<PAGE>
3,750,000 SHARES
<TABLE>
<S> <C>
[METRON TECHNOLOGY LOGO]
</TABLE>
COMMON SHARES
----------------
Metron Technology N.V. is offering 2,300,000 common shares, and the selling
shareholders are offering 1,450,000 common shares in a firmly underwritten
offering. Metron will not receive any of the proceeds from the sale of shares by
the selling shareholders. This is Metron's initial public offering, and no
public market currently exists for Metron's common shares.
------------------------
The common shares have been approved for quotation on the Nasdaq National
Market under the symbol "MTCH."
------------------------
INVESTING IN THE COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
---------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Offering Price $13.00 $ 48,750,000
Discounts and Commissions to Underwriters $ 0.91 $ 3,412,500
Offering Proceeds to Metron $12.09 $ 27,807,000
Offering Proceeds to the Selling Shareholders $12.09 $ 17,530,500
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Metron Technology N.V. has granted the underwriters the right to purchase up
to an additional 562,500 common shares to cover over-allotments. The
underwriters can exercise this right at any time within thirty days after the
offering. Banc of America Securities LLC expects to deliver the common shares to
investors on November 24, 1999.
BANC OF AMERICA SECURITIES LLC
SG COWEN
U.S. BANCORP PIPER JAFFRAY
----------------
The date of this Prospectus is November 19, 1999.
<PAGE>
Graphic depicting certain of Metron's principals' names with arrows pointing
toward the Metron logo in the center of the page, below which arrows point
toward the names of certain of Metron's customers.
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, COMMON SHARES ONLY IN
JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THIS PROSPECTUS MAY ONLY BE
USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS
DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR EQUITY SHARES.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Consolidated Financial Data........................ 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 33
Management.................................................. 42
Certain Transactions........................................ 54
Principal and Selling Shareholders.......................... 57
Description of Capital Shares............................... 59
Shares Eligible for Future Sale............................. 64
Underwriting................................................ 66
Legal Matters............................................... 68
Experts..................................................... 68
Where You Can Find Additional Information................... 69
Index to Financial Statements............................... F-1
</TABLE>
"METRON" AND THE METRON LOGO ARE REGISTERED TRADEMARKS OF METRON
TECHNOLOGY N.V. IN THE UNITED STATES AND OTHER JURISDICTIONS. ALL OTHER
TRADEMARKS OR SERVICE MARKS APPEARING IN THIS PROSPECTUS ARE TRADEMARKS OR
SERVICE MARKS OF THE RESPECTIVE COMPANIES THAT USE THEM.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON SHARES. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY BEFORE MAKING AN INVESTMENT DECISION. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THOSE SET FORTH IN "RISK
FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES. EXCEPT
AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, THE EFFECTIVENESS OF AN AMENDMENT TO
OUR ARTICLES OF ASSOCIATION UPON COMPLETION OF THIS OFFERING AND THE CONVERSION
OF METRON TECHNOLOGY FROM A "B.V." INTO AN "N.V." UNDER NETHERLANDS LAW.
REFERENCES TO "GUILDERS" AND "NLG" ARE TO DUTCH GUILDERS, AND REFERENCES TO
"DOLLARS," "U.S.$" AND "$" ARE TO UNITED STATES DOLLARS.
METRON TECHNOLOGY
We are a leading global provider of marketing, sales, service and support
solutions to semiconductor materials and equipment suppliers and semiconductor
manufacturers. On behalf of semiconductor materials and equipment suppliers,
which we refer to as our principals, we provide a broad range of materials and
equipment to leading semiconductor manufacturers such as Advanced Micro Devices,
IBM, Intel, Lucent, Motorola, NEC Electronics, Philips, Infineon (Siemens) and
STMicroelectronics. This enables our customers to purchase a broad range of
products from a single supplier. We also provide semiconductor manufacturers
with the ability to outsource a wide variety of silicon wafer fabrication
facility, or fab, and equipment support services, such as materials management,
cleanroom services and facility maintenance. These services enable our customers
to increase fab productivity in a cost-effective manner, simplify and
standardize their materials and equipment purchases and focus on their core
competencies, such as product development, manufacturing and marketing. By
partnering with us, our principals can focus on product development and other
core competencies, reduce their time to market and use our global network to
better compete with larger companies that often have established sales, service
and support infrastructures. Our principals are both independent companies that
have developed emerging technologies and divisions of larger companies that have
other primary products and markets and include Cabot, Entegris, FSI, Komatsu,
Pall, Schumacher, SDI, Seiko Instruments and Zeiss.
Demand by semiconductor manufacturers for global solutions is being driven
by profitability pressures. As semiconductors have become increasingly complex,
the manufacturing process requires a wide range of complex and expensive
fabrication equipment and materials, and modern fabs can cost over $2.0 billion
to build. At the same time, semiconductor average selling prices have
consistently declined. Therefore, it is imperative that fabs quickly reach and
maintain optimal productivity levels in order to maximize their return on
investment. This necessitates around-the-clock manufacturing, which in turn
requires effective materials management and support services to minimize
equipment downtime.
We work closely with our principals to support semiconductor manufacturers
in numerous ways, from supplying materials to installing and servicing complex
equipment. Our materials offerings include an extensive array of over 15,000
items, including wafer carriers and shippers, fluid and gas handling components,
high purity chemicals and cleanroom products. Our equipment offerings include
cleaning, microlithography, which refers to the part of the fabrication process
during which an image is projected on to a wafer by passing light through a
photomask, which is a high-purity quartz or glass plate used as the stencil in
semiconductor device fabrication to create an integrated circuit design pattern
on a semiconductor wafer, metrology, which refers to the measurement and
inspection of the wafer during the fabrication process, photomask inspection and
repair, which refers to the inspection and repair, if necessary, of the glass or
quartz photomasks used during the microlithography process, and inspection and
defect characterization, which refers to the process by which silicon wafers are
inspected during
3
<PAGE>
and after fabrication, equipment. Our global infrastructure, developed over our
25-year history in the semiconductor industry, provides our principals with
access to our extensive customer base, a technically sophisticated sales force
and the ability to effectively provide global product service and support in all
major semiconductor manufacturing markets in the world, except Japan.
Our goal is to be the leading global provider of marketing, sales, service
and support solutions to semiconductor materials and equipment suppliers and
semiconductor manufacturers. The key elements of our strategy include:
- leveraging our global infrastructure and expanding our leadership
position;
- continuing to broaden product and service offerings;
- expanding our materials business;
- fostering long-term relationships with our principals;
- acquiring complementary businesses; and
- expanding into Japan.
We were incorporated under the laws of The Netherlands in October 1975. Our
principal executive offices are located at 1350 Old Bayshore Highway,
Suite 360, Burlingame, California 94010, and our telephone number is
(650) 373-1133. The address of our web site is "www.metrontech.com." Information
contained on our web site is not a part of this prospectus.
THE OFFERING
<TABLE>
<S> <C>
Common shares offered by Metron...................... 2,300,000 shares
Common shares offered by the selling shareholders.... 1,450,000 shares
Common shares to be outstanding after this 12,404,261 shares
offering...........................................
Use of proceeds...................................... For working capital and general corporate
purposes. We may also use a portion of the
proceeds to acquire complementary businesses.
See "Use of Proceeds."
Nasdaq National Market symbol........................ MTCH
</TABLE>
The number of common shares to be outstanding after this offering is based
on the number of shares outstanding as of August 31, 1999 and does not include
the following:
- 1,986,348 shares subject to options outstanding as of August 31, 1999 at a
weighted average exercise price of $5.50 per share;
- 828,952 shares that we could issue under employee stock plans; and
- 562,500 shares that may be purchased by the underwriters to cover
over-allotments, if any.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue................................. $298,576 $275,024 $228,618 $56,922 $69,473
Cost of revenue............................. 241,675 222,028 189,295 46,596 57,332
-------- -------- -------- ------- -------
Gross profit................................ 56,901 52,996 39,323 10,326 12,141
Selling, general, administrative and other
expenses.................................. 49,417 48,997 43,391 11,321 10,489
Restructuring and merger costs.............. 258 881 2,550 806 --
-------- -------- -------- ------- -------
Operating income (loss)..................... 7,226 3,118 (6,618) (1,801) 1,652
Equity in net income (loss) of joint
ventures.................................. 273 (497) 267 44 (85)
Other expense, net.......................... (602) (71) (397) (212) (198)
-------- -------- -------- ------- -------
Income (loss) before income taxes........... 6,897 2,550 (6,748) (1,969) 1,369
Provision (benefit) for income taxes........ 2,699 1,448 (2,214) (703) 466
-------- -------- -------- ------- -------
Net income (loss)........................... $ 4,198 $ 1,102 $ (4,534) $(1,266) $ 903
======== ======== ======== ======= =======
Basic net income (loss) per share........... $ 0.40 $ 0.11 $ (0.44) $ (0.12) $ 0.09
Diluted net income (loss) per share......... $ 0.37 $ 0.10 $ (0.44) $ (0.12) $ 0.08
Shares used to compute basic net income
(loss) per share(1)....................... 10,386 10,369 10,325 10,341 10,104
Shares used to compute diluted net income
(loss) per share(1)....................... 11,195 11,112 10,325 10,341 11,179
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
-------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 17,128 $ 17,128 $ 44,285
Working capital........................................ 23,993 23,993 51,150
Total assets........................................... 112,431 112,431 139,588
Total shareholders' equity............................. 30,831 32,804 59,961
</TABLE>
- ------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in computing per share
data.
(2) Pro forma to give effect to the termination of certain put rights as a
result of the termination of a buy and sell agreement upon completion of
this offering.
(3) Adjusted to reflect the sale by Metron of 2,300,000 common shares, assuming
no exercise of the underwriters' over-allotment option, at an initial public
offering price of $13.00 per share and the application of the estimated net
proceeds after deducting the underwriting discounts and commissions and our
estimated offering expenses.
5
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON SHARES.
INVESTING IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. THE RISKS AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES THAT WE FACE. ADDITIONAL
RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY BELIEVE
ARE IMMATERIAL ALSO MAY IMPAIR OUR BUSINESS OPERATIONS. IF ANY OF THE EVENTS
DESCRIBED IN THE FOLLOWING RISKS OCCUR, OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. IN ADDITION, THE
TRADING PRICE OF OUR COMMON SHARES COULD DECLINE DUE TO ANY OF THE EVENTS
DESCRIBED IN THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO METRON.
WE ARE DEPENDENT ON A FEW KEY PRINCIPALS FOR A MAJORITY OF OUR REVENUE;
THEREFORE, THE LOSS OF ONE OR MORE OF OUR KEY PRINCIPALS COULD SERIOUSLY HARM
OUR BUSINESS.
If, for any reason, any of our key principals were to materially reduce
their business or terminate their relationship with us, the loss of the key
principal would have a material adverse effect on our business. In particular,
if our commercial relationship with FSI or Entegris were to materially change or
were terminated, our business would be significantly adversely affected due to
the large percentage of our revenue generated by sales of these companies'
products. For the fiscal year ended May 31, 1999, 24% of our total revenue was
generated from the sale of products manufactured by FSI and 21% from the sale of
products manufactured by Entegris. For more information about our relationships
with FSI and Entegris, see also the risk titled "We are significantly controlled
by FSI and Entegris, which may limit your ability to influence the outcome of
director elections and other shareholder matters" and "Certain Transactions." In
each of our last three fiscal years, a majority of our revenue came from the
sale of products from five or fewer of the semiconductor materials and equipment
companies we represent, who we refer to as our principals. Although the
principals that comprise our largest sources of revenue may change from period
to period, we expect that revenue from the sale of products of a relatively
small number of principals will continue to account for a substantial portion of
our revenue for at least the next five years.
All of the semiconductor materials, equipment and products we market, sell,
service and support are sold pursuant to agreements with our principals. These
agreements are generally cancelable at will, subject to notification periods
which range from 30 days to two years. We generally do not sell competing
products in the same market, and therefore the number of principals we can
represent at any one time is limited. It is likely that in the future some of
our principals will terminate their relationships with us upon relatively short
notice. If we lose a key principal, we may not be able to find a replacement
quickly, or at all. The loss of a key principal may cause us to lose customers
and incur expenses associated with ending our agreement with that principal. We
may lose principals for various reasons, including:
- mergers and acquisitions involving our principals and other semiconductor
materials and equipment manufacturers that we do not represent;
- a principal's decision to attempt to build a direct sales organization;
- the expansion of a principal's product offerings to compete with the
products of another principal, because we generally do not offer competing
product lines;
- a principal's dissatisfaction with our level or quality of service; and
- the failure of a principal's business.
We have lost principals in the past. For example, after Ontrak was acquired
by Lam Research in August 1997, we ceased marketing and selling Ontrak products
in Europe in September 1998 and in
6
<PAGE>
South Korea in June 1998. In March 1999, A.G. Associates was acquired by Steag.
As a result of this acquisition, we will cease marketing and selling A.G.
Associates' products in September 1999. In July 1999, FSI sold its chemical
management division to BOC Edwards. As a result of this divestiture, we are
phasing out our marketing and sale of products of this division. In
October 1999, Applied Materials acquired Obsidian. As a result of the
acquisition, we expect that Obsidian will terminate its agreement with us.
THE SEMICONDUCTOR INDUSTRY IS HIGHLY CYCLICAL, AND THEREFORE, A DOWNTURN MAY
RESULT IN POOR OPERATING RESULTS.
The recent downturn in the semiconductor industry has had a material adverse
effect on our recent operating results. Our business depends in large part on
the procurement expenditures of semiconductor manufacturers, which, in turn,
depend on the current and anticipated demand for semiconductors and products
utilizing semiconductors. The semiconductor industry is highly cyclical and
historically has experienced periodic downturns, which often have resulted in
decreased expenditures by semiconductor manufacturers. These downturns generally
have adversely affected the sales, gross profits and operating results of
semiconductor materials and equipment suppliers. From 1996 through 1998, the
semiconductor industry experienced a downturn, which led semiconductor
manufacturers to delay or cancel capital expenditures. During this downturn,
some of our customers delayed or canceled purchases of semiconductor materials
and equipment, which had a negative impact on our sales, gross profits and
operating results. We cannot predict when downturns will occur and how we will
be affected by future downturns.
IF WE ARE UNABLE TO SUCCESSFULLY IDENTIFY NEW PRODUCTS AND ENTER INTO AND
IMPLEMENT ARRANGEMENTS WITH THE SUPPLIERS OF THESE PRODUCTS, OUR BUSINESS WILL
BE SERIOUSLY HARMED.
Any failure by us to enter into relationships with principals that
anticipate or respond adequately to technological developments or customer
requirements, or any significant delays in product development or introductions
by these principals, could result in a loss of competitiveness and could
materially adversely effect our business. The semiconductor materials and
equipment market is subject to rapid technological change, changing customer
requirements and frequent new product introductions. Because of this, the life
cycle of products that we market and sell is difficult to determine. Our future
success will depend to a significant extent on our principals' ability to keep
pace with changes in the market and on our ability to identify and carry
successful new product lines, particularly because we generally do not carry
competing product lines.
WE FACE INTENSE COMPETITION FROM COMPANIES WITH SIGNIFICANTLY GREATER FINANCIAL,
TECHNICAL AND MARKETING RESOURCES, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
MAINTAIN OR INCREASE SALES.
We face intense competition on two distinct fronts: competition for product
lines and competition for customers.
IF WE ARE UNABLE TO COMPETE SUCCESSFULLY FOR PRODUCT LINES AGAINST INDEPENDENT
SALES AND DISTRIBUTION COMPANIES THAT HAVE GREATER FINANCIAL RESOURCES, ARE
MORE ESTABLISHED OR HAVE LONG-STANDING RELATIONSHIPS WITH SEMICONDUCTOR
MATERIALS AND EQUIPMENT MANUFACTURERS, WE WILL BE UNABLE TO OFFER COMPETITIVE
PRODUCTS, WHICH WILL NEGATIVELY IMPACT OUR SALES.
We compete with independent sales and distribution companies for the right
to sell specific product lines in specific territories. We believe that our most
formidable competition comes from regionally established semiconductor materials
and equipment distribution companies. Some of these independent sales and
distribution companies have substantially greater financial resources to devote
to a particular region than we do, are better established in particular regions
than we are, have greater name recognition in their chosen markets than we have
and have long-standing collaborative business
7
<PAGE>
relationships with semiconductor materials and equipment manufacturers which are
difficult to overcome. If we are unable to effectively compete with sales and
distribution companies to attract and retain principals, our business will be
adversely effected.
IF WE ARE UNABLE TO COMPETE FOR CUSTOMERS DUE TO OUR INABILITY TO PROVIDE
SALES, MARKETING AND SUPPORT SERVICES OR PARTICULAR PRODUCT OFFERINGS, IT
WILL ADVERSELY AFFECT OUR ABILITY TO MAINTAIN OR INCREASE SALES.
We compete for orders from semiconductor manufacturers with established
semiconductor materials and equipment manufacturers who sell directly to
customers and with independent sales and distribution companies and sales
representatives. We believe that to compete effectively for customers we must
maintain a high level of investment in marketing, customer service and support
in all of the markets in which we operate, and we may not have sufficient
financial resources, technical expertise or marketing, services and support
capabilities to continue to compete successfully in the future. Some of our
competitors have greater name recognition in the territories they serve and have
long-standing relationships with semiconductor manufacturers that may give them
an advantage in attracting and retaining customers. Furthermore, we believe that
once a semiconductor manufacturer has selected a particular product for a
specific use from a vendor that is not one of our principals, it may be
difficult to achieve significant sales of a competing product to that customer
unless there are compelling reasons for the customer to switch products, such as
significant performance or cost advantages.
We anticipate that as we continue to diversify our product portfolio and
expand into new markets for our principals' products, we will encounter
additional competition for customers. If we cannot continue to compete
successfully for customers in the future, it will have a significant negative
impact on our business.
THE MANAGEMENT INFORMATION SYSTEMS THAT WE CURRENTLY USE IN OUR DAY-TO-DAY
OPERATIONS ARE NOT INTEGRATED ACROSS COUNTRY BORDERS AND NEED TO BE UPGRADED.
UPGRADING THEM WILL BE COSTLY, AND IF THE NEW SYSTEM IS NOT SUCCESSFULLY
IMPLEMENTED, OUR BUSINESS MAY SUFFER MATERIAL ADVERSE CONSEQUENCES.
While our financial reporting management information system is integrated
and operational, our current management information systems that we use to
control our day-to-day operations are not integrated across country borders. To
accommodate growth in the past, we have had to hire additional people to
compensate for the lack of a fully-functional, integrated operations management
information system. We anticipate that we will need to invest in a new
operations management information system in order to maintain our current level
of business and accommodate any future growth. We anticipate that the total
costs associated with the implementation of the new system will be approximately
$3.0 to $4.0 million and that the system will be implemented over the next
18 months. Any failure to successfully choose and implement a new operations
management information system may result in delayed growth, increased
inefficiency due to a lack of centralized data, higher inventories, increased
expenses associated with employing additional employees, a loss of our
investment in the new operations management information system and may have
additional material adverse effects on our business.
WE NEED TO SUCCESSFULLY MANAGE THE ANTICIPATED EXPANSION IN OUR OPERATIONS OR
OUR BUSINESS MAY SUFFER MATERIAL ADVERSE CONSEQUENCES.
Any failure by us to effectively manage future expansion and the system and
procedural transitions required by expansion could seriously harm our business
and our operating results. We have expanded our operations in the past and
anticipate future expansion of our operations through acquisitions and
otherwise. Our growth has placed and will continue to place significant demands
on our management, operational, financial and technical resources, as well as
our accounting and control systems, as we work to integrate geographically
dispersed offices and administrative personnel, diverse service and
8
<PAGE>
maintenance operations and different accounting and financial systems. Our
future operating results will depend on the ability of our management and other
employees to:
- continue to implement and improve our operational, customer support and
financial control systems;
- recruit, train, manage and motivate our employees;
- identify companies that are strategic acquisition candidates and
successfully acquire and integrate them with our existing business;
- communicate information efficiently throughout our organization; and
- work effectively with principals and customers.
We cannot predict whether these efforts will be successful or will occur in
a timely or efficient manner. We may not be able to install adequate control
systems in an efficient and timely manner, and our current or planned
operational systems, procedures and controls may not be adequate to support our
future operations. The difficulties associated with installing and implementing
new systems, procedures and controls may place a significant burden on our
management and our internal resources. Delays in the implementation of new
systems or operational disruptions when we transition to new systems would
impair our ability to accurately forecast sales demand, manage our product
inventory and record and report financial and management information on a timely
and accurate basis.
WE MAY NOT BE SUCCESSFUL IN ANY EFFORT TO PENETRATE JAPAN, WHICH COULD LIMIT OUR
FUTURE GROWTH.
We do not market and sell products to semiconductor manufacturers in Japan.
However, approximately 21% of the world's production of semiconductors takes
place in Japan. Accordingly, to reach all of the world's major semiconductor
markets, we will need to establish or acquire sales and marketing capabilities
in Japan. Historically, it has been difficult for non-Japanese companies to
succeed in establishing themselves in Japan, and we believe that expanding our
operations to Japan would be both expensive and time-consuming and would place
additional demands on our management. In addition, FSI and Entegris have
existing arrangements for the sale, service and support of their products in
Japan and have not indicated that they would modify such arrangements in the
event that Metron establishes or acquires sales and marketing capabilities in
Japan. We cannot predict whether any of our efforts to penetrate the Japanese
market will be successful. If we are not successful in our efforts to penetrate
the Japanese market, our future growth may be limited.
WE EXPECT CONTINUED DOWNWARD PRESSURE ON THE GROSS MARGINS OF THE PRODUCTS WE
SELL, AND AS A RESULT, IF WE ARE UNABLE TO CONTINUE TO DECREASE OUR EXPENSES AS
A PERCENTAGE OF SALES, WE WILL BE UNABLE TO INCREASE OR MAINTAIN OUR OPERATING
MARGINS.
Particularly during industry down cycles, pressure on the gross margins of
the products we sell is intense and can adversely impact our financial
performance. We have experienced significant downward pressure on our gross
margins mainly as a result of sales discounts offered by our competitors and
pressure from our customers to reduce prices and from our principals to reduce
the discounts they provide to us. This, in turn, has put significant downward
pressure on our operating margins. To maintain or increase our gross margins, we
must develop and maintain relationships with principals who introduce new
products and product enhancements on a timely basis. As a result of continued
pressure on gross margins, we must find ways to decrease our selling, general,
administrative and other expenses as a percentage of sales to increase or
maintain our operating margins. If our principals cannot continue to innovate,
if we cannot maintain our relationships with the innovating principals, or if we
cannot successfully manage our selling, general, administrative and other
expenses, our operating margins may decrease. If our operating margins decline
as a result of these factors, our business would be harmed.
9
<PAGE>
OUR EMPLOYMENT COSTS IN THE SHORT-TERM ARE TO A LARGE EXTENT FIXED, AND
THEREFORE ANY UNEXPECTED REVENUE SHORTFALL COULD ADVERSELY AFFECT OUR OPERATING
RESULTS.
Our operating expense levels are based in significant part on our head
count, which is generally driven by longer-term revenue goals. For a variety of
reasons, particularly the high cost and disruption of lay-offs and the costs of
recruiting and training, our head count in the short-term is, to a large extent,
fixed. In particular, approximately half of our employees are in Europe, and the
costs associated with the reduction of our labor force in Europe are high.
Accordingly, we may be unable to reduce employment costs in a timely manner to
compensate for any unexpected revenue or gross margin shortfall, which could
have a material adverse effect on our operating results.
WE MAY BEAR INVENTORY RISK DUE TO AN INABILITY TO RETURN PRODUCTS, AND IF WE ARE
UNABLE TO MANAGE OUR INVENTORY EFFECTIVELY, OUR OPERATING RESULTS COULD BE
ADVERSELY AFFECTED.
We bear inventory risk because we generally take title to our products when
we receive them from our principals, and we cannot always return products to the
principal in the event the products are not sold. Our customers do not always
purchase at the time or in the quantities we originally anticipated. For
example, as a result of the industry downturn in 1997 and 1998, we had excess
inventory for which we booked reserves in both the United States and Asia.
Typically, products cannot be returned to principals after they have been in our
inventory for a certain period of time; this time period varies depending on the
product and the principal. In addition, although it is typical when a
relationship with a principal terminates for that principal to repurchase most
of the inventory we have of that principal's products, it is possible under
certain circumstances that a principal may be unable or unwilling to repurchase
our inventory. If we fail to manage our inventory and accumulate substantial
product that cannot be returned, our operating results could be adversely
affected. Furthermore, if a principal cannot provide refunds in cash for the
inventory we desire to return, we may be forced to dispose of inventory below
cost, and this may have a material adverse effect on our financial condition.
OUR REVENUE AND OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, WHICH COULD
ADVERSELY AFFECT OUR SHARE PRICE.
In the past, we have experienced fluctuations in our quarterly and annual
operating results and anticipate that these fluctuations will continue in the
future due to a variety of factors, many of which are out of our control.
Fluctuations in our results could cause our share price to decline
substantially. We believe that period-to-period comparisons of our results of
operations may not be meaningful, and you should not rely upon them as
indicators of our future performance. Our sales in, and the operating results
for, a particular quarter can vary significantly due to a variety of factors,
including those described elsewhere in this prospectus and the following:
- THE TIMING OF SIGNIFICANT CUSTOMER ORDERS AND CUSTOMER SPENDING PATTERNS.
During industry downturns, our customers may ask us to delay or even
cancel the shipment of previously firm orders. Delays and cancellations
may adversely affect our operating results in any particular quarter if we
are unable to recognize revenue for particular sales in the quarter in
which those sales were expected.
- THE TIMING OF PRODUCT SHIPMENTS BY OUR PRINCIPALS. For the most part, we
recognize sales upon the shipment of goods to our customers. Most of the
equipment and some of the materials we sell are shipped by the principal
directly to our customers, and we do not necessarily have any control over
the timing of a particular shipment. If we are unable to recognize revenue
for a particular sale in the quarter in which that sale was expected, our
operating results in that particular quarter will be negatively affected.
- THE TIMING OF NEW PRODUCT AND SERVICE ANNOUNCEMENTS BY OUR PRINCIPALS AND
THEIR COMPETITORS. New product announcements by our principals and their
competitors could cause our customers to
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<PAGE>
delay a purchase or to decide to purchase products of one of our
principal's competitors which would adversely affect our revenue and,
therefore, our results of operations. New product announcements by others
may make it necessary for us to reduce prices on our products or offer
more service options, which could adversely impact operating margins and
net income.
- THE MIX OF PRODUCTS SOLD AND THE MARKET ACCEPTANCE OF OUR NEW PRODUCT
LINES. The mix of products we sell varies from period to period, and
because margins vary amongst or within different product lines, this can
adversely affect our results of operations. If we fail to sell our
products which generate higher margins, our average gross margins may be
lower than expected. If we fail to sell our new product lines, our revenue
may be lower than expected.
- GENERAL GLOBAL ECONOMIC CONDITIONS OR ECONOMIC CONDITIONS IN A PARTICULAR
REGION. When economic conditions in a region or worldwide worsen,
customers may delay or cancel their orders. There may also be an increase
in the time it takes to collect from our customers or even outright
defaults in payments. This can negatively affect our cash flow and our
results.
- COSTS WE MAY INCUR IF WE BECOME INVOLVED IN FUTURE LITIGATION. Litigation
is often costly, and even if we are successful in defending or making any
claim, the expenses incurred may significantly impact our results.
As a result of the factors listed above, our future operating results are
difficult to predict. Further, we base our current and future expense plans in
significant part on our expectations of our longer-term future revenue. As a
result, we expect our expense levels to be relatively fixed in the short-run. An
unanticipated decline in revenue for a particular quarter may disproportionately
affect our net income in that quarter. If our revenue is below our projections,
then our operating results will also be below expectations and, as we have in
the past, we may even have losses in the short-run. Any one of the factors
listed above, or a combination thereof, could adversely affect our quarterly
results of operations, and consequently may cause a decline in our share price.
WE DEPEND ON SALES TO A RELATIVELY SMALL NUMBER OF CUSTOMERS FOR A SIGNIFICANT
PORTION OF OUR REVENUE, AND IF ANY OF OUR LARGE CUSTOMERS WERE TO STOP OR REDUCE
THEIR PURCHASING FROM US, IT WOULD MATERIALLY AND ADVERSELY AFFECT OUR REVENUE.
A loss or a significant reduction or delay in sales to any of our major
customers could materially and adversely affect our revenue. We depend on a
small number of customers for a substantial portion of our revenue. During
fiscal 1999, our top 10 customers accounted for an aggregate of 32% of our
sales. Although a ranking by revenue of our largest customers will vary from
period to period, we expect that revenue from a relatively small number of
customers will account for a substantial portion of our revenue in any
accounting period for the foreseeable future. Consolidation in the semiconductor
industry may result in increased customer concentration and the potential loss
of customers as a result of acquisitions. Unless we diversify and expand our
customer base, our future success will significantly depend upon certain factors
which are not within our control, including:
- the timing and size of future purchase orders, if any, from our larger
customers;
- the product requirements of our customers; and
- the financial and operational success of our customers.
If any of our largest customers were to stop or reduce their purchasing from
us, our financial results could be adversely affected. A significant decrease in
sales to a major customer or the deferral or cancellation of any significant
order would have a material adverse effect on our operating results.
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<PAGE>
OUR SALES CYCLE, PARTICULARLY FOR EQUIPMENT, IS LONG AND UNPREDICTABLE, WHICH
COULD REQUIRE US TO INCUR HIGH SALES AND MARKETING EXPENSES WITH NO ASSURANCE
THAT A SALE WILL RESULT.
Sales cycles for some of our products, particularly equipment, can run as
long as 12 to 18 months. As a result, we may not recognize revenue from efforts
to sell particular products for extended periods of time. We believe that the
length of the sales cycle may increase as some current and potential customers
of our key principals centralize purchasing decisions into one decision-making
entity. We expect this may intensify the evaluation process and require us to
make additional sales and marketing expenditures with no assurance that a sale
will result.
WE HAVE NOT YET DEVELOPED A STRATEGY TO SELL TO OUR CUSTOMERS OVER THE INTERNET,
AND IF A COMPETITOR DEVELOPS AND IMPLEMENTS AN EFFECTIVE E-COMMERCE STRATEGY, WE
MAY LOSE SOME OF OUR CUSTOMERS, WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR
RESULTS OF OPERATIONS.
We have not developed a strategy to sell to our customers over the Internet,
but we plan to develop an e-commerce strategy in the future. Because rights to
sell principals' products are granted only for specific territories and sales
conducted over the Internet may occur anywhere around the globe, it is difficult
to adopt e-commerce practices in this industry. If principals decide to directly
distribute their products over the Internet, if our competitors develop a
successful strategy for engaging in e-commerce or if our customers require
e-commerce capability, we may lose customers, which would have a negative impact
on our revenue and on our operating results.
WE FACE YEAR 2000 RISKS.
The year 2000 problem arises because many older computer hardware and
software systems use only two digits to represent the year. As a result, these
systems and programs cannot distinguish between 20(th) and 21(st) century dates,
which may cause errors in information or system failures. Failure by us to
identify and remediate all material year 2000 risks could adversely affect our
business, financial condition and results of operations. Some of the risks you
should be aware of include:
- we cannot assure you that the entities that we rely on for products and
services that are important for our business, including our principals,
will be successful in addressing all of their software and systems
problems in order to operate without disruption in the year 2000;
- our customers or potential customers may be affected by year 2000 issues
that may, in part, cause a reduction, delay or cancellation of customer
orders; cause a delay in payments for products shipped; or cause customers
to expend significant resources on year 2000 compliance matters rather
than the products we sell; and
- we have not developed a contingency plan related to a failure of our, or a
third party's, year 2000 remediation efforts and may not be prepared if
this occurs.
Although we have not yet determined the most-likely worst-case year 2000
scenarios or quantified the likely impact of these scenarios, it is clear that
the occurrence of one or more of the risks described above could have a material
adverse effect on our business, financial condition or results of operations.
While we have made efforts to notify our customers who have purchased
potentially non-compliant products, we cannot be sure that these customers will
not assert claims against us alleging that the purchased products should have
been year 2000 compliant at the time of purchase, which could result in costly
litigation and divert management's attention.
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<PAGE>
RISKS RELATED TO OUR INTERNATIONAL OPERATIONS.
ECONOMIC DIFFICULTIES IN COUNTRIES IN WHICH WE SELL OUR PRODUCTS CAN LEAD TO A
DECREASE IN DEMAND FOR OUR PRODUCTS AND IMPAIR OUR FINANCIAL RESULTS.
The volatility of general economic conditions and fluctuations in currency
exchange and interest rates can lead to decreased demand in countries in which
we sell product. For example, in 1997 and 1998 many Asian countries experienced
economic and financial difficulties. During this period, we experienced
cancellation or delay of orders for our products from customers in Asia, thus
adversely affecting our results of operations. Moreover, any economic, banking
or currency difficulties experienced by countries in which we have sales may
lead to economic recession in those countries. This in turn may result in the
cancellation or delay of orders for our products from customers in these
countries, thus adversely affecting our results of operations.
MOST OF OUR PRODUCT SALES ARE OUTSIDE THE UNITED STATES, AND CURRENCY
FLUCTUATIONS MAY IMPAIR OUR FINANCIAL RESULTS.
While most of our international sales are denominated in dollars, some are
denominated in various foreign currencies. To the extent that our sales and
operating expenses are denominated in foreign currencies, our operating results
may be adversely affected by changes in exchange rates. For example, in fiscal
1997, we recorded exchange losses of approximately $600,000. Given the number of
currencies involved, the substantial volatility of currency exchange rates, and
our constantly changing currency exposures, we cannot predict the effect of
exchange rate fluctuations on our future operating results. Although we engage
in foreign currency hedging transactions from time to time, these hedging
transactions can be costly, and therefore, we do not attempt to cover all
potential foreign currency exposures. These hedging techniques do not eliminate
all of the effects of foreign currency fluctuations on anticipated revenue.
In addition, the transition period from legacy currencies to the euro
currently is set to expire January 1, 2002. We are assessing our information
technology systems to determine whether they will accommodate the eventual
elimination of the legacy currencies. If our information technology systems are
unable to do so, they would have to be upgraded or replaced.
IF WE OR OUR NON-UNITED STATES SUBSIDIARIES ARE DEEMED SUBJECT TO UNITED STATES
TAXES, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS MAY SUFFER.
Metron and its non-United States subsidiaries conduct most of their
activities in a manner which we believe does not constitute the conduct of a
trade or business in the United States. Accordingly, although we report taxable
income and pay taxes in the countries where we operate, including the United
States, we believe that income earned by Metron and its non-United States
subsidiaries from operations outside the United States is not reportable in the
United States for tax purposes and is not subject to United States income tax.
If income earned by us or our non-United States subsidiaries from operations
outside the United States is determined to be income effectively connected to an
United States trade or business and as a result becomes taxable in the United
States, we could be subject to United States taxes on this income. If we were to
be deemed to be subject to these taxes, our business, financial condition and
results of operations might be materially and adversely affected.
RISKS RELATED TO INVESTING IN OUR INITIAL PUBLIC OFFERING.
WE ARE SIGNIFICANTLY CONTROLLED BY FSI AND ENTEGRIS, WHICH MAY LIMIT YOUR
ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER SHAREHOLDER
MATTERS.
Prior to this offering, FSI owned 32.7% and Entegris owned 32.7% of our
outstanding shares, and following the offering, FSI will own 21.8% and Entegris
will own 21.8% of our outstanding shares. By
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<PAGE>
virtue of their share ownership and the fact that each holds one of the four
seats on our supervisory board, FSI and Entegris can exercise significant voting
and management control over Metron. As a result, each of these shareholders will
have significant influence over all matters requiring shareholder or supervisory
board approval, including the election of directors and approval of significant
corporate transactions, which may have the effect of delaying or preventing a
third party from acquiring control over us.
WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE OFFERING PROCEEDS.
We have not allocated the majority of the net proceeds of this offering for
specific uses, and our shareholders may disagree with the uses to which
management puts the proceeds from this offering. We may use a portion of the net
proceeds to acquire additional businesses or to invest in one or more principals
that we believe will complement or enhance our current or future business. We
cannot be certain that we will be able to use the proceeds to earn a favorable
return.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL, AND ANY INABILITY TO RAISE REQUIRED
FUNDS COULD HARM OUR BUSINESS.
We expect the net proceeds from this offering, cash from operations and
borrowings under our credit facilities will be sufficient to meet our working
capital and capital expenditure needs for the foreseeable future. However, we
may need to raise additional capital to acquire or invest in complementary
businesses. Further, if we issue additional equity securities, the ownership
stakes of our existing shareholders would be reduced, and the new equity
securities may have rights, preferences or privileges senior to those of our
existing common shares. If we cannot raise funds, if needed, on acceptable
terms, we may not be able to develop our business, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements,
all of which could seriously harm our business and results of operations.
NEW INVESTORS IN OUR COMMON SHARES WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The initial public offering price is substantially higher than the book
value per share of our common shares. Investors purchasing common shares in this
offering will, therefore, incur immediate dilution of $8.36 in net tangible book
value per common share. Investors will incur additional dilution upon the
exercise of outstanding share options. See "Dilution."
THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON SHARES AND FOLLOWING THE
OFFERING, OUR SHARE PRICE MAY BE VOLATILE.
There has not been a public market for our common shares prior to this
offering, and a liquid trading market for our shares may not develop following
this offering. The initial price for our common shares to be sold in the
offering has been determined by negotiations between us and the representatives
of the underwriters and may not be indicative of prices that will prevail in the
trading market. The trading price of our common shares could be subject to wide
fluctuations in response to various factors, some of which are beyond our
control, including factors discussed elsewhere in this prospectus and the
following:
- failure to meet the published expectations of securities analysts for a
given quarterly period;
- changes in financial estimates by securities analysts;
- changes in market values of comparable companies;
- stock market price and volume fluctuations, which are particularly common
among securities of high technology companies;
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<PAGE>
- stock market price and volume fluctuations attributable to inconsistent
trading volume levels;
- additions or departures of key personnel; and
- commencement of our involvement in litigation.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation may result in substantial costs and divert management's attention and
resources, which may seriously harm our business.
SUBSTANTIAL SALES OF SHARES MAY IMPACT THE MARKET PRICE OF OUR COMMON SHARES.
If our shareholders sell substantial amounts of our common shares, including
shares issued upon the exercise of outstanding options, the market price of our
common shares may fall. These sales also might make it more difficult for us to
sell equity or equity-related securities in the future at a time and price that
we deem appropriate. After completion of this offering, we will have outstanding
12,404,261 common shares, assuming no exercise of outstanding options after
August 31, 1999. All of the shares sold in this offering will be freely
tradable. 139,341 additional shares are eligible to be sold immediately, of
these 12,300 are subject to volume limitations, under federal securities laws.
2,200 restricted shares will be eligible for sale 90 days after the date of this
offering. 8,590,945 shares are subject to lock-up arrangements between the
shareholders and us or the underwriters. 8,590,945 shares will be eligible for
sale in the public market 180 days following the date of this prospectus. Of
these shares 8,060,867 shares will be subject to volume limitations, under
federal securities laws. The remaining 5,000 shares will be eligible for sale in
the public market subject to volume restrictions on March 17, 2000.
If our shareholders sell substantial amounts of common shares (including
shares issued upon the exercise of outstanding options) in the public market,
the market price of our common shares could fall.
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never declared or paid any cash dividends on our capital shares. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
RISKS RELATED TO BEING A DUTCH COMPANY.
OUR SUPERVISORY BOARD HAS THE AUTHORITY TO ISSUE SHARES WITHOUT SHAREHOLDER
APPROVAL, WHICH MAY MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
As a Netherlands "NAAMLOZE VENNOOTSCHAP," or N.V., we are subject to
requirements not generally applicable to corporations organized in United States
jurisdictions. Among other things, under Netherlands law the issuance of shares
of a N.V. company must be approved by the shareholders unless the shareholders
have delegated this authority to issue shares to another corporate body. Our
articles of association provide that the shareholders have the authority to
resolve to issue shares, common or preferred, and may designate the Metron board
of supervisory directors as the corporate body with the authority to adopt the
resolution to issue shares, but this designation may not exceed a period of five
years. Our articles also provide that as long as the supervisory board has the
authority to adopt a resolution to issue shares, the shareholders shall not have
the authority to adopt this resolution. Pursuant to the Metron articles, the
supervisory board will have the authority to adopt resolutions to issue shares
until five years from the date of the deed of conversion from a B.V. to an N.V.
and the related amendment of the articles. This authorization of the supervisory
board may be renewed by the
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<PAGE>
shareholders from time to time. As a result, our supervisory board has the
authority to issue common and preferred shares without shareholder approval.
The issuance of preferred shares could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, a majority of the outstanding shares of our share capital.
IT MAY NOT BE POSSIBLE TO ENFORCE UNITED STATES JUDGMENTS AGAINST NETHERLANDS
CORPORATIONS, DIRECTORS AND OTHERS.
Our articles provide that Metron has two separate boards of directors, a
managing board and a supervisory board. One of our managing directors resides
outside of the United States. A significant percentage of our assets are located
outside the United States. As a result, it may not be possible to effect service
of process within the United States upon the managing director who lives outside
the United States. Furthermore, judgments of United States courts, including
judgments against us, our directors or our officers predicated on the civil
liability provisions of the federal securities laws of the United States, are
not directly enforceable in The Netherlands.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DUTCH LAW COULD DISCOURAGE POTENTIAL
ACQUISITION PROPOSALS AND COULD DELAY, DETER OR PREVENT A CHANGE IN CONTROL.
Our articles of association and the applicable law of The Netherlands
contain provisions that may be deemed to have anti-takeover effects. These
provisions may delay, defer or prevent a takeover attempt that a shareholder
might consider in the best interest of our shareholders. For example, our
articles may be amended only pursuant to a proposal of the supervisory board
followed by a resolution of the general meeting of shareholders. To amend our
articles requires that at a general meeting of shareholders, (1) more than half
of the issued share capital is represented and (2) the resolution to amend the
articles is supported by a two-thirds majority of the valid votes cast. This
supermajority voting requirement may have the effect of discouraging a third
party from acquiring a majority of the outstanding Metron shares. In addition,
these provisions could have a negative impact on our stock price. Furthermore,
some United States tax laws may discourage third parties from accumulating
significant blocks of our common shares. For a more full description of
anti-takeover measures, see "Description of Capital Shares."
IF WE ARE CLASSIFIED AS A "CONTROLLED FOREIGN CORPORATION," OUR 10% OR MORE
UNITED STATES SHAREHOLDERS COULD BE TAXED ON DIVIDENDS PAID BY OUR OPERATING
SUBSIDIARIES TO US, EVEN IN THE ABSENCE OF A DISTRIBUTION OF OUR INCOME TO THEM.
BECAUSE UNITED STATES SHAREHOLDERS OF MORE THAN 10% OF OUR COMMON SHARES HELD,
IN THE AGGREGATE, 65.6% OF OUR COMMON SHARES AS OF AUGUST 31, 1999, THEY MIGHT
DISCOURAGE US FROM HAVING OUR OPERATING SUBSIDIARIES PAY US DIVIDENDS, WHICH
MIGHT LIMIT OUR ABILITY TO MOVE OUR FINANCIAL RESOURCES AROUND OUR OPERATIONS.
Following this offering, we do not believe that we will be a "controlled
foreign corporation" for the purposes of United States tax law. However, we are
currently classified as a "controlled foreign corporation" and we may again be
so classified if the sum of the percentage ownership by all United States
holders of more than 10% of our common shares were greater than 50% by voting
power or value. As of August 31, 1999, United States shareholders of more than
10% of our common shares held, in the aggregate, 65.6% of our common shares. In
the event we are determined to be a "controlled foreign corporation" after this
offering, our 10% or more United States shareholders could be taxed on dividends
paid by our operating subsidiaries to us, even in the absence of a distribution
of our income to them. Because United States shareholders of more than 10% of
our common shares held a majority of our common shares as of August 31, 1999,
they might discourage us from having our operating subsidiaries pay us
dividends, which might limit our flexibility in utilizing our financial
resources throughout the consolidated company.
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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are "forward-looking statements." These statements involve known and
unknown risks, uncertainties, and other factors that may cause our, or our
industry's, actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by the forward-looking statements. These
factors are listed under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "expects," "anticipates," "intends," "may," "should," "plans,"
"believes," "seeks," "estimates," "could," "would" or the negative of such terms
or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual results.
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<PAGE>
USE OF PROCEEDS
We expect to receive net proceeds of approximately $27,157,000, after
deducting underwriting discounts and estimated offering expenses, from the sale
of 2,300,000 common shares, and an additional $6,800,625 from the sale of
562,500 common shares if the underwriters' over-allotment option is exercised in
full, at an initial public offering price of $13.00 per share. We will not
receive any proceeds from the sale of common shares by the selling shareholders.
We intend to use the proceeds of the offering for working capital and
general corporate purposes, including sales, marketing, customer support and
other activities related to our business. We may also use a portion of the net
proceeds to acquire additional businesses or to invest in one or more of our
principals that we believe will complement or enhance our current or future
business. However, we have no specific plans, agreements or commitments to do so
and are not currently engaged in any negotiations for any acquisition or joint
venture.
The amounts that we actually expend for working capital and other general
corporate purposes will vary significantly depending on a number of factors,
including future revenue growth, if any, and the amount of cash we generate from
operations. As a result, we will retain broad discretion in the allocation of
the net proceeds of this offering. Pending such uses, we intend to invest the
net proceeds of the initial public offering in investment grade interest-bearing
securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common shares. We
currently intend to retain any future earnings to fund the development and
growth of the our business. Therefore, we currently do not anticipate paying any
cash dividends.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of August 31, 1999: (1)
on an actual basis; (2) pro forma to give effect to the termination of certain
put rights as a result of the termination of a buy-sell agreement upon
completion of this offering; and (3) pro forma as adjusted to give effect to the
sale of 2,300,000 common shares offered in this offering and to give effect to
the receipt of the estimated net proceeds from the sale of such shares at an
initial public offering price of $13.00 per share and the application of the net
proceeds from such sale.
The capitalization information set forth in the table below is qualified by,
and you should read it in conjunction with, our more detailed Consolidated
Financial Statements and the related Notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
AUGUST 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term debt (including current portion of
long-term debt)...................................
$ 15,111 $ 15,111 $ 15,111
======== ======== ========
Long-term debt (excluding current portion).......... $ 1,101 $ 1,101 $ 1,101
Common shares subject to Buy-Sell Agreement......... 1,973 -- --
Shareholders' equity:
Preferred shares: NLG 0.96 par value, 10,000,000
shares authorized; no shares issued and
outstanding, actual; no shares issued and
outstanding, pro forma and pro forma as
adjusted........................................ -- -- --
Common shares: NLG 0.96 par value, 40,000,000
shares authorized; 10,385,268 shares issued and
10,104,261 shares outstanding, actual and pro
forma; 12,685,268 shares issued and
12,404,261 shares outstanding, pro forma as
adjusted........................................ 3,030 5,003 32,160
Retained earnings................................. 31,089 31,089 31,089
Cumulative other comprehensive loss............... (3,157) (3,157) (3,157)
Treasury shares: 281,007.......................... (131) (131) (131)
-------- -------- --------
Total shareholders' equity...................... $ 30,831 $ 32,804 $ 59,961
-------- -------- --------
Total capitalization............................ $ 33,905 $ 33,905 $ 61,062
======== ======== ========
</TABLE>
This table excludes the following shares as of August 31, 1999:
- 1,986,348 shares subject to options outstanding as of August 31, 1999 at a
weighted average exercise price of $5.50 per share; and
- 828,952 additional shares that could be granted under our stock plans.
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DILUTION
Our pro forma tangible book value as of August 31, 1999 was $30,338,000, or
approximately $3.00 per share. Pro forma net tangible book value per share
represents the amount of our total assets less total liabilities, divided by the
number of common shares outstanding. Dilution in net tangible book value per
share represents the difference between the amount per share paid by purchasers
of common shares in this offering and the net tangible book value per common
share immediately after the completion of this offering. After giving effect to
the sale of the 2,300,000 common shares in this offering at an initial public
offering price of $13.00 per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma net tangible book value at August 31, 1999 would have been
$57,495,000, or approximately $4.64 per share. This represents an immediate
increase in pro forma net tangible book value of $1.64 per share to existing
shareholders and an immediate dilution in net tangible book value of $8.36 per
share to purchasers of common shares in this offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Initial public offering price per share................. $ 13.00
Pro forma net tangible book value per share as of
August 31, 1999..................................... $ 3.00
Increase in net tangible book value per share
attributable to new investors....................... 1.64
--------
Pro forma net tangible book value per share after
offering.............................................. 4.64
--------
Dilution in net tangible book value per share to new
investors............................................. $ 8.36
========
</TABLE>
The following table sets forth, on a pro forma basis as of August 31, 1999,
after giving effect to the difference between the number of common shares
purchased from us, the total cash consideration paid and the average price per
share paid by existing holders of common shares and by the new investors, before
deducting underwriting discounts and commissions and estimated offering expenses
payable by us, at an initial public offering price of $13.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.... 11,355,809 83.2% $10,147,000 25.3% $ 0.89
New investors............ 2,300,000 16.8 29,900,000 74.7 $13.00
----------- ----- ----------- -----
Total................ 13,655,809 100.0% $40,047,000 100.0%
=========== ===== =========== =====
</TABLE>
This table includes the following shares as of August 31, 1999:
- 1,251,548 shares subject to exercisable options outstanding as of August
31, 1999 at a weighted average exercise price of $4.11 per share.
This table excludes the following shares as of August 31, 1999:
- 734,800 shares subject to unexercisable options outstanding as of
August 31, 1999 at a weighted average exercise price of $7.87 per share;
and
- 828,952 additional shares that could be issued under our stock plans.
The sale of common shares by the selling shareholders in this offering will
reduce the number of common shares held by existing shareholders to 9,905,809,
or approximately 72.5% of the total number of common shares outstanding upon the
closing of this offering; and will increase the number of shares held by new
public investors to 3,750,000, or approximately 27.5% of the total number of
common shares outstanding after this offering.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
consolidated financial data in conjunction with our Consolidated Financial
Statements and the related Notes and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus. The consolidated statement of operations data for the years ended
May 31, 1997, 1998 and 1999, and the consolidated balance sheet data as of
May 31, 1998 and 1999, are derived from and are qualified in their entirety by
our Consolidated Financial Statements that have been audited by KPMG LLP,
independent auditors, and are included elsewhere in this prospectus. The
consolidated statement of operations data for the years ended May 31, 1995 and
1996, and the consolidated balance sheet data as of May 31 1995, 1996 and 1997
are derived from our audited consolidated financial statements which do not
appear elsewhere in this prospectus. The selected consolidated statement of
operations data for the three-month periods ended August 31, 1998 and 1999 and
the selected consolidated balance sheet data at August 31, 1999 have been
derived from unaudited consolidated financial statements included elsewhere in
this prospectus. The unaudited consolidated financial statements include, in the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, that management considers necessary for a fair statement of the
results for those periods. The historical results presented below are not
necessarily indicative of the results to be expected for any future fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue................................... $167,681 $283,325 $298,576 $275,024 $228,618 $56,922 $ 69,473
Cost of revenue............................... 130,921 223,292 241,675 222,028 189,295 46,596 57,332
-------- -------- -------- -------- -------- ------- --------
Gross profit.................................. 36,760 60,033 56,901 52,996 39,323 10,326 12,141
Selling, general, administrative and other
expenses.................................... 23,229 43,989 49,417 48,997 43,391 11,321 10,489
Restructuring and merger costs................ -- -- 258 881 2,550 806 --
-------- -------- -------- -------- -------- ------- --------
Operating income (loss)....................... 13,531 16,044 7,226 3,118 (6,618) (1,801) 1,652
Equity in net income (loss) of joint
ventures.................................... 97 355 273 (497) 267 44 (85)
Minority interest in net income of
consolidated entities....................... (116) -- -- -- -- -- --
Other income (expense), net................... (1,401) 15 (602) (71) (397) (212) (198)
-------- -------- -------- -------- -------- ------- --------
Income (loss) before income taxes............. 12,111 16,414 6,897 2,550 (6,748) (1,969) 1,369
Provision (benefit) for income taxes.......... 3,682 5,435 2,699 1,448 (2,214) (703) 466
-------- -------- -------- -------- -------- ------- --------
Net income (loss)............................. $ 8,429 $ 10,979 $ 4,198 $ 1,102 $ (4,534) $(1,266) $ 903
======== ======== ======== ======== ======== ======= ========
Basic net income (loss) per share............. $ 0.93 $ 1.07 $ 0.40 $ 0.11 $ (0.44) $ (0.12) $ 0.09
======== ======== ======== ======== ======== ======= ========
Diluted net income (loss) per share........... $ 0.93 $ 1.02 $ 0.37 $ 0.10 $ (0.44) $ (0.12) $ 0.08
======== ======== ======== ======== ======== ======= ========
Shares used to compute basic in per share
calculation................................. 9,094 10,289 10,386 10,369 10,325 10,341 10,104
Shares used to compute diluted in per share
calculation................................. 9,094 10,801 11,195 11,112 10,325 10,341 11,179
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
---------------------------------------------------- AUGUST 31,
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $11,008 $ 13,683 $ 17,033 $ 10,387 $10,601 $ 17,128
Working capital.................................. 17,782 23,296 26,383 24,469 22,630 23,993
Total assets..................................... 68,869 125,791 110,791 114,161 99,625 112,431
Total shareholders' equity....................... 22,825 32,908 36,399 36,049 29,955 30,831
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, except for the historical information,
contains forward-looking statements. These statements are subject to risks and
uncertainties. You should not place undue reliance on these forward-looking
statements as actual results could differ materially. We do not assume any
obligation to publicly release the results of any revision or updates to these
forward-looking statements to reflect future events or unanticipated
occurrences. This discussion and analysis should be read in conjunction with our
Consolidated Financial Statements and the related Notes, which are included
elsewhere in this prospectus. This discussion of fiscal 1997, 1998 and 1999
refers to the fiscal years ended on May 31 of each year.
OVERVIEW
Metron Technology N.V. is a holding company organized under the laws of The
Netherlands. Through our various operating subsidiaries, we are a leading global
provider of marketing, sales, service and support solutions to semiconductor
materials and equipment suppliers and semiconductor manufacturers. We operate in
Europe, Asia and the United States. We were founded in Europe in 1975 by our two
corporate shareholders, who own a majority of our shares, and certain of our
current and former management. In 1995, we reorganized Metron to combine three
Asian companies as a reorganization under common control, and purchased
Transpacific Technology Corporation and its subsidiaries, referred to as TTC.
TTC was founded in California in 1982 as a semiconductor equipment
manufacturers' representative company and expanded into the distribution
business in 1990. In July 1998, we acquired T.A. Kyser Co., which we refer to as
Kyser, in a transaction accounted for as a pooling of interests. Founded in
1977, Kyser markets and sells materials in nine states within the United States
principally to the semiconductor industry.
We derive our revenue from sales of materials, equipment, service and spare
parts to the semiconductor industry, as well as from commissions on sales of
equipment and materials. We recognize revenue for most of an equipment sale and
all other product sales upon the shipment of goods to customers. We defer the
portion of our equipment revenue associated with our estimate of our
installation and warranty obligations. We amortize the deferred revenue over the
applicable installation and warranty periods. We recognize service revenue in
the periods the services are rendered to customers.
In each of our three fiscal years ended May 31, 1999, a majority of our
revenue came from the sale of products from five or fewer of the semiconductor
materials and equipment companies we represent, who we refer to as our
principals. For fiscal 1999, 24% of our total revenue was generated from the
sale of products manufactured by FSI and 21% from the sale of products
manufactured by Entegris. In addition to representing our two largest sources of
revenue, FSI and Entegris are also our two largest shareholders, and after the
offering FSI will hold 21.8% and Entegris will hold 21.8% of our outstanding
shares. Although the principals that comprise our largest sources of revenue may
change from period to period, we expect that revenue from the sale of products
of a relatively small number of principals will continue to account for a
substantial portion of our revenue for at least the next five years.
We operate in all areas of the world in which there is a significant
semiconductor industry, except Japan. The following tables show our sales in
Europe, Asia and the United States in dollars and as a
22
<PAGE>
percentage of net revenue for each of the three fiscal years ended May 31, 1997,
1998 and 1999 and for the three month periods ended August 31, 1998 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenue
Europe................................. $179,853 $155,472 $112,369 $29,040 $31,705
Asia................................... 58,839 53,047 62,243 14,285 19,345
United States.......................... 59,884 66,505 54,006 13,597 18,423
-------- -------- -------- ------- -------
Total net revenue.................... $298,576 $275,024 $228,618 $56,922 $69,473
======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
------------------------------------ --------------------
1997 1998 1999 1998 1999
-------- -------- -------- ------- -------
(PERCENTAGE OF NET REVENUE)
<S> <C> <C> <C> <C> <C>
Net revenue
Europe................................. 60.2% 56.5% 49.2% 51.0% 45.7%
Asia................................... 19.7 19.3 27.2 25.1 27.8
United States.......................... 20.1 24.2 23.6 23.9 26.5
----- ----- ----- ----- -----
Total net revenue.................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
Since the beginning of fiscal 1999, we have been organized into two
worldwide operating divisions, equipment and materials. Our equipment division
derives the majority of its revenue from the sale of capital equipment. The
remainder of the division's revenue comes from service, which includes the
installation, maintenance and repair of semiconductor equipment, spare part
sales and commissions. Our equipment sales represent products that support
various production activities for the manufacture of semiconductors. The sales
of the equipment division principally represent a small number of high-dollar
value transactions for which the products are generally shipped directly to the
customer by the manufacturer. As a result, our equipment sales are significantly
affected by the pattern of capital spending by customers, the timing of customer
orders and the timing of product shipments by the equipment manufacturer.
Our materials division derives the majority of its revenue from sales of
materials and components. The remainder of the division's revenue comes from
commissions. The materials and components we sell are used both in the
production of semiconductors and in the building and maintenance of
semiconductor equipment and manufacturing facilities. Materials include products
such as wafer handling cassettes and accessories, wafer surface preparation
materials, fluid-handling components such as fittings, valves and tubing, and
disposable cleanroom clothing. Sales of these products tend to be less cyclical
than sales of semiconductor equipment and generally offer higher gross margins.
RESULTS OF OPERATIONS
Beginning in the second half of 1996, as the result of excess capacity and
significant price erosion, especially for memory chips, semiconductor industry
growth slowed significantly. This slowdown caused semiconductor manufacturers to
exercise caution in making capital equipment purchasing decisions. Some
semiconductor manufacturers reduced or delayed the expansion or construction of
facilities. This directly affected the sales of semiconductor capital equipment
and, to a lesser extent, the sales of materials. As a result of the slowdown, we
experienced order cancellations, delays in booking new orders and delays in
shipping orders to customers, all of which contributed to the reductions in our
23
<PAGE>
revenue in fiscal 1998 and 1999. We believe that, despite short term slowdowns,
the semiconductor industry has long term growth opportunities. As a result, we
believe we must maintain our infrastructure, even during periodic slowdowns, in
order to continue to serve our customers and to be in a position to take
advantage of long term growth opportunities. Accordingly, we did not reduce our
operating expenses sufficiently to prevent us from recording an operating loss
in fiscal 1999.
The following table summarizes our historical results of operations as a
percentage of net revenue for the fiscal years and periods indicated. The
historical financial data for fiscal 1997, 1998 and 1999 were derived from, and
should be read in conjunction with, our audited Consolidated Financial
Statements and the related Notes included elsewhere in this prospectus. The
historical financial data for the three month periods ended August 31, 1998 and
1999 have been derived from unaudited consolidated financial statements included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenue........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.................................... 80.9 80.7 82.8 81.9 82.5
----- ----- ----- ----- -----
Gross margin....................................... 19.1 19.3 17.2 18.1 17.5
Selling, general, administrative, and other
expenses......................................... 16.6 17.8 19.0 19.9 15.1
Restructuring and merger costs..................... 0.1 0.3 1.1 1.4 --
----- ----- ----- ----- -----
Operating margin................................... 2.4 1.2 (2.9) (3.2) 2.4
</TABLE>
The following table shows our materials division and equipment division
revenue as a percent of net revenue, together with the related gross margins:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
--------------------------- ------------------
1997 1998 1999 1998 1999
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue
Equipment division............................... 62.9% 55.1% 55.7% 59.5% 53.0%
Materials division............................... 37.1 44.9 44.3 40.5 47.0
Gross margins
Equipment division............................... 18.2% 17.4% 14.9% 16.5% 14.1%
Materials division............................... 20.5 21.6 20.1 20.5 21.3
</TABLE>
THREE MONTHS ENDED AUGUST 31, 1999 COMPARED TO THREE MONTHS ENDED AUGUST 31,
1998
NET REVENUE.
EQUIPMENT DIVISION. The equipment division's net revenue for the three
months ended August 31, 1999 was $36.8 million, an increase of $2.8 million or
8.3% from the three months ended August 31, 1998. Revenue gains in Asia and
Europe were offset by lower revenue in the United States, where revenue is
particularly dependent on a small number of high-dollar transactions. Service
revenue was lower in the three months ended August 31, 1998, principally as a
result of a reduction in the amount of deferred revenue realized from the
installation and warranty of equipment. This reduction was due to lower
equipment sales during the second through fourth quarters of fiscal 1999
compared to the same quarters in fiscal 1998. The division's revenue decreased
as a percentage of total revenue owing to higher growth of materials division
revenue.
MATERIALS DIVISION. The materials division's net revenue for the three
months ended August 31, 1999 was $32.7 million, an increase of $9.8 million or
42.3% from the three months ended August 31,
24
<PAGE>
1998. The division recorded higher revenue in all regions, with particularly
strong growth coming from the United States.
GROSS MARGINS
EQUIPMENT DIVISION. The equipment division's gross margin was 2.4
percentage points lower for the three months ended August 31, 1999 compared to
the three months ended August 31, 1998. The decline was due to the lower service
revenues cited above which were insufficient to cover the largely fixed costs of
Metron's service organization, and to lower commission revenue in the three
months ended August 31, 1998.
MATERIALS DIVISION. The gross margin of the materials division increased
0.8 percentage points for the three months ended August 31, 1999 compared to the
three months ended August 31, 1998. Higher gross margins in Asia and the United
States offset a slight margin decline in Europe.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses
for the three months ended August 31, 1999 were $10.5 million, down
$0.8 million or 7.0% from the $11.3 million incurred in the three months ended
August 31, 1998. The decline is due to reduced salary and other employment
related costs as a result of lower headcount.
RESTRUCTURING AND MERGER COSTS. There was no restructuring expense in
either period, but in the three months ended August 31, 1998, Metron incurred
$806,000 of expenses in connection with the acquisition of Kyser which was
consummated during the period. There were no comparable merger costs in the
three months ended August 31, 1999.
FISCAL YEAR ENDED MAY 31, 1999 COMPARED TO FISCAL YEARS ENDED MAY 31, 1998 AND
1997
NET REVENUE
EQUIPMENT DIVISION. The equipment division's net revenue in fiscal 1999 was
$127.4 million, down $24.2 million or 16.0% from fiscal 1998. Net revenue in
fiscal 1998 was $151.6 million, down $36.3 million or 19.3% from $187.9 million
in fiscal 1997. The revenue decline over the three-year period was primarily the
result of reduced equipment sales in Europe, our largest geographic segment. The
decline in our equipment sales during the three-year period ended May 31, 1999
reflected the influence of the cyclical slowdown in the growth of the
semiconductor industry. In the third and fourth quarters of fiscal 1999, as the
industry began to emerge from its prolonged downturn, revenue grew by 16.2% in
the third quarter and 6.4% in the fourth quarter of fiscal 1999.
MATERIALS DIVISION. The materials division's net revenue in fiscal 1999 was
$101.2 million, down $22.2 million or 18.0% from fiscal 1998. Net revenue in
fiscal 1998 was $123.4 million, up $12.8 million or 11.6% from the
$110.6 million in fiscal 1997. The decline in net revenue in fiscal 1999 was a
result of the reduced and delayed expansion and construction of semiconductor
facilities and lower than expected increases in the number of wafers processed.
In fiscal 1999, materials revenue was lower in all geographic areas. However, as
the industry began to emerge from its prolonged downturn, revenue grew
sequentially from the two year low in the first quarter and, in the fourth
quarter of fiscal 1999, was 21.3% higher than in the third quarter. The increase
in fiscal 1998 from fiscal 1997 was primarily due to revenue growth in Europe
and the United States, with a smaller amount of revenue growth in Asia.
GROSS MARGINS
EQUIPMENT DIVISION. The equipment division's gross margin declined in both
fiscal 1999 and fiscal 1998. The decline in gross margin in fiscal 1999 was due
principally to the lower proportion of division revenue represented by
commission sales. This reflected both the closure of our United States
25
<PAGE>
manufacturers' representative sales business in December 1998 and the decline in
equipment sales in South Korea, most of which are structured as commission
sales. The decline in gross margin in fiscal 1998 was due principally to the
fact that we recorded a small loss on service in fiscal 1998, whereas we
recorded a small profit in fiscal 1997.
MATERIALS DIVISION. The gross margin of the materials division declined in
fiscal 1999. The decline was due principally to changes in product mix,
increased reserves which we booked for potential inventory obsolescence and
higher period costs. Gross margin increased in fiscal 1998 as a result of
changes in product mix and higher margins on materials sales in Asia.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses
in fiscal 1999 were $43.4 million, down $5.6 million or 11.4% from the
$49.0 million incurred in fiscal 1998. Fiscal 1998 expenses were down by
$0.4 million or less than 1% from the $49.4 million incurred in fiscal 1997.
SG&A expenses consist principally of salaries and other employment-related
costs, travel and entertainment, occupancy, communications and computer-related
expense, trade show and professional services, depreciation and amortization of
acquisition goodwill. Our SG&A expenses are a function principally of our total
headcount. Over 60% of SG&A expenses consist of salaries and other
employment-related costs.
The decrease in SG&A expenses in fiscal 1999 was primarily the result of the
reduction in headcount levels which we made to match the lower than expected
levels of revenue. However, because we base our headcount levels on longer term
revenue goals, we did not reduce headcount sufficiently to prevent SG&A expense
from increasing as a percentage of net revenue.
RESTRUCTURING AND MERGER COSTS. The following table summarizes the
restructuring and merger costs we incurred in the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
-------------------------------------- -----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Restructuring costs.............................. -- $261 $1,835 -- --
Merger costs..................................... $258 620 715 $806 --
---- ---- ------ ---- ----
Restructuring and merger costs................. $258 $881 $2,550 $806 --
==== ==== ====== ==== ====
</TABLE>
Restructuring costs represent primarily severance costs associated with the
implementation of our new organizational structure and other reductions in
headcount. During fiscal 1998, we began the transition from our organizational
structure based on individual Metron subsidiaries in each country to a global
organization built around our product lines in order to improve our service to
our principals and customers. This organizational change allowed us to eliminate
several positions in fiscal 1998 and fiscal 1999 that had been duplicated under
the previous subsidiary structure. The restructuring costs incurred during
fiscal 1998 represent termination costs for 13 employees, primarily in finance
and administration. This change did not have a material impact on restructuring
and merger expenses in fiscal 1998, but we incurred approximately $856,000 of
charges in fiscal 1999. This represents the termination costs of 51 employees,
most of whom worked in the equipment division. In February 1999, we entered into
an early retirement agreement with one of our managing directors in connection
with the termination of his employment agreement. To cover the entire cost of
the early retirement agreement, we recorded a pre-tax charge of $979,000 in
fiscal 1999.
All the merger costs we incurred, primarily professional fees, were in
connection with the acquisition of Kyser. We began discussions with Kyser
regarding a possible combination of the two companies in fiscal 1997.
Discussions were terminated for extended periods of time and subsequently
resumed several times before completion of the transaction in July 1998.
26
<PAGE>
OTHER EXPENSE. The following table summarizes the components of other
income (expense) for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MAY 31, ENDED AUGUST 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Foreign exchange gain (loss).................... $ (578) $ 489 $ 211 $ 58 $(114)
Interest income................................. 487 514 438 83 69
Interest expense................................ (1,260) (1,110) (913) (252) (263)
Loss on the sale of joint ventures.............. -- -- (140) -- --
Miscellaneous income............................ 749 36 7 (101) 110
------- ------- ----- ----- -----
Other expense................................... $ (602) $ (71) $(397) $(212) $(198)
======= ======= ===== ===== =====
</TABLE>
We engage in limited hedging activities to reduce our exposure to exchange
risks arising from fluctuations in foreign currency, but because hedging
activities can be costly, we do not attempt to cover all potential foreign
currency exposures. During the three-year period ended May 31, 1999, we entered
into contracts to hedge firm purchase commitments, to hedge the maturities of
foreign currency denominated liabilities with foreign currency denominated
assets and to hedge differences existing between foreign currency assets and
liabilities. The currencies in which we purchase forward exchange contracts have
numerous market makers to provide ample depth and liquidity for our hedging
activities.
Interest income represents primarily earnings on our available cash
balances. The decrease in our interest income in fiscal 1999 is a result of
lower average cash balances and of declining interest rates. Our interest
expense decreased year over year primarily as the result of reduced interest
rates, and the reduction in average borrowings from our various overdraft
facilities.
QUARTERLY RESULTS OF OPERATIONS
The following tables present certain consolidated statements of operations
data in dollars and as a percentage of net revenue for the eight quarters ended
August 31, 1999. In management's opinion, this unaudited information has been
prepared on the same basis as our audited annual Consolidated Financial
Statements and includes all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation of the unaudited information for
the quarters presented. The results of operations for any quarter are not
necessarily indicative of results that we may achieve for any subsequent
quarters.
27
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------
NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31,
1997 1998 1998 1998 1998 1999 1999 1999
--------- --------- -------- --------- --------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenue................. $72,209 $78,249 $63,014 $56,922 $51,296 $56,559 $63,840 $69,473
Gross profit................ 13,432 14,343 12,689 10,326 8,445 9,022 11,530 12,141
Income (loss) from
operations................ 158 1,364 271 (1,801) (2,595) (2,832) 610 1,652
Net income (loss)........... (308) 563 (39) (1,266) (1,513) (1,899) 144 903
Basic net income (loss) per
share..................... $ (0.03) $ 0.05 $ 0.00 $ (0.12) $ (0.15) $ (0.18) $ 0.01 $ 0.09
Diluted net income (loss)
per share................. $ (0.03) $ 0.05 $ 0.00 $ (0.12) $ (0.15) $ (0.18) $ 0.01 $ 0.08
PERCENTAGE OF NET REVENUE:
Net revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit................ 18.6 18.3 20.1 18.1 16.5 16.0 18.1 17.5
Income (loss) from
operations................ 0.2 1.7 0.4 (3.2) (5.1) (5.0) 1.0 2.4
Net income (loss)........... (0.4) 0.7 (0.1) (2.2) (2.9) (3.4) 0.2 1.3
</TABLE>
Our quarterly operating results have fluctuated significantly and are likely
to continue to fluctuate significantly due to a number of factors including:
- the timing of significant customer orders and customer spending patterns;
- the timing of product shipments by our principals;
- the loss of any significant customer or principal;
- the timing of new product and service announcements by our principals and
their competitors;
- the mix of products sold and the market acceptance of our new product
lines;
- the efficiencies we are able to achieve in managing inventories of
materials and spare parts;
- the timing of expenditures intended to increase future sales of materials
and equipment;
- general global economic conditions or economic conditions in a particular
region;
- changes in pricing by us, our principals or our competitors;
- changes in currency valuations relative to the U.S. dollar;
- costs we may incur if we become involved in future litigation; and
- other factors, many of which are beyond our control.
28
<PAGE>
Net revenue has fluctuated over the past eight quarters primarily due to the
cyclical downturn of the semiconductor industry. The following table shows our
materials division and equipment division net revenue, together with their
related gross margins:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------
NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31,
1997 1998 1998 1998 1998 1999 1999 1999
--------- --------- -------- -------- --------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue
Equipment
division.......... $39,352 $47,804 $32,812 $33,975 $27,507 $31,950 $33,991 $36,807
Materials
division.......... 32,857 30,445 30,201 22,948 23,790 24,609 29,849 32,666
Gross margins
Equipment
division.......... 16.9% 15.7% 18.9% 16.5% 13.9% 12.9% 15.9% 14.1%
Materials
division.......... 20.7 22.5 21.4 20.5 19.4 19.9 20.5 21.3
</TABLE>
Equipment division revenue for the past eight quarters fluctuated primarily
due to the factors described above. The decline in materials division revenue
during the first quarter of fiscal 1999 was primarily due to the slowdown in the
construction of semiconductor fabrication facilities. In the fourth quarter of
fiscal 1999, the increase in equipment and materials division revenue reflects
the beginning of the industry's emergence from its prolonged downturn.
Equipment division gross margins fluctuate primarily due to changes in
product mix. Materials division gross margins have remained relatively stable
for the past eight quarters except for the second and third quarters of fiscal
1999 when we recorded additional provisions for inventory which we purchased for
customer orders in Asia that were subsequently delayed or canceled.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity to date have been cash flow from
operations and bank borrowings. We define liquidity as our ability to generate
resources to pay our current obligations and to finance our growth during
periods of business expansion. Our principal requirement for capital is for
working capital to finance receivables and inventories. Our working capital,
current assets less current liabilities, at August 31, 1999 was $24.0 million.
Our working capital at May 31, 1999 was $22.6 million. As a result of lower
revenue, our working capital decreased 7.5% from May 31, 1998, and our current
ratio, current assets divided by current liabilities, was 1.3 at May 31, 1998
and 1.4 at May 31, 1999.
OPERATING ACTIVITIES. Cash flows from operating activities in fiscal 1998
were $1.1 million. The net total of items which did not affect operating cash
flows, $4.1 million, was offset by net changes in assets and liabilities of a
similar amount. As a result, the $1.1 million of cash flows from operating
activities in fiscal 1998 were approximately equal to net income. Cash flows
from operating activities in fiscal 1999 were a negative $3.0 million, largely
as the result of Metron's net loss of $4.5 million. In fiscal 1999, the net
total of items which did not affect operating cash flows increased to
$4.8 million. The increase was principally due to the fact that we provided
additional reserves against inventory purchased for customers in Asia who
subsequently deferred or canceled their orders, and took a reserve against a
receivable from a customer in Europe who filed for bankruptcy. The net effect of
changes in assets and liabilities in fiscal 1999 was approximately
$3.3 million. A significant reduction in receivables caused by the reduction in
revenue was offset by reductions in accounts payable and amounts due to
affiliates, which are also accounts payable. The decline in equipment revenue in
fiscal 1999 also caused a significant reduction in the amounts deferred for
installation and warranty. The net effect of all these items was a positive
$1.5 million.
INVESTING ACTIVITIES. In fiscal 1998, we contributed $526,000 to increase
our investment in FSI-CME, a joint venture with FSI in Europe, and invested
$583,000 to purchase a 35% interest in a
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<PAGE>
new Korean joint venture with FSI called FSI-CMK. In February 1999, we sold our
interests in these joint ventures to FSI for $2.5 million.
During fiscal 1999, through our wholly-owned subsidiary Metron Technology
(United Kingdom) Ltd. we formed a joint venture with WS Atkins Plc., a publicly
traded provider of engineering and facilities maintenance services around the
world. This joint venture Metron Atkins Partnership Limited, of which we own a
50% interest, makes available the services of both joint venturers to the
semiconductor industry and coordinates the supply of services from others. These
services include the design and engineering of manufacturing facilities changes,
facilities management and comprehensive technical support.
Our capital expenditures for property, plant and equipment totaled
$3.6 million for fiscal 1997, $4.0 million for fiscal 1998 and $1.4 million for
fiscal 1999. Most of our capital expenditures are for leasehold improvements and
computer and communications equipment. We expect that our total capital
expenditures in fiscal 2000 will be about $2.5 million, excluding whatever
portion we incur this year of the costs of a new operations management
information system which we estimate could total $3.0 to $4.0 million over a 24
to 36 month period. At May 31, 1999, we had commitments to spend approximately
$21.9 million for the purchase of equipment, materials and spare parts for
resale.
FINANCING ACTIVITIES. During the three-year period ending May 31, 1999, we
satisfied our funding requirements principally from internally generated funds
and our various borrowing facilities. In fiscal 1999, we repurchased common
shares from two employee shareholders for a total of $1.2 million pursuant to
the Amended and Restated Buy and Sell Agreement. We expect that the net proceeds
from this offering, along with cash generated from operations, will be
sufficient to meet our anticipated needs for working capital both in the
short-term and the long-term. We do not anticipate that we will need to raise
additional capital to permit us to conduct our operations in the ordinary
course. However, we may need to raise additional capital for significant
acquisitions or other extraordinary transactions. We do not currently have any
specific plans, agreements or commitments related to any such transaction and
are not currently engaged in any negotiations related to any such transaction.
We have no plans to pay any dividends on our common shares and intend to retain
all of our future profits to fund future growth. However, our future growth,
including potential acquisitions, may require additional external financing, and
from time to time we may need to raise additional funds through public or
private sales of equity and/or additional borrowings. If we are unable to obtain
this additional funding, we might have to curtail our expansion plans. The
issuance of additional equity or debt securities convertible into equity could
result in dilution to our existing shareholders.
The following table summarizes our material borrowing facilities as of
August 31, 1999:
<TABLE>
<CAPTION>
RECENT
U.S. $ EQUIVALENT AMOUNT AMOUNT INTEREST
LENDER FACILITY AMOUNT CURRENTLY OUTSTANDING AVAILABLE RATE
- ------ ----------------- --------------------- --------- ----------
<S> <C> <C> <C> <C>
Deutsche Bank......................... 4,283,000 3,273,000 1,011,000 7.50%
Royal Bank of Scotland................ 3,428,000 1,692,000 1,735,000 7.25%
Silicon Valley Bank................... 4,000,000 3,200,000 800,000 8.00%
Compass Bank.......................... 8,500,000 6,985,000 1,515,000 7.50%
ING Bank.............................. 1,402,000 217,000 1,185,000 7.50%
All Others............................ 2,056,000 845,000 1,211,000 5.0 to 8.5%
---------- ---------- ---------
Total................................. 23,669,000 16,212,000 7,457,000
========== ========== =========
</TABLE>
YEAR 2000 IMPLICATIONS
The year 2000 problem arises because many older computer hardware and
software systems use only two digits to represent the year. As a result, these
systems and programs cannot distinguish
30
<PAGE>
between 20(th) and 21(st) century dates, which may cause errors in information
or system failures. Since uncertainty is inherent in any assessment of the
potential year 2000 issues, we recognize the need to remain vigilant and are
continuing our analysis, assessment and conversion for the various year 2000
issues which we have identified across our business.
We utilize many third party software packages for our business applications
and computer systems that support our day-to-day operations. We are upgrading
our business applications and computer systems to be year 2000 compliant as the
result of our analysis of identified year 2000 deficiencies.
Many of the pieces of equipment we sold to customers in prior years and sell
now rely on specialized integrated software to monitor and control their
functions. Since the beginning of 1998, we have been working with suppliers and
customers to review and assess the software in these older products and in our
current product portfolio to identify any year 2000 issues. In January 1999, we
completed a report on all our current equipment principals, including our key
principals FSI and Entegris, and sent it to all of our customers. To date, we
have completed analysis of approximately 80% of our installed base and found
that about 10% require modification or upgrading to be year 2000 compliant. Our
goal is to complete this analysis as soon as we can, but we are significantly
dependent for information on our customers and on former principals, and we
cannot predict whether we will be able to complete the project before
December 31, 1999. We believe that those principals that are not currently
year 2000 compliant will be compliant before the year 2000. Wherever possible,
we are letting our customers know what upgrades or modifications are necessary
to be year 2000 ready. We are in the process of upgrading the software for
certain customers and are working with all of our customers to insure that any
necessary upgrades can be scheduled for completion in a timely manner. In
addition, we have asked those customers that do not wish to receive an upgrade
to sign a disclaimer. We also intend to support our customers with spare parts
and technical support, after the year 2000 commences.
Our internal systems include both information technology, or IT, and non-IT
systems. We are in the process of completing an assessment of our material
internal IT systems, including both our own software products and third-party
software and hardware technology, but we have not initiated an assessment of our
non-IT systems. We expect to complete testing of our IT systems in 1999. To the
extent that we are not able to test the technology provided by principals and
third-party vendors, we are seeking assurances from vendors that their systems
are year 2000 compliant and/or installing upgrades and modifications where
recommended. We are not currently aware of any material operational issues or
costs associated with preparing our internal IT and non-IT systems for the year
2000. However, we may experience material unanticipated problems and costs
caused by undetected errors or defects in the technology used in our internal IT
and non-IT systems. Although the year 2000 project team has not yet determined
the most-likely worst-case year 2000 scenarios or quantified the likely impact
of these scenarios, it is clear that the occurrence of one or more of the risks
described above could have a material adverse effect on our business, financial
condition or results of operations.
While we have made efforts to notify our customers who have purchased
potentially non-compliant products, we cannot be sure that these customers will
not assert claims against us alleging that the purchased products should have
been year 2000 compliant at the time of purchase, which could result in costly
litigation and divert management's attention. We cannot be sure that we will not
encounter unforeseen problems related to year 2000 issues, but we currently
expect that the year 2000 program and any resulting issues will be resolved in a
timely manner. We are currently incurring staff costs and may incur other costs
to complete our program to resolve year 2000 issues, but we do not account for
these costs separately. Although we do not separately account for year 2000
expenses, we estimate that the expenses we have incurred to date to address
year 2000 issues have not been material and, although we have not completed our
full assessment of our year 2000 readiness, we do not expect to incur material
expenses in connection with any required future remediation efforts.
31
<PAGE>
We have not developed a contingency plan related to a failure of our, or a
third party's, year 2000 remediation effort and may not be prepared if this
occurs. We are also subject to external forces, both in the United States and
elsewhere, that might affect generally affect industry and commerce, such as
utility or transportation company year 2000 compliance failures and related
service interruptions.
EFFECT OF CURRENCY EXCHANGE RATE AND EXCHANGE RATE RISK MANAGEMENT
A significant portion of our business is conducted outside of the United
States through our foreign subsidiaries. While most of our international sales
are denominated in dollars, some are denominated in various foreign currencies.
To the extent that our sales and operating expenses are denominated in foreign
currencies, our operating results may be adversely affected by changes in
exchange rates. Owing to the number of currencies involved, the substantial
volatility of currency exchange rates, and our constantly changing currency
exposures, we cannot predict the effect of exchange rate fluctuations on our
future operating results. Although we engage in foreign currency hedging
transactions from time to time, these hedging transactions can be costly, and
therefore, we do not attempt to cover all potential foreign currency exposures.
These hedging techniques do not eliminate all of the effects of foreign currency
fluctuations on anticipated revenue.
In addition, the transition period from legacy currencies to the euro
currently is set to expire January 1, 2002. We are assessing our information
technology systems to determine whether they will accommodate the eventual
elimination of the legacy currencies. If our information technology systems are
unable to do so, they would have to be upgraded or replaced.
MARKET RISK
At May 31, 1999 we had aggregate forward exchange contracts in various
currencies as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
CONTRACT AMOUNT US$ BUY SELL CONTRACT RATE FAIR VALUE EXPIRATION DATE
- --------------------- ----------------- ----------------- ---------------- ---------- ---------------
<C> <S> <C> <C> <C> <C>
$3,773,000 -- Singapore Dollars 1.69 $ 98,319 January 2000
$4,889,000 Japanese Yen 107.26 (1,439) March 2000
$2,022,000 Singapore Dollars 1.67 3,578 January 2000
$1,700,000 Italian Lira 1,864.90 5,492 July 1999
$ 500,000 British Pound 1.63 (475) June 1999
$ 700,000 Deutsch Mark 1.79 (36,445) July 1999
--------
$ 69,030
========
</TABLE>
The building mortgage with the Royal Bank of Scotland plc interest rate is
comprises a variable LIBOR rate, a fixed rate of 1.5%, and a regulatory bank
charge. In May 1996 we entered into an interest rate swap, expiring June 2001,
to convert only the variable LIBOR portion of the interest rate to a fixed
interest rate of 7.72%. The interest rates at May 31, 1998 and 1999 for the
mortgage were 9.25% and 6.87%, while the interest rates for the swap were 9.27%
and 9.24%, respectively. At May 31, 1999, the notional amount for the interest
rate swap was $1,002,000 and its estimated fair value was a payable of $43,000.
32
<PAGE>
BUSINESS
OVERVIEW
We are a leading global provider of marketing, sales, service and support
solutions to semiconductor materials and equipment suppliers and semiconductor
manufacturers. On behalf of semiconductor materials and equipment suppliers,
which we refer to as our principals, we provide a broad range of materials and
equipment to leading semiconductor manufacturers such as Advanced Micro Devices,
IBM, Intel, Lucent, Motorola, NEC Electronics, Philips, Infineon (Siemens) and
STMicroelectronics. We also provide semiconductor manufacturers with the ability
to outsource a wide variety of silicon wafer fabrication, or fab, and equipment
support services, such as materials management, cleanroom services and facility
maintenance. Our principals are both independent companies that have developed
emerging technologies and divisions of larger companies that have other primary
products and markets and include Cabot, Entegris, FSI, Komatsu, Pall,
Schumacher, SDI, Seiko Instruments and Zeiss. Our materials offerings include an
extensive array of over 15,000 items, including wafer carriers and shippers,
fluid and gas handling components, high purity chemicals and cleanroom products.
Our equipment offerings include cleaning, microlithography, which refers to the
part of the fabrication process during which an image is projected on to a wafer
by passing light through a photomask, which is a high-purity quartz or glass
plate used as the stencil in semiconductor device fabrication to create an
integrated circuit design pattern on a semiconductor wafer, metrology, which
refers to the measurement and inspection of the wafer during the fabrication
process, photomask inspection and repair, which refers to the inspection and
repair, if necessary, of the glass or quartz photomasks used during the
microlithography process, and inspection and defect characterization, which
refers to the process by which silicon wafers are inspected during and after
fabrication, equipment.
INDUSTRY BACKGROUND
Semiconductor Industry Association, or SIA, data indicates that the
semiconductor industry grew from $21.5 billion in revenue in 1985 to
$125.5 billion in revenue in 1998, representing a compound annual growth rate of
14.6%. Although the industry recently experienced one of its periodic down
cycles, The SIA estimates that semiconductor industry revenue will exceed
$144.0 billion in 1999 and will increase at a compound annual growth rate of
17.6% to $234.0 billion in 2003. The increase in demand for semiconductors is
driven by the communications industry, particularly the Internet, as well as
growth in traditional markets for semiconductors such as computers, automobiles
and other consumer and industrial products.
The manufacture of semiconductors requires a wide array of equipment and
materials. The semiconductor capital equipment industry consists of equipment
for wafer manufacture and processing and equipment for assembly, packaging and
testing of semiconductors. According to Semiconductor Equipment and Materials
International, in 1998, the semiconductor wafer fabrication equipment industry
generated $14.2 billion in revenue. The high cost of equipment development and
the desire of semiconductor manufacturers to buy products from financially and
technically strong suppliers have led to consolidation among equipment
manufacturers. At the same time, the long-term growth prospects of the industry
continue to attract small players with new technologies to fill product niches.
In addition, some suppliers to the industry are divisions of larger companies
which have other primary products and markets.
The semiconductor manufacturing materials industry provides the wide variety
of consumable and manufacturing materials that are required by semiconductor
manufacturers, including wafer carriers and shippers, fluid and gas handling
components, high purity chemicals and cleanroom products. According to Rose
Associates, in 1998, the semiconductor manufacturing materials industry
generated $19.8 billion in revenue. Rapid changes in technology have led to the
creation and emergence of newer
33
<PAGE>
semiconductor materials manufacturers offering innovative products. The
materials industry is more fragmented and less cyclical than the equipment
industry, in part because demand for semiconductor materials is driven more by
the volume of semiconductors produced than by industry capacity and expectations
of future revenue growth. The lower barriers to entry in this industry also
attracts new competitors.
As semiconductors continually become smaller and more complex, the number of
manufacturing steps increases, which requires more complex and costly
semiconductor equipment. The complex manufacturing process also entails the use
of a large variety of materials from many sources. In addition, the high capital
cost of semiconductor fabrication plants, called fabs, which can now exceed
$2.0 billion, requires that fabs quickly reach and maintain optimal productivity
levels in order to maximize their return on investment. This also necessitates
around-the-clock manufacturing, which in turn requires that spare parts,
materials and service be delivered quickly and on short notice.
The semiconductor industry has evolved into a global industry as
semiconductor manufacturers are increasingly operating fabs in multiple
locations throughout the world in proximity to their customers. The requirement
for the rapid ramp-up of new facilities and new products has led semiconductor
manufacturers increasingly to standardize all aspects of their operations and to
require that their suppliers do the same. We believe that in order to ensure
standardization, semiconductor manufacturers are increasingly seeking materials
and equipment suppliers that offer a comprehensive and cost-effective global
procurement solution to their materials, equipment and service needs.
Semiconductor equipment and materials suppliers and semiconductor
manufacturers are increasingly focusing on their core competencies and
outsourcing other aspects of their operations to third parties. The increasing
complexity of semiconductors and related capital investment, combined with
long-term pricing pressures, have led semiconductor manufacturers to
increasingly focus on design, development and manufacturing and outsource to
third parties equipment service, materials management, cleanroom services and
facility maintenance, as well as other similar services. We believe that
outsourcing enables these companies to increase fab productivity in a
cost-effective manner. In addition, semiconductor equipment and materials
suppliers often focus on product development and manufacturing and outsource to
third parties the marketing, sale, installation, service and support of their
products. In particular, smaller semiconductor equipment and materials
manufacturers that cannot afford to invest the time or the capital resources
required to build a global infrastructure, and divisions of larger companies
whose main focus is on other products or markets, often benefit from
outsourcing. Outsourcing enables these companies to reduce time to market,
financial risk and marketing investment while maintaining the ability to compete
with often larger companies with established infrastructures.
Providers of outsourcing services to the semiconductor industry are able to
take advantage of operational efficiencies due to their ability to offer
products and services from multiple suppliers and leverage their infrastructure
costs over a larger revenue base. There are a large number of generally smaller
companies that provide outsourcing services, including regional, privately-held
companies that focus on a portion of, or a specific geographic market in, the
semiconductor manufacturing industry. We believe that semiconductor equipment
and materials manufacturers and semiconductor manufacturers are increasingly
seeking an international services and support company that offers a
comprehensive global solution.
THE METRON SOLUTION
We are a leading global provider of marketing, sales, service and support
solutions to semiconductor materials and equipment suppliers and semiconductor
manufacturers. We provide an important link between semiconductor manufacturers
and our principals. We provide semiconductor manufacturers, who otherwise might
be required to purchase materials and equipment from a range of suppliers
worldwide, with the ability to purchase their materials and equipment through a
single
34
<PAGE>
supplier and the ability to outsource equipment service, materials management,
cleanroom services and facility maintenance. These services enable our customers
to:
- simplify and standardize their materials and equipment purchases in
multiple locations throughout the world;
- focus their resources on product design, development and marketing; and
- increase fab productivity in a cost-effective manner.
We also provide timely and comprehensive marketing, sales, installation,
service and support for materials and equipment manufacturers, enabling our
principals to:
- focus their resources on technology and product development and
manufacturing;
- reduce their time to market, financial risk and marketing investment; and
- enable them to compete more effectively with larger companies with
established infrastructures without investing the time or capital
resources required to build their own infrastructures.
STRATEGY
Our goal is to be the leading global provider of marketing, sales, service
and support solutions to semiconductor materials and equipment suppliers and
semiconductor manufacturers. The key elements of our strategy include:
- LEVERAGE OUR GLOBAL INFRASTRUCTURE AND EXPAND OUR LEADERSHIP POSITION. We
believe that our global infrastructure, as well as our 25-year history of
serving the semiconductor industry, provide us a significant competitive
advantage in serving our principals and customers. As of August 31, 1999,
we had approximately 390 sales and marketing and customer service and
support employees in 33 offices in Asia (except Japan), Europe and the
United States. We plan to continue to leverage our global infrastructure
by offering an increasing variety of products and services.
- CONTINUE TO BROADEN PRODUCT AND SERVICE OFFERINGS. We offer a wide range
of semiconductor manufacturing materials and equipment and plan to
selectively broaden our product lines and territories to meet the needs of
our customers. We believe our competitive advantage is generally greater
in product areas that are not served by one of the large
globally-integrated equipment or materials manufacturers. We will also
seek to enter into additional relationships with non-United States
principals seeking to penetrate the United States market and other markets
outside their home territories. We also plan to expand on-site maintenance
and other support services, including specialized parts cleaning,
inventory management and engineering services. We believe these efforts
will strengthen our long-term relationships with our customers.
- EXPAND MATERIALS BUSINESS. While continuing to expand our equipment
business, we intend to increase the relative size of our materials
business. We believe that the materials business is particularly
well-suited to benefit from the global infrastructure that we have
developed, in part because addressable markets are more fragmented, there
are a large number of individual products and typical transactions are
smaller. Materials products generally offer relatively favorable gross
margins, and the materials business is generally less cyclical than the
equipment business.
- FOSTER LONG-TERM RELATIONSHIPS WITH OUR PRINCIPALS. We seek to continue to
develop long-term relationships with our principals. Generally, within the
territories we serve for a principal, we operate as the exclusive
representative of the principal and do not offer competing product lines.
To foster long-term relationships with our principals, we will continue
the joint training of our sales, service and applications personnel, the
investment in inventories and demonstration equipment, as appropriate, and
the joint participation in trade shows with our principals. In
35
<PAGE>
addition, to help us secure longer term relationships with our principals,
we plan to selectively invest in principals during their later stage
financings.
- ACQUIRE COMPLEMENTARY BUSINESSES. To enable us to better serve our
principals and customers, we plan to selectively acquire complementary
businesses. Potential acquisition candidates include independent regional
sales, service and support companies, which currently operate in a highly
fragmented segment of the semiconductor industry. We believe that our
acquisition strategy will allow us to gain access to new principals and
territories, broaden our offerings to existing customers and gain new
customers. Our acquisition of T.A. Kyser Co. in 1998, an example of our
execution of this strategy, established our United States materials and
components business.
- EXPAND INTO JAPAN. Japan is the second largest producer of semiconductors
in the world and accounted for approximately 21% of world production in
1998. Although we represent a limited number of Japanese principals, we do
not currently operate an office in Japan. We currently intend to open an
office in Japan in 2000 to foster closer relations with Japanese materials
and equipment suppliers and to explore opportunities to service the
Japanese semiconductor manufacturing industry.
PRODUCTS AND SERVICES
We believe Metron markets and sells a wider range of materials, equipment,
spare parts, service and support solutions to the semiconductor industry than
any other independent provider of these products and services. We are organized
into two worldwide operating divisions, materials and equipment. In fiscal 1999,
sales by our equipment division accounted for approximately 56% of our revenue,
and sales by our materials division accounted for approximately 44% of our
revenue.
We operate under a series of agreements with our principals. These
agreements generally give us the exclusive right to market, sell and support
particular products in specific geographic regions. Generally, within the
territories we serve for a principal, we operate as the exclusive representative
of the principal and do not offer competing product lines. The agreements with
our principals are typically cancelable without cause with notice periods that
range from 30 days to two years. In addition to maintaining appropriate
inventories of materials and spare parts, we sometimes purchase equipment for
demonstration purposes which may be installed in a customer's fab for evaluation
purposes or at one of our facilities.
Product selection is critical to our success. We evaluate a large number of
product opportunities, relatively few of which we ultimately add to our product
offerings. In our evaluation of new product lines, we thoroughly review numerous
factors, including the product line's current and projected revenue stream and
market share, whether the product line is sufficiently developed for its
targeted market segment, whether distribution arrangements for the product line
are currently in place, the prospective principal's anticipated ability to offer
innovative and advanced products, the history and stability of the prospective
principal and our ability to market, sell and provide a consistent level of
service and support for the product line.
MATERIALS
Our materials business includes the marketing and sale of an extensive array
of over 15,000 items, including wafer carriers and shippers, fluid and gas
handling components, high purity chemicals and cleanroom products, to
semiconductor manufacturers, manufacturers of semiconductor equipment and to a
lesser extent, customers in other industries such as pharmaceuticals and
petroleum. As of August 31, 1999, our materials division represented over 50
principals. The table below lists the
36
<PAGE>
business units in our materials division, the types of products sold and the
largest principals within each business unit:
<TABLE>
<CAPTION>
BUSINESS UNIT TYPES OF PRODUCTS LARGEST PRINCIPALS
- ------------- ----------------- ------------------
<S> <C> <C>
Gas and fluid handling Valves, fittings and other components for Entegris
ultrapure applications
High end filtration products and systems Pall
Stainless steel control valves and regulators Tescom
Wafer management Wafer transport carriers Entegris
Pellicles MLI
Device handling Semiconductor device transport carriers Entegris
Vacuum release chip trays Gelpak
Quartz components MGI Products
Cleanroom products Latex gloves Omni Sales
Face masks Tecnol
Wipers and swabs Texwipe
Integrated shippers products Wafer and disc shippers Entegris
</TABLE>
We believe the materials business is particularly well-suited to benefit
from our global infrastructure because addressable markets are more fragmented,
there are a large number of individual products and average transaction sizes
are generally smaller than in the equipment business. As a result, we believe
that many companies are often unable to cost-effectively provide materials,
service and support globally in order to meet semiconductor manufacturer
requirements and can benefit from Metron's ability to distribute their products
through our international sales and marketing organization. Similarly, by
working with Metron, a customer can increase sales by improving fab productivity
while reducing inventory, warehousing and other costs. For some fabs of our
customers in the United States, including Motorola and Philips, our materials
division has primary responsibility for the operation of the customer's on-site
warehouse of materials and components we sell. Our experience, infrastructure
and systems in the United States enable us to maintain a highly reliable
materials inventory management and order processing system, which allows us to
increase the speed of order fulfillment and provide other value-added services
to both customers and principals. We plan to expand our activities in this area
to other parts of the world to provide more comprehensive support to more of our
customers.
EQUIPMENT
Our equipment business includes the marketing and sale of equipment,
including products for cleaning, coating, developing and etching; detection,
measurement and quality control tools; equipment used in the manufacture, fault
diagnosis and repair of the masks used to create the complex patterning of
semiconductors; automatic wafer handling, particle counting and cleanroom
monitoring equipment. The equipment division also markets specialized containers
of high purity chemicals which are used in the chemical vapor deposition and
diffusion phases of semiconductor wafer processing. As of
37
<PAGE>
August 31, 1999, our equipment division represented over 40 principals. The
table below lists the largest products by revenue in the equipment division and
the principals for those products:
<TABLE>
<CAPTION>
TYPES OF PRODUCTS PRINCIPALS
- ----------------- ----------
<S> <C>
Environmental gas cleaning systems ATMI
Wafer cleaning tools FSI
Photo-lithography processing tools FSI
High purity wafer processing chemicals Schumacher
Wafer characterization and diagnostic tools SDI
Photomask inspection and repair tools Seiko Instruments
</TABLE>
In July 1999, we signed an agreement with Carl Zeiss to market, sell,
service and support its semiconductor inspection tools in the United States. In
August 1999, we signed an agreement with Komatsu Ltd. to market, sell, service
and support its deep UV excimer lasers in Europe.
Particularly in the equipment business, we believe our competitive advantage
is generally greater in product areas that are not served by one of the large
globally-integrated manufacturers. We have sought, and expect to continue to
seek, relationships with non-United States principals seeking to penetrate the
United States market and other markets outside their home territories.
SERVICE AND SPARE PARTS
We believe that as semiconductor manufacturers become increasingly sensitive
to the costs of system downtime, they direct their purchases to suppliers who
can offer comprehensive local installation, maintenance and repair service and
spare parts. To meet these needs, we provide installation, maintenance, repair
and service for the equipment we sell, and we employ skilled service engineers
in 18 offices located in approximately 13 countries. In some cases, our service
engineers are located on-site at a semiconductor manufacturer's facility. By
continuing to maintain local offices in most major markets and staffing those
offices with nationals fluent in local languages and customs, we are able to
provide our principals and customers with sales, service and support 24 hours a
day, seven days a week where necessary. We provide our customers with
applications services and help them develop customized solutions to technical
problems. To better serve our customers, during fiscal 1999 Metron formed a
joint venture with WS Atkins Plc. to provide additional services to the
semiconductor industry, including facilities management and comprehensive
technical support of production equipment.
Our service personnel receive extensive initial and follow-up training
internally and/or from the principals whose products they service. Our service
personnel generally receive the same training from our principals as their own
personnel and receive and maintain the same certification. We generally warrant
the products we sell for a period of one year, and our warranty liability is
generally backed by a warranty from the principal. If we install the equipment
in a customer's fab, we are generally responsible for the costs of the labor
component of the warranty, and the principal is responsible for replacing parts
which are under warranty. After the warranty period has expired, we also offer
service contracts or on-call service support for equipment which we have
supplied.
We also provide our customers with the spare parts required to maintain and
repair the equipment we have supplied and to operate other systems in their
fabs. We work with our principals to maintain an inventory of mission-critical
spare parts and materials close to our customers' sites so we can deliver the
required parts in the shortest time possible. In some cases, we are responsible
for maintaining inventories at our customers' sites, and we plan to expand the
service we provide in this area.
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<PAGE>
SALES AND MARKETING
Our worldwide sales and marketing organization is an essential part of our
strategy of maintaining close relationships with our principals and with our
semiconductor manufacturer customers. We provide timely and comprehensive
marketing, sales, service and support for materials and equipment manufacturers,
enabling these manufacturers to focus their resources on technology and product
development. As of August 31, 1999, we had 204 sales and marketing employees in
33 offices in Asia, Europe and the United States. Through these sales and
support offices, we maintain an important link between our principals and
semiconductor manufacturers. Our sales and marketing organization identifies
customer requirements, assists in product selection and monitors each
transaction through final sale, shipment and installation. We also employ
approximately 183 highly-skilled technical and engineering personnel around the
world to support our sales and marketing organization and our customers. In
Europe, we have approximately 114 support personnel in eight countries located
in eleven offices as well as at several semiconductor manufacturers' facilities.
In Asia, we have approximately 57 support personnel in five countries located in
seven offices as well as at several semiconductor manufacturers' facilities. In
the United States, we have approximately eleven support personnel located in two
states. Most of our employees are fully conversant in local languages and
familiar with local business culture and practices.
We offer comprehensive sales and marketing technical support services,
including materials and equipment specification review from the initial sales
effort through on-going product improvement programs; demonstration of materials
and equipment; tool installation, including customer site preparation and final
system acceptance; on-going customer support and process improvement; editing,
improving and writing of operation and maintenance manuals; and customer
training programs including maintenance training and on-site operator training.
Our ability to offer these extensive support services is due in part to
extensive initial and follow-up training of our sales and marketing technical
support personnel both in-house and by the principals whose products we sell. We
also conduct technical seminars, training sessions and user group meetings, and
we own and operate a 720 square foot, Class 100 cleanroom facility in Sunnyvale,
California.
We also employ applications engineers who work closely with our customers to
solve particular customer problems and develop innovative processing solutions
using particular equipment supplied by our principals. In some cases, our
customers' engineers have collaborated with our engineers to produce and publish
technical papers. Application selling and application support is a key part of
our strategy to introduce and sell new technology into the semiconductor
marketplace.
We utilize a number of other marketing techniques that enable our principals
to access new markets and semiconductor manufacturers. We seek to actively
involve our principals in the marketing and sales process and often conduct
joint sales calls on existing and potential customers with representatives from
our principals. We assign product managers to some of our principals to provide
particular attention to the marketing, service and support of specific product
lines. We participate in various trade shows around the world, including Semicon
Europa in Europe, Semicon Korea, Semicon Singapore and Semicon Taiwan in Asia
and Semicon Southwest and Semicon West in the United States.
CUSTOMERS
We market semiconductor materials and equipment to most of the world's
semiconductor manufacturers and to many suppliers to the semiconductor industry,
including semiconductor equipment manufacturers. In fiscal 1999, our 10 largest
customers accounted for approximately 32% of our net revenue. We expect that
sales to relatively few semiconductor manufacturers will always account for a
significant percentage of our revenue, although the relative revenue ranking of
individual
39
<PAGE>
customers may change from period to period. The table below sets forth our 10
largest customers in 1999 based on revenue and the geographic regions where we
support these customers:
<TABLE>
<CAPTION>
CUSTOMER LOCATIONS
- -------- ---------
<S> <C>
Advanced Micro Devices Germany, Singapore, United States
Dupont Photomask France, United States
IBM France, Germany, United States
Intel Ireland, Israel, United States
Lucent France, Singapore, United States
Motorola France, Hong Kong, United Kingdom,
United States
NEC Electronics United Kingdom, United States
Philips France, Hong Kong, The Netherlands
Infineon (Siemens) Germany
STMicroelectronics France, Italy
</TABLE>
COMPETITION
The semiconductor industry is highly competitive. We face substantial
competition on two distinct fronts: competition for product lines and
competition for customers.
COMPETITION FOR PRODUCT LINES
For those semiconductor equipment and materials manufacturers who elect to
sell through independent sales and distribution companies, we must compete with
other companies for the right to sell specific product lines. Some of these
independent sales and distribution companies have long-standing collaborative
business relationships with semiconductor equipment and materials manufacturers
which are difficult to overcome. We believe that the most significant
competition on this front comes from regional semiconductor equipment and
materials distribution companies. Furthermore, many equipment and materials
manufacturers choose to sell directly to semiconductor manufacturers in some or
all markets. In Europe and Asia, we compete with equipment and materials
manufacturers who choose to sell their products directly to semiconductor
manufacturers as well as with regional independent distribution companies such
as Hermes in Taiwan and Macrotron and Teltec in Europe. In the United States, we
compete primarily with United States semiconductor equipment and materials
manufacturers who choose to sell their products directly to semiconductor
manufacturers.
We believe that our competitive advantage is greater in product areas that
are not served by one of the large globally-integrated equipment or materials
manufacturers. We believe that to compete effectively we must maintain a high
level of investment in marketing, customer service and support in all of the
markets in which we operate. Although we consider our global operations and
reputation to be significant competitive advantages, we cannot be certain that
we will have sufficient financial resources, technical expertise, or marketing,
services and support capabilities to continue to compete successfully on this
front in the future.
COMPETITION FOR CUSTOMERS
We compete with established semiconductor equipment and materials
manufacturers who sell directly to customers and with other independent sales
and distribution companies for orders from semiconductor manufacturers. Some of
these competitors have greater name recognition in the territories they serve
and have long-standing relationships with semiconductor manufacturers that may
40
<PAGE>
give them a competitive advantage. Other significant competitive factors in the
semiconductor equipment and materials market include product specifications and
quality, product performance, product reliability, process repeatability,
customer service and support, timeliness of new product introductions, in
addition to total cost of ownership and price. We anticipate that as we expand
our product portfolio and expand into new markets, we will encounter additional
competition, and the competitive factors listed above, among others, might make
it difficult for us to establish sales and distribution capability in new
markets such as Japan. This competition, as well as the local political climate
and local business practices, may limit our ability to successfully expand into
new markets. We cannot be certain that we will continue to compete successfully
in the future.
EMPLOYEES
As of August 31, 1999, we had 571 full-time employees, including 142 in our
materials division, 246 in our equipment division and 183 in general
administrative activities, including finance and accounting, sales
administration, shipping and receiving and corporate management. Of our
full-time employees, 125 are located in the United States, 311 are located in
Europe and 135 are located in Asia. None of our employees is covered by a
collective bargaining arrangement. We consider our relationships with our
employees to be good.
FACILITIES
Our corporate headquarters are located in Burlingame, California. The head
of our global materials division is also based in Burlingame, California, and
the head of our global equipment division is based in the United Kingdom. We own
our 30,000 square foot facility in Livingston, Scotland, 18,000 square foot
facility in Aschheim, Germany and 6,500 square foot facility in Almere, The
Netherlands. In addition, we leased space for marketing and customer service and
support purposes in 33 locations worldwide as of August 31, 1999. We operate a
720 square foot, Class 100 cleanroom in our leased facility in Sunnyvale,
California.
LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings.
41
<PAGE>
MANAGEMENT
SUPERVISORY AND MANAGING DIRECTORS
The following tables set forth, as of August 31, 1999, certain information
with respect to the supervisory directors and managing directors of Metron:
SUPERVISORY BOARD
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Robert R. Anderson(1)(2).................. 61 Supervisory Director
James E. Dauwalter(1)(2).................. 48 Supervisory Director
Joel A. Elftmann(1)(2).................... 59 Supervisory Director
Sho Nakanuma(3)(4)........................ 67 Supervisory Director
</TABLE>
MANAGING BOARD
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Edward D. Segal(5)........................ 59 President, Chief Executive Officer and
Managing Director
Michael A. Grandinetti(6)................. 51 Executive Vice President, Materials
Division and Managing Director
C. Garry Hendricks(6)..................... 65 Vice Chairman of T.A. Kyser Co. and
Managing Director
Peter V. Leigh(6)......................... 54 Vice President, Finance, Chief Financial
Officer and Managing Director
J. Christopher Levett-Prinsep(6).......... 53 Executive Vice President, Equipment
Division and Managing Director
Keith Reidy(6)............................ 42 Vice President, Marketing and Managing
Director
</TABLE>
- ------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
(3) Has agreed to serve as a supervisory director of Metron prior to completion
of this offering.
(4) Expected to become a member of the audit committee and the compensation
committee.
(5) Managing director A.
(6) Managing director B.
ROBERT R. ANDERSON has been a supervisory director of Metron since
November 1995. Mr. Anderson is presently Chairman of the Board and Chief
Executive Officer of Yield Dynamics, Inc., (YDI) a semiconductor yield
management software start-up company. He became a director of YDI in
August 1997 and Chairman and Chief Executive Officer in October 1998.
Mr. Anderson has been Chairman of the Board of Silicon Valley Research, a
semiconductor design automation software company, since January 1994 and served
as Chief Executive Officer from April 1994 until July 1995 and from
December 1996 until October 1997 and as Chief Financial Officer from
September 1994 to November 1995. Mr. Anderson co-founded KLA Instruments
Corporation, now KLA-Tencor Corporation, a supplier of equipment for
semiconductor process control, in 1975 and served in various
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<PAGE>
capacities including Chief Operating Officer, Chief Financial Officer, Vice
Chairman and Chairman. Mr. Anderson also serves as a director of Applied
Science & Technology Inc., a supplier of systems components for the
semiconductor industry.
JAMES E. DAUWALTER has been a supervisory director of Metron since
November 1995 and was a managing director from June 1979 until November 1995.
Mr. Dauwalter is Executive Vice President of Fluoroware, Inc., a wholly-owned
subsidiary of Entegris, Inc. which is a principal and a large minority
shareholder of Metron. Mr. Dauwalter joined Fluoroware in 1973. Mr. Dauwalter
also serves as a director of Nippon Fluoroware K.K., Fluoroware-Valqua Japan
K.K. and Fluoroware Southeast Asia PTE Ltd.
JOEL A. ELFTMANN, a co-founder of Metron, has been a supervisory director
since November 1995 and was a managing director from October 1975 until
November 1995. Mr. Elftmann is Chairman of the Board, President and Chief
Executive Officer of FSI International, Inc., a principal and a large minority
shareholder of Metron. Mr. Elftmann is also a co-founder of FSI and has served
as a director of FSI since 1973 and as Chairman of the Board since August 1983.
From August 1983 to August 1989, and from May 1991 until the present,
Mr. Elftmann also has served as Chief Executive Officer of FSI. From 1977 to
August 1983, from May 1991 until January 1998 and from August 1999 to the
present, Mr. Elftmann has served as President of FSI. Mr. Elftmann also serves
as a director of Veeco, Inc.
SHO NAKANUMA, who has agreed to become a supervisory director of Metron
prior to completion of this offering, has been Chairman of the Board of
Directors of Ando Electric Company in Japan since June 1997. From 1988 to 1997,
Mr. Nakanuma served as President of Ando Electric Company. From 1984 to 1986,
Mr. Nakanuma served as President of NEC Electronics Inc. in the United States.
From 1985 to 1988, Mr. Nakanuma served as a member of the Board of Directors of
NEC Corporation in Japan. Mr. Nakanuma is a member of the Board of Directors of
Semiconductor Equipment and Materials Internationals in the United States.
Mr. Nakanuma holds a B.S. degree in Chemical Engineering from the University of
Kyoto and a Ph.D. in Engineering from the University of Tokyo.
EDWARD D. SEGAL has been a managing director of Metron since November 1995.
He joined Metron as President and Chief Executive Officer in July 1995. Prior to
joining Metron, Mr. Segal served as President and Chief Executive Officer of
Transpacific Technology Corporation, a company which he founded in 1982.
Mr. Segal is a member of the Board of Directors of Semiconductor Equipment &
Materials International, a trade association for suppliers to the semiconductor
industry. Mr. Segal holds a B.S. degree in Metallurgical Engineering from
Rensselaer Polytechnic Institute.
MICHAEL A. GRANDINETTI has been a managing director and served as Executive
Vice President, Materials Division of Metron since December 1997. From 1990 to
1997, Mr. Grandinetti served in several management positions at Tylan
General, Inc., a publicly-traded manufacturer of mass flow controllers, vacuum
gauges and other engineering products, most recently as Senior Vice President,
and prior to that as Vice President of Sales and Marketing. Mr. Grandinetti
holds a B.S. degree in Mechanical Engineering and an M.S. degree in Engineering
Management from Northeastern University.
C. GARRY HENDRICKS has been a managing director of Metron since
January 1999. He was a founding associate of T.A. Kyser Co. and Chief Executive
Officer since its inception in 1977 until Kyser became a wholly-owned subsidiary
of Metron in July of 1998, at which point he joined Metron and was appointed
Vice Chairman of Kyser. Mr. Hendricks has served on various distributor councils
of principals represented by Metron and its subsidiary, Kyser. Mr. Hendricks
holds a B.B.A. degree from North Texas State University in production
management.
PETER V. LEIGH has served as Vice President, Finance and Chief Financial
Officer of Metron since November 1995 and has been a managing director of Metron
since November 1996. From 1992 to 1995 Mr. Leigh served as Vice President,
Finance and Chief Financial Officer of Sequus Pharmaceuticals, a
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<PAGE>
publicly-traded bio-pharmaceutical firm. From 1982 until 1992, Mr. Leigh served
as Corporate Controller of Bio-Rad Laboratories, a publicly-traded
multi-national manufacturer and marketer of analytical chemistry, diagnostic and
semiconductor metrology equipment and materials. Mr. Leigh holds a B.A. degree
from the University of Oxford and an M.B.A. degree from the Harvard Business
School.
J. CHRISTOPHER LEVETT-PRINSEP has been a managing director of Metron since
July 1983 and has served as managing director of Metron's United Kingdom
subsidiary, of which he was the founder and first employee, since 1978.
Mr. Levett-Prinsep served as President of Metron's European Operations from
August 1994 until December 1997, when he became Executive Vice President,
Equipment Division. Mr. Levett-Prinsep holds an Ordinary Certificate in
Technology from Coventry Technical College and an Advanced Certificate from
Wednesbury College of Technology.
KEITH REIDY has been a managing director of Metron since April 1999 and has
served as Vice President, Marketing since March 1999. Mr. Reidy has also served
as Director, Product Development and Director, U.S. Representative Organization.
Prior to joining Metron in July 1995, Mr. Reidy served as the Vice President,
Sales of Transpacific Technology. Mr. Reidy holds a B.S. degree in engineering
from the University of California, Davis and an M.S. in engineering from Purdue
University.
DUTIES OF METRON MANAGEMENT
Metron has a supervisory board and a managing board. Under the laws of The
Netherlands, supervisory directors cannot be managing directors of a company.
The primary responsibilities of the supervisory board are supervising the
managing board of Metron and the general affairs and business of Metron and
advising the managing board. The managing board is responsible for the
management of the day-to-day operations of Metron and is required to keep the
supervisory board informed about such operations. Under Metron's articles of
association, the managing board is required to obtain the prior approval of the
supervisory board for those resolutions of the managing board as the supervisory
board has designated by resolution and so informed the managing board. No
resolution to this effect has been passed to date. Generic references in this
prospectus to directors refer to members of either the supervisory board or
managing board. Other executives do not bear the responsibilities attributed to
members of the managing board and the supervisory board, or the related
liabilities, if any.
The Metron articles provide for a supervisory board of one or more persons.
The Metron articles also provide for the appointment of one or more managing
directors A and one or more managing directors B under the supervision of the
supervisory board. The number of supervisory directors and the number of
managing directors is determined by the supervisory board. Metron presently has
three supervisory directors, one managing director A, Mr. Segal, its President
and Chief Executive Officer, and five managing directors B.
The general meeting of shareholders appoints the supervisory directors and
at all times has the power to suspend or dismiss any supervisory director. A
resolution to appoint a supervisory director can only be passed upon
recommendation by the supervisory board. Under the Metron articles, each member
of the supervisory board holds office for a one-year term following that
member's election as a member of the supervisory board, or until that member's
earlier resignation, death or removal by a decision of a general meeting.
However, a member of the supervisory board elected not at the general meeting of
shareholders but at an extraordinary meeting of shareholders serves until the
next general meeting of shareholders or until that member's earlier resignation,
death or removal by a decision of the general meeting. Each member of the
supervisory board holds office until that member's resignation, death or removal
by a decision of a general meeting of shareholders. In addition, each
supervisory director is required to resign as of the date of the general meeting
of shareholders held in the year in which that director attains the age of 72. A
shareholders' resolution to suspend or dismiss a supervisory director must be
adopted by a two-thirds majority of the valid votes cast representing more than
half of the issued share capital.
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<PAGE>
The entire managing board, as well as each managing director A individually,
has the power to represent Metron and bind Metron in agreements with third
parties. A managing director B may only represent Metron together with another
managing director. The general meeting of shareholders appoints the managing
directors for an unlimited period of time, determines whether the managing
director shall serve as a managing director A or as a managing director B and at
all times has the power to suspend or dismiss any managing director. A
resolution to appoint a managing director can only be passed upon recommendation
by the supervisory board. Each managing director can at all times also be
suspended by the supervisory board for a period of up to three months. A
shareholders' resolution to suspend or dismiss a managing director must be
adopted by a two-thirds majority of the valid votes cast representing more than
half of the issued share capital. The supervisory board decides on the
remuneration and further terms and conditions of employment for each of the
managing directors. Managing directors, along with other employees of
subsidiaries of Metron, are eligible for options under the terms of Metron's
employee option plans.
Metron's managing directors have been appointed by the general meeting of
Metron's shareholders to serve for an indefinite period of time.
COMMITTEES OF THE SUPERVISORY BOARD
In March 1996, the supervisory board created two supervisory board
committees. The compensation committee has responsibility for providing
recommendations to the supervisory board for final decision concerning salaries
and incentive compensation for managing directors, executive officers and
certain key employees of, and consultants to, Metron. The audit committee has
responsibility for reviewing the internal accounting procedures and controls of
Metron and the results and scope of the audit and other services provided by
Metron's independent auditors. At the present time, and until the general
meeting appoints further supervisory board members, all of the existing
supervisory directors are members of both committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee consists of Messrs. Anderson, Dauwalter and
Elftmann.
None of the current members of our compensation committee is an officer or
employee of Metron. Mr. Elftmann is Chairman of the Board and Chief Executive
Officer of FSI, one of our principals and shareholders. Mr. Dauwalter is
Executive Vice President of Fluoroware, a wholly-owned subsidiary of Entegris,
one of our principals and shareholders. See "Certain Transactions" for a more
detailed description of the relationship between Metron and each of FSI and
Entegris.
SUPERVISORY DIRECTOR COMPENSATION
The supervisory board may grant a remuneration to one or more of the
supervisory directors. Members of the supervisory board are paid annual
director's fees of $1,000 for each meeting which they attend in person or by
telephone. In addition, supervisory board members are paid $500 for each meeting
they attend of a board committee of which they are a member, but only when the
board committee meets on a day when the supervisory board itself is not meeting.
Beginning in January 1998, the supervisory directors voluntarily opted to forego
receiving their directors fees. The supervisory directors may at any time choose
to accept their director fees and at that point the fees would again be paid by
Metron to the supervisory directors. Each member of the supervisory board will
receive an initial grant of 15,000 options and subsequent annual grants of 3,750
options.
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<PAGE>
MANAGING DIRECTOR COMPENSATION
The following table sets forth certain information for fiscal 1999 regarding
the compensation of Metron's Chief Executive Officer and each of the four most
highly compensated managing directors of Metron whose salary and bonus for such
year were in excess of $100,000 on an annualized basis, which we refer to as the
Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND POSITION SALARY BONUS COMPENSATION(1) COMPENSATION
- ----------------- -------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Edward D. Segal .............................. $281,730 $86,000 -- $ 699(2)
President and Chief Executive Officer and
Managing Director
J. Christopher Levett-Prinsep ................ 207,611 60,644 -- 44,338(3)
Executive Vice President, Equipment Division
and Managing Director
Keith Reidy .................................. 192,500 60,000 $1,308(4) 677(2)
Vice President, Marketing and Managing
Director
C. Garry Hendricks ........................... 190,818 25,000 -- 13,940(2)
Vice Chairman of T.A. Kyser Co. and Managing
Director
Peter V. Leigh ............................... 155,513 51,000 -- 614(2)
Vice President, Finance and Chief Financial
Officer and Managing Director
</TABLE>
- ------------------------
(1) None of the perquisites and other benefits paid to any Named Executive
Officer exceeded the lesser of $50,000 or 10% of the total annual salary and
bonus received by the Named Executive Officer.
(2) Represents insurance premiums.
(3) Represents $8,654 in insurance premiums and $35,684 in payments to a defined
contribution plan.
(4) Represents commissions.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options or stock appreciation rights awarded to any of the
Named Executive Officers during fiscal 1999.
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<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
None of the Named Executive Officers exercised options in the last fiscal
year. The following table sets forth the number and value of securities
underlying unexercised options held by the Named Executive Officers at May 31,
1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS
MAY 31, 1999(1) AT MAY 31, 1999(2)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward D. Segal .......................... 493,076 32,872 $2,490,034 $166,004
President and Chief Executive Officer
and Managing Director
J. Christopher Levett-Prinsep ............ 84,375 5,625 426,094 28,406
Executive Vice President, Equipment
Division and Managing Director
Keith Reidy .............................. 84,375 5,625 426,094 28,406
Vice President, Marketing and Managing
Director
C. Garry Hendricks ....................... -- -- -- --
Vice Chairman of T.A. Kyser Co. and
Managing Director
Peter V. Leigh ........................... 78,750 11,250 397,688 56,813
Vice President, Finance and Chief
Financial Officer and Managing Director
</TABLE>
- ------------------------
(1) The weighted average exercise price for these options is $2.78 per share.
(2) The value of unexercised "in-the-money" options is based on the fair market
value of $7.83 as of May 31, 1999, as determined by the supervisory board,
minus the exercise price, multiplied by the number of shares underlying the
option.
EQUITY AND PROFIT SHARING PLANS
EMPLOYEE STOCK OPTION PLAN. The Amended and Restated Employee Stock Option
Plan (Option Plan) was adopted by our supervisory board in February 1995 and
approved by our shareholders in June 1995. An amendment and restatement of the
Option Plan, adopted by our supervisory board in October 1999, amended the
Option Plan in preparation for this offering. Our shareholders will also be
asked to approve the amendment and restatement of the Option Plan.
There are 2,750,000 common shares reserved for issuance under the Option
Plan. Shares subject to share awards that have lapsed or terminated, without
having been exercised in full, and any shares repurchased by Metron pursuant to
a repurchase option provided under the Option Plan may again become available
for the grant of awards under the Option Plan.
The Option Plan provides for grants of incentive stock options that qualify
under Section 422 of the Internal Revenue Code of 1986, as amended (Code), to
our employees, including officers and employee directors, or the employees of
any of our affiliates. Nonqualified stock options, rights to acquire restricted
shares and share bonuses may be granted to employees, including officers,
directors of and consultants to Metron or any of our affiliates. Options, rights
to acquire restricted shares and share bonuses are referred to collectively as
"stock awards" for purposes of the Option Plan. The Option Plan may be
administered by the supervisory board or a committee appointed by the
47
<PAGE>
supervisory board; references herein to the supervisory board shall include any
such committee. After this offering, it is intended that the Option Plan will be
administered by the compensation committee, currently consisting of
Messrs. Anderson, Dauwalter and Elftmann, all of whom are "non-employee
directors" under applicable securities laws and "outside directors," as defined
under the Code. The supervisory board has the authority to determine to whom
awards are granted, the terms of such awards, including the type of awards to be
granted, the exercise price, the number of shares subject to the awards and the
vesting and exercisability of the awards.
The term of an option granted under the Option Plan generally may not exceed
ten years. The exercise price of options granted under the Option Plan is
determined by the supervisory board, but cannot be less than 100% of the fair
market value of the underlying common shares on the date of grant. Options
granted under the Option Plan vest at the rate specified in the option
agreement. No option may be transferred by the optionee other than by will or
the laws of descent or distribution, provided that an optionee may designate a
beneficiary who may exercise the option following the optionee's death. An
optionee whose relationship with Metron or any of our affiliates ceases for any
reason, other than due to disability, generally may exercise vested options
during the 90-day period following such cessation, unless such options terminate
or expire sooner by their terms, or during such longer or shorter period as may
be determined by the supervisory board and set forth in the option agreement.
Vested options generally may be exercised during the 12-month period after an
optionee's relationship with Metron or any of our affiliates ceases due to the
optionee's disability.
No incentive stock options may be granted to any person who, at the time of
the grant, owns, or is deemed to own, shares possessing more than 10% of the
total combined voting power of Metron or any of our affiliates, unless the
option exercise price is at least 110% of the fair market value of the shares
subject to the option on the date of grant and the term of the option does not
exceed five years from the date of grant. In addition, the aggregate fair market
value, determined at the time of grant, of the common shares underlying
incentive stock options which become exercisable by an optionee during any
calendar year may not exceed $100,000. Any options, or portions thereof, which
exceed this limit are treated as nonqualified stock options.
If Metron becomes subject to Section 162(m) of the Code, which denies a
deduction to publicly held corporations for certain compensation paid to
specific employees in a taxable year to the extent that the compensation exceeds
$1,000,000, no person may be granted options under the Option Plan covering more
than 1,000,000 common shares in any calendar year.
Rights to acquire restricted shares granted under the Option Plan may be
granted subject to a repurchase option in favor of Metron that will expire
pursuant to a vesting schedule. The purchase price of such awards will be at
least 85% of the fair market value of the common shares on the date of grant.
Share bonuses may be awarded in consideration for past services without the
payment of a purchase price. Rights under a share bonus or restricted share
bonus agreement may not be transferred other than by will, the laws of descent
and distribution or a qualified domestic relations order while the shares
awarded pursuant to such an agreement remain subject to the agreement, provided
that a holder of such rights may designate a beneficiary who may exercise the
right following the holder's death.
Upon certain changes in control of Metron, all outstanding share awards
under the Option Plan may be assumed by the surviving entity or replaced with
similar share awards granted by the surviving entity. If the surviving entity
does not assume such awards or provide substitute awards, then with respect to
persons whose service with Metron or an affiliate has not terminated prior to
such change in control, the awards shall become fully vested and will terminate
if not exercised prior to such change in control.
As of August 31, 1999, there were 1,986,348 options outstanding under the
Option Plan, held by 331 employees including all of the managing directors, to
purchase shares of Metron at a weighted average exercise price of $5.50 per
share. No other share awards were outstanding under the Option
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<PAGE>
Plan. The Option Plan will terminate in February 2005, unless terminated sooner
by the supervisory board.
1999 EMPLOYEE STOCK PURCHASE PLAN. In October 1999, our supervisory board
adopted, subject to shareholder approval, the 1999 Employee Stock Purchase Plan
(Purchase Plan). A total of 300,000 common shares have been reserved for
issuance under the Purchase Plan. The Purchase Plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Code.
The Purchase Plan provides a means by which employees may purchase common
shares of Metron through payroll deductions. The Purchase Plan is implemented by
offerings of rights to eligible employees. Under the Purchase Plan, the
supervisory board may specify offerings with a duration of not more than
12 months, and may specify shorter purchase periods within each offering. The
initial offering will begin on the effective date of this offering and terminate
on June 1, 2000. Purchase dates under the offerings will occur each June 1 and
December 1. New offerings are expected to begin each June 1 and December 1 after
the initial offering.
Employees who participate in an offering may have up to 5% of their earnings
withheld pursuant to the Purchase Plan. The amount withheld is then used to
purchase common shares on specified purchase dates determined by the supervisory
board, up to a maximum of 10,000 common shares on each specified purchase date.
The price of common shares purchased under the Purchase Plan will be equal to
85% of the lower of the fair market value of the common shares on the
commencement date of each offering period or the fair market value of the common
shares on the relevant purchase date. Employees who become eligible to
participate in the Purchase Plan for the first time during an ongoing offering
will be permitted to begin participating in the Purchase Plan on the day after
the next purchase date that occurs under the offering. The price of common
shares purchased under the Purchase Plan for employees who begin participating
in the Purchase Plan during an ongoing offering will be equal to 85% of the
lower of the fair market value of the common shares on the day they begin
participating in the Purchase Plan or the fair market value of the common shares
on the relevant purchase date. Employees may end their participation in an
offering at any time during such offering except during the 15-day period
immediately prior to a purchase date. Employees' participation in all offerings
will end automatically on termination of their employment with us or one of our
subsidiaries.
Unless otherwise determined by our supervisory board, employees are eligible
to participate in the Purchase Plan only if they are customarily employed by us
or one of our subsidiaries designated by the supervisory board for at least
20 hours per week and five months per calendar year. No employee shall be
eligible for the grant of any rights under the Purchase Plan if immediately
after such rights are granted, such employee will have voting power over 5% or
more of our outstanding capital shares. Eligible employees may be granted rights
only if the rights together with any other rights granted under employee stock
purchase plans do not permit such employees' rights to purchase shares of Metron
to accrue at a rate which exceeds $25,000 of fair market value of those shares
for each calendar year in which those rights are outstanding.
Upon a change in control of Metron, each right to purchase common shares
will be assumed or an equivalent right substituted by the successor corporation;
if the rights are not assumed or substituted, all sums collected by payroll
deductions will be applied to purchase shares immediately prior to the change in
control. The supervisory board has the authority to amend or terminate the
Purchase Plan; provided, however, that no action may adversely affect any
outstanding rights to purchase common shares.
1997 SUPERVISORY DIRECTORS' STOCK OPTION PLAN. Effective October 1997, our
supervisory board and managing board adopted, and our shareholders approved, the
1997 Supervisory Directors' Stock Option Plan (Directors' Plan), to provide for
the automatic grant of options to purchase common shares to supervisory
directors of Metron. The Directors' Plan is administered by the supervisory
board. In
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October 1999, an amendment and restatement of the Directors' Plan was adopted by
the supervisory board in connection with this offering.
The aggregate number of common shares that may be issued pursuant to options
granted under the Directors' Plan is 225,000. Pursuant to the terms of the
Directors' Plan, each of our directors who is not an employee of or consultant
to Metron or one of our affiliates was automatically granted an option to
purchase 15,000 common shares on the effective date of the Directors' Plan. Each
person who is elected or appointed for the first time to be a non-employee
director after the effective date of the Directors' Plan will be granted an
option to purchase 15,000 common shares upon such election or appointment. In
addition, each non-employee director who has served as a non-employee director
for six months prior to an annual meeting and who is reelected at such annual
meeting will be automatically granted an option to purchase 3,750 common shares
on the day of each such annual meeting. The exercise price of options under the
Directors' Plan will equal the fair market value of the common shares on the
date of grant. No option granted under the Directors' Plan may be exercised
after the expiration of ten years from the date on which it was granted.
Each option granted under the Directors' Plan will vest in four equal annual
installments, with the first installment vesting on the first anniversary of the
date of grant, provided that the optionee has, during the entire period prior to
each vesting installment date, continuously served as a non-employee director or
employee of or consultant to Metron or one of our affiliates. If a non-employee
director's service as a non-employee director or employee of or consultant to
Metron or one of our affiliates ceases for any reason other than a voluntary
termination by the optionee or an involuntary termination for cause, the option
will become fully vested on the date of termination. A non-employee director
whose service as a non-employee director or employee of or consultant to Metron
or any of our affiliates ceases for any reason other than death may exercise
outstanding options in the 12-month period following such cessation (unless
these options terminate or expire sooner by their terms). Outstanding options
may be exercised during the 18-month period after such service ceases due to
death.
Upon specified changes in control of Metron, all outstanding share awards
under the Directors' Plan may be assumed by the surviving entity or replaced
with similar share awards granted by the surviving entity. If the surviving
entity does not assume the awards or provide substitute awards, then the awards
will terminate if not exercised prior to the change in control.
As of August 31, 1999, there were 67,500 options outstanding under the
Directors' Plan, held by three non-employee directors, to purchase common shares
of Metron at a weighted average exercise price of $8.03 per share. The
Directors' Plan will terminate in October 2007, unless terminated sooner by the
supervisory board.
T.A. KYSER COMPANY EMPLOYEE STOCK OWNERSHIP PLAN. Prior to our acquisition
of Kyser, Kyser established a stock bonus plan that qualifies as a tax-qualified
employee stock ownership plan under Sections 401(a) and 4975(e)(7) of the Code
and Section 407(d)(6) of ERISA, the T.A. Kyser Company Employee Stock Ownership
Plan (Kyser ESOP). Employees of Kyser are eligible to participate in the Kyser
ESOP. Unlike our 401(k) plan, eligible employees may not make deferrals from
their own compensation as contributions to the Kyser ESOP. Instead, we may make
discretionary contributions to the Kyser ESOP on behalf of eligible employees.
These contributions are then used to purchase common shares of Metron, which is
held in the Kyser ESOP in participants' accounts. Participants may also elect to
invest a portion of their account balances in other investment options. Eligible
employees may not sell the Metron shares held in their accounts until they
retire or otherwise terminate employment with Kyser. Contributions to the Kyser
ESOP, if any, are subject to a vesting schedule. Although Kyser made
contributions to the Kyser ESOP prior to our acquisition of Kyser, we do not
intend to make, and have not made, any contributions to the Kyser ESOP following
that acquisition.
As of August 31, 1999, the Kyser ESOP held an aggregate of 460,683 common
shares.
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METRON TECHNOLOGY CORPORATION 401(k) RETIREMENT PLAN. We have established a
tax-qualified employee savings and retirement plan, the Metron Technology
Corporation 401(k) Retirement Plan (401(k) Plan), for eligible employees.
Eligible employees may elect to defer a percentage of their pre-tax gross
compensation in the 401(k) Plan, subject to the statutorily prescribed annual
limit. We may make matching contributions on behalf of all participants in the
401(k) Plan in an amount determined by our supervisory board. We may also make
additional discretionary profit sharing contributions in such amounts as
determined by the supervisory board, subject to statutory limitations. Matching
and profit-sharing contributions, if any, are subject to a vesting schedule; all
other contributions are at all times fully vested. We intend the 401(k) Plan,
and the accompanying trust, to qualify under Sections 401 and 501 of the Code so
that contributions by employees or by Metron to the 401(k) Plan, and income
earned, if any, on plan contributions, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that we will be able to deduct our
contributions, if any, when made. The trustee under the 401(k) Plan, at the
direction of each participant, invests the assets of the 401(k) Plan in any of a
number of investment options.
The Named Executive Officers, along with other members of management, are
also entitled to participate in various annual profit sharing plans which are
adopted on an annual basis by our supervisory board on the recommendation of our
Chief Executive Officer. These profit sharing plans generally provide that we
will reserve various amounts, a profit sharing pool, calculated in accordance
with certain pre-determined formulas, and that participants in a particular
profit sharing pool will be entitled to receive a pre-determined share of such
pool. In addition, the compensation committee of the supervisory board does,
from time to time, grant discretionary bonuses to our employees, including the
Named Executive Officers.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
All of the Named Executive Officers are employed pursuant to employment
contracts with a subsidiary of Metron which is incorporated in their country of
residence.
Edward D. Segal is employed at will pursuant to an employment contract
entered into in September 1999 with Metron Technology Corporation (MTC), a
California corporation and with Metron Technology N.V. The employment contract
provides that Mr. Segal will serve as a managing director of Metron and as
Metron's President and Chief Executive Officer at an annual salary of not less
than $295,000. The agreement also provides for Mr. Segal's participation in an
annual incentive compensation plan approved by the supervisory board and for
other usual and customary benefits. Metron and MTC agreed to indemnify
Mr. Segal against any liability to which he may be subject for judgments,
settlements, penalties, fees and expenses of defense, including attorney's fees,
bonds and costs of investigation, arising out of or in any way related to acts
or omissions as a member of the management board, or an executive officer, or in
any other capacity in which services are rendered to Metron or MTC and its
subsidiaries. However, Mr. Segal would not be entitled to indemnification under
this agreement under certain circumstances including if indemnification is
expressly prohibited under applicable law and if indemnification is expressly
prohibited by Metron's articles or MTC's charter. If Mr. Segal's employment is
terminated by MTC without cause or by Mr. Segal for good reason or due to
disability, in exchange for Mr. Segal's signing a release of all claims, he will
continue to receive his base salary for a period of 12 months in addition to
other customary benefits.
Michael A. Grandinetti is employed pursuant to an employment contract
entered into in September 1999 with MTC and with Metron Technology N.V. The
employment contract provides that Mr. Grandinetti will serve as a managing
director and as Executive Vice President, Materials of Metron at an annual
salary of not less than $190,000. The agreement also provides for
Mr. Grandinetti's participation in an annual incentive compensation plan
approved by the supervisory board and for other usual and customary benefits.
Metron and MTC agreed to indemnify Mr. Grandinetti against any liability to
which he may be subject for judgments, settlements, penalties, fees and expenses
of defense,
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including attorney's fees, bonds and costs of investigation, arising out of or
in any way related to acts or omissions as a member of the management board, or
an executive officer, or in any other capacity in which services are rendered to
Metron or MTC and its subsidiaries. However, Mr. Grandinetti would not be
entitled to indemnification under this agreement under specified circumstances,
including if indemnification is expressly prohibited under applicable law or
prohibited by Metron's articles or MTC's charter. If Mr. Grandinetti's
employment is terminated by MTC without cause or by Mr. Grandinetti for good
reason or due to disability, in exchange for Mr. Grandinetti's signing a release
of all claims, he will continue to receive his base salary for a period of
12 months in addition to other customary benefits.
C. Garry Hendricks is employed pursuant to an employment contract entered
into July 1998 with Kyser, MTC and Metron Technology N.V. The employment
contract provides that Mr. Hendricks will serve as Vice Chairman of Kyser at an
annual salary of not less than $195,000. The agreement also provides that if
Mr. Hendricks' employment is terminated by Metron for cause or by Mr. Hendricks
for good reason prior to July 2001, Mr. Hendricks will enter into a consulting
arrangement with Metron and will continue to receive his base salary until
July 2001. Under the agreement, Mr. Hendricks participates in an annual
incentive compensation plan approved by the supervisory board of Metron and an
incentive compensation plan for employees of Kyser and receives other usual and
customary benefits. Kyser agreed to indemnify Mr. Hendricks against any
liability to which he may be subject for judgments, settlements, penalties, fees
and expenses of defense, including attorney's fees, bonds and costs of
investigation, arising out of or in any way related to acts or omissions as an
employee, officer, director or agent in which services are rendered to Kyser.
However, Mr. Hendricks would not be entitled to indemnification under this
agreement under specified circumstances, including if indemnification is
expressly prohibited under applicable law or prohibited by Kyser's charter.
Peter V. Leigh is employed pursuant to an employment contract entered into
in September 1999 with MTC and with Metron Technology N.V. The employment
contract provides that Mr. Leigh will serve as a managing director of Metron and
as Metron's Vice President, Finance and Chief Financial Officer at an annual
salary of not less than $170,000. The agreement also provides for Mr. Leigh's
participation in an annual incentive compensation plan approved by the
supervisory board and for other usual and customary benefits. Metron and MTC
agreed to indemnify Mr. Leigh against any liability to which he may be subject
for judgments, settlements, penalties, fees and expenses of defense, including
attorney's fees, bonds and costs of investigation, arising out of or in any way
related to acts or omissions as a member of the management board, or an
executive officer, or in any other capacity in which services are rendered to
Metron or MTC and its subsidiaries. However, Mr. Leigh would not be entitled to
indemnification under this agreement under specified circumstances including if
indemnification is expressly prohibited under applicable law or prohibited by
Metron's articles or MTC's charter. If Mr. Leigh's employment is terminated by
MTC without cause or by Mr. Leigh for good reason or due to disability, in
exchange for Mr. Leigh's signing a release of all claims, he will continue to
receive his final base salary for a period of 12 months in addition to other
customary benefits.
J. Christopher Levett-Prinsep is employed by Metron Technology (U.K.) Ltd.,
pursuant to an employment contract entered into in May 1996. The employment
contract provides that Mr. Levett-Prinsep will serve as a managing director of
Metron and of Metron Technology (U.K.) Ltd. and as President of Metron's
European Operations at an annual salary of not less than L103,000, or
approximately $173,000. The agreement also provides for Mr. Levett-Prinsep's
participation in an annual incentive compensation plan approved by our
supervisory board and for other usual and customary benefits. The employment
contract may be terminated by either party on twelve months' notice.
Keith Reidy is employed by Metron Technology Corporation, pursuant to an
employment contract entered into in September 1999 with MTC and with Metron
Technology N.V. The employment contract
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provides that Mr. Reidy will serve as a managing director and as Vice President,
Marketing of Metron at an annual salary of not less than $200,000. The agreement
also provides for Mr. Reidy's participation in an annual incentive compensation
plan approved by the supervisory board, and for other usual and customary
benefits. Metron and MTC agreed to indemnify Mr. Reidy against any liability to
which he may be subject for judgments, settlements, penalties, fees and expenses
of defense, including attorney's fees, bonds and costs of investigation, arising
out of or in any way related to acts or omissions as a member of the management
board, or an executive officer, or in any other capacity in which services are
rendered to Metron or MTC and its subsidiaries. However, Mr. Reidy would not be
entitled to indemnification under this agreement under specified circumstances,
including if indemnification is expressly prohibited under applicable law or
prohibited by Metron's articles or MTC's charter. If Mr. Reidy's employment is
terminated by MTC without cause or by Mr. Reidy for good reason or due to
disability, in exchange for Mr. Reidy's signing a release of all claims, he will
continue to receive his base salary for a period of 12 months in addition to
other customary benefits.
LIMITATION OF LIABILITY AND INDEMNIFICATION
In addition to the indemnification provisions included in some of the
managing directors' employment agreements discussed above, under the Metron
articles, except in case of willful misfeasance, bad faith or gross negligence
or improper personal benefit, every person or legal entity who is, or has been,
a managing director, a supervisory director or an officer with the power to
represent Metron, employee or agent of Metron, who is made a party or is
threatened to be made a party to any claim by virtue of such capacity, shall be
indemnified by Metron, to the fullest extent permitted under any applicable law,
against (1) any and all liabilities imposed on him or it, (2) any and all
expenses and (3) any and all amounts paid in settlement by him or it, in each
case in connection with any such claim.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling Metron pursuant to the foregoing provisions, Metron has been
informed that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and therefore is unenforceable.
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CERTAIN TRANSACTIONS
The following is a description of transactions since June 1, 1996, to which
Metron has been a party, in which the amount involved in the transaction exceeds
$60,000, and in which any of our directors, executive officers or holders of
more than 5% of our capital stock had or will have a direct or indirect material
interest other than compensation arrangement which are otherwise required to be
described under "Management."
TRANSACTIONS WITH FSI
Prior to this offering, FSI held approximately 32.7% of Metron's outstanding
shares, and in fiscal 1999, products from FSI accounted for 24% of Metron's
revenue. In addition, Mr. Elftmann, a supervisory director of Metron, is
Chairman of the Board of FSI.
DISTRIBUTION AGREEMENT. In March 1998, Metron and FSI entered into a
distribution agreement which has been amended to reflect FSI's sale of its
chemical management division in July 1999. Pursuant to the terms of this
agreement, FSI and Metron agreed that, with some exceptions, Metron would
distribute some of FSI's products and related spare parts in specific countries
primarily in Europe and Asia. Metron, as distributor, agreed to use its best
efforts to sell the agreed upon products and spare parts in the designated
territory. Provided that FSI does not provide Metron with a termination notice
prior to the closing of this offering, the distribution agreement shall continue
for a term of two years from the date of the closing of the offering. Either
party may terminate the agreement after the expiration of this initial term by
providing at least 12 months prior written notice. In the event that, in
connection with a public offering, the agreement with Entegris is amended to
change the term and termination provisions which are in effect, and if those
terms are more favorable to Entergis, then the agreement with FSI shall be
amended to include the terms of the Entegris amendment regarding the term and
termination.
FSI sells products to Metron and Metron receives from FSI discounts ranging
from 5% to 20% of the net sales price. The exact percentage varies depending on
the product. For some products, the discounts may be renegotiated at the request
of FSI if FSI's ownership of Metron drops below 25%. In cases where customers
receive discounts off of the net sales price, the discounts are generally
divided between FSI and Metron. The actual terms vary depending on product,
location and the extent of the discount.
JOINT VENTURE AND SHARE PURCHASE AGREEMENTS. Prior to February 27, 1999,
Metron and FSI were parties to joint venture agreements. Pursuant to these
agreements, Metron owned 50% of FSI-CME and 35% of FSI-CMK. Metron contributed
470,925,000 South Korean won, or approximately $583,000, as an initial capital
contribution to FSI-CMK in June 1997 and was responsible for 35% of any further
capital contributions. Metron was responsible for 50% of any capital
contributions to FSI-CME. Metron distributed some of the products of FSI-CME
pursuant to a distribution agreement with FSI-CME. Metron was entitled to elect
two members to FSI-CME's board and one member to the board of FSI-CMK.
As of February 27, 1999, Metron entered into share purchase agreements with
FSI pursuant to which Metron sold, and FSI purchased, all of Metron's ownership
interest in FSI-CMK for $310,000 and all of Metron's ownership interest in
FSI-CME for $2,200,000. Metron recorded a loss on the sale of its interest in
FSI-CMK of $263,000 and a gain on the sale of its interest in FSI-CME of
$123,000. Pursuant to the share purchase agreements, Metron agreed to execute
whatever documentation was reasonably determined necessary for the parties to
terminate the joint venture agreements and the distribution agreement with
FSI-CME. In addition, the directors appointed by Metron to the boards of FSI-CMK
and FSI-CME resigned from these board positions. On May 18, 1999 Metron and FSI
entered into an agreement, effective as of February 27, 1999, to terminate the
joint venture agreements and the distribution agreement with FSI-CME.
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OTHER AGREEMENTS. FSI is also party to an investor rights agreement which
grants FSI registration rights pursuant to the shares it owns. See "Summary of
Certain Provisions of the Metron Articles and Other Matters--Registration
Rights" for a description of the registration rights granted to FSI.
As a supervisory director of Metron, Mr. Elftmann receives yearly option
grants. In connection with Mr. Elftmann's service as the Chairman of the Board
of FSI, he has entered into an agreement with FSI pursuant to which he agrees to
exercise his options to purchase common shares of Metron at the request of FSI,
to vote the shares received upon exercise of the options as directed by FSI and
to hold title to these shares only as a nominee for FSI, without any beneficial
right, ownership, or interest in the shares. In addition, Mr. Elftmann agreed to
convey title to the option (if this is permitted by its terms) and any shares
received upon exercise of the option to FSI or to sell the shares and remit the
proceeds to FSI upon FSI's request.
TRANSACTIONS WITH ENTEGRIS
Prior to this offering, Entegris held approximately 32.7% of Metron's
outstanding shares, and in fiscal 1999, products from Entegris accounted for 21%
of Metron's revenue. In addition, Mr. Dauwalter, a supervisory director of
Metron, is Executive Vice President and Chief Operating Officer of Fluoroware, a
wholly-owned subsidiary of Entegris.
DISTRIBUTION AGREEMENTS. In July 1995, Metron and Fluoroware, now a
wholly-owned subsidiary of Entegris, entered into a distribution agreement.
Pursuant to the terms of this agreement, Entegris and Metron agreed that, with
some exceptions, Metron would be the exclusive, independent distributor of some
of Entegris's products in specific countries primarily in Europe and Asia.
Metron, as distributor, agreed to use its best efforts to sell the agreed upon
products in the designated territory. Unless the contract is terminated under
specific conditions, the contract will remain in place until July 1, 2000, and
is automatically renewed thereafter for additional terms of two years. The
contract can be terminated upon written notification given more than twelve
months prior to the expiration of the applicable term.
Entegris may sell products for use in the territories on a representative
basis, but agrees to pay Metron a commission of 10% of the applicable sales list
price of the products for all such sales, such commission may, at the option of
Entegris, be divided between Metron and a third party on an equitable basis and
consistent with past practices between Metron and Entegris. With certain
exceptions, products are sold to Metron at the U.S. domestic sales list prices,
less a discount which ranges from 5% to 40% depending on the product, unless
another amount is agreed to in writing.
In September of 1997, Fluoroware entered into a distribution agreement with
Kyser. Pursuant to the terms of this agreement, Fluoroware and Kyser agreed that
Kyser would be stocking distributor for specific Fluoroware gas and liquid
handling products in certain states in the United States. Kyser, as distributor,
agreed to use its best efforts to stock, market and sell products within the
states which comprise its territory. The agreement is for a term of five years,
expiring August 31, 2002, and, unless either party terminates, the agreement is
renewed automatically for successive five year terms. Notice of termination must
be given one year prior to the expiration of the term of the agreement for
termination without cause. Termination for cause may occur at any time if
specific conditions are met.
Fluoroware agreed to sell its products to Kyser at a 15% to 40% discount
from the Fluoroware published list price, with the exact percentage dependent on
the product. In some instances, Kyser may act as a manufacturer's representative
rather than as a stocking distributor. As a manufacturer's representative, Kyser
receives a commission of between 10% and 2% of the sales price depending on the
discount off of the list price given to the customer and the products sold. In
some instances the commission is not specified and is to be negotiated prior to
the sale.
OTHER AGREEMENTS. Entegris is also party to an investor rights agreement
which grants Entegris registration rights pursuant to the shares it owns. See
"Summary of Certain Provisions of the Metron
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Articles and Other Matters--Registration Rights" for a description of the
registration rights granted to Entegris.
As a supervisory director of Metron, Mr. Dauwalter receives yearly option
grants. In connection with Mr. Dauwalter's service as the Executive Vice
President of Fluoroware, he has entered into an agreement with Fluoroware
pursuant to which he agrees to exercise his options to purchase common shares of
Metron at the request of Fluoroware, to vote the shares received upon exercise
of the options as directed by Fluoroware and to hold title to these shares only
as a nominee for Fluoroware, without any beneficial right, ownership, or
interest in the shares. In addition, Mr. Dauwalter agreed to convey title to the
option (if this is permitted by its terms) and any shares received upon exercise
of the option to Fluoroware or to sell the shares and remit the proceeds to
Fluoroware upon the request of Fluoroware.
KYSER TRANSACTIONS
In July 1998, Metron entered into a merger and reorganization agreement with
Kyser pursuant to which all of the outstanding shares of Kyser stock were
converted into 1,582,683 common shares of Metron, of which 10,230 have been
returned to Metron in accordance with the agreement. The transaction was valued
by an independent appraiser at approximately $12.3 million. Pursuant to the
transaction, Kyser became a wholly-owned subsidiary of Metron. Mr. Hendricks,
currently a managing director of Metron and Vice Chairman of Kyser, was the
Chief Executive Officer and large minority shareholder of Kyser at the time.
Pursuant to the merger agreement, Mr. Hendricks received 694,585 shares in the
transaction, valued at approximately $5.4 million, he entered into an employment
agreement with us, was elected as a managing director of Metron and appointed as
Vice Chairman of Kyser. For additional information on the terms of the
employment agreement, see "Employment Agreements and Termination of Employment
Arrangements."
Prior to Kyser's becoming a subsidiary of Metron, Mr. Hendricks personally
guaranteed loans and revolving credit agreements made by banks to Kyser for
general operating expenses. Mr. Hendricks was the guarantor on a revolving
credit agreement in a maximum amount of $11,000,000 with Compass Bank at the
time of the Kyser transaction. In October 1998, following the acquisition of
Kyser by Metron, the note was amended and Metron became the guarantor and
Mr. Hendricks was released as a guarantor.
EARLY RETIREMENT AGREEMENT
Udo Jaensch was the managing director of Metron Technology Deutschland Gmbh
(MTD), a subsidiary of Metron, until 1998 and a managing director of Metron
until February 15, 1999. Pursuant to a cancellation and early retirement
agreement among Metron, MTD and Mr. Jaensch, Mr. Jaensch resigned from both
positions. In exchange, MTD agreed to pay Mr. Jaensch early retirement payments
of DM 270,000 (approximately $150,000) per year in monthly installments until
April 2, 2005. The early retirement payment is to be adjusted yearly for changes
in the cost of living. In the event MTD fails to make these payments, Metron
agreed to make the payments to Mr. Jaensch. MTD also agreed to transfer certain
property owned by MTD and used by Mr. Jaensch to Mr. Jaensch. Mr. Jaensch is
selling 83,225 common shares in this offering.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common shares as of August 31, 1999, and as adjusted to reflect
the sale of our common shares offered in this offering: (1) each shareholder who
is known by us to own beneficially more than 5% of our common shares; (2) each
of our supervisory directors; (3) each of our Named Executive Officers; (4) all
of our supervisory directors and managing directors as a group; and (5) all
selling shareholders as a group. Unless otherwise indicated, to our knowledge,
all persons listed below have sole voting and investment power with respect to
their common shares, except to the extent authority is shared by spouses under
applicable law. Unless otherwise noted, the address of each shareholder is
c/o Metron Technology N.V., 1350 Old Bayshore Highway, Suite 360, Burlingame,
California 94010.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE NUMBER OF OWNED AFTER THE
OFFERING(1) SHARES OFFERING(1)
-------------------- BEING ----------------------
NAME AND ADDRESS NUMBER PERCENT OFFERED NUMBER PERCENT(2)
- ---------------- --------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Entegris, Inc.(3) ........................ 3,315,774 32.8% 611,962 2,703,812 21.8%
3500 Lyman Boulevard
Chaska, MN 55318
FSI International, Inc.(4) ............... 3,315,774 32.8 611,962 2,703,812 21.8
322 Hazeltime Drive
Chaska, MN 55318
Udo Jaensch .............................. 440,000 4.0 83,225 356,775 2.9
Burgmaierstrasse 9A
D-85521 Ottobrunn
Germany
Joel A. Elftmann(5) ...................... 3,315,774 32.8 611,962 2,703,812 21.8
James E. Dauwalter(6) .................... 3,315,774 32.8 611,962 2,703,812 21.8
Robert R. Anderson(7) .................... 57,600 * 0 57,600 *
Edward D. Segal(8) ....................... 1,077,046 10.1 0 1,077,046 8.3
J. Christopher Levett-Prinsep(9) ......... 710,712 7.0 142,851 567,861 4.5
C. Garry Hendricks ....................... 694,585 6.9 0 694,585 5.6
Keith Reidy(10) .......................... 164,856 1.6 0 164,856 1.3
Peter V. Leigh(11) ....................... 84,375 * 0 84,375 *
Michael A. Grandinetti(12) ............... 39,375 * 0 39,375 *
All supervisory directors and managing
directors as a group (9 persons)(13) ... 9,460,097 86.2 1,366,775 8,093,322 61.0
All selling shareholders as a 7,782,260 76.1 1,450,000 6,332,260 50.6
group(14) ..............................
</TABLE>
- ------------------------
* Represents beneficial ownership of less than one percent of the common
shares.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Applicable percentage ownership based
on 10,104,261 common shares outstanding as of August 31, 1999 and
12,404,261 common shares outstanding immediately following the completion
of this offering, both numbers include 0 shares issuable upon exercise of
warrants, together with applicable options for such shareholder. Common
shares subject to options currently exercisable, or exercisable within
60 days of August 31, 1999, are not deemed outstanding for computing the
percentage ownership of any other person.
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<PAGE>
(2) After giving effect to the issuance of 2,300,000 common shares offered in
this offering, assuming no exercise of the underwriters' over-allotment
option.
(3) Includes 13,125 shares issuable to Mr. Dauwalter pursuant to an agreement
between Mr. Dauwalter and Entegris in which Mr. Dauwalter assigned
ownership rights to all shares issuable upon exercise of the options to
Entegris.
(4) Includes 13,125 shares issuable to Mr. Elftmann pursuant to an agreement
between Mr. Elftmann and FSI in which Mr. Elftmann assigned ownership
rights to all shares issuable upon exercise of the options to FSI.
(5) Mr. Elftmann is Chairman of the Board and Chief Executive Officer of FSI.
The shares listed consist of 3,302,649 shares held by FSI prior to this
offering, or 2,690,687 shares to be held by FSI after this offering, and
13,125 shares issuable pursuant to options exercisable within 60 days of
August 31, 1999. The shares being offered consist of 611,962 shares being
offered by FSI. Mr. Elftmann disclaims beneficial ownership of all shares
held by FSI and of all shares issuable pursuant to the exercise of options,
pursuant to an agreement with FSI in which Mr. Elftmann assigned ownership
rights to all shares issuable upon exercise of the options to FSI.
(6) Mr. Dauwalter is Executive Vice President and Chief Operating Officer of
Entegris. The shares listed consist of 3,302,649 shares held by Entegris
prior to this offering, or 2,690,687 shares to be held by Entegris after
this offering, and 13,125 shares issuable pursuant to options exercisable
within 60 days of August 31, 1999. The shares being offered consist of
611,962 shares being offered by Entegris. Mr. Dauwalter disclaims
beneficial ownership of all shares held by Entegris and of all shares
issuable pursuant to the exercise of options, pursuant to an agreement with
Entegris in which Mr. Dauwalter assigned ownership rights to all shares
issuable upon exercise of the options to Entegris.
(7) Includes 13,125 shares issuable pursuant to options exercisable within
60 days of August 31, 1999.
(8) Consists of 421,570 shares held by Mr. Segal, 129,528 shares held by Segal
Investments LP, an investment partnership of which Mr. Segal is the
Managing Partner and 525,948 shares issuable pursuant to options
exercisable within 60 days of August 31, 1999. Mr. Segal disclaims
beneficial ownership of the shares held by Segal Investment LP.
(9) Consists of 620,712 shares held by Mr. Levett-Prinsep prior to this
offering, or 477,861 shares to be held by Mr. Levett-Prinsep after this
offering, and 90,000 shares issuable pursuant to options exercisable within
60 days of August 31, 1999.
(10) Consists of 74,856 shares held by Mr. Reidy and 90,000 shares issuable
pursuant to options exercisable within 60 days of August 31, 1999.
(11) Consists of 84,375 shares issuable pursuant to options exercisable within
60 days of August 31, 1999.
(12) Consists of 39,375 shares issuable pursuant to options exercisable within
60 days of August 31, 1999.
(13) Includes an aggregate of 869,073 shares issuable pursuant to options
exercisable within 60 days of August 31, 1999. Also includes an aggregate
of 3,302,649 shares held by Entegris, 3,302,649 shares held by FSI and
129,528 shares owned by the investment partnership of Mr. Segal.
(14) Includes an aggregate of 116,250 shares issuable pursuant to options
exercisable within 60 days of August 31, 1999, including 13,125 options
held by Mr. Dauwalter and 13,125 options held by Mr. Elftmann, pursuant to
agreements with Entegris and FSI.
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<PAGE>
DESCRIPTION OF CAPITAL SHARES
Following the closing of the sale of the common shares offered by this
prospectus, our authorized capital shares will consist of 48,000,000 Dutch
guilders, divided into 40,000,000 common shares, NLG 0.96 par value, and
10,000,000 preferred shares, NLG 0.96 par value.
Harris Trust and Savings Bank will maintain the registry and act as transfer
agent and registrar for the shares sold in this offering.
Unless otherwise set forth in a supplement to this prospectus, all of the
common shares sold in this offering will initially be represented by a single
global certificate held through the Depository Trust Company, DTC, and
registered in the name of Cede & Co., the nominee of DTC. Beneficial interests
in the shares represented by the global certificate or otherwise held through
DTC will be represented, and transfers of such beneficial interests will be
effected through accounts of financial institutions acting on behalf of
beneficial owners as direct and indirect participants in DTC. Investors may hold
beneficial interests in the shares directly through DTC if they are a
participant in such system, or indirectly through organizations that are
participants in such system.
COMMON SHARES
As of August 31, 1999, there were 10,104,261 Metron common shares
outstanding, which were held of record by 32 shareholders. Each shareholder of
record is entitled to one vote for each Metron share held on every matter
submitted to a vote of shareholders. The shareholders, at a general meeting, may
decide upon a distribution of Metron's annual profits to all shareholders out of
nonreserved profits insofar as permitted by Netherlands law. In the event of the
dissolution of Metron, holders of Metron common shares are entitled to receive,
on a pro rata basis, all assets of Metron remaining after the payment of all
debts, liquidation expenses and taxes and after payment to the holders of
preferred shares of all amounts paid by such holders on such shares. The Metron
articles make no provision for cumulative voting and, as a result, the holders
of a majority of Metron's voting power will have the power to elect all members
of the supervisory and managing boards. The holders of Metron common shares are
entitled to preemptive rights to subscribe for a pro rata portion of future
issuances of Metron common shares, with the exception of shares issued to
employees of Metron or of a group company. However, pursuant to the Metron
articles, the supervisory board has the authority to limit or exclude these
preemptive rights with respect to issuances of Metron common shares until
5 years from the date of execution of the deed of conversion and amendment of
the articles or a later date if the general meeting of shareholders extends the
term of this authority.
PREFERRED SHARES
Pursuant to the Metron articles, the supervisory board has authority to
issue authorized but unissued preferred shares of Metron until 5 years from the
date of execution of the deed of conversion and amendment of the articles or a
later date if the general meeting of shareholders extends the term of this
authority. Each preferred share would have voting rights equal to those of the
Metron common shares. Preferred shares could be issued quickly for a
subscription price equal to their par value, irrespective of the then current
market value of the common shares. Furthermore, it can be agreed between Metron
and the subscriber that upon issuance, only 25% of the nominal value of the
preferred shares needs to be paid at the time of issuance, with the balance
subject to call by Metron. Consequently, the issuance of preferred shares could
effectively delay or prevent a change in control of Metron or make removal of
management more difficult. In addition, the issuance of preferred shares may
have the effect of decreasing the value of the Metron common shares. As of
August 31, 1999, there were no preferred shares outstanding and Metron has no
plans to issue any of the preferred shares.
59
<PAGE>
SUMMARY OF CERTAIN PROVISIONS OF THE METRON ARTICLES AND OTHER MATTERS
GENERAL MEETINGS OF SHAREHOLDERS. All holders of Metron shares are entitled
to attend any general meeting in person or by proxy and to cast one vote for
each share held. The annual general meeting is required to be held in The
Netherlands no later than six months after the end of Metron's financial year.
Other general meetings may be called by the managing board, the supervisory
board or, subject to certain conditions, by the holders of not less than 10% of
the outstanding share capital. Metron will mail notices to the shareholders at
least 14 days before any general meetings. Most resolutions at general meetings
may be adopted by an absolute majority of the votes cast but only when a quorum
of at least half of the outstanding shares entitled to vote are represented in
person or by proxy. There are no laws currently in effect in The Netherlands or
provisions in the Metron articles limiting the rights of non-resident or foreign
investors to hold or vote the Metron common shares. A resolution to legally
merge, to legally split-up, to amend the Metron articles, to dissolve Metron or
to suspend or dismiss a managing director or a supervisory director requires at
least two-thirds of the validly cast votes in a general meeting at which more
than half of the issued capital is present or represented. In addition, such a
resolution to legally merge, to legally split-up, to amend the Metron articles
or to dissolve the company must be proposed by the supervisory board.
Shareholders must give notice of at least 60 days and no more than 90 days prior
to the one year anniversary of the date of the previous year's annual general
meeting of any shareholder proposal to be discussed at an annual general meeting
of shareholders. Proposals by shareholders for extraordinary general meetings of
shareholders will be discussed only if timely notice has been given to Metron.
ADOPTION OF STATUTORY ANNUAL ACCOUNTS; DIVIDENDS. Within five months after
the close of Metron's financial year, except where this period is extended for a
further period of up to a maximum of six months by the general meeting on
account of special circumstances, the managing board is required to submit to
the general meeting its annual report with respect to such financial year and
Metron's statutory annual accounts for such year, prepared in accordance with
Dutch GAAP and accompanied by a report of an independent auditor on such
statutory annual accounts. The statutory annual accounts are submitted by the
managing board to the general meeting for confirmation and adoption by the
shareholders at the annual general meeting which must be held no later than six
months after the close of Metron's financial year; in the event that the period
for submitting the annual accounts has been extended as set forth above, a
special shareholders' meeting will be called for such purpose. Under the Metron
articles such confirmation and adoption shall, subject to compliance with
certain requirements of Dutch law, including disclosure of all relevant facts to
the general meeting, to the extent permitted by law, constitute a full release
from liability of the managing directors and the members of the supervisory
board for the exercise of their duties during the financial year concerned.
Under the Metron articles, the supervisory board may set aside as reserves a
part or all of the annual profits of Metron. The amount reserved is not
available to be distributed as a dividend. Out of the remaining profits, a
non-cumulative cash dividend of one tenth of one percent (0.1%) of the par value
of the preferred shares will be paid to the holders of such shares, if any. At
any general meeting, the shareholders are entitled to decide upon a distribution
of the remaining profits to all common shareholders insofar as permitted by law.
Metron can only make distributions to its shareholders to the extent that its
equity exceeds the aggregate of (1) the par value of its issued share capital
and (2) the reserves to be maintained pursuant to the law. In addition, subject
to statutory provisions, the supervisory board may distribute one or more
interim dividends on the common shares before the annual financial statements
for any financial year have been adopted at a general meeting. The general
meeting may also declare and pay dividends out of reserves other than reserves
set aside by the supervisory board. Dividends may be paid either in cash or in
kind. Dividends and distributions must be claimed within five years and one day
following the date on which they become payable. There are no laws currently in
force in The Netherlands or provisions of the Metron articles restricting
payment of dividends to holders of Metron common shares not resident in The
Netherlands.
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<PAGE>
LIQUIDATION RIGHTS. In the event of dissolution of Metron, the liquidation
proceeds remaining after payment of all debts, liquidation expenses and taxes
are to be distributed ratably first to the holders of the preferred shares to
the extent of the amount paid by them on their shares and then to the holders of
Metron common shares.
PREEMPTIVE RIGHTS. Under the Metron articles, the holders of Metron shares
have preemptive rights with regard to any issue of Metron shares pro rata to the
aggregate amount of the Metron shares held by them. Metron shareholders have no
preemptive rights to subscribe for the Metron common shares issued to employees
of Metron or of a company belonging to the Metron group. Preemptive rights may
be limited or excluded by the supervisory board until 5 years from the date of
the execution of the deed of conversion and amendment of the Metron articles and
thereafter, provided that the supervisory board is so authorized by the general
meeting.
ACQUISITION BY METRON OF ITS OWN SHARES. Subject to certain restrictions
contained in Netherlands law and the Metron articles, the general meeting of
shareholders may delegate to the managing board for a period of not longer than
18 months the authority to cause Metron to acquire its own fully-paid shares in
an amount not to exceed 10% of the issued share capital. No such authorization
will be required if Metron acquires shares in its own capital for the purpose of
transferring the same to employees of Metron or of a group company under a plan
applicable to such employees, provided that such shares are officially listed on
an exchange, including the Nasdaq National Market.
ISSUANCE OF ADDITIONAL SHARES. Pursuant to the Metron articles, the
supervisory board has authority to issue authorized but unissued common shares
of Metron until five years from the date of execution of the deed of conversion
and amendment of the Metron articles or a later date if the general meeting
extends the term of this authority. As long as the supervisory board has the
authority to adopt a resolution to issue shares, the general meeting shall not
have the authority to adopt such resolutions. In the event that a future
supervisory board no longer has the authority to issue shares, pursuant to the
Metron articles any resolution of the general meeting to issue shares will
require the prior approval of the supervisory board.
PUT AND CALL RIGHTS WITH RESPECT TO CERTAIN METRON COMMON SHARES. Pursuant
to the terms of the Kyser ESOP, Metron is required in certain limited
circumstances to repurchase Metron common shares from the trustee of the Kyser
ESOP or participants or beneficiaries of the Kyser ESOP. However, there are
certain restrictions imposed by Netherlands law on the ability of Metron to
repurchase its common shares. See "Acquisition by Metron of its own Shares." To
the extent Metron is prohibited by Netherlands law from repurchasing any shares
when required to do so by the Kyser ESOP, Metron has agreed to use its best
efforts to timely obtain an alternate purchaser for Metron common shares
required to be purchased from the Trustee of the Kyser ESOP or participants or
beneficiaries of the Kyser ESOP.
REGISTRATION RIGHTS. Pursuant to an investor rights agreement entered into
in July 1995 and two accession agreements entered into in 1998, a limited number
of shareholders have the right to require Metron to register their common shares
under specific circumstances. In the event Metron decides to offer shares
pursuant to underwritten registrations, Metron must notify these shareholders
and include the shares of those who elect to be included in the offering. In the
case of an initial public offering involving net proceeds of more than
$7,500,000 and a gross offering price of at least $1.33 per share with a par
value of 0.10 Dutch guilders, the underwriters and Metron have the right to
reduce pro rata the number of shares proposed to be registered in view of market
conditions. The combined holders of at least 375,000 common shares of Metron, as
adjusted for share splits, share dividends and the like, may request that Metron
file a registration statement on Form S-3, if available to Metron. However,
Metron shall not be obligated to file more than one Form S-3 registration in any
12 month period or within 180 days after completing Metron's initial public
offering. In addition, if the majority of the members of the supervisory board
determine in good faith that a registration on Form S-3 would be
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<PAGE>
seriously detrimental to Metron, the registration may be delayed for up to
130 days. Metron will bear all registration expenses related to the above
mentioned registrations.
The registration rights are transferable to anyone acquiring all of a
shareholder's common shares and who agrees to be bound by the terms of the
investor rights agreement. The registration rights of each shareholder entitled
to such rights terminate on the earlier of the date three years after the date
of Metron's initial public offering and the date the holder may sell all of its
shares pursuant to Rule 144 during any 90 day period.
CERTAIN NETHERLANDS TAX CONSEQUENCES OF HOLDING METRON COMMON SHARES
The following discussion is a summary of the material anticipated tax
consequences of an investment in Metron common shares by non-Dutch resident
shareholders under the Netherlands tax laws. The discussion does not deal with
all possible tax consequences relating to an investment in Metron common shares.
In particular, the discussion does not address the tax consequences under any
non-Netherlands tax laws, nor does it address special circumstances that may
apply to any individual investor. Accordingly, prospective investors should
consult their respective tax advisors regarding the tax consequences to them of
an investment in the Metron common shares.
The anticipated tax consequences are subject to change, and such change may
be retroactively effective. In particular, a complete revision of the
Netherlands income tax act is planned. See "--Taxes in the 21st century" below.
The revision, if enacted, may affect the Netherlands tax position as described
below. Further, any variation or differences from the facts or representations
recited below, for any reason, might affect the following discussion, perhaps in
an adverse manner, and make them inapplicable. In addition, Metron does not
expect to update this discussion for changes in facts or laws occurring
subsequent to the date of this prospectus.
The summary represents solely the views of Metron as to the interpretation
of existing law and, accordingly, no assurance can be given that the tax
authorities or courts in the Netherlands will agree with the summary below.
The following is a summary of Netherlands tax consequences to an owner of
Metron common shares who is not, or is not deemed to be, a resident of the
Netherlands for purposes of the relevant tax codes (a "non-resident
shareholder"). The summary does not address taxes imposed by the Netherlands and
its political subdivisions, other than the dividend withholding tax, individual
income tax, corporate income tax, net wealth tax and gift and inheritance tax.
NETHERLANDS DIVIDEND WITHHOLDING TAX. Metron does not expect to pay
dividends on its capital stock. To the extent that dividends are distributed by
Metron, such dividends would, in principle, be subject under Netherlands tax law
to withholding tax at a statutory rate of 25%. Dividends, in principle, include
dividends in cash or in kind, constructive dividends and liquidation proceeds in
excess of, for Netherlands tax purposes, recognized paid-in capital. Stock
dividends are also subject to withholding tax unless distributed out of Metron's
paid-in share premium as recognized for Netherlands tax purposes.
No withholding tax applies on the sale or disposition of Metron common
shares to persons other than Metron.
A non-resident shareholder may be eligible for a reduction or a refund of
Netherlands dividend withholding tax pursuant to be EU Parent-Subsidiary
Directive or under a tax convention which is in effect between the country of
residence of the non-resident shareholder and the Netherlands. The Netherlands
has concluded such conventions with, among others, the United States, most
European Union countries, Canada, Switzerland and Japan. Under most of these
conventions, Netherlands dividend withholding tax is reduced to a rate of 15% or
under certain circumstances a lower rate unless (i) the non-resident shareholder
has an enterprise or an interest in an enterprise that is, in whole or in part,
carried on through a permanent establishment in the Netherlands or performs
independent
62
<PAGE>
services from a fixed base in the Netherlands and to which enterprise, part of
an enterprise or fixed base the Metron common shares are attributable and
(ii) the participation exemption is not applicable.
NETHERLANDS INCOME TAX AND CORPORATE INCOME TAX. A non-resident shareholder
will not be subject to Netherlands individual or corporate income tax with
respect to dividends distributed by Metron on the Metron common shares or with
respect to capital gains derived from the sale or disposal of Metron common
shares, provided that:
(a) 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 permanent representative in the Netherlands
and to which enterprise or part of an enterprise the Metron common shares
are attributable unless the participation exemption is applicable; and
(b) neither the non-resident shareholder nor his/her spouse, other persons
sharing his/her household or certain other close relatives have a
substantial interest or a deemed substantial interest in the share
capital of Metron or, in the event that the non-resident shareholder or
one or more of the other persons referred to does have such an interest,
the substantial interest(s) form part of the assets of an enterprise; and
(c) the non-resident shareholder does not carry out and has not carried out
employment activities with which the holding of the Metron common shares
is connected.
In general terms, a substantial interest in the share capital of Metron does
not exist if the non-resident shareholder, his/her spouse, other persons sharing
his/her household or certain other close relatives, do not hold alone or
together, whether directly or indirectly, the ownership of, or certain other
rights over, shares representing 5% or more of the total issued and outstanding
capital (or the issued and outstanding capital of any class of shares) of
Metron.
The substantial interest tax rate for individuals is 25%, which percentage
will probably be raised to 30% in the future. The substantial interest tax rate
for corporate shareholders is the Dutch corporate income tax rate of 35%. If a
tax treaty is in force between The Netherlands and the country where the
shareholder is resident, the shareholder may, depending on the treaty
provisions, be entitled to protection under the treaty, which could prohibit the
levying tax on substantial interest income or capital gains.
NETHERLANDS NET WEALTH TAX. A non-resident shareholder who is an individual
is not subject to Netherlands net wealth tax with respect to the Metron common
shares, provided 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 and to
which enterprise or part of an enterprise the Metron common shares is
attributable. The applicable tax rate is 0.7%. Corporations are not subject to
Netherlands net wealth tax.
NETHERLANDS GIFT AND INHERITANCE TAX. A gift or inheritance of Metron
common shares from a non-resident shareholder will not be subject to a
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 the Metron common shares are
attributable.
TAXES IN THE 21ST CENTURY. Recently, the Dutch government submitted its
draft bill for personal taxation in 2001 to the Dutch Parliament. These tax
reforms entail extensive changes to the current Dutch personal income tax
system. The new legislation is expected to come into force on January 1, 2001.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT ITS OWN TAX ADVISORS ABOUT THE
SPECIFIC NETHERLANDS TAX CONSEQUENCES TO SUCH PROSPECTIVE PURCHASER AND THE
EFFECTS, IF ANY, OF APPLICABLE NETHERLANDS TAX LAWS.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
shares. We cannot provide any assurances that a significant public market for
the common shares will develop or be sustained after this offering. Future sales
of substantial amounts of common shares in the public market, or the possibility
of such sales occurring, could adversely affect prevailing market prices for the
common shares or our future ability to raise capital through an offering of
equity securities.
After this offering, we will have outstanding 12,404,261 common shares. Of
these shares, the 3,750,000 shares to be sold in this offering, 4,312,500 shares
if the underwriters' over-allotment option is exercised in full, will be freely
tradable in the public market without restriction under the Securities Act,
unless such shares are held by "affiliates" of Metron, as that term is defined
in Rule 144 under the Securities Act.
The remaining 8,654,261 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold the restricted shares in private transactions in reliance on
exemptions from registration under the Securities Act. Restricted shares may be
sold in the public market only if they are registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities Act,
as summarized below.
139,341 of the restricted shares are available for immediate sale, of which
12,300 shares will be subject to certain volume, manner of sale and other
limitations under Rule 144. 2,200 of the restricted shares will be available for
sale 90 days from the date of this offering. Pursuant to certain "lock-up"
agreements between our shareholders and either Metron or the underwriters, the
holders of 8,590,945 restricted shares have agreed not to offer, sell, pledge or
otherwise dispose of, directly or indirectly, or announce their intention to do
the same, any common shares of Metron or security convertible into, or
exchangeable or exercisable for any security of Metron for a period of 180 days
from the date of this offering. However, if the holder of the restricted shares
is an individual, he or she may transfer any such securities either during his
or her lifetime or on death by will or intestacy to his or her immediate family
or to a trust the beneficiaries of which are exclusively the holder of the
securities and/or a member of his or her immediate family. We also have entered
into an agreement with the underwriters that we will not offer, sell or
otherwise dispose of common shares for a period of 180 days from the date of
this offering. On the date of the expiration of the lock-up agreements,
8,590,945 of the restricted shares will be eligible for immediate sale, of which
8,060,867 shares will be subject to certain volume, manner of sale and other
limitations under Rule 144, and 5,000 shares will be eligible for sale subject
to volume restrictions on March 17, 2000.
Following the expiration of such lock-up periods, certain shares issued upon
exercise of options we granted prior to the date of this offering will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of such shares in reliance upon
Rule 144 under the Securities Act but without compliance with certain
restrictions, including the holding-period requirement, imposed under Rule 144.
In general, under Rule 144 as in effect at the closing of this offering,
beginning 90 days after the date of this prospectus, a person, or persons whose
shares are aggregated, who has beneficially owned Restricted shares for at least
one year, including the holding period of any prior owner who is not an
Affiliate, would be entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of (1) 1% of the then-outstanding common
shares or (2) the average weekly trading volume of the common shares during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an Affiliate at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner who is not an Affiliate, is entitled to sell
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<PAGE>
such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
We intend to file, after the effective date of this offering, a Registration
Statement on Form S-8 to register approximately 3,735,683 common shares reserved
for issuance under the Option Plan, the Directors' Plan, the Purchase Plan and
the Kyser ESOP. The Registration Statement will become effective automatically
upon filing. Shares issued under the foregoing plans, after the filing of a
Registration Statement on Form S-8, may be sold in the open market, subject, in
the case of certain holders, to the Rule 144 limitations applicable to
affiliates, the above-referenced lock-up agreements and vesting restrictions
imposed by us.
In addition, following this offering, the holders of 7,606,759 common shares
will, under certain circumstances, have rights to require us to register their
shares for future sale.
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UNDERWRITING
Metron and the selling shareholders are offering the common shares described
in this prospectus through a number of underwriters. Banc of America Securities
LLC, SG Cowen Securities Corporation and U.S. Bancorp Piper Jaffray Inc. are the
representatives of the underwriters. Metron and certain of the selling
shareholders have entered into an underwriting agreement with the
representatives. Subject to the terms and conditions of the underwriting
agreement, Metron and the selling shareholders have agreed to sell to the
underwriters, and each underwriter has severally agreed to purchase, the number
of common shares listed next to its name in the following table:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ----------
<S> <C>
Banc of America Securities LLC.............................. 1,275,000
SG Cowen Securities Corporation............................. 765,000
U.S. Bancorp Piper Jaffray Inc.............................. 510,000
BancBoston Robertson Stephens Inc........................... 100,000
Bear, Stearns & Co. Inc..................................... 100,000
CIBC Oppenheimer Corp....................................... 100,000
Deutsche Bank Securities Inc................................ 100,000
Hambrecht & Quist LLC....................................... 100,000
Lehman Brothers Inc......................................... 100,000
Prudential Securities Incorporated.......................... 100,000
Salomon Smith Barney Inc.................................... 100,000
Sanford C. Bernstein & Co., Inc............................. 50,000
Cruttenden Roth Incorporated................................ 50,000
John G. Kinnard & Company, Incorporated..................... 50,000
Needham & Company, Inc...................................... 50,000
Pacific Crest Securities.................................... 50,000
Sandler O'Neill & Partners L.P.............................. 50,000
First Security Van Kasper................................... 50,000
H.C. Wainwright & Co., Inc.................................. 50,000
----------
Total................................................... 3,750,000
==========
</TABLE>
Shares sold by the underwriters to the public will initially be offered on
the terms set forth on the cover page of this prospectus. The underwriters may
allow to selected dealers a concession of not more than $0.52 per share, and the
underwriters may also allow, and any other dealers may reallow, a concession of
not more than $0.10 per share to other dealers. If all the shares are not sold
at the initial public offering price, the underwriters may change the offering
price and the other selling terms. The common shares are offered subject to
receipt and acceptance by the underwriters and other conditions, including the
right to reject orders in whole or in part.
If the underwriters sell more shares than the total number of shares set
forth in the table above, they have an option to buy up to a maximum of 562,500
additional shares from Metron to cover such sales. The underwriters have
30 days to exercise this option. If any shares are purchased pursuant to this
option, the underwriters will severally purchase shares in approximately the
same proportion as set forth in the table above. If purchased, the underwriters
will offer such additional shares on the same terms as those on which the
3,750,000 shares are being offered. The following table sets forth the per
66
<PAGE>
share and total underwriting discounts and commissions to be paid to the
underwriters assuming both no exercise and full exercise of the underwriters'
option to purchase 562,500 additional shares.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ 0.91 $ 0.91
Total................................................ $3,412,500 $3,924,375
</TABLE>
Metron and holders of approximately 90% of our outstanding common shares,
including all of our executive officers and directors, as well as holders of
options to purchase common shares who are senior officers, have agreed with the
underwriters not to dispose of or hedge any of their common shares or securities
convertible into or exchangeable for common shares during the period from the
date of this prospectus continuing through 180 days after the date of this
prospectus without the prior written consent of Banc of America Securities LLC.
At any time and without notice, Banc of America Securities LLC may, in its sole
discretion, release all or any portion of the securities from these lock-up
agreements.
The underwriting agreement provides that Metron and the selling shareholders
will indemnify the underwriters against liabilities set forth in such agreement,
including civil liabilities under the Securities Act, or will contribute to
payments the underwriters may be required to make in respect thereof.
At our request, the underwriters have reserved up to 125,000 of the common
shares offered by this prospectus for sale at the initial public offering price
to persons having business relationships with us. The number of shares of common
stock available to the general public will be reduced to the extent that these
persons purchase the reserved shares. Any reserved common shares that are not
purchased by such persons at the closing of the initial public offering will be
offered by the underwriters to the general public on the same terms as the other
shares in the initial public offering.
In connection with this offering, the underwriters may purchase and sell
common shares in the open market. These transactions may include:
- short sales;
- stabilizing transactions; and
- purchases to cover positions created by short sales.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common shares while this offering
is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the common shares, including:
- over-allotment;
- stabilization;
- syndicate covering transactions; and
- imposition of penalty bids.
67
<PAGE>
As a result of these activities, the price of the common shares may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National Market,
in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of common shares offered by this prospectus.
Prior to this offering, there has been no public market for the common
shares of Metron. The initial public offering price was negotiated among Metron
and the underwriters. Among the factors considered in such negotiations were:
- the history of, and prospects for, Metron and the industry in which it
competes;
- the past and present financial performance of Metron;
- an assessment of Metron's management;
- the present state of Metron's development;
- the prospects for Metron's future earnings;
- the prevailing market conditions of the applicable U.S. securities market
at the time of this offering;
- market valuations of publicly traded companies that Metron and the
representatives believe to be comparable to Metron; and
- other factors deemed relevant.
The total expenses related to this initial public offering of our common
shares are estimated to be $650,000.
LEGAL MATTERS
The validity of the issuance of the common shares offered by this prospectus
will be passed upon for Metron by Nauta Dutilh, Netherlands counsel to the
company. Certain other legal matters in connection with the offering will be
passed upon for Metron by Cooley Godward LLP, Palo Alto, California. Certain
legal matters in connection with the offering will be passed upon for the
underwriters by Latham & Watkins, Menlo Park, California.
EXPERTS
The consolidated balance sheets of Metron Technology N.V. and subsidiaries
as of May 31, 1998 and 1999, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three year
period ended May 31, 1999, have been included in this prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
auditors, as set forth in their report thereon appearing elsewhere in this
prospectus, and upon the authority of said firm as experts in accounting and
auditing.
68
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
A registration statement on Form S-1, including amendments to the
registration statement, relating to the common shares offered by this prospectus
has been filed by us with the Commission. This prospectus, which constitutes a
part of the registration statement, does not contain all of the information set
forth in the registration statement and the exhibits and schedules to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference. For further
information with respect to us and the common shares offered by this prospectus,
reference is made to such registration statement, exhibits and schedules. A copy
of the registration statement may be inspected by anyone without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
NW, Judiciary Plaza, Washington, D.C. 20549, and copies of all or any part
thereof maybe obtained from the Commission upon payment of certain fees
prescribed by the Commission. The telephone number for the public reference
facilities maintained by the Commission is (800) SEC-0330. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information filed electronically with the Commission. The
address of the site is http://www.sec.gov.
69
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants....................... F-2
Consolidated Statements of Income for the years ended
May 31, 1997, 1998 and 1999 and for the three months
ended August 31, 1998 and 1999......................... F-3
Consolidated Balance Sheets as of May 31, 1998 and 1999
and as of August 31, 1999.............................. F-4
Consolidated Statements of Cash Flows for the years
ended May 31, 1997, 1998 and 1999 and for the three
months ended August 31, 1998 and 1999.................. F-5
Consolidated Statements of Shareholders' Equity for the
years ended May 31, 1996, 1997, 1998 and 1999 and for
the three months ended August 31, 1999................. F-6
Notes to Consolidated Financial Statements.............. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Metron Technology N.V.:
We have audited the accompanying consolidated balance sheets of Metron
Technology N.V. and subsidiaries as of May 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended May 31, 1999. These consolidated
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. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Metron
Technology N.V. and subsidiaries as of May 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended May 31, 1999 in conformity with generally accepted accounting
principles.
KPMG LLP
Mountain View, California
July 22, 1999, except as to
Note 19 which is as of
November 17, 1999.
F-2
<PAGE>
METRON TECHNOLOGY N.V.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED MAY 31 ENDED AUGUST 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue................................. $298,576 $275,024 $228,618 $56,922 $69,473
Cost of revenue............................. 241,675 222,028 189,295 46,596 57,332
-------- -------- -------- ------- -------
Gross profit................................ 56,901 52,996 39,323 10,326 12,141
Selling, general, administrative, and other
expenses.................................. 49,417 48,997 43,391 11,321 10,489
Restructuring and merger costs.............. 258 881 2,550 806 --
-------- -------- -------- ------- -------
Operating income (loss)..................... 7,226 3,118 (6,618) (1,801) 1,652
Equity in net income (loss) of joint
ventures.................................. 273 (497) 267 44 (85)
Other expense, net.......................... (602) (71) (397) (212) (198)
-------- -------- -------- ------- -------
Income (loss) before income taxes........... 6,897 2,550 (6,748) (1,969) 1,369
Provision (benefit) for income taxes........ 2,699 1,448 (2,214) (703) 466
-------- -------- -------- ------- -------
Net income (loss)........................... $ 4,198 $ 1,102 $ (4,534) $(1,266) $ 903
======== ======== ======== ======= =======
Earnings (loss) per common share
Basic..................................... $ 0.40 $ 0.11 $ (0.44) $ (0.12) $ 0.09
Diluted................................... $ 0.37 $ 0.10 $ (0.44) $ (0.12) $ 0.08
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
F-3
<PAGE>
METRON TECHNOLOGY N.V.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 31 AUGUST 31, 1999
------------------- --------------------
1998 1999 ACTUAL PRO FORMA
-------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 10,387 $10,601 $ 17,128 $ 17,128
Accounts receivable, net of allowance for doubtful
accounts of $815, $1,312, $1,395, and $1,395,
respectively............................................ 53,216 42,150 49,044 49,044
Inventories, net.......................................... 25,881 24,079 24,413 24,413
Prepaid expenses and other current assets................. 8,375 10,126 9,766 9,766
-------- ------- -------- --------
Total current assets.................................. 97,859 86,956 100,351 100,351
Property, plant, and equipment, net....................... 9,901 8,152 7,757 7,757
Intangible assets, net.................................... 2,995 2,572 2,466 2,466
Investments in joint ventures............................. 2,342 185 100 100
Other assets.............................................. 1,064 1,760 1,757 1,757
-------- ------- -------- --------
Total Assets.......................................... $114,161 $99,625 $112,431 $112,431
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable.......................................... $ 26,633 $21,507 $ 24,341 $ 24,341
Amounts due affiliates.................................... 18,125 13,125 18,824 18,824
Accrued wages and employee-related expenses............... 5,716 5,304 4,537 4,537
Deferred revenue for installation and warranty............ 7,224 4,611 5,374 5,374
Short term borrowings and current portion of long-term
debt.................................................... 8,771 11,086 15,111 15,111
Amounts payable to shareholders........................... 76 1,016 1,016 1,016
Other current liabilities................................. 6,845 7,677 7,155 7,155
-------- ------- -------- --------
Total current liabilities............................. 73,390 64,326 76,358 76,358
Long-term debt, excluding current portion................... 1,379 1,141 1,101 1,101
Deferred credits and other long-term liabilities............ 1,343 2,230 2,168 2,168
-------- ------- -------- --------
Total liabilities..................................... 76,112 67,697 79,627 79,627
-------- ------- -------- --------
Commitments................................................. -- -- -- --
Common shares subject to Buy-Sell Agreement................. 2,000 1,973 1,973 --
-------- ------- -------- --------
Shareholders' Equity:
Preferred shares, par value NLG 0.96 Authorized;
10,000,000 shares Issued and outstanding; none.......... -- -- -- --
Common shares and additional paid-in capital, par value
NLG 0.96;
Authorized: 40,000,000
Issued: 10,383,068; 10,385,268; 10,385,268 and
10,385,268, respectively
Outstanding: 10,367,862; 10,104,261; 10,104,261; and
10,104,261, respectively................................ 3,177 3,030 3,030 5,003
Retained earnings......................................... 35,559 30,186 31,089 31,089
Cumulative other comprehensive loss....................... (2,405) (3,130) (3,157) (3,157)
Deferred compensation..................................... (275) -- -- --
Treasury shares; 15,206 shares in 1998 and 281,007 shares
in 1999................................................. (7) (131) (131) (131)
-------- ------- -------- --------
Total shareholders' equity............................ 36,049 29,955 30,831 32,804
-------- ------- -------- --------
Total Liabilities and Shareholders' Equity............ $114,161 $99,625 $112,431 $112,431
======== ======= ======== ========
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
F-4
<PAGE>
METRON TECHNOLOGY N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED MAY 31 ENDED AUGUST 31
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from (used for) operating activities:
Net income (loss)..................................... $ 4,198 $ 1,102 $(4,534) $(1,266) $ 903
Adjustments to reconcile net income for items currently
not affecting operating cash flows:
Pooling adjustment relating to acquisition of T.A.
Kyser Co.......................................... -- (185) -- -- --
Depreciation and amortization....................... 2,748 2,911 3,047 761 682
Provision for inventory valuation and bad debts..... 2,724 1,701 2,781 244 242
Deferred income taxes............................... (604) (1,152) (1,157) (254) 291
Amortization of deferred compensation expense....... 329 245 275 69 --
Equity in net (income) loss of joint venture........ (273) 497 (267) (44) 85
Loss on disposition of assets....................... 9 80 126 8 15
Changes in assets and liabilities:
Accounts receivable, net.......................... 17,980 (5,779) 10,003 9,947 (6,989)
Inventories, net.................................. (654) (3,309) (21) 2,843 (464)
Prepaid expenses and other current assets......... (517) (1,123) (904) 597 45
Accounts payable.................................. (3,513) 1,246 (5,126) (8,105) 2,834
Amounts due affiliates............................ (9,419) 6,089 (5,000) (3,993) 5,699
Accrued wages and employee-related expenses....... 6 (378) (412) (1,161) (767)
Deferred revenue for installation and warranty.... 635 (16) (2,613) (249) 763
Other current liabilities......................... (6,761) (802) 832 47 (522)
------- ------- ------- ------- -------
Net cash flows from (used for) operating
activities.................................. 6,888 1,127 (2,970) (556) 2,817
------- ------- ------- ------- -------
Cash flows (used for) from investing activities:
Additions to property, plant, and equipment......... (3,598) (3,966) (1,369) (526) (377)
Proceeds from the sale of property, plant, and
equipment......................................... 383 66 334 39 190
Equity investment in joint venture.................. -- (1,109) -- -- --
Proceeds from the sale of equity investment in joint
ventures.......................................... -- -- 2,510 -- --
Other assets........................................ (191) (90) (418) (19) 33
Deferred credits and other long-term liabilities 121 254 283 102 (5)
------- ------- ------- ------- -------
Net cash flows (used for) from investing
activities.................................. (3,285) (4,845) 1,340 (404) (159)
------- ------- ------- ------- -------
Cash flows (used for) from financing activities:
Increase (decrease) in short-term borrowings........ 238 (1,522) 2,377 1,118 4,060
Proceeds from issuance of long-term debt............ 407 40 120 118 --
Principal payments on long-term debt................ (175) (283) (323) (75) (77)
Amounts payable to shareholders..................... 372 -- 1,582 (62) (62)
Principal payments on indebtedness to officer and
shareholders...................................... (465) (342) (76) -- --
Purchase of treasury stock.......................... -- (469) (1,152) -- --
Proceeds from issuance of common and treasury
shares............................................ -- 200 15 -- --
------- ------- ------- ------- -------
Net cash flows (used for) from financing
activities.................................. 377 (2,376) 2,543 1,099 3,921
------- ------- ------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents........................................... (629) (553) (699) (90) (52)
------- ------- ------- ------- -------
Net change in cash and cash equivalents................. 3,351 (6,647) 214 49 6,527
Beginning cash and cash equivalents..................... 13,683 17,034 10,387 10,387 10,601
------- ------- ------- ------- -------
Ending cash and cash equivalents........................ $17,034 $10,387 $10,601 $10,436 $17,128
======= ======= ======= ======= =======
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
F-5
<PAGE>
METRON TECHNOLOGY N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
SHARES AND
ADDITIONAL CUMULATIVE
PAID-IN CAPITAL OTHER
------------------- TREASURY RETAINED COMPREHENSIVE DEFERRED COMPREHENSIVE
SHARES AMOUNT STOCK EARNINGS INCOME (LOSS) COMPENSATION TOTAL INCOME (LOSS)
-------- -------- -------- -------- ------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at May 31, 1996.... 10,383 $3,221 $ (5) $30,444 $ 136 $(888) $32,908
Net income.................. 4,198 4,198 $ 4,198
Foreign translation
adjustment................ (1,088) (1,088) (1,088)
Amortization of deferred
compensation.............. 329 329
Issuance of shares for
license................... 8 52 52
------ ------ ----- ------- ------- ----- ------- -------
Balances at May 31, 1997.... 10,391 3,273 (5) 34,642 (952) (559) 36,399 $ 3,110
=======
Net income.................. 1,102 1,102 $ 1,102
Kyser pooling adjustment.... (185) (185)
Foreign translation
adjustment................ (1,453) (1,453) (1,453)
Amortization of deferred
compensation.............. (38) 284 246
Release of rights under
Buy-Sell Agreement........ 209 209
Purchase of treasury
stock..................... (75) (463) (6) (469)
Issuance of shares
For cash.................. 7 75 75
Exercise of stock
option.................. 45 121 4 125
------ ------ ----- ------- ------- ----- ------- -------
Balances at May 31, 1998.... 10,368 3,177 (7) 35,559 (2,405) (275) 36,049 $ (351)
=======
Net loss.................... (4,534) (4,534) $(4,534)
Foreign translation
adjustment................ (725) (725) (725)
Amortization of deferred
compensation.............. 275 275
Release of rights under
Buy-Sell Agreement........ 27 27
Purchase of treasury
stock..................... (266) (189) (124) (839) (1,152)
Issuance of shares
Exercise of stock
option.................. 2 15 15
------ ------ ----- ------- ------- ----- ------- -------
Balances at May 31, 1999.... 10,104 3,030 (131) 30,186 (3,130) -- 29,955 $(5,259)
=======
Net income (unaudited)...... 903 903 $ 903
Foreign translation
adjustment (unaudited).... (27) (27) (27)
------ ------ ----- ------- ------- ----- ------- -------
Balances at August 31, 1999
(unaudited)............... 10,104 $3,030 $(131) $31,089 $(3,157) $ -- $30,831 $ 876
====== ====== ===== ======= ======= ===== ======= =======
</TABLE>
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
F-6
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Metron Technology N.V. ("Metron" or "the Company") is a holding company
organized under the laws of The Netherlands. Metron and its subsidiaries are
engaged in the marketing, sale and service of semiconductor equipment and
materials support in Europe, Asia and the United States. The majority of
Metron's revenue is derived from sales of materials and equipment. The Company's
principal subsidiaries include: Metron Technology (Deutschland) GmbH, Metron
Technology (United Kingdom) Ltd., Metron Technology (France) EURL, Metron
Technology (Italy) S.r.l., Metron Technology (Benelux) B.V., Metron Technology
(Israel) Ltd., Metron Technology (Asia) Ltd., Metron Technology (Hong Kong)
Ltd., T.A. Kyser Co. (a Nevada corporation), and Metron Technology Corporation
(a California corporation). Certain prior period items have been reclassified to
conform with the current year format.
In June 1995, the Company issued 1,595,376 common shares in exchange for all
of the outstanding capital stock of three companies trading in Asia, similarly
engaged in the distribution of semiconductor equipment and materials. These
three Asian companies were owned by the controlling shareholders of Metron.
Accordingly, the transaction has been treated as a reorganization of entities
under common control and is presented in a manner similar to a pooling-of
interests. Consequently, the Company's consolidated financial statements have
been restated to include the accounts and operations of the three Asian
companies for all reported periods prior to the reorganization.
In July 1995, the Company acquired Transpacific Technology Corporation
("TTC") and its subsidiaries in a business combination accounted for as a
purchase. The total purchase price for TTC was $5,035,000 and resulted in
goodwill of $4,229,000 which is being amortized over 10 years.
In July 1998, the Company issued common shares in exchange for substantially
all of the outstanding capital stock of T.A. Kyser Co ("Kyser"), which was
engaged in the marketing and sale of semiconductor materials. The transaction
has been treated as a pooling of interests. Consequently, the Company's
consolidated financial statements have been restated to include the accounts and
operations of Kyser for all reported periods prior to the merger.
The Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applicable in the United
States. Conformity with GAAP requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Future results may
differ from these estimates.
UNAUDITED INTERIM INFORMATION
The interim consolidated financial statements (including notes to financial
statements) of the Company for the three months ended August 31, 1998 and 1999,
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC"). In
the opinion of management, the accompanying unaudited interim consolidated
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of the
Company at August 31, 1999, and
F-7
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
the results of its operations and its cash flows for the three months ended
August 31, 1998 and 1999. Historical results are not necessarily indicative of
the results to be expected in the future.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company
and all its subsidiaries. All significant intercompany balances and transactions
have been eliminated.
REVENUE RECOGNITION
Equipment and other product sales are recognized on the shipment of goods to
customers. The Company defers the revenue associated with its installation and
warranty obligations. The deferred revenue is recognized ratably over the
applicable installation and warranty periods. Service revenue is recognized in
the periods the services are rendered to customers.
COMPREHENSIVE INCOME (LOSS)
Effective June 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME.
SFAS No. 130 establishes standards of report and presentation of comprehensive
income and its components of net income and other comprehensive income. Other
comprehensive income pertains to revenues, expenses, gains, and losses that are
not included in net income, but rather are recorded directly in stockholders'
equity. For the years ended May 31, 1997, 1998, and 1999, the Company had one
item of other comprehensive loss related to the foreign currency translation
adjustment.
EARNINGS PER SHARE
Basic earnings per common share are based on the weighted-average number of
common shares outstanding in each year. Diluted earnings per common share
reflect the potential dilution that could occur if dilutive securities were
exercised into common shares. For all years presented the reported net income
(loss) was used in the computation of basic and diluted earnings per common
share.
A reconciliation of the shares used in the computation follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED MAY 31 ENDED AUGUST 31
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(SHARES IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Shares used for basic earnings per
common share...................... 10,386 10,369 10,325 10,341 10,104
Shares used for stock options having
a dilutive effect................. 809 743 -- -- 1,075
------ ------ ------ ------ ------
Shares used for diluted earnings per
share............................. 11,195 11,112 10,325 10,341 11,179
====== ====== ====== ====== ======
</TABLE>
As of May 31, 1999 there were 1,944,348 shares of stock options outstanding
to purchase the Company's common stock with a weighted-average exercise price of
approximately $5.41. These securities were not included in diluted earnings per
share for the fiscal 1999 periods as their effect was anti-dilutive, but could
potentially dilute basic earnings per share in the future.
F-8
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments with original
maturities of 90 days or less from the date of purchase.
INVENTORIES
Inventories consist primarily of purchased products and are stated at the
lower of cost (first-in, first-out basis) or net realizable value. Provision is
made for slow-moving and obsolete items.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Metron Technology N.V., Metron Technology (Asia) Ltd., and Metron Technology
(Hong Kong) Ltd. maintain their books in their respective local currencies, but
their functional currency is the U.S. dollar. Accordingly, the gains and losses
from the re-measurement of these financial statements into US dollars are
included in current results of operations. The functional currency for each of
the Company's other subsidiaries is the applicable local currency. The
translation from foreign currencies to U. S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate during the
period. Translation gains or losses are included in "Cumulative other
comprehensive income" within shareholders' equity.
FINANCIAL INSTRUMENTS AND CREDIT RISK
The carrying value of the Company's financial instruments, including cash
and cash equivalents, and accounts receivable approximates fair value. Financial
instruments that subject the Company to concentrations of credit risk consist
primarily of cash and cash equivalents and accounts receivable.
The Company sells its products and services principally to leading well
established semiconductor companies. Credit risk is concentrated in North
America, Europe and Asia. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from its
customers. The Company has had write-offs of accounts receivable, and based on
an ongoing evaluation of its accounts receivable collectibility and customer
creditworthiness, believes it has adequately provided for such losses, which
have been within management's expectations.
The Company attempts to reduce its exposure arising from foreign currency
fluctuations by matching the maturities of foreign currency assets and
liabilities, mainly accounts receivable and accounts payable. Metron enters into
forward exchange contracts that are designated to hedge differences existing
between foreign currency assets and liabilities. Any gains or losses on these
contracts are recognized in the income statement, and generally offset the
resulting gains and losses on the related balance sheet items. Metron also uses
forward exchange contracts that are designated to hedge firm purchase
commitments. Any unrealized gains or losses are deferred and realized gains or
losses adjust the carrying basis of assets acquired, principally inventory.
F-9
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is recorded at cost. Depreciation is
determined primarily by the straight-line method over the estimated useful life
of the related asset or the lease term if applicable, as follows:
<TABLE>
<S> <C>
Buildings and leasehold improvements........................ 10 - 50 years
Machinery, equipment, vehicles and fixtures................. 3 - 17 years
</TABLE>
Land is not depreciated. Gains and losses on disposals are included in
income at amounts equal to the difference between the net book value of the
disposed assets and the proceeds received upon disposal. Repair and maintenance
costs are capitalized only if they extend the useful life of the related asset.
The Company reviews the carrying value of these assets for impairment whenever
events and circumstances indicate that the carrying value of an asset may not be
recoverable from estimated future cash flows expected to result from its use and
disposition. Where undiscounted expected cash flows are less than the carrying
value, an impairment loss is recognized for the difference between the estimated
fair value and the carrying value of an asset. No impairment of property, plant,
and equipment existed at May 31, 1999.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill, representing the excess of
the purchase price paid over the fair value of net assets acquired in a business
combination. Goodwill is amortized in selling, general, administrative, and
other expenses over ten years, using the straight-line method. The Company
periodically reviews intangible assets for recoverability using an undiscounted
cash flow approach to assess if there is impairment. If the undiscounted cash
flows are less than the carrying value, impairment is measured by the excess of
the carrying value over the undiscounted cash flows.
INVESTMENT IN JOINT VENTURES
The Company uses the equity method to account for its joint ventures. Metron
has the ability to influence the operating policies of, but does not control its
joint ventures.
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under this method deferred income taxes are provided to reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for tax
purposes.
DEFERRED REVENUE FOR WARRANTY AND INSTALLATION
Generally, the Company warrants products sold to customers to be free from
defects in material and workmanship for up to two years and defers the portion
of equipment revenue associated with its estimate of installation and warranty
obligations. Deferred revenue includes both the estimated cost of fulfilling the
obligations for installation and warranty and the related profit.
F-10
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
COMMON SHARES SUBJECT TO BUY-SELL AGREEMENT
The Company has reflected under the caption "Common shares subject to
Buy-Sell Agreement" the value as of the date of original issuance of the common
shares subject to put rights at the effective date of the Amended and Restated
Buy and Sell Agreement (the "Buy-Sell Agreement"). When shares are put to the
Company, the related value is released and reclassified to common shares. If the
offering contemplated by this prospectus is consummated, the Buy-Sell Agreement
will be terminated and the value ascribed to the put rights will be reclassified
to shareholders' equity.
The unaudited pro forma consolidated balance sheet at August 31, 1999
assumes the consummation of this offering, and reflects the value of the put
rights in shareholders' equity.
ACCOUNTING FOR STOCK OPTIONS
The Company uses the intrinsic value-based method to account for employee
stock-based compensation plans. The Company has adopted the disclosure
requirements of SFAS 123--"Accounting for Stock Based Compensation." (See
footnote 9)
2. ACQUISITION OF KYSER
On July 13, 1998, pursuant to an Agreement and Plan of Merger and
Reorganization ("Merger Agreement") dated as of June 12, 1998, the Company
acquired substantially all the outstanding shares of Kyser. Under the terms of
the Merger Agreement, each outstanding share of Kyser's common stock acquired
was converted into 16.5 shares of the Company's common shares. Accordingly, the
Company issued 1,572,453 new common shares to the shareholders of Kyser. Kyser
is a stocking distributor of materials and components which markets both
high-purity and industrial-use products in Texas and five other states.
The merger has been accounted for as a pooling of interests. There were no
transactions between the Company and Kyser prior to the combination. In
conjunction with the merger, Kyser changed its fiscal year end to coincide with
Metron's.
Certain amounts for Kyser have been reclassified to conform to the financial
statement classification followed by Metron. Since the fiscal years of Metron
and Kyser prior to May 31, 1998 differ, the consolidated statements of income
combine the operations of Kyser for its fiscal year ended July 31, 1997 with the
operations of Metron for the fiscal year ended May 31, 1997. The operations of
Metron for the year ended May 31, 1998 are combined with the operations of Kyser
for both the ten-month period ended May 31, 1998, and for the two-month period
ended July 31, 1997. Thus the two-month period ended July 31, 1997 is included
both in the Kyser fiscal year ended July 31, 1997 and the consolidated statement
of income for the fiscal year ended May 31, 1998. Accordingly, the net income of
Kyser for the two-month period ended July 31, 1997 is deducted from retained
earnings. Kyser revenue and net income for the two-month period was $8,842,000
and $185,000, respectively.
F-11
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
Total revenues and net income (loss) previously reported by the separate
enterprises prior to the acquisition were as follows.
<TABLE>
<CAPTION>
MAY 31
-----------------------
1997 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total revenues:
Metron................................................ $255,283 $224,913
Kyser................................................. 43,293 50,111
-------- --------
$298,576 $275,024
Net income (loss):
Metron................................................ $ 4,614 $ 414
Kyser................................................. (416) 688
-------- --------
$ 4,198 $ 1,102
======== ========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MAY 31
-----------------------
1998 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land................................................... $ 951 $ 917
Buildings and leasehold improvements................... 4,107 4,056
Machinery, equipment, vehicles, and fixtures........... 13,338 13,141
------- -------
18,396 18,114
Less accumulated depreciation.......................... 8,495 9,962
------- -------
Property, plant and equipment.......................... $ 9,901 $ 8,152
======= =======
</TABLE>
Depreciation expense relating to property, plant and equipment for the years
ended May 31, 1997, 1998, and 1999 was $2,320,000, $2,474,000, and $2,617,000,
respectively.
4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company's interests in its joint ventures were as follows:
<TABLE>
<CAPTION>
MAY 31
-------------------------
1998 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
FSI-CME.................................................. $2,127 $ --
FSI-CMK.................................................. 215 --
MAP...................................................... -- 185
------ ----
Investment in joint ventures............................. $2,342 $185
====== ====
</TABLE>
F-12
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
In 1995, the Company and FSI International, Inc. ("FSI"), a related party,
each acquired 50% of FSI-CME (formerly Vinylglass Ltd.). In 1998, Metron
Technology (Asia) Ltd. ("MTA"), a wholly owned subsidiary of the Company and FSI
established another joint venture in Korea, FSI-CMK. FSI-CMK was owned 65% by
FSI and 35% by MTA. The business of FSI-CMK is the design, construction,
installation, supply, support and servicing of chemical management equipment for
microelectronics fabrication facilities located within Korea. In February 1999,
the Company sold its interests in these joint ventures to FSI. Proceeds from the
sale of the Company's interests in FSI-CME and FSI-CMK amounted to $2,200,000
and $310,000, respectively. The Company recorded a gain on the sale of its
interest in FSI-CME of $123,000 and a loss on the sale of its interest in
FSI-CMK of $263,000.
During fiscal year 1999, Metron Technology (United Kingdom) Ltd., a wholly
owned subsidiary of the Company and WS Atkins Plc. formed a 50/50 joint venture
Metron Atkins Partnership Limited ("MAP"). MAP provides services to the
semiconductor industry including but not limited to design and engineering of
manufacturing facilities, facilities management, and comprehensive technical
support.
Condensed combined financial information for the unconsolidated investments
in FSI-CME, FSI-CMK, and MAP are as follows:
<TABLE>
<CAPTION>
MAY 31
-------------------------
1998 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets........................................... $6,971 $3,771
Noncurrent assets........................................ 1,536 --
Current liabilities...................................... (4,540) (3,400)
Noncurrent liabilities................................... (34) --
------ ------
Total shareholders' equity............................... 3,933 371
Other shareholder's share of equity...................... (2,059) (186)
------ ------
Metron's share of equity................................. 1,874 185
Goodwill and other items (10 year life).................. 468 --
------ ------
Investment in unconsolidated joint ventures.............. $2,342 $ 185
====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
------------------------------
1997 1998 1999
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operating income (loss).............................. $946 $(1,804) $1,605
Net income (loss).................................... $682 $ (995) $ 705
Metron's share of net income (loss).................. $342 $ (437) $ 319
Amortization of goodwill and other intangible
items.............................................. (69) (60) (52)
---- ------- ------
Equity in net income (loss) of joint ventures........ $273 $ (497) $ 267
==== ======= ======
</TABLE>
Product sales to FSI-CME for the years ended May 31, 1997, 1998, and 1999
were $1,738,000, $632,000, and $441,000, respectively. Purchases from FSI-CME
during the same periods were $17,956,000, $6,470,000, and $4,560,000,
respectively. At May 31, 1998 and 1999, amounts receivable from joint ventures
were $49,469 and $449,000, respectively, and amounts payable were $1,035,000 and
none, respectively.
F-13
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
5. SHORT-TERM BORROWINGS AND DEBT
Short-term borrowings consist of the following:
<TABLE>
<CAPTION>
MAY 31
-----------------------
1998 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Line of credit.......................................... $7,017 $ 7,669
Short-term credit facilities............................ 1,443 3,168
Current portion of long-term debt....................... 311 249
------ -------
Short-term borrowings and current portion of long-term
debt.................................................. $8,771 $11,086
====== =======
</TABLE>
A subsidiary of the Company has a revolving line of credit with a bank. The
line of credit provides borrowings not to exceed the lesser of $8,500,000 or a
borrowing base based upon inventory and accounts receivable, which collateralize
the line. The interest rate is 2.5% above LIBOR, and was 9.0% and 7.43% at
May 31, 1998 and 1999, respectively. The line of credit is also subject to the
maintenance of certain financial ratios and minimum levels of tangible net
worth. The Company has guaranteed the line of credit.
The Company and its subsidiaries have short-term credit facilities in
various currencies with a number of banks. Weighted average interest rates on
the outstanding facilities at May 31, 1998 and 1999 were 7.2% and 6.6%,
respectively. Certain assets of subsidiaries of the Company collateralize the
facilities. At May 31, 1999, the total amount available and unutilized under the
Company's short-term borrowings was approximately $8,000,000. The Company and
its subsidiaries have guaranteed certain short-term credit facilities.
F-14
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MAY 31
-------------------
<S> <C> <C>
1998 1999
------ ------
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Building mortgage with The Royal Bank of Scotland plc with
an interest rate of 9.24% (9.27% in 1998) until
June 2001, and thereafter at LIBOR plus 1.5% per annum
until maturity. Principal and interest are payable in
quarterly installments through April 2006. The mortgage is
also subject to the maintenance of certain financial
ratios and minimum levels of tangible net worth........... $1,100 $ 953
Note payable to shareholder for purchase of retired treasury
shares. The note has an interest rate of 6.65%, payable in
annual installments until July 2002, and is collateralized
by an ESOP bond........................................... 310 248
Unsecured notes payable with principal and interest payable
quarterly. Two of the notes bear interest at the 6-month
Rome Interbank Offered Rate plus 1.75%, and one note bears
interest at the Italian Prime Rate plus 1.0%.............. 93 41
Various notes maturing through August 2005; interest rates
ranging from 3.4% to 7.5%................................. 263 210
------ ------
1,766 1,452
Less current portions:
Notes payable to shareholder.............................. 76 62
Long-term debt............................................ 311 249
------ ------
Long-term debt.............................................. $1,379 $1,141
====== ======
</TABLE>
Future fiscal year ("FY") annual maturities of long-term debt are as
follows: FY2000, $311,000; FY2001, $218,000; FY2002, $220,000; FY2003, $217,000;
FY2004, $155,000 and thereafter, $331,000.
F-15
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
6. RESTRUCTURING AND MERGER COSTS
The following table summarizes the restructuring and merger costs incurred
for fiscal years 1997, 1998, and 1999.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31
------------------------------------
<S> <C> <C> <C>
1997 1998 1999
---- ---- ------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Restructuring costs................................ $ -- $261 $1,835
Merger costs (primarily professional fees)
associated with the acquisition of Kyser......... 258 620 715
---- ---- ------
Restructuring and merger costs..................... $258 $881 $2,550
==== ==== ======
</TABLE>
Restructuring costs are comprised primarily of severance costs and the early
retirement agreement ("ERA") associated with the implementation of the Company's
new organizational structure and other reductions in headcount. During fiscal
year 1998, Metron began the transition from an organizational structure based on
geography to a global organization built around the Company product lines. The
restructuring costs incurred during fiscal 1998 represent termination costs for
13 employees, primarily in finance and administration. In fiscal 1999,
approximately $856,000 pertains to the change in the organization and represents
the termination costs of 51 employees, most of whom worked in the equipment
division. At May 31, 1999, approximately $86,000 remained as a liability of the
Company.
In February 1999, the Company entered into an early retirement agreement
with one of its managing directors in connection with the termination of his
employment agreement, who had a lifetime employment agreement with the Company.
To cover the entire cost of the early retirement agreement, the Company recorded
a pre-tax charge of $979,000 in fiscal year 1999. Under the terms of the ERA,
the Managing Director resigned from his employment, and the Company agreed to
pay him a portion of his salary for the years remaining until he is eligible to
retire under the terms of his employment agreement. The Company also agreed to
provide him with certain other benefits. The present value of remaining
obligation discounted at an interest rate of 6.0% is $782,000 of which $154,000,
the current portion, is included in amounts payable to shareholders with the
remainder included in deferred credits and other long-term liabilities. The ERA
is payable monthly until March 2005.
7. RELATED PARTIES
Two of Metron's shareholders, Entegris (formerly Fluoroware) and FSI, each
own approximately 32.7% of the outstanding shares of the Company. The Company
purchases goods from these shareholders and their subsidiaries for resale in the
normal course of business under terms and conditions similar to those with
unrelated vendors. For the years ended May 31, 1997, 1998 and 1999 such
purchases totaled approximately $79,000,000, $83,400,000, and $65,300,000,
respectively. At May 31, 1998 and 1999, amounts payable to these affiliates were
$18,125,000 and $13,125,000, respectively. In addition, the Company receives
commissions from these shareholders for sales made to certain Asian customers.
For the years ended May 31, 1997, 1998 and 1999 such commissions totaled
approximately $677,000, $316,000, and $7,000, respectively. At May 31, 1998 and
1999, amounts receivable from these shareholders were $186,000 and $168,000,
respectively.
F-16
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
8. INCOME TAXES
The domestic and foreign components of income (loss) before taxes for each
year ended May 31 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
------------------------------
<S> <C> <C> <C>
1997 1998 1999
------ ------ -------
The Netherlands.................................... $ 360 $ 502 $ (792)
Other countries:
France........................................... (91) (91) (2,283)
Germany.......................................... 609 (1,374) (2,937)
United Kingdom................................... 1,792 764 553
Hong Kong........................................ 2,725 831 (254)
Korea............................................ (1,490) (1,460) (1,246)
United States.................................... 1,993 3,476 700
All other countries.............................. 999 (98) (489)
------ ------ -------
Income (loss) before income taxes.................. $6,897 $2,550 $(6,748)
====== ====== =======
</TABLE>
The components of income tax expense (benefit) for each year ended May 31
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
------------------------------
<S> <C> <C> <C>
1997 1998 1999
------ ------ -------
CURRENT:
The Netherlands.................................. $ 80 $ 117 $ (207)
Other countries:
France......................................... 303 12 (751)
Germany........................................ 115 (26) (180)
United Kingdom................................. 697 395 (132)
United States.................................. 1,497 1,735 (129)
All other countries............................ 435 347 341
------ ------ -------
Current tax...................................... 3,127 2,580 (1,058)
------ ------ -------
DEFERRED:
The Netherlands.................................. -- -- --
Other countries:
France......................................... (248) (19) 225
Germany........................................ (197) (723) (1,557)
United Kingdom................................. (3) 21 (44)
United States.................................. (321) (223) 552
All other countries............................ 341 (188) (332)
------ ------ -------
Deferred tax..................................... (428) (1,132) (1,156)
------ ------ -------
Total income taxes................................. $2,699 $1,448 $(2,214)
====== ====== =======
</TABLE>
At May 31, 1999, the Company had $9,473,000 in net operating loss
carryforwards, which represented approximately $3,100,000 of tax benefit, which
may be carried forward for periods ranging from 5 years to indefinitely. A
valuation allowance of $2,506,000 has been provided against the related deferred
tax asset because it is more likely than not that Metron will not fully utilize
these tax losses.
F-17
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
Significant components of the Company's deferred tax assets and liabilities
are set forth below.
<TABLE>
<CAPTION>
MAY 31
-------------------
<S> <C> <C>
1998 1999
------ ------
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred revenue for installation and warranty............ $ 731 $ 251
Account receivable and inventory provisions............... 598 942
Unrealized foreign currency losses........................ 302 923
Accruals deductible when paid............................. 1,273 1,168
Tax loss carryforwards and other items.................... 2,261 3,264
------ ------
5,165 6,548
Less: Valuation allowance................................... 2,256 2,506
------ ------
2,909 4,042
Deferred tax liabilities.................................... 91 68
------ ------
Net deferred tax assets recorded in consolidated balance
sheets.................................................... $2,818 $3,974
====== ======
</TABLE>
Differences between the statutory income tax rate of The Netherlands and the
Company's effective income tax rate are reconciled as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31
------------------------------
<S> <C> <C> <C>
1997 1998 1999
---- ----- -----
Statutory income tax rate............................... 35.1% 35.1% (35.0)%
Increase (decrease) in taxes resulting from:
Tax rate differential in other countries.............. (5.7) (15.9) (6.5)
Current year net operating losses for which no benefit
is recognized....................................... -- 37.6 17.0
Utilization of prior year net operating losses for
which no benefit was previously recognized.......... -- (7.4) (2.3)
Amortization of Goodwill.............................. 2.1 6.9 2.5
All other............................................. 7.6 .5 (8.5)
---- ----- -----
Effective income tax rate............................... 39.1% 56.8% (32.8)%
==== ===== =====
</TABLE>
9. CAPITAL STOCK
CHANGES IN CAPITAL SHARES
During 1998, the Company amended and restated its Articles of Association to
include, among other things, changes in the par value and in the number of
authorized shares of its common stock. The Company increased the par value of
its common shares from NLG 0.24 to NLG 0.96, and issued one new share for each 2
shares then outstanding. As a result of the stock split, the Company issued
additional common shares, and the financial statements reflect changes in par
value and the stock split for all periods presented.
F-18
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
AMENDED AND RESTATED BUY AND SELL AGREEMENT
In conjunction with the acquisition of Transpacific Technology Corporation,
the Company and five shareholder-employees of the Company entered into an
Amended and Restated Buy and Sell Agreement (the "Buy-Sell Agreement") effective
as of July 1995. The Buy-Sell Agreement provides for the repurchase under
certain circumstances of the outstanding shares and options of the five
shareholder-employees. Under the terms of the Buy-Sell Agreement, the
shareholder-employees have certain put rights and the Company has certain call
rights on the shares and options owned by the shareholder-employees. Until
July 5, 2000, the put rights are triggered upon the occurrence of certain
specified events, namely death, permanent disability, termination of employment
of the shareholder-employee, and failure of the Company to complete a qualified
initial public offering by July 6, 2000.
Under the terms of the Buy-Sell Agreement, the maximum obligation of the
Company during any fiscal year is re-determined annually until the fiscal year
beginning June 1, 2000. In general, the Company's payment obligations are
subject to an annual limit equal to one half of the sum of the previous fiscal
year's net income and the non-cash flow items reported in the consolidated
financial statements. Any obligation remaining is carried forward to the
following fiscal year. At May 31, 1998 and 1999, the potential obligation to the
Company to settle the Buy-Sell Agreement rights for the shareholder-employees
amounted to approximately $9,700,000 and $9,000,000, respectively. Pursuant to
the payment cap provision of the Buy-Sell Agreement, the Company will have no
payment obligation for put rights exercised during fiscal 2000.
The Buy-Sell Agreement terminates upon a change in control or the completion
of a qualified initial public offering by the Company.
TREASURY SHARES
In July 1998 and May 1999, under the terms of the Buy-Sell Agreement, two
former employees exercised certain of their put rights, which required the
Company to repurchase 265,801 common shares for approximately $1,152,000.
STOCK OPTION PLAN
In fiscal 1996 the Company established an Employee Stock Option Plan to
award options to managing directors and employees, and in fiscal 1997
established a Supervisory Directors' Stock Option Plan to award options to
supervisory directors. The two plans consist of 2,362,500 common shares
(2,250,000 shares for managing directors and employees and 112,500 for
supervisory directors). The plans require that the exercise price of options be
the fair value of the common shares at the grant date, except for 1,065,948
shares awarded at amounts below fair value during the initial six-month period
following the establishment of the Plan. Deferred compensation expense of
$1,232,000 for the 1,065,948 shares was charged to income over the vesting
periods. Options generally vest over a four-year period, and are exercisable in
installments beginning one year after the grant date.
The following pro forma information has been prepared as if the Company had
accounted for its stock options using the fair value accounting method
established by SFAS No. 123--"Accounting for Stock Based Compensation."
Additional compensation expense arising from the application of SFAS 123 has
been estimated using the minimum value method from the date of grant without
F-19
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
considering the volatility of the underlying stock. For purposes of the pro
forma disclosures below, additional compensation cost is amortized to expense
over the options' vesting period.
<TABLE>
<CAPTION>
YEARS ENDED MAY 31
------------------------------
<S> <C> <C> <C>
1997 1998 1999
------ ------ -------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net income (loss):
As reported...................................... $4,198 $1,102 $(4,534)
Pro forma(a)..................................... $3,816 $ 761 $(4,822)
Earnings (loss) per common share
Basic
As reported.................................... $ 0.40 $ 0.11 $ (0.44)
Pro forma...................................... $ 0.37 $ 0.07 $ (0.47)
Diluted
As reported.................................... $ 0.37 $ 0.10 $ (0.44)
Pro forma...................................... $ 0.34 $ 0.07 $ (0.47)
</TABLE>
- ------------------------
(a) Based on the following assumptions for grants in fiscal years 1997, 1998,
and 1999: risk-free weighted average interest rates of 6.13%, 6.14%, and
5.16% in fiscal years 1997, 1998, and 1999, respectively; weighted average
expected option lives of 6.5 years, 5.6 years, and 4.8 years in fiscal years
1997, 1998, and 1999, respectively; and no dividend yield in each year.
There were approximately 326,000 and 45,000 shares available for future
employee awards and supervisory director awards, respectively, at May 31, 1999.
The following table summarizes award activity:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----- --------- ----- --------- -----
Outstanding, beginning of period......... 1,410,348 $3.60 1,557,798 $3.99 1,669,998 $4.67
Stock options granted.................... 154,950 $7.70 302,700 $8.33 446,250 $7.83
Stock options exercised.................. -- -- (45,000) $2.78 (2,200) $7.00
Awards canceled.......................... (7,500) $7.08 (145,500) $5.57 (169,700) $5.46
--------- ----- --------- ----- --------- -----
Outstanding, end of period............... 1,557,798 $3.99 1,669,998 $4.67 1,944,348 $5.41
========= ===== ========= ===== ========= =====
Options exercisable at end of period..... 588,467 $3.51 666,244 $3.75 1,128,602 $3.91
========= ===== ========= ===== ========= =====
</TABLE>
F-20
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
Summary information concerning outstanding and exercisable options as of
May 31, 1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------------- ----------- ----------- -------- ----------- --------
<C> <C> <S> <C> <C> <C>
$0.00 - $2.78 885,948 6.1 yrs $ 2.78 824,951 $ 2.78
$2.79 - $6.16 229,650 5.9 yrs $ 6.16 175,047 $ 6.16
$6.17 - $7.00 8,400 5.5 yrs $ 7.00 4,200 $ 7.00
$7.01 - $7.83 421,500 8.9 yrs $ 7.83 8,377 $ 7.83
$7.84 - $8.00 129,600 6.0 yrs $ 8.00 49,804 $ 8.00
$8.01 - $8.33 269,250 7.5 yrs $ 8.33 66,223 $ 8.33
--------- ---------
1,944,348 1,128,602
========= =========
</TABLE>
Market price is the fair value of the Company's common stock as determined
by the Plan Committee on the grant date. All options issued during the past
three years have an exercise price equal to the market price on the date of
grant. The weighted average fair values below have been determined using the
Minimum Value Method.
<TABLE>
<CAPTION>
YEARS ENDED MAY 31
------------------------------
<S> <C> <C> <C>
1997 1998 1999
-------- -------- --------
Options granted............................... 154,950 302,700 446,250
Weighted average exercise price............... $ 7.70 $ 8.33 $ 7.83
Weighted average fair value................... $ 2.51 $ 2.35 $ 1.66
</TABLE>
10. EMPLOYEE BENEFITS
Most employees of the Company are covered by one of several defined
contribution retirement plans. Contributions are generally based on the
participant's compensation. The amount of pension expense charged to operating
expenses for defined contribution plans was $659,000 in fiscal 1997, $956,000 in
fiscal 1998, and $1,140,000 in fiscal 1999.
Kyser has an employee stock ownership plan ("ESOP") for its employees. Upon
the acquisition of Kyser, all Kyser shares held by the ESOP were exchanged for
shares of the Company. The subsidiary's full time employees generally become
eligible to participate after 12 months of continuous service. The cost of the
ESOP may be paid by the subsidiary or through contributions made by the
subsidiary to the ESOP in amounts determined by the Board of Directors. Shares
of common stock acquired from terminated employees by the plan and forfeitures
by terminated participants are allocated to each eligible participant account
under the plan. Participants are eligible for a distribution in the sixth year
after normal termination and in the second year after termination for
retirement, death, or disability. Participants vest in amounts allocated to them
according to a vesting schedule. Distributions of participant accounts to
participants in either cash or the Company's common stock may be made in the
event of termination, retirement, death or disability. To the extent the
participant elects to receive common stock in the event of retirement, death or
disability, and the common stock is not readily
F-21
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
tradable in an established market, such common stock may be put to the Company
during the put option period at the then current fair value.
11. FINANCIAL INSTRUMENTS
The carrying value of accounts receivable, accounts payable and long-term
debt approximate fair value. At May 31, 1999 the Company had aggregate forward
exchange contracts in various currencies as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
CONTRACT AMOUNT EXCHANGE
US $ BUY SELL RATE FAIR VALUE EXPIRATION DATE
- --------------- ----------------- ----------------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$3,773,000 -- Singapore Dollars 1.69 $ 98,319 January 2000
$4,889,000 Japanese Yen 107.26 (1,439) March 2000
$2,022,000 Singapore Dollars 1.67 3,578 January 2000
$1,700,000 Italian Lira 1,864.90 5,492 July 1999
$500,000 British Pounds 1.63 (475) June 1999
$700,000 Deutsch Mark 1.79 (36,445) July 1999
--------
$ 69,030
========
</TABLE>
The building mortgage with the Royal Bank of Scotland plc interest rate
comprises a variable LIBOR rate, a fixed rate of 1.5%, and a regulatory bank
charge. In May 1996 the Company entered into an interest rate swap, expiring
June 2001, to convert the variable LIBOR portion of the interest rate to a fixed
interest rate of 7.72%. The interest rates at May 31, 1998 and 1999 for the
mortgage were 9.25% and 6.87%, while the interest rates for the swap were 9.27%
and 9.24%, respectively. At May 31, 1999, the notional amount for the interest
rate swap was $1,002,000 and its estimated fair value was a payable of $43,000.
12. COMMITMENTS
At May 31, 1999, Metron was committed to spending approximately $21,900,000,
principally to purchase equipment, materials, and spare parts for resale.
The Company and its subsidiaries lease certain facilities and equipment
under various operating lease agreements. Future minimum payments under
operating leases that have initial or remaining noncancelable lease terms of one
year or more consist of the following at May 31, 1999.
<TABLE>
<CAPTION>
FISCAL YEAR (DOLLARS IN THOUSANDS)
- ----------- ----------------------
<S> <C>
2000..................................................... $2,579
2001..................................................... 1,906
2002..................................................... 739
2003..................................................... 448
2004..................................................... 209
Thereafter............................................... 1,208
------
Total minimum lease payments............................. $7,089
======
</TABLE>
F-22
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
The Company's rental expense for operating leases for the fiscal years ended
May 31, 1997, 1998 and 1999, was $2,919,000, $2,976,000, and $3,330,000
respectively.
13. ADDITIONAL SALES INFORMATION AND CONCENTRATION OF RISK
In fiscal 1997, sales to Siemens and IBM represented approximately 11.4% and
11.3%, of net revenues, respectively. In fiscal 1998 and 1999, no individual
customer represented sales of 10% or more of operating revenues.
A large portion of the Company's sales is made to a number of major publicly
owned corporations. There is a concentration of credit risk in accounts
receivable from these customers. Metron performs ongoing credit evaluations of
its customers and generally does not require collateral. Although the credit
risk associated with nonpayment from these customers is affected by conditions
or occurrences within their industry, accounts receivable from these customers
were substantially current at May 31, 1999. The Company believes that there is
no significant credit risk with respect to these receivables.
14. SEGMENT AND GEOGRAPHIC DATA
The Company implemented SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," as of June 1, 1998. This Statement
establishes standards for the reporting of information pertaining to operating
segments in annual and in interim financial reports issued to shareholders.
Previously reported amounts are not presented to compare with operating results
for fiscal year 1999, except for net revenues. The Company is unable to restate
reported amounts in fiscal years 1997 and 1998 due to the reorganization 1999 of
its management structure to coincide with its product lines beginning in fiscal
1999.
The Company operates predominantly in the semiconductor industry. This
involves the marketing, sales, and service of semiconductor manufacturing and
test equipment and materials. Reportable segments are based on the way the
Company is organized, reporting responsibilities to the chief operating officer,
and on the nature of the products offered to customers. Reportable segments are
the equipment division (which includes equipment including certain specialized
process chemicals, and spare part sales, and equipment service), the materials
division (which includes components used in construction and maintenance), and
other which includes finance, administration and corporate functions.
The accounting policies of the segments are the same as those described in
Note 1 Summary of Significant Accounting Policies. Segment operating results are
measured based on profit (loss) before tax, adjusted if necessary, for certain
segment specific items. There are no inter-segment sales. Identifiable assets
are the Company's assets that are identified with classes of similar products or
operations in each geographic region. Corporate assets include primarily cash,
equity investments and administrative headquarters assets of the Company.
F-23
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
SEGMENT INFORMATION
<TABLE>
<CAPTION>
EQUIPMENT MATERIALS
DIVISION DIVISION OTHER TOTAL
--------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended May 31, 1997
Net revenues...................................... $187,944 $110,632 $ -- $298,576
Year ended May 31, 1998
Net revenues...................................... $151,610 $123,414 $ -- $275,024
Year ended May 31, 1999
Net revenues...................................... $127,420 $101,198 $ -- $228,618
Depreciation expense.............................. $ 794 $ 475 $ 1,348 $ 2,617
Interest income................................... $ -- $ -- $ 438 $ 438
Interest expense.................................. $ -- $ -- $ 913 $ 913
Operating income (loss) before tax................ $ 3,161 $ 8,384 $(18,293) $ (6,748)
Assets............................................ $ 35,424 $ 48,635 $ 15,566 $ 99,625
Capital expenditures.............................. $ 409 $ 341 $ 619 $ 1,369
Three months ended August 31, 1998 (unaudited)
Net revenues...................................... $ 33,893 $ 23,029 $ -- $ 56,922
Operating income (loss) before tax................ $ 721 $ 2,308 $ (4,830) $ (1,801)
Assets............................................ $ 39,575 $ 28,303 $ 32,482 $100,360
Three months ended August 31, 1999 (unaudited)
Net revenues...................................... $ 36,807 $ 32,666 $ -- $ 69,473
Operating income (loss) before tax................ $ 1,877 $ 3,196 $ (3,421) $ 1,652
Assets............................................ $ 42,844 $ 30,371 $ 39,216 $112,431
</TABLE>
F-24
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED MAY 31 ENDED AUGUST 31
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
United States........................... $ 59,884 $ 66,505 $ 54,285 $ 13,597 $ 18,423
Germany................................. 60,639 44,425 32,059 9,057 9,701
United Kingdom.......................... 58,645 47,483 30,952 6,806 7,702
France.................................. 36,512 29,393 17,701 5,525 4,867
Hong Kong............................... 33,342 29,218 27,672 7,148 9,535
Singapore............................... 21,148 17,155 29,000 6,415 8,610
The Netherlands......................... 9,126 14,219 10,780 3,516 2,558
Other nations........................... 19,280 26,626 26,169 4,858 8,077
-------- -------- -------- -------- --------
Geographic totals......................... $298,576 $275,024 $228,618 $ 56,922 $ 69,473
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAY 31 AUGUST 31
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
(DOLLARS IN (UNAUDITED)
THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
United States............................................ $ 30,798 $23,171 $ 22,313 $ 27,309
Germany.................................................. 16,120 12,330 12,416 13,745
United Kingdom........................................... 22,276 13,868 16,477 14,060
Singapore................................................ 9,262 24,910 15,869 19,432
Hong Kong................................................ 14,302 11,821 7,181 12,706
The Netherlands.......................................... 6,855 5,787 5,972 5,578
Other nations............................................ 14,548 7,738 20,132 19,601
-------- ------- -------- --------
Geographic totals.......................................... $114,161 $99,625 $100,360 $112,431
======== ======= ======== ========
</TABLE>
F-25
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
15. SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
MAY 31
-------------------
1998 1999
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Other current liabilities:
Customer prepayments...................................... $2,143 $1,321
Accrued taxes including income taxes...................... 2,577 2,150
Project costs............................................. 840 1,677
Other..................................................... 1,285 2,529
------ ------
Total other current liabilities............................. $6,845 $7,677
====== ======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED MAY 31
------------------------------
1997 1998 1999
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Other income (expense):
Foreign exchange gain (loss).............................. $ (578) $ 489 $ 211
Interest income........................................... 487 514 438
Interest expense.......................................... (1,260) (1,110) (913)
Loss on sale of joint ventures............................ -- -- (140)
Miscellaneous income...................................... 749 36 7
------- ------- -----
Other income (expense)...................................... $ (602) $ (71) $(397)
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED MAY 31
------------------------------
1997 1998 1999
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Supplemental cash flow information:
Cash payments for:
Interest................................................ $1,312 $ 982 $ 930
Income taxes............................................ $3,210 $3,622 $(604)
Noncash transactions:
Issuance of shares for license.......................... $ 52 $ -- $ --
Deferred compensation................................... $ -- $ (38) $ --
</TABLE>
F-26
<PAGE>
METRON TECHNOLOGY N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AUGUST 31, 1999 AND
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1999 IS UNAUDITED)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended May 31, 1998
Net revenues.......................................... $61,552 $72,209 $78,249 $63,014
Operating income...................................... $ 1,325 $ 158 $ 1,364 $ 271
Net income (loss)..................................... $ 886 $ (308) $ 563 $ (39)
Basic net income (loss) per share..................... $ 0.09 $ (0.03) $ 0.05 $ 0.00
Diluted net income (loss) per share................... $ 0.08 $ (0.03) $ 0.05 $ 0.00
Year ended May 31, 1999
Net revenues.......................................... $56,922 $51,296 $56,559 $63,840
Operating income (loss)............................... $(1,801) $(2,595) $(2,832) $ 610
Net income (loss)..................................... $(1,266) $(1,513) $(1,899) $ 144
Basic net income (loss) per share..................... $ (0.12) $ (0.15) $ (0.18) $ 0.01
Diluted net income (loss) per share................... $ (0.12) $ (0.15) $ (0.18) $ 0.01
</TABLE>
17. RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which, as amended, becomes effective for
fiscal years beginning after June 15, 2000, with early adoption encouraged. The
pronouncement requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the value of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
Company is presently analyzing this statement and the impact, if any, on the
Company's financial statements.
18. DIVIDEND RESTRICTION
Pursuant to the Company's Articles of Incorporation and Dutch law, the
Company has available for distribution to its shareholders approximately
$22,000,000.
19. SUBSEQUENT EVENTS
In July 1999, the Supervisory Board of the Company reserved an additional
500,000 shares for future grant under the Employee Stock Option Plan.
In October 1999 the Supervisory Board of the Company reserved an additional
112,500 shares for future grant under the Supervisory Directors' Stock Option
Plan.
On November 17, 1999, the Company amended its Articles of Association to
convert from a B.V. to an N.V. under the laws of The Netherlands, to increase
the number of authorized preferred shares from 1,500,000 to 10,000,000 and the
number of authorized common shares from 23,500,000 to 40,000,000 and to remove
the mandatory reserve of $7,000,000 created in connection with the Buy-Sell
Agreement.
F-27
<PAGE>
[Photographs of selected materials and equipment marketed and sold by Metron.]
<PAGE>
- ------------------------------------------------------------
- ------------------------------------------------------------
3,750,000 SHARES
<TABLE>
<S> <C>
[METRON TECHNOLOGY LOGO]
</TABLE>
------------
Prospectus
November 19, 1999
-------------------
BANC OF AMERICA SECURITIES LLC
SG COWEN
U.S. BANCORP PIPER JAFFRAY
Until December 14, 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in the common shares, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- ------------------------------------------------------------
- ------------------------------------------------------------
