1.00 to Nlg. 2.20371. The comparative balances
reported in Euros depict the same trends as would have been presented if we had
continued to present balances in Netherlands guilders. Balances for periods
prior to January 1, 1999 are not comparable to the balances of other companies
that report in Euros but restated amounts from a different currency than
Netherlands guilders due to the fixing of the exchange rate between the Euro and
the currencies of participating countries. See Note A of the Consolidated
Financial Statements.
FINANCIAL INSTRUMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
(`SFAS 133') as amended by SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities", is effective for the Company as of January 1, 2001.
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at fair value. Gains or losses resulting from changes in the value of
derivatives are accounted for depending on the intended use of the derivative
and whether they qualify for hedge accounting. The Company believes that the
adoption of SFAS 133, effective January 1, 2001, will not have a significant
impact on the results of operations or financial position.
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modification to the Rights of Security Holders and Use of
Proceeds.
None.
Part III
Item 17. Financial Statements.
Not applicable.
Item 18. Financial Statements.
54
55
See pages F-1 through F-24
Item 19. Exhibits
Exhibit Number Description Incorporated by Included Herein:
- -------------- ----------- ---------------- ----------------
Reference to:
-------------
1.1 Articles of Association Exhibit 4.1 to
of Registrant, with Registrant's
English translation Registration Statement
on Form F-3 filed on
December 15, 1997
4.1 1994 Stock Option Plan Exhibit 99.1 to the
Registrant's S-8 filed
October 25, 1999
4.2 Debenture Purchase Exhibit 4.2 to the
Agreement Part 1 Registrant's Form F-3
filed on December 13,
1999
4.3 Debenture Purchase Exhibit 4.2 to the
Agreement Part 2 Registrant's Form F-3
filed on December 13,
1999
4.4 Zero Coupon Debenture Exhibit 4.3 to the
Registrant's Form F-3
filed on December 13,
1999
4.5 Common Stock Purchase Exhibit 4.4 to the
Warrant Registrant's Form F-3
filed on December 13,
1999
4.6 Supplemental Common Exhibit 4.5 to the
Stock Purchase Warrant Registrant's Form F-3
filed on December 13,
1999
4.7 Registration Rights Exhibit 4.6 to the
Agreement Registrant's Form F-3
filed on December 13,
1999
4.8 Equity Line Financing Exhibit 23.1 to
Agreement between ASM Registrant's 6-K filed
International N.V. and on September 6, 2000
Canadian Imperial
Holdings Inc. dated July
6, 2000
4.9 Amendment No. 1 to the X
Equity Line Agreement
between ASM
International N.V. and
Canadian
55
56
Imperial Holdings Inc.
4.10 Credit Agreement among Exhibit 23.2 to
ASM International N.V., Registrant's 6-K filed
Canadian Imperial Bank on September 6, 2000
of Commerce and
Advanced Semiconductor
Materials (Netherlands
Antilles) N.V. dated
July 6, 2000
4.11 Amendment No. 1 to the X
Credit Agreement among
ASM International N.V.
and Canadian Imperial
Bank of Commerce,
Advanced Semiconductor
Materials (Netherlands
Antilles) N.V.
4.12 Registration Rights Exhibit 23.3 to
Agreement between ASM Registrant's 6-K filed
International N.V. and on September 6, 2000
Canadian Imperial
Holdings Inc. dated July
6, 2000
4.13 Amendment No. 1 to the X
Registration Rights
Agreement between ASM
International N.V. and
Canadian Imperial
Holdings Inc.
4.14 Security Agreement among Exhibit 23.4 to the
ASM International N.V., Registrant's 6-K filed
Advanced Semiconductor on September 6, 2000
Materials (Netherlands
Antilles), N.V. and
Canadian Imperial Bank
of Commerce dated July
6, 2000
4.15 Supplement No. 1 to the X
Security Agreement
between ASM
International N.V. ,
Advanced Semiconductor
Materials (Netherlands
Antilles),
56
57
N.V. and Canadian
Imperial Bank of Commerce
8.1 Subsidiaries Included on page 24 of
this annual report.
57
58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
ASM International N.V.
Independent Auditors' Report of Deloitte & Touche Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000 F-3
Consolidated Statements of Operations for the years ended December 31,
1998, 1999 and 2000 F-4
Consolidated Statements of Comprehensive Income F-5
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1998, 1999 and 2000 F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1999 and 2000 F-6
Notes to the Consolidated Financial Statements F-7
F-1
59
Independent Auditors' Report
Board of Directors and Shareholders
ASM International N.V.
Bilthoven, the Netherlands
We have audited the accompanying consolidated balance sheets of ASM
International N.V. and subsidiaries (collectively, the 'Company') as of December
31, 1999 and 2000, and the related consolidated statements of operations,
comprehensive income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1999 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000, in
conformity with generally accepted accounting principles in the United States of
America.
Deloitte & Touche
Accountants
Amsterdam, the Netherlands,
February 9, 2001
F-2
60
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------------------
(thousands except share data) EUR
- ------------------------------------------------------------------------------------------------------------------------------------
December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Assets NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents B 14,153 106,805
Marketable securities B 5,709 5
Accounts receivable (less allowance for doubtful accounts of
E 1,432 and E 8,734) 149,115 238,620
Inventories C 107,280 188,001
Other current assets 15,844 23,828
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 292,101 557,259
Property, plant and equipment, net D 127,176 152,168
Goodwill, net E 5,758 68,513
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 425,035 777,940
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Notes payable to banks F 22,667 13,136
Accounts payable 108,922 142,342
Accrued expenses 48,566 88,703
Advance payments from customers 4,595 13,623
Deferred revenue - 14,913
Income taxes G 3,887 22,988
Current portion of long-term DEBT H 36,944 31,484
Subordinated debt I 52,285 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 277,866 327,189
Long-term debt H 7,997 31,660
Deferred income taxes G 3,490 838
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 289,353 359,687
Minority interest in subsidiary 70,130 109,931
Shareholders' Equity:
Common shares
Authorized 60,000,000 shares, par value NLG.01, issued and
outstanding 40,107,784 and 48,797,346 shares 182 221
Financing preferred shares
Authorized 900 shares, par value NLG100, none issued - -
Preferred shares
Authorized 6,900 shares, par value NLG100, none issued - -
Capital in excess of par value 103,443 252,784
Retained (deficit) earnings (35,454) 58,818
Accumulated other comprehensive income (loss) (2,619) (3,501)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity J 65,552 308,322
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity 425,035 777,940
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
F-3
61
CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
(thousands except per share data) EUR
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE 1998 1999 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales Q 288,111 414,495 935,212
Cost of sales (179,326) (244,485) (518,027)
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 108,785 170,010 417,185
Operating expenses:
Selling, general and administrative costs E (59,924) (83,170) (147,318)
Research and development, net M (36,277) (47,145) (73,800)
Amortization of goodwill (93) (340) (4,295)
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses (96,294) (130,655) (225,413)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings from operations Q 12,491 39,355 191,772
Net interest and other financial income (expenses) (5,350) (8,608) (1,595)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, minority interest
and cumulative effect of change in accounting principle 7,141 30,747 190,177
Income taxes G (648) (1,274) (22,830)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before minority interest and cumulative
Effect of change in accounting principle 6,493 29,473 167,347
Minority interest (6,261) (18,374) (69,285)
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings before cumulative effect of change in
Accounting principle q 232 11,099 98,062
Cumulative effect of change in accounting principle, net of tax A -- -- (3,790)
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 232 11,099 94,272
- ------------------------------------------------------------------------------------------------------------------------------------
Basic net earnings per share:
Net earnings before cumulative effect of change in
accounting principle 0.01 0.30 2.09
Cumulative effect of change in accounting principle A -- -- (0.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 0.01 0.30 2.01
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted net earnings per share:
Net earnings before cumulative effect of change in
accounting principle 0.01 0.29 2.02
Cumulative effect of change in accounting principle A -- -- (0.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 0.01 0.29 1.94
====================================================================================================================================
Proforma amounts assuming the new accounting principle
is applied retroactively:
Net earnings A 585. 8,881 98,062
Basic net earnings per share 0.02 0.24 2.09
Diluted net earnings per share 0.02 0.23 2.02
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares:
Basic S 33,794 37,301 46,810
Diluted S 34,743 40,664 48,703
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
See Notes to Consolidated Financial Statements.
Balances prior to January 1, 1999 were restated from Netherlands guilders into
Euros using the fixed exchange rate as of January 1, 1999 (EUR 1.00 =
NLG 2.20371).
F-4
62
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(thousands) EUR
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 232 11,099 94,272
Other comprehensive income (loss)
Exchange rate changes for the year. 137 9,448 (882)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other comprehensive income (loss) 137 9,448 (882)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 369 20,547 93,390
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------
See Notes to Consolidated Financial Statements.
Balances prior to January 1, 1999 were restated from Netherlands guilders into
Euros using the fixed exchange rate as of January 1, 1999 (EUR 1.00 = NLG
2.20371)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(thousands, except for number of common shares)
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Common Capital in Retained Accumulated
common Shares excess of earnings other com-
shares par value (deficit) prehensive
NOTE income (loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 33,379,043 151 74,858 (46,785) (12,204)
Issuance of common shares:
For stock options P 961,800 5 436 -- --
Other 200,000 1 702 -- --
Net earnings -- -- -- 232 --
Fair value of warrants issued -- -- 2,455 -- --
Debt conversion discount -- -- 476 -- --
Exchange rate changes for the year -- -- -- -- 137
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 34,540,843 157 78,927 (46,553) (12,067)
Issuance of common shares:
For stock options P 169,900 1 495 -- --
Conversion of subordinated notes 5,397,041 24 24,021 -- --
Net earnings -- -- -- 11,099 --
Exchange rate changes for the year -- -- -- -- 9,448
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 40,107,784 182 103,443 (35,454) (2,619)
ISSUANCE OF COMMON SHARES:
FOR STOCK OPTIONS P 901,605 4 3,123 -- --
EXERCISE OF WARRANTS J 3,537,957 16 27,514 -- --
PUBLIC OFFERING J 4,250,000 19 119,692 -- --
NET EARNINGS -- -- -- 94,272 --
FAIR VALUE OF PUT OPTION FOR
STRUCTURED EQUITY LINE -- -- (988) -- --
EXCHANGE RATE CHANGES FOR THE YEAR -- -- -- -- (882)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 2000 48,797,346 221 252,784 58,818 (3,501)
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------
See Notes to Consolidated Financial Statements.
Balances prior to January 1, 1999 were restated from Netherlands guilders
into Euros using the fixed exchange rate as of January 1, 1999 (EUR 1.00 =
NLG 2.20371)
F-5
63
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands) EUR
- ----------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- ----------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings 232 11,099 94,272
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation and amortization 22,688 24,487 52,223
Amortization of discounted financing costs -- 1,421 1,575
Cumulative effect of change in accounting principle, net of tax -- -- 3,790
Deferred income taxes (56) (123) (2,652)
Minority interest 6,261 18,374 69,285
Increase (decrease) in allowance for doubtful receivables (1,492) (407) 7,302
Changes in other assets and liabilities:
Accounts receivable 12,831 (64,514) (96,807)
Inventories 14,230 (42,644) (73,462)
Other current assets 850 (7,091) (7,984)
Accounts payable and accrued expenses (25,002) 102,928 74,757
Advance payments from customers (2,573) 1,468 9,028
Deferred revenue -- -- 2,664
Income taxes (1,935) 1,904 19,101
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 26,034 46,902 153,092
Cash flows from investing activities:
Capital expenditures (24,142) (30,587) (71,366)
Acquisition of shares from minority shareholders -- -- (75,461)
Acquisition of business -- (1,267) (96)
Proceeds from sale of property, plant and equipment 2,448 2,453 4,332
Proceeds from (purchase of) marketable securities (1,538) 2,607 6,214
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (23,232) (26,794) (136,377)
Cash flows from financing activities:
Notes payable to banks, net (8,567) (15,372) (9,531)
Proceeds from long-term debt and subordinated debt 27,574 16,652 78,466
Repayments of long-term debt and subordinated debt (29,730) (19,690) (96,202)
Proceeds from issuance of common shares 1,144 496 126,813
Fair value of put option for structured equity line -- -- (988)
Dividends paid to minority shareholders (5,526) (8,384) (28,249)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (15,105) (26,298) 70,309
Exchange rate effects (3,418) 8,619 5,628
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (15,721) 2,429 92,652
Cash and cash equivalents at beginning of year 27,445 11,724 14,153
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year 11,724 14,153 106,805
======================================================================================================================
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest 7,232 7,916 2,257
Income taxes 2,638 (505) 6,381
- ----------------------------------------------------------------------------------------------------------------------
Non cash investing activities:
Acquisition of business through issuance of convertible note -- (3,868) --
- ----------------------------------------------------------------------------------------------------------------------
Non cash financing activities:
Conversion of subordinated notes and 6 % zero-coupon
debentures into common shares -- 24,045 23,555
======================================================================================================================
See Notes to Consolidated Financial Statements.
Balances prior to January 1, 1999 were restated from Netherlands guilders into
Euros using the fixed exchange rate as of January 1, 1999 (EUR 1.00 = NLG
2.20371.
F-6
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EUR in thousands, unless otherwise stated)
NOTE A Summary of significant Accounting Policies
General - ASM International N.V. (`ASMI' or `the Company') is a corporation
domiciled in the Netherlands with principal operations in Europe, the United
States, South East Asia and Japan. The Company dedicates its resources to the
research, development, manufacturing, marketing and servicing of equipment and
materials used to produce semiconductor devices. ASMI provides production
solutions for the main areas of semiconductor production: wafer processing
(Front-end), assembly and packaging (Back-end). The Company follows accounting
principles generally accepted in the United States of America. Effective
beginning of the year ended December 31, 1999, the Company changed its reporting
currency from Netherlands guilders (NLG) to Euros (EUR or E). Balances for the
year ended December 31, 1998 have been restated using the fixed exchange rate as
of January 1, 1999 (EUR 1.00 = NLG 2.20371).
The comparative balances reported in Euros depict the same trends as would have
been presented if the Company had continued to present balances in Netherlands
guilders. Balances for periods prior to January 1, 1999 are not comparable to
the balances of other companies that report in Euros having restated amounts
from a different currency than Netherlands guilders.
Principles of Consolidation - The Consolidated Financial Statements include the
accounts of ASMI and its subsidiaries (`the Company'), in all of which ASMI
holds a controlling interest. The minority interest of third parties is
disclosed separately in the Financial Statements. All intercompany profits,
transactions and balances have been eliminated in consolidation. Intercompany
profits included in inventory are recognized in the Statement of Operations
upon the sale of the respective inventory.
Foreign Currency Translation - Assets and liabilities of foreign subsidiaries
are translated into Euros at exchange rates prevailing at the end of the year.
Revenues and costs relating to the operation of such subsidiaries are translated
at average exchange rates during the period. Resulting translation adjustments
are directly recorded in Shareholders' Equity. Foreign currency transaction
gains and losses generally are included in determining net earnings. From time
to time the Company enters into foreign currency exchange contracts as a hedge
against transactions denominated in foreign currencies. Gains and losses in
market value of such contracts are recognized as an offset against foreign
exchange gains or losses on the underlying transactions. A change in the market
value of a foreign exchange contract that is a hedge of a firm commitment is
deferred and included in the valuation of the completed transaction.
Revenue Recognition - Effective January 1, 2000 the Company adopted new guidance
on revenue recognition as is described in Staff Accounting Bulletin No. 101
"Revenue Recognition in Financial Statements" ("SAB 101"), issued by the staff
of the Securities and Exchange Commission (the "SEC") in December 1999.
Net revenues include product revenues derived primarily from sales of Front-end
and Back-end equipment used by both segments of the semiconductor market. The
Company recognizes revenue from equipment sales upon shipment of its products
when it is proven prior to shipment that the equipment has met all of the
customers' criteria and specifications. The installation process is not believed
to be essential to the functionality of the Company's products. However, since
under most of the Company's sales contracts, the timing of payment of a portion
of the sales price is coincident with installation, such installation is not
considered to be inconsequential or perfunctory under the guidance of SAB 101.
Therefore, at the time of shipment, the Company defers that portion of the sales
price related to the fair value of installation at the time of shipment. The
Company believes it has an enforceable claim for that portion of the sales price
not related to the fair value of the installation should it not fulfill its
installation obligation. The fair value of the installation process is measured
based upon the per-hour amounts charged by third parties for similar
installation services. When the Company can only satisfy the customer acceptance
criteria or specifications at the customer's location, revenue is deferred until
final acceptance by the customer or until contractual conditions lapse.
F-7
65
The Company provides training and technical support to customers. Revenue
related to such services are recognized when the service is completed. Revenue
from the sale of spare parts and materials is recognized when the goods are
shipped.
The Company previously recognized revenue from the sale of all equipment sales
including installation services at the time of transfer of title, and when no
significant contractual obligations remained. Revenue recognition for sale of
spare parts and services has not been changed.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand,
amounts due from banks on demand, and short-term deposits with a maturity of
three months or less at the date of purchase.
Marketable Securities - The Company classifies all its investments in marketable
securities as available for sale which requires the Company to report these
investments at fair market value and record the unrealized gains and losses,
after tax, as a component of Shareholders' Equity. In the accompanying Financial
Statements the marketable securities are carried at cost which approximates fair
market value. Realized gains and losses on securities sold are included in net
earnings.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
method) or market. Costs include net prices paid for materials purchased,
charges for freight and custom duties, direct wages of employees and charges for
factory production overhead.
Property, Plant and Equipment - Property, plant and equipment are carried at
cost (net of government grants), less accumulated depreciation. Capital leased
assets are recorded at the present value of future lease obligations.
Depreciation is calculated using the straight-line method over the estimated
useful lives.
Goodwill - Goodwill represents the excess of the cost of businesses acquired
over the fair market value of identifiable net assets at the dates of
acquisition. Goodwill arising on acquisitions is amortized on a straight-line
basis over the estimated useful life thereof. The Company reviews goodwill for
impairment whenever facts or circumstances indicate that the carrying amounts
may not be recoverable.
Recoverability of Long-Lived Assets - In accordance with Statement of Financial
Accounting Standard (`SFAS') No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of", long-lived assets
and certain identifiable intangibles held and used by a company are required to
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the Company estimates the future cash flows expected
to result from the use of the asset and its eventual disposition. If the
undiscounted future cash flow is less than the carrying amount of the asset, the
asset is deemed impaired. The amount of the impairment is measured as the
difference between the carrying value and the fair value of the asset.
Generally, long-lived assets and certain identifiable intangibles to be disposed
of are reported at the lower of carrying amount or fair value less cost to sell.
Income Taxes - The Company accounts for income taxes under the provisions of
SFAS No. 109, "Accounting for Income Taxes" (`SFAS 109'). SFAS 109 requires
recognition of deferred tax assets and liabilities for the estimated future tax
consequences of events 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 carryforwards. Deferred
tax assets and liabilities are measured using enacted rates in effect for the
year in which the differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of changes in tax rates is
recognized in the Statement of Operations in the period in which the enactment
date changes. Deferred tax assets and liabilities are reduced through the
establishment of a valuation allowance at such time as, based on available
evidence, it is more likely than not that the deferred tax assets will not be
realized.
Stock-Based Compensation - The Company accounts for its stock option and
stock-based compensation plans using the intrinsic-value method prescribed in
Accounting Principles Board Opinion No. 25,
F-8
66
"Accounting for Stock Issued to Employees" (`APB 25'). Accordingly, the Company
computes compensation costs for each employee stock option granted as the amount
by which the estimated fair value of the Company's common shares on the date of
the grant exceeds the amount the employee must pay to acquire the shares. As
required by SFAS No. 123, "Accounting for Stock-Based Compensation" (`SFAS
123'), the Company has included, in Note P, the required SFAS 123 pro forma
disclosures of net income (loss) and earnings (loss) per share as if the fair
value-based method of accounting had been applied.
Research and Development Expenses - Research and development costs are expensed
as incurred. Costs which relate to prototype and experimental models which are
sold to customers are charged to cost of sales. Subsidies and other governmental
credits to cover research and development costs relating to approved projects
are recorded as research and development credits in the period when such project
costs occur. Technical development credits (Technische Ontwikkelings Kredieten
or `TOK's') received from the Netherlands government to offset the cost of
certain research and development projects are contingently repayable to the
extent sales of equipment developed in such projects occur. Such repayments are
calculated as a percentage of sales and are charged to cost of sales. No such
repayments are required if such sales do not occur (see Note M).
Comprehensive Income - Effective fiscal year 1998, the Company adopted Statement
of Financial Accounting Standards No. 130 (FASB 130), `Reporting Comprehensive
Income'
New Accounting Pronouncements - SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (`SFAS 133') as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133", and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", is effective for
the Company as of January 1, 2001. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at fair value. Gains or losses
resulting from changes in the value of derivatives are accounted for depending
on the intended use of the derivative and whether they qualify for hedge
accounting. The Company believes that the adoption of SFAS 133, effective
January 1, 2001, will not have a significant impact on the results of operations
or financial position.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
necessarily 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.
Reclassifications - Certain reclassifications have been made to prior year
Financial Statements to conform to the current year presentation.
Cumulative Effect of Change in Accounting Principle - As more fully described
under Revenue Recognition, the Company adopted the guidance outlined in SAB 101.
The new method of revenue recognition was adopted January 1, 2000 and has been
applied retroactively to revenue earned in prior years. The effect of the change
in 2000 was to decrease net earnings by E 1,710 (or E 0.04 per basic and diluted
earnings per share). The adjustment of E 3,790 to apply retroactively the new
method is included in the statement of operations for the year ended December
31, 2000. The pro forma amounts shown on the income statement have been adjusted
for the effect of retroactive application on revenues and costs and related
income taxes.
F-9
67
NOTE B Cash and Cash Equivalents, Marketable Securities
At December 31, 2000, cash and cash equivalents and marketable securities of the
Company's subsidiary ASM Pacific Technology Ltd ('ASMPT') amounting to E 89,708
are restricted to use in the operations of this company only.
NOTE C Inventories
Inventories are comprised of the following:
- -------------------------------------------------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 2000
- -------------------------------------------------------------------------------------------------------------------------
Components and raw materials 41,052 68,786
Work in process 50,612 104,875
Finished goods 15,616 14,340
- -------------------------------------------------------------------------------------------------------------------------
Inventories 107,280 188,001
=========================================================================================================================
NOTE D Property, Plant and Equipment
- -------------------------------------------------------------------------------------------------------------------------
Land, Machinery,
Buildings Equipment,
and leasehold Furniture
improvements and fixtures Total
- -------------------------------------------------------------------------------------------------------------------------
At cost:
Balance January 1, 2000 74,389 201,730 276,119
Capital expenditures 5,847 65,519 71,366
Retirements and sales (3,463) (35,857) (39,320)
Translation effect 6,439 6,284 12,723
- -------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2000 83,212 237,676 320,888
- -------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation:
Balance January 1, 2000 30,729 118,214 148,943
Depreciation for the year 9,525 38,403 47,928
Retirements and sales (1,885) (33,103) (34,988)
Translation effect 2,317 4,520 6,837
- -------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2000 40,686 128,034 168,720
=========================================================================================================================
Property, plant and equipment, net:
January 1, 2000 43,660 83,516 127,176
December 31, 2000 42,526 109,642 152,168
=========================================================================================================================
Useful lives in years:
- Buildings and leasehold improvements 10-25 year
- Machinery and equipment 2-10 year
- Furniture and fixtures 2-10 year
Leasehold improvements are depreciated over the lesser of the useful life of the
underlying property and the lease term.
F-10
68
NOTE E Goodwill
- -------------------------------------------------------------------------------------------------------------------------
At cost:
Balance January 1, 2000 6,202
Acquired 65,081
Translation effect 1,786
- -------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2000 73,069
- -------------------------------------------------------------------------------------------------------------------------
Accumulated amortization:
Balance January 1, 2000 444
Amortization for the year 4,295
Translation effect (183)
- -------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2000 4,556
=========================================================================================================================
Goodwill, net:
January 1, 2000 5,758
December 31, 2000 68,513
=========================================================================================================================
Following the issuance of common shares under the ASMPT Employee
Incentive Scheme in March 2000, the Company's shareholding in ASMPT dropped
slightly below 50%. In various transactions in April and June, the Company
acquired 0.3% of the outstanding common shares of ASMPT, thereby restoring its
total shareholding in that company to over 50%. Throughout this entire period,
the Company maintained control over ASMPT.
On July 6, 2000, the Company completed a purchase of approximately 4.7%
of the outstanding common shares in ASMPT from one institutional investor. At
December 31, 2000, ASMI's shareholding in ASMPT amounts to 54.62% of the
outstanding common shares. The total purchase price of the acquired shares of
ASMPT in 2000 amounted to E 74,757. The acquisition of these shares was
accounted for using the purchase method and the excess of the purchase price
over the fair market value of the underlying net assets acquired in the amount
of E 64,985 has been recorded as goodwill. The fair market value approximates
the book value of such net assets of ASMPT.
The proforma impact on minority interest in the Statement of Operations
based on the assumption that the Company acquired the total additional 5%
interest in ASMPT as of January 1, 2000 and 1999 is E3,182 and E1,964,
respectively.
In July 1999, the Company acquired all the outstanding shares of
Microchemistry Ltd. The acquisition was accounted for using the purchase method.
Total consideration paid amounted to FIM (Finnish Marks) 23.2 million or E 3,868
and after adding the assets deficiency recorded goodwill totaled E 4,747.
In December 1999, the Company acquired a 24% interest in NanoPhotonics
AG, a German supplier of precision thin film metrology equipment, for E 388. An
officer of the Company also holds a 44.5% interest in NanoPhotonics AG. The
Company has the option to purchase the 44.5% interest from the officer at the
same price as paid by the officer at the time of purchase in December 1999. In
exchange for this option, the Company granted the officer a five-year option to
purchase 25,000 common shares in ASMI at the fair market value of the shares at
the option grant date.
The weighted average amortization period for acquired goodwill is 10
years.
NOTE F Notes Payable to Banks
ASMI and its individual subsidiaries borrow under separate short-term
lines of credit with banks in the countries where they are located. The lines,
which contain general provisions concerning renewal and continuance at the
option of the banks, bear a weighted average interest of 4.65% at December 31,
2000.
Total short-term lines of credit available amounted to E 81,685 at
December 31, 2000. The amount outstanding at December 31, 2000 was E 13,136 and
the unused portion totaled E 68,549. The
F-11
69
unused portion includes E 48,794 relating to ASMPT and such amount is authorized
solely for use in the operations of ASMPT.
At December 31, 2000 ASMI has guaranteed available short-term
facilities and other obligations of certain subsidiaries of E 32,887. The
Company does not provide guarantees for borrowings of ASMPT and there are no
guarantees from ASMPT to secure indebtedness of the Company. Under the rules of
the Stock Exchange of Hong Kong, ASMPT is precluded from providing loans and
advances other than trade receivables in the normal course of business, to other
ASM subsidiaries.
Information on notes payable to banks is as follows:
- ------------------------------------------------------------------------------------------------------------------------
Short-term debt outstanding in: December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------------------------
The Netherlands 12,223 -
Japan 10,274 13,132
Hong Kong 170 4
- ------------------------------------------------------------------------------------------------------------------------
22,667 13,136
========================================================================================================================
Short-term debt outstanding in local currencies:
- ------------------------------------------------------------------------------------------------------------------------
(thousands) December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Netherlands Guilders 26,935 -
Japanese Yens 1,053,140 1,404,854
Hong Kong Dollars 1,323 30
========================================================================================================================
NOTE G Income Taxes
The components of earnings (loss) before income taxes, minority interest and
cumulative effect of change in accounting principle consist of:
Year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Netherlands (1,218) (11,159) (2,582)
Other countries 8,359 41,906 192,759
- ------------------------------------------------------------------------------------------------------------------------
7,141 30,747 190,177
========================================================================================================================
The provision for income tax consist of:
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Current:
Netherlands 33 (37) -
Other countries (344) (968) (25,809)
- ------------------------------------------------------------------------------------------------------------------------
(311) (1,005) (25,809)
Deferred:
Netherlands - - -
Other countries (337) (269) 2,979
- ------------------------------------------------------------------------------------------------------------------------
(337) (269) 2,979
- ------------------------------------------------------------------------------------------------------------------------
Provision for income taxes (648) (1,274) (22,830)
========================================================================================================================
F-12
70
The provisions for income taxes as shown in the Consolidated Statements of
Operations differ from the amounts computed by applying the Netherlands'
statutory income tax rates to earnings before taxes. A reconciliation of the
provisions for income taxes and the amounts that would be computed using the
statutory Netherlands' income tax rates is set forth below:
Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, minority interest and cumulative
effect of change in accounting principle 7,141 30,747 190,177
Netherlands' statutory tax rate 35% 35% 35%
Income tax provisions at statutory rate (2,499) (10,761) (66,562)
Non-deductible expenses (569) (1,126) (1,211)
Foreign taxes at a rate other than the Netherlands'
statutory rate 3,110 6,576 21,313
Net operating loss benefits not realized for tax purposes
nor recognized for financial statement purposes (6,058) (8,531) (7,790)
Utilization of net operating loss carryforwards 538 3,513 7,888
Non-taxable income 2,176 8,215 24,875
Other 2,654 840 (1,343)
- -------------------------------------------------------------------------------------------------------------------------
Provision for income taxes (648) (1,274) (22,830)
=========================================================================================================================
Non-taxable income relates primarily to our Singapore operations where the
Company has been granted a tax holiday.
Deferred income taxes consist of the following:
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Depreciation (5,257) (5,274) (5,523)
Reserves and allowances 64 51 2,053
Research and development credits (4,223) (4,152) (4,215)
Net operating loss carryforwards 5,873 5,909 5,276
Other (70) (24) 1,571
- ------------------------------------------------------------------------------------------------------------------------
Total deferred income tax (3,613) (3,490) (838)
========================================================================================================================
Substantially all of the net deferred tax liabilities are of a long-term
nature.
Based on tax filings, ASMI and its individual subsidiaries have net
operating losses available at December 31, 2000, of E 260 million for tax return
purposes to reduce future income taxes. ASMI believes that realization of its
net deferred tax assets is dependent on the ability of ASMI to generate taxable
profits in the future. Given the volatile nature of the semi-conductor equipment
industry, past experience, and the tax jurisdictions where ASMI has net
operating loss carryforwards ASMI believes that there is currently insufficient
evidence to substantiate recognition of all net deferred tax assets with respect
to net operating loss carryforwards in the financial statements. Accordingly, a
valuation reserve of E 79.9 million in 1998, E 90.2 million in 1999 and E 86.2
million in 2000 has been recorded; the resulting deferred tax asset amounts to E
5.9 million at the end of 1998, E 5.9 million at the end of 1999 and E 5.3
million at the end of 2000.
The Company has not provided for deferred foreign withholding taxes, if
any, on undistributed earnings of its foreign subsidiaries, because it considers
such earnings to be indefinitely invested in those subsidiaries.
F-13
71
NOTE H Long-term Debt
Long-term debt consists of the following:
- ------------------------------------------------------------------------------------------------------------------------
December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Term loans:
The Netherlands, 5.16 - 6.75 %, due 2000 24,958 -
The Netherlands US $ facility, 8.65 %, due 2001-2002 - 49,607
Japan, 2.15 - 3.30 %, due 2005 - 2006 800 3,459
Hong Kong, 7.3 - 7.5 %, due 2000 10,975 -
Finland, 2.25 - 4.25 %, due 2004 - 2005 2,545 3,383
Mortgage loans:
The Netherlands, 5.35 - 6.75%, due 2007 - 2026 2,121 1,873
Japan, 1.71 - 2.75 %, due 2005 - 2006 3,232 4,468
Lease commitments, 5.75 - 12.60 %, due 1999 - 2002 310 354
- ------------------------------------------------------------------------------------------------------------------------
44,941 63,144
Current portion 36,944 31,484
- ------------------------------------------------------------------------------------------------------------------------
7,997 31,660
========================================================================================================================
Long-term debt outstanding in local currencies:
- ------------------------------------------------------------------------------------------------------------------------
(thousands) December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Including current portion:
Netherlands Guilders 59,674 4,128
Finnish Marks 15,135 20,119
United States Dollars 311 46,328
Japanese Yen 413,270 847,990
Hong Kong Dollars 85,521 -
========================================================================================================================
Aggregate annual principal repayments for years subsequent to December 31, 2000
are:
- ------------------------------------------------------------------------------------------------------------------------
2001 31,484
2002 21,494
2003 1,902
2004 2,210
2005 3,479
Thereafter 2,575
- ------------------------------------------------------------------------------------------------------------------------
63,144
- ------------------------------------------------------------------------------------------------------------------------
In April 2000 the Company repaid its term loan of E 24,958 to the
Nationale Investeringsbank N.V. (NIB) in full and repaid its term loans in Hong
Kong during 2000.
On July 6, 2000, the Company entered into two financing arrangements.
Pursuant to the first such financing arrangement, the Company received a
two-year credit facility of US $ 75 million from Canadian Imperial Bank of
Commerce, a bank organized and validly existing under the laws of Canada, acting
through its New York Agency, carrying a variable interest rate linked to London
Inter Bank Offered Rates and secured by substantially all of the Company's
shareholding in ASMPT. US $ 69 million of this facility was drawn down and the
funds were used to purchase additional shares in ASMPT (see Note E). The
facility has a quarterly repayment schedule. On October 6, 2000 the Company
repaid US $ 10 million in principle amount under the loan facility consisting of
US $ 5.5 million installment and US $ 4.5 million partial prepayment of the
loan. On December 21, 2000 a second partial prepayment of US $ 13 million was
made. The outstanding balance as of December 31, 2000 is US $ 46 million. The
loan is secured by our shareholding in ASMPT.
Pursuant to the second facility, the Company entered into a Structured
Equity Line (the "Line") with an investor, who is an affiliate of the bank
providing the credit facility, mentioned immediately above. Under the Line, the
Company can issue, with intervals of at least five business days between two
F-14
72
issuances, common shares to the investor in amounts not exceeding US $ 10
million and for a total not exceeding US $140 million. The maximum amount of
shares to be issued has been lowered to $65 million by an amendment to the Line
as of March 9, 2001. The investor has committed to purchase these shares at
market price, which is defined as the volume weighted average price of five
trading days preceding the date of issuance, minus a discount of 4.5%. The
investor is not obligated to purchase shares if the purchase would cause the
aggregate number of common shares in the Company owned by the investor,
including those purchased during the previous 60 days, to exceed 9.9% of all of
the issued and outstanding common shares of the Company. The investor is also
under no obligation to purchase newly issued shares under the Line in the event
that the effectiveness of the Company's registration statement is withdrawn,
certain conditions precedent to the Line are not satisfied or certain covenants
are not complied with. The Company is obligated to register their shares
issuable under the Line with the Securities and Exchange Commission.
The Company filed a registration statement on September 6, 2000, but,
addressing concerns of the SEC, voluntarily withdrew this statement on October
12, 2000. A new registration statement will be filed in due course. Until the
registration statement is filed and declared effective by the SEC, the Company
is unable to issue shares under this equity line of credit. The investor has
agreed to extend the date by which such registration must be effective until
April 23, 2001.
We must pay the investor a monthly fee of 3/4% of the outstanding loan
amount if the registration statement is not effective by April 23, 2001, which
fee increases to 1% per month if effectiveness is not achieved by June 8, 2001.
In the event of a collateral value shortfall under the Line, the
Company is obligated to either deposit cash with the investor, make prepayments
to the Line or issue shares to the investor to the extent of the collateral
value shortfall.
The long-term facilities offered by the Japanese banks to ASM Japan are
collaterized by the real estate and other assets of ASM Japan, with guarantees
provided by ASMI. In Finland, the long-term loans offered by Leonia Bank are
collaterized by machinery and equipment of ASM Microchemistry and guaranteed by
ASMI.
Lease commitments relate to lease commitments on property, equipment
and machines in the United States of America.
Interest income, which is included in net interest and other financial
income (expenses), amounted to E 1,569, E 913 and E 6,695 in 1998, 1999 and
2000, respectively, and interest expense, which is also included in net interest
and other financial income (expenses), amounted to E 7,566, E 13,210 and E
10,232 in 1998, 1999 and 2000, respectively.
NOTE I Subordinated Debt
Subordinated Debt consists of the following:
- ------------------------------------------------------------------------------------------------------------------------
December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Current:
Subordinated loan - NIB 2,042 -
Subordinated loan - related party 1,361 -
Subordinated note - Applied Materials 33,744 -
6% zero-coupon debentures (less unamortized discount of E 4,817 and -) 15,138 -
- ------------------------------------------------------------------------------------------------------------------------
52,285 -
========================================================================================================================
In 2000 the Company paid the last installments of subordinated loans
from De Nationale Investeringsbank N.V. (NIB) and an officer of ASMI who is also
a major shareholder.
F-15
73
During 1998, the Company negotiated an extension of an original US $
80.0 million convertible note provided by Applied Materials following the
settlement of the patent dispute in 1997. After paying Applied Materials US $
15.0 million in 1997 and US $ 20.0 million in 1998, the remaining balance of US
$ 45.0 million of the initial interest-free subordinated convertible loan was
replaced by an interest-bearing note for which the Company provided security. In
addition, the Company issued a warrant to Applied Materials to purchase
1,500,000 shares in ASMI, of which 750,000 were immediately exercisable. See
Note J to Consolidated Financial Statements. The note was repayable in two
installments: US $10.0 million was paid in 1999 and the remaining US $ 35.0
million due in 2000 was repaid from the proceeds of the exercise of the
1,500,000 warrants in March 2000 and from the proceeds of the share offering in
April 2000.
On October 1, 1999, the Company issued US $ 20 million, five-year,
zero-coupon debentures. The debentures were discounted at 6% annual interest;
the Company received net proceeds of US $ 14.9 million. As part of the debenture
agreement, the investors received 2,037,957 non-detachable warrants and 200,000
supplemental warrants on common shares of the Company with an exercise price of
US $ 9.81 per share, a premium to market at the date of issuance of 20%. In
February 2000, the 2,037,957 warrants were exercised and the debentures were
cancelled in partial payment of the exercise price of the warrants. The
remaining portion of the exercise price of the warrants was fulfilled by the
investors contributing US $ 4.8 million in cash.
In December 1998, the Company issued a E 20,420 (NLG 45 million), 6%
subordinated convertible note, due December 4, 2003, which has been purchased by
strategic and financial investors. The conversion price had been set at E 4.08
per common share, the average of the share price on the Euronext Amsterdam
during a set period previous to concluding the contract, with protection clauses
for below market price stock issues and stock dividends. The note was fully
converted in 1999.
NOTE J Shareholders' Equity
The authorized capital of the Company amounts to NLG 1,380,000. It is
divided into 60,000,000 common shares, each with a par value of NLG 0.01, 900
financing preferred shares, each with a par value of NLG 100, and 6,900
preferred shares, each with a nominal value of NLG 100.
Shareholders are entitled to cast a number of votes equal to the par
value of shares held; consequently, each holder of a common share (par value of
NLG 0.01) is entitled to a single vote while each holder of preferred shares and
financing preferred shares is entitled to ten thousand votes (par value of NLG
100). Preferred shares carry the right to a cumulative dividend based on a
promissory discount rate as established by the Dutch Central Bank. Financing
preferred shares are also entitled to a cumulative dividend based on the par
value and share premium paid on such shares. Dividends distributable to common
shareholders are limited to retained earnings of ASMI decreased by the legal
reserves which must be maintained. At December 31, 2000, ASMI had no
distributable retained earnings.
WARRANTS
In December 1998, in conjunction with the restructuring of a
subordinated convertible note with Applied Materials, Inc., the Company issued
to Applied Materials warrants to purchase 1,500,000 of ASMI's common shares, of
which 750,000 were immediately exercisable at a price of US $ 5.375 per share.
Exercise of the remaining 750,000 warrants was contingent upon the Company not
repaying all outstanding debt due to Applied Materials by February 15, 1999. At
December 31, 1998 it was determined that the Company would be unable to repay
the outstanding debt by February 15, 1999 and, therefore, the entire fair value
of the warrants amounting to E 2.5 million has been added to Shareholders'
Equity in 1998. In March 2000, Applied Materials exercised the warrants and the
proceeds therefrom were used to reduce the outstanding balance of the
subordinated note.
F-16
74
In conjunction with US $ 20 million five-year zero-bond debentures
issued on October 1, 1999 (see Note I to Consolidated Financial Statements), the
Company issued 2,037,957 non-detachable exercise warrants and 200,000
supplemental warrants on common shares of the Company at a price of US $ 9.81
per share, a premium to market at the date of issuance of 20%. In February 2000
the 2,037,957 warrants were exercised and the debentures were cancelled in
partial payment of the exercise price of the warrants. The remaining portion of
the exercise price was fulfilled by the investors contributing US $ 4.8 million
in cash. At December 31, 2000 the 200,000 supplemental warrants have not been
exercised.
PUBLIC OFFERING OF COMMON SHARES
In April 2000, the Company completed a public offering of 4,250,000
common shares at a price of US $ 29.00 per share. The net proceeds amounted to E
119,711, which were used to repay outstanding loans and fund working capital
needs.
NOTE K Pension Plans
The Company has retirement plans covering substantially all employees.
The principal plans are defined contribution plans, except that of the Company's
Japanese operations, which is a defined benefit pension plan. The Company has no
major continuing obligations other than the payment of annual contributions.
Aggregate retirement plan contributions including those for the Japanese
operations, which are determined by an actuary were E 3,117 in 1998, E 3,225 in
1999 and E 5,756 in 2000. Employees of the Company's Japanese operations
terminating their employment are generally entitled to a lump-sum severance
payment or to pension plan benefits based on years of service and certain other
factors. Plan assets are held as general assets by a life insurance company.
There are no unrecognized prior service costs.
The Company does not provide any post retirement benefits other than pensions.
NOTE L Financial Instruments and Risk Management
The estimated fair value of the Company's financial instruments at
December 31, 1999 and 2000 is summarized below. Certain estimates and judgements
were required to develop the fair value amounts. The fair value amounts shown
below are not necessarily indicative of the amounts that the Company would
realize upon disposition nor do they indicate the Company's intent or ability to
dispose of the financial instrument:
- ------------------------------------------------------------------------------------------------------
1999 2000
- ------------------------------------------------------------------------------------------------------
Carrying Fair CARRYING FAIR
Amount Value AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
Forward exchange contracts:
Sell foreign currency 10,674 10,381 7,549 7,141
Buy foreign currency 2,431 2,422 5,495 5,761
Long-term debt, including current portion:
Long-term debt 44,941 44,828 63,144 64,691
Subordinated debt 52,285 50,660 - -
======================================================================================================
The following methods and assumptions were used by the Company in estimating its
fair value disclosure for financial statements:
For cash and cash equivalents, marketable securities, accounts
receivable, notes payable to banks, accounts payable and accrued expenses, the
carrying amounts approximate fair value due to their short maturities. For
long-term debt, the estimated fair values of the Company's long-term debt are
based on current interest rates available to the Company for debt instruments
with similar terms and remaining maturities. For forward exchange contracts
market values have been used to determine the fair value.
F-17
75
Credit risk represents the accounting loss that would be recognized at
the reporting date if counterparties failed completely to perform as contracted
and from movements in interest rates and foreign exchange rates. The Company
does not anticipate nonperformance by counterparties. The Company generally does
not require collateral or other security to support financial instruments with
credit risk. Concentrations of credit risk (whether on or off-balance sheet)
that arise from financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics that would cause
their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. Financial instruments on the balance
sheet that potentially subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents and accounts receivable. The
Company maintains a policy providing for the diversification of cash and cash
equivalent investments and places its investments in high quality financial
institutions to limit the amount of credit risk exposure. Concentrations of
credit risk with respect to receivables are limited due to the large number of
customers as well as the dispersion across many geographic areas.
NOTE M Research and Development
The Company's Netherlands, Finnish and Singapore operations receive
research and development grants and credits from various governmental sources.
The amount of research and development credits offset against research and
development expenses amounted to E 5,235, E 3,293 and E 2,167 in 1998, 1999 and
2000, respectively.
The amounts received by the Company's Netherlands operations for TOK's
are contingently repayable to the extent sales of the products to which the
credit was related occur.
The amount of repayment as a percentage of the realized sales of the
associated products varies from 1% to 4%. Contingent amounts repayable accrue
interest at varying rates from 5% to 8% per year. The amount contingently
repayable was E 11,863 and E 12,044 at December 31, 1999 and December 31, 2000,
respectively. In 1998, 1999 and 2000 the Company made TOK repayments in the
amount of E 1,319, E 1,411 and E 1,505 respectively.
NOTE N Commitments and Contingencies
Capital leases included in property, plant and equipment are as follows:
- -------------------------------------------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------------------------------------------
1999 2000
- -------------------------------------------------------------------------------------------------------------------
Machinery and equipment 225 402
Furniture and fixtures 354 420
- -------------------------------------------------------------------------------------------------------------------
579 822
Less accumulated depreciation (292) (484)
- -------------------------------------------------------------------------------------------------------------------
287 338
===================================================================================================================
The Company leases certain office and plant facilities and equipment
under various operating lease arrangements. Original non-cancelable lease terms
typically are between 1 and 15 years. At December 31, 2000 minimum rental
commitments under capital leases and operating leases having initial or
remaining non-cancelable terms in excess of one year are as follows:
- -----------------------------------------------------------------------------------------------------------------
Capital Operating
Leases Leases
- -----------------------------------------------------------------------------------------------------------------
2001 229 9,702
2002 140 7,503
2003 38 5,919
2004 7 4,741
2005 4 3,141
Thereafter 3 18,494
- -----------------------------------------------------------------------------------------------------------------
Total 421 49,500
F-18
76
Less amount representing interest (68)
- ----------------------------------------------------------------------------------------------------------------
Present value of net minimum lease payments 353
================================================================================================================
Aggregate rental expense for operating leases in 1998 was E 6,925, in
1999 E 8,039 and in 2000 E 9,847.
The Company is subject to legal proceedings and claims that arise in
the ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have a material adverse effect on its financial position,
results of operations or liquidity.
NOTE O Restructuring
During the first quarter of 1999, the Company decided to close its
manufacturing activities for wafer processing equipment in the United States and
in combination therewith, to outsource to third parties the manufacturing of
substantially all parts previously manufactured in-house. Concurrently, the
United States assembly and test activities were combined with those in Europe.
This resulted in a reduction of employees in the United States by approximately
75 and in the vacating of certain facilities. Approximately 50 new positions
were created in Europe. The Company incurred a restructuring charge, covering
employee terminations, write-offs and occupancy costs of E 3,854 associated with
these decisions.
The Company's intention was to begin implementing the steps necessary
to complete the 1999 restructuring program immediately on formalization thereof
and to substantially complete all necessary steps by the end of 1999. At
December 31, 1999, however, there was a remaining accrual associated with the
restructuring program of E 2,504; implementation of the certain elements of the
program had been delayed due to longer than anticipated time taken to transfer
certain operations to Europe where plant modifications were required. At
December 31, 1999, the revised schedule for completion of the program was mid
2000.
In the first half of 2000, the global demand for wafer processing
equipment and, as a consequence, the assembly and final testing activities of
such equipment, increased sharply when compared to the same period in 1999. The
Company's European facilities and the Company's third party subcontractors had
difficulty in coping with the much higher volumes. Consequently, the Company
decided to partially reverse its earlier decision and reopened facilities that
were vacated under the 1999 restructuring program. As a consequence, part of the
restructuring provision mainly related to legal contractual obligations for
leased properties in the amount of E 1,572 was reversed and credited to selling,
general and administrative expenses in the Consolidated Statement of Operations
in the second quarter of 2000.
Selected information for restructuring charges is as follows:
- -------------------------------------------------------------------------------------------------------------------------
Accrual Amount Reversal of Accrual
Restructuring December 31, Utilized restructuring Translation December
program 1999 1999 in 2000 provision effect 31, 2000
- -------------------------------------------------------------------------------------------------------------------------
Lay-off and severance
Payments 665 93 (11) (87) 5 -
Legal contract
terminations 1,855 1,452 (521) (1,021) 90 -
Other 1,334 959 (563) (464) 68 -
- -------------------------------------------------------------------------------------------------------------------------
Total 3,854 2,504 (1,095) (1,572) 163 -
=========================================================================================================================
NOTE P Employee Stock Option Plan
F-19
77
The Company has adopted various stock option plans and has entered into stock
option agreements with various key management personnel. Under these plans, key
employees may purchase a specific number of shares of the Company's common
stock. Options are generally priced at market value in Euros or US Dollars on
the date of grant and generally expire after five or ten years. Shares subject
to these agreements, which expire at various dates through 2009, totaled
1,675,979 at December 31, 2000.
The Company applies the intrinsic value method allowed by APB 25 in accounting
for its stock option plans. Under APB 25, compensation expense resulting from
awards under fixed plans is measured as the difference between the market price
and the exercise price at the grant date. All fixed plan options were granted at
an exercise price equal to market value at the measurement date. Accordingly, no
compensation expense has been recognized in the consolidated statements of
operations pursuant to APB 25.
Following is a summary of changes in shares under option:
- ------------------------------------------------------------------------------------------------------------------------
Number of Option price Number of Option price
shares Per share in Shares per share in
US dollars EUR
- ------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 2,860,200 0.250 - 13.625 287,000 8.44 - 11.98
Options granted 142,500 3.625 - 10.750 234,000 2.41 - 7.67
Options cancelled (48,600) 1.458 - 7.000 (193,000) 11.98
Options exercised (961,800) 0.500 - 2.333 - -
- ------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 1,992,300 0.250 - 13.625 328,000 2.41 - 8.44
Options granted 230,000 5.625 - 15.625 75,000 6.90 - 19.20
Options cancelled (80,000) 3.625 - 12.375 (9,000) 7.67
Options exercised (114,700) 0.250 - 8.688 (55,200) 2.41 - 7.67
- ------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 2,027,600 0.250 - 15.625 338,800 6.90 - 19.20
OPTIONS GRANTED 200,783 8.563 - 26.438 120,000 11.41 - 26.45
OPTIONS CANCELLED (107,799) 0.250 - 24.625 (1,800) 7.67
OPTIONS EXERCISED (893,205) 0.250 - 10.750 (8,400) 6.90 - 7.67
- ------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 2000 1,227,379 0.250 - 26.438 448,600 7.67 - 26.45
========================================================================================================================
Had compensation cost been determined consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), proforma net earnings, basic and diluted earnings per share would have
been as follows:
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1998 1999 2000
- ------------------------------------------------------------------------------------------------------------------------
Expected life (years) 3 - 8 3 - 10 3 - 10
Risk free interest rate 5.0% 5.0% 5.0%
Volatility 60% 85% 81%
Assumed forfeitures
Net earnings (loss):
As reported 232 11,099 94,272
Proforma (1,389) 9,621 92,921
Basic earnings (loss) per share:
As reported 0.01 0.30 2.01
Proforma (0.04) 0.26 1.98
Diluted earnings (loss) per share:
As reported 0.01 0.29 1.94
Proforma (0.04) 0.25 1.90
========================================================================================================================
F-20
78
The average remaining contractual life of the outstanding options granted in
2000 is 6.58 years at December 31, 2000.
- ------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------------------------------------
Range of Number Weighted Weighted Number Weighted
Exercise Outstanding at Average Average Exercisable at Average
Prices in US$ December 31, Remaining Exercise December 31, Exercise
2000 Contractual Price in US$ 2000 Price in US$
Life, in years
- ------------------------------------------------------------------------------------------------------------------------
0.25 - 3.00 165,500 2.18 0.32 165,500 0.32
3.00 - 6.00 324,496 7.00 5.17 146,171 5.15
6.00 - 9.00 547,883 4.08 8.18 326,300 8.26
9.00 - 14.00 500,600 6.39 9.08 129,500 7.84
14.00 - 20.00 100,000 7.92 16.60 6,000 15.66
20.00 - 30.00 37,500 7.90 25.08 - -
- ------------------------------------------------------------------------------------------------------------------------
0.25 - 30.00 1,675,979 5.46 7.97 773,471 5.96
========================================================================================================================
In 1989, the shareholders of ASMPT approved a plan to issue up to 5
percent of the total issued shares of ASMPT to directors and employees. The
directors annually may approve an amount of supplemental compensation to the
designated directors and officers which will be used to issue or purchase
ASMPT's common shares for the designees at current market value.
In 2000, 2,828,000 common shares of ASMPT were issued, for cash at par,
pursuant to the Employee Share Incentive Scheme of ASMPT. In 1999 and 1998,
respectively 1,796,000 and 1,610,000 ASMPT shares were issued to certain
directors and employees under the plan. The effect of this transaction on ASMI
was a dilution of its ownership interest in ASMPT of 0.41% in 2000, 0.24% in
1999 and 0.22% in 1998. Following the issuance of 1,043,000 common shares under
the plan in March 2000, the Company's shareholding in ASMPT dropped slightly
below 50%. In various transactions in April, June and July, the Company acquired
18,897,500 of the outstanding common shares of ASMPT, thereby restoring its
total shareholding in that company to 54.88%. Throughout this entire period,
the Company maintained control over ASMPT. In December 2000 1,785,000 common
shares were issued under the plan diluting ASMI's ownership in ASMPT to 54.62%.
As of December 31, 2000 management of ASMPT has determined that 1,800,000 common
shares will be allocated to employees for their services in the year 2000, which
shares will be issued in the year 2001. Total compensation expense related to
the Employee Share Incentive Scheme of ASMPT of respectively HK$ 20.0 million (E
2,773) in 2000, HK$ 38.7 million (E 5,463) in 1999 and HK$ 5.9 million (E 737)
in 1998 was charged to the Statement of Operations.
NOTE Q Disclosures about Segments and Related Information
The Company organizes its activities in two operating segments, Front-End and
Back-End.
The Front-End segment manufactures and sells equipment used in wafer processing,
encompassing the fabrication steps in which silicon wafers are layered with
semiconductor devices. The segment is a product driven organizational unit
comprised of manufacturing, service, and sales operations in Europe, the United
States, Japan and South East Asia.
The Back-End segment manufactures and sells equipment and materials used in
assembly and packaging, encompassing the processes in which silicon wafers are
separated into individual circuits and subsequently assembled, packaged and
tested. The segment is organized in ASM Pacific Technology Ltd., in which the
Company holds a majority of 54.62% interest, whilst the remaining shares are
listed on
F-21
79
the Stock Exchange of Hong Kong. The segment's main operations are located in
Hong Kong, Singapore and the People's Republic of China.
- -----------------------------------------------------------------------------------------------------------------
Front-End Back-End Total
- -----------------------------------------------------------------------------------------------------------------
Year ended 31 December, 1998
Net sales to unaffiliated customers 132,858 155,253 288,111
Earnings (loss) from operations (1,604) 14,095 12,491
Net interest and other financial income (expenses) (4,966) (384) (5,350)
Income tax (17) (631) (648)
Minority interest - (6,261) (6,261)
Net earnings (loss) (6,587) 6,819 232
Capital expenditures 9,212 14,930 24,142
Total assets 119,060 163,890 282,950
Short-term debt 17,136 8,845 25,981
Long-term debt 75,315 9,421 84,736
=================================================================================================================
Year ended 31 December, 1999
Net sales to unaffiliated customers 181,737 232,758 414,495
Earnings (loss) from operations (805) 40,160 39,355
Net interest and other financial income (expenses) (6,841) (1,767) (8,608)
Income tax (141) (1,133) (1,274)
Minority interest - (18,374) (18,374)
Net earnings (loss) (7,787) 18,886 11,099
Capital expenditures 8,996 21,591 30,587
Total assets 182,268 242,767 425,035
Short-term debt 78,254 10,975 89,229
Long-term debt 7,997 - 7,997
=================================================================================================================
Year ended 31 December, 2000
Net sales to unaffiliated customers 379,283 555,929 935,212
Earnings from operations 34,520 157,252 191,772
Net interest and other financial income (expenses) (5,560) 3,965 (1,595)
Income tax (12,176) (10,654) (22,830)
Minority interest - (69,285) (69,285)
Net earnings before cumulative effect of change in accounting
principle 16,784 81,278 98,062
Capital expenditures 48,018 23,348 71,366
Total assets 376,852 401,088 777,940
Short-term debt 31,484 - 31,484
Long-term debt 31,660 - 31,660
=================================================================================================================
There are no inter-segment transactions, other than charges for management
services which are based on actual cost. The accounting policies used to measure
the net earnings and total assets in each segment are identical to those used in
the Consolidated Financial Statements. The measurement methods used to determine
reported segment earnings are consistently applied for all periods presented.
There were no asymmetrical allocations to segments.
F-22
80
Segmentation of the business by geographic area, in which the Company has
operating units, in sales to unaffiliated customers and fixed assets is
summarized as follows:
- -------------------------------------------------------------------------------------------------------------------------------
Europe United States Far East Japan Corporate Consolidated
- -------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
Net Sales to unaffiliated customers 47,320 40,238 153,619 46,934 -- 288,111
Fixed assets 4,882 10,339 69,665 18,291 3,173 106,350
- -------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
Net Sales to unaffiliated customers 49,299 55,650 231,471 78,075 -- 414,495
Fixed assets 8,345 9,230 87,048 20,370 7,941 132,934
- -------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000
Net Sales to unaffiliated customers 91,737 126,371 554,509 162,595 -- 935,212
Fixed assets 9,988 9,821 106,715 23,657 70,500 220,681
- -------------------------------------------------------------------------------------------------------------------------------
In 2000 one single customer accounted for 14.2% of the total net sales. In 1999
one single customer accounted for 11.0% of total net sales.
NOTE R Selected Operating Expenses and Additional Information
Aggregate cash compensation paid or accrued by ASMI for the Management Board of
the Company was E 1,037 in 1998, E 1,366 in 1999 and E 1,925 in 2000. Aggregate
compensation for the members of the Supervisory Board amounted to E 50 in 1998,
E 59 in 1999 and E 61 in 2000.
Personnel expenses for employees were as follows:
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- -------------------------------------------------------------------------------------------------------------------------
Wages ,salaries and social charges 90,003 105,137 178,427
Pensions 3,117 3,225 5,756
- -------------------------------------------------------------------------------------------------------------------------
93,120 108,362 184,183
=========================================================================================================================
The average number of employees by geographic area during the year were as
follows:
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1998 1999 2000
- -------------------------------------------------------------------------------------------------------------------------
Netherlands 227 226 284
Other European countries 37 53 103
United States of America 322 254 279
Far East 3,817 4,026 5,622
Japan 178 180 203
- -------------------------------------------------------------------------------------------------------------------------
4,581 4,739 6,491
=========================================================================================================================
F-23
81
NOTE S Earnings per Share
The following represents a reconciliation of net earnings and weighted average
number of shares outstanding (in thousands) for purposes of calculating basic
and diluted net earnings per share:
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31
- -------------------------------------------------------------------------------------------------------------------------
1998 1999 2000
- -------------------------------------------------------------------------------------------------------------------------
Net earnings used for purpose of computing basic earnings
per share 232 11,099 94,272
After-tax equivalent of interest expense on convertible
notes and exercisable warrants - 565 430
- -------------------------------------------------------------------------------------------------------------------------
Net earnings used for purposes of computing diluted net
earnings per share 232 11,664 94,702
=========================================================================================================================
Basic weighted average number of shares outstanding at the
end of period used for purpose of computing basic earnings
per share 33,794 37,301 46,810
Dilutive effect of stock options 949 934 1,112
Dilutive effect of convertible notes and exercisable warrants - 2,429 781
=========================================================================================================================
Dilutive weighted average number of shares outstanding 34,743 40,664 48,703
=========================================================================================================================
Net earnings per share:
Basic 0.01 0.30 2.01
Diluted 0.01 0.29 1.94
=========================================================================================================================
F-24
82
SIGNATURES
The registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused and authorized the undersigned to sign
this annual report on its behalf.
ASM INTERNATIONAL N.V.
Date: March 9, 2001 /s/ Arthur H. Del Prado
------------------------
Arthur H. del Prado
Managing Director and
Chief Executive Officer
S-1
83
Index to Exhibits
Exhibit Number Description Incorporated by Included Herein:
- -------------- ----------- ---------------- ----------------
Reference to:
-------------
1.1 Articles of Association Exhibit 4.1 to
of Registrant, with Registrant's
English translation Registration Statement
on Form F-3 filed on
December 15, 1997
4.1 1994 Stock Option Plan Exhibit 99.1 to the
Registrant's S-8 filed
October 25, 1999
4.2 Debenture Purchase Exhibit 4.2 to the
Agreement Part 1 Registrant's Form F-3
filed on December 13,
1999
4.3 Debenture Purchase Exhibit 4.2 to the
Agreement Part 2 Registrant's Form F-3
filed on December 13,
1999
4.4 Zero Coupon Debenture Exhibit 4.3 to the
Registrant's Form F-3
filed on December 13,
1999
4.5 Common Stock Purchase Exhibit 4.4 to the
Warrant Registrant's Form F-3
filed on December 13,
1999
4.6 Supplemental Common Exhibit 4.5 to the
Stock Purchase Warrant Registrant's Form F-3
filed on December 13,
1999
4.7 Registration Rights Exhibit 4.6 to the
Agreement Registrant's Form F-3
filed on December 13,
1999
4.8 Equity Line Financing Exhibit 23.1 to
Agreement between ASM Registrant's 6-K filed
International N.V. and on September 6, 2000
Canadian Imperial
Holdings Inc. dated July
6, 2000
4.9 Amendment No. 1 to the X
Equity Line Agreement
between ASM
International N.V. and
Canadian
84
Imperial
Holdings Inc.
4.10 Credit Agreement among Exhibit 23.2 to
ASM International N.V., Registrant's 6-K filed
Canadian Imperial Bank on September 6, 2000
of Commerce and
Advanced Semiconductor
Materials (Netherlands
Antilles) N.V. dated
July 6, 2000
4.11 Amendment No. 1 to the X
Credit Agreement among
ASM International N.V.
and Canadian Imperial
Bank of Commerce,
Advanced Semiconductor
Materials (Netherlands
Antilles) N.V.
4.12 Registration Rights Exhibit 23.3 to
Agreement between ASM Registrant's 6-K filed
International N.V. and on September 6, 2000
Canadian Imperial
Holdings Inc. dated July
6, 2000
4.13 Amendment No. 1 to the X
Registration Rights
Agreement between ASM
International N.V. and
Canadian Imperial
Holdings Inc.
4.14 Security Agreement among Exhibit 23.4 to the
ASM International N.V., Registrant's 6-K filed
Advanced Semiconductor on September 6, 2000
Materials (Netherlands
Antilles), N.V. and
Canadian Imperial Bank
of Commerce dated July
6, 2000
4.15 Supplement No. 1 to the X
Security Agreement
between ASM
International N.V. ,
Advanced Semiconductor
Materials (Netherlands
Antilles),
85
N.V. and Canadian
Imperial Bank
of Commerce
8.1 Subsidiaries Included on page 24 of
this annual report.