<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period
from_______to________.
Commission File Number: 000-27863
METRON TECHNOLOGY N.V.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
THE NETHERLANDS 98-0180010
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1350 Old Bayshore Highway
Suite 360
Burlingame, California 94010
-----------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (650) 373-1133
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes / X / No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
TITLE OF EACH CLASS OUTSTANDING AT MARCH 31, 2000
- ------------------------------ ------------------------------
Preferred shares, par value NLG 0.96 per share -
Common shares, par value NLG 0.96 per share 13,274,088
1
<PAGE>
METRON TECHNOLOGY N.V.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
----------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
for the Three Months and Nine months Ended February 28, 1999 and February 29, 2000 3
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
for the Three Months and Nine months Ended February 28, 1999 and February 29, 2000 4
Condensed Consolidated Balance Sheets
as of May 31, 1999 and February 29, 2000 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine months Ended February 28, 1999 and February 29, 2000 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Part II. Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 27
Signature 28
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METRON TECHNOLOGY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net revenue.................................................. $56,559 $80,980 $164,777 $224,616
Cost of revenue.............................................. 47,537 65,135 136,984 183,481
--------- --------- ---------- ----------
Gross profit................................................. 9,022 15,845 27,793 41,135
Selling, general, administrative, and other expenses......... 11,145 12,535 32,997 34,093
Restructuring and merger costs............................... 709 - 2,024 -
--------- --------- ---------- ----------
Operating income (loss)...................................... (2,832) 3,310 (7,228) 7,042
Equity in net income (loss) of joint ventures................ (102) (31) 40 (159)
Other income (expense), net.................................. (19) 340 (88) 444
--------- --------- ---------- ----------
Income (loss) before income taxes............................ (2,953) 3,619 (7,276) 7,327
Provision (benefit) for income taxes......................... (1,054) 1,062 (2,598) 2,381
--------- --------- ---------- ----------
Net income (loss)............................................ $(1,899) $ 2,557 $ (4,678) $ 4,946
========= ========= ========== ==========
Earnings (loss) per common share
Basic..................................................... $(0.18) $0.20 $(0.45) $0.44
Diluted................................................... $(0.18) $0.18 $(0.45) $0.40
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
METRON TECHNOLOGY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss)............................................ $(1,899) $2,557 $(4,678) $4,946
Other comprehensive loss..................................... (287) (280) (2) (503)
---------- --------- ---------- ----------
Comprehensive income (loss )................................. $(2,186) $2,277 $(4,680) $4,443
========== ========= ========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
METRON TECHNOLOGY N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
MAY 31 FEBRUARY 29
1999 2000
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................ $10,601 $14,103
Short-term investments............................................... - 20,245
Accounts receivable, net............................................. 42,150 62,976
Inventories, net..................................................... 24,079 34,664
Prepaid expenses and other current assets............................ 10,126 11,530
-------------- -------------
Total current assets.............................................. 86,956 143,518
Property, plant, and equipment, net.................................. 8,152 7,555
Intangible assets, net............................................... 2,572 2,255
Investments in joint ventures........................................ 185 187
Other assets......................................................... 1,760 931
-------------- -------------
Total Assets...................................................... $99,625 $154,446
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................................... $21,507 $20,833
Amounts due affiliates............................................... 13,125 27,669
Accrued wages and employee-related expenses.......................... 5,304 6,289
Deferred revenue for installation and warranty....................... 4,611 4,590
Short term borrowings and current portion of long-term debt.......... 11,086 12,145
Amounts payable to shareholders...................................... 1,016 216
Other current liabilities............................................ 7,677 8,676
-------------- -------------
Total current liabilities......................................... 64,326 80,418
Long-term debt, excluding current portion............................... 1,141 1,037
Deferred credits and other long-term liabilities........................ 2,230 2,076
-------------- -------------
Total liabilities................................................. 67,697 83,531
-------------- -------------
Commitments............................................................. - -
Common shares subject to Buy-Sell Agreement............................. 1,973 -
-------------- -------------
Shareholders' Equity:
Preferred shares, par value NLG 0.96................................. - -
Common shares and additional paid-in capital, par value NLG 0.96..... 3,030 39,547
Retained earnings.................................................... 30,186 35,132
Cumulative other comprehensive loss.................................. (3,130) (3,633)
Treasury shares...................................................... (131) (131)
-------------- -------------
Total shareholders' equity........................................ 29,955 70,915
-------------- -------------
Total Liabilities and Shareholders' Equity........................ $99,625 $154,446
============== =============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
METRON TECHNOLOGY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
FEBRUARY 28 FEBRUARY 29
----------- -----------
1999 2000
---- ----
<S> <C> <C>
Cash flows (used for) operating activities:
Net income (loss).................................................................. $(4,678) $4,946
Adjustments to reconcile net income for items currently not affecting operating cash
flows:
Depreciation and amortization................................................... 2,324 1,698
Provision for inventory valuation and bad debts................................. 1,866 429
Deferred income taxes........................................................... (1,103) 107
Amortization of deferred compensation expense................................... 206 -
Equity in net loss of joint venture............................................. 102 159
Loss (gain) on disposition of assets............................................ 146 (57)
Changes in assets and liabilities:
Accounts receivable, net...................................................... 9,648 (21,044)
Inventories, net.............................................................. 2,839 (10,895)
Prepaid expenses and other current assets..................................... (863) (766)
Accounts payable.............................................................. (3,405) (674)
Amounts due affiliates........................................................ (10,030) 14,544
Accrued wages and employee-related expenses................................... (977) 985
Deferred revenue for installation and warranty................................ (1,838) (20)
Other current liabilities..................................................... (943) 999
-------------- ------------
Net cash flows used for operating activities............................... (6,706) (9,589)
-------------- ------------
Cash flows (used for) from investing activities:
Additions to property, plant, and equipment..................................... (1,136) (1,523)
Proceeds from the sale of property, plant, and equipment........................ 220 672
Equity investment in joint venture.............................................. - (161)
Proceeds from the sale of equity investment in joint ventures................... 2,510 -
Other assets.................................................................... (58) 158
Other long-term liabilities..................................................... 700 (233)
-------------- ------------
Net cash flows (used for) from investing activities........................ 2,236 (1,087)
-------------- ------------
Cash flows from financing activities:
Purchase of short-term investments.............................................. - (40,755)
Sales of short-term investments................................................. - 20,510
Proceeds in short-term borrowings............................................... 2,683 1,168
Proceeds from issuance of long-term debt........................................ 192 62
Principal payments on long-term debt............................................ (213) (223)
Amounts payable to shareholders................................................. 154 -
Principal payments on indebtedness to officer and shareholders.................. (76) (862)
Purchase of treasury stock...................................................... (352) -
Proceeds from issuance of common shares......................................... 15 34,544
-------------- ------------
Net cash flows from financing activities................................... 2,403 14,444
-------------- ------------
Effect of exchange rate changes on cash and cash equivalents.......................... (420) (266)
-------------- ------------
Net change in cash and cash equivalents............................................... (2,487) 3,502
Beginning cash and cash equivalents................................................... 10,387 10,601
-------------- ------------
Ending cash and cash equivalents...................................................... $7,900 $14,103
============== ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM INFORMATION
The interim consolidated financial statements (including notes to condensed
consolidated financial statements) of Metron Technology N.V. ("Metron" or the
"Company") for the three and nine months ended February 28, 1999 and February
29, 2000, 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 February 29, 2000, and the results of its operations and its
cash flows for the three and nine month periods ended February 28, 1999 and
February 29, 2000. Historical results are not necessarily indicative of the
results the Company expects in the future. This report should be read in
conjunction with the consolidated financial statements and notes thereto for the
fiscal year ended May 31, 1999 included in the Company's Registration Statement
on Form S-1 as filed with the SEC for its initial public offering of common
shares.
EARNINGS PER SHARE
Basic earnings per common share are based on the weighted-average
number of common shares outstanding in each period. Diluted earnings per common
share reflect the potential dilution that could occur if dilutive securities
were converted into common shares. For all periods 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 ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
---- ---- ---- ----
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C>
Shares used for basic earnings per common share............ 10,325 12,980 10,329 11,170
Shares used for stock options having a dilutive effect..... - 1,364 - 1,136
----------- ----------- ----------- -----------
Shares used for diluted earnings per share................. 10,325 14,344 10,329 12,306
=========== =========== =========== ===========
</TABLE>
As of February 28, 1999, there were 1,967,000 shares of stock options
outstanding to purchase the Company's common shares with a weighted-average
exercise price of approximately $5.20 per share. Because their effect was
anti-dilutive, these securities were not included in the calculation of diluted
earnings per share for the three and nine months ended February 28, 1999.
2. 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"). With the consummation of the
initial public offering, the Buy-Sell Agreement was terminated and the value
ascribed to the put rights was reclassified to shareholders' equity as common
shares. The unaudited condensed consolidated balance sheet at February 29, 2000
reflects the value of the put rights in shareholders' equity.
3. 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 about operating segments
in annual and in interim financial reports issued to shareholders.
7
<PAGE>
Metron operates predominantly in the semiconductor industry. Metron
provides marketing, sales, service and support solutions to semiconductor
materials and equipment suppliers and semiconductor manufacturers. Reportable
segments are based on the way the Company is organized, reporting
responsibilities to the chief executive officer, and on the nature of the
products offered to customers. Reportable segments are the equipment division,
which includes certain specialized process chemicals, 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.
SEGMENT INFORMATION
<TABLE>
<CAPTION>
EQUIPMENT MATERIALS OTHER TOTAL
DIVISION DIVISION ------- -------
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Three months ended February 28, 1999
Net revenues........................................... $31,898 $24,661 $- $56,559
Income (loss) before tax............................... $(216) $1,857 $(4,594) $(2,953)
Three months ended February 29, 2000
Net revenues........................................... $36,501 $44,479 $- $80,980
Income (loss) before tax............................... $2,484 $4,508 $(3,373) $3,619
Nine months ended February 28, 1999
Net revenues........................................... $93,233 $71,544 $- $164,777
Income (loss) before tax............................... $657 $5,550 $(13,483) $(7,276)
Assets................................................. $33,674 $44,263 $17,679 $95,616
Nine months ended February 29, 2000
Net revenues........................................... $109,826 $114,790 $- $224,616
Income (loss) before tax............................... $7,015 $10,749 $(10,437) $7,327
Assets................................................. $60,179 $49,868 $44,399 $154,446
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues:
United States........................................... $14,418 $17,176 $39,492 $53,551
Germany................................................. 8,451 8,118 23,809 27,755
United Kingdom.......................................... 6,551 6,081 19,939 21,741
France.................................................. 3,417 11,839 13,418 23,725
Hong Kong............................................... 3,212 10,229 16,390 22,744
Singapore............................................... 10,575 12,069 24,129 32,265
The Netherlands......................................... 1,896 5,004 7,443 13,605
Other nations........................................... 8,039 10,464 20,159 29,230
----------- ----------- ----------- -----------
Geographic totals.......................................... $56,559 $80,980 $164,777 $224,616
=========== =========== =========== ===========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
MAY 31 FEBRUARY 29
-------- -------------
1999 2000
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
United States..................................................................... $23,171 $32,494
Germany........................................................................... 12,330 11,889
United Kingdom.................................................................... 13,868 13,286
Singapore......................................................................... 24,910 25,059
Hong Kong......................................................................... 11,821 11,386
The Netherlands................................................................... 5,787 34,533
Other nations..................................................................... 7,738 25,799
----------- -----------
Geographic totals.................................................................... $99,625 $154,446
=========== ===========
</TABLE>
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which, as amended, becomes effective for
fiscal quarters of 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.
In December 1999 the Security and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in
Financial Statements, which as amended, becomes effective for the Company on
June 1, 2000. SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. As presently written, SAB 101 may require companies to recognize
revenue pertaining to certain equipment sales only when installation has been
completed and the equipment has been accepted by the customer. In addition,
SAB 101 requires companies that have not applied this method of accounting
previously to report a change in accounting principle in accordance with
Accounting Principles Bulletin No. 20, Accounting Changes. The Company is
presently analyzing SAB 101 and the impact, if any, on the Company's
financial statements.
5. SUBSEQUENT EVENT
On March 3, 2000 Metron Technology (United Kingdom) Limited, a wholly
owned subsidiary of Metron Technology N.V., acquired all of the common shares of
Shieldcare Limited ("Shieldcare"), a privately held company incorporated in
Scotland for cash of 6.3 million British Pounds (approximately 9.9 million US
Dollars). The transaction was accounted for as a purchase. Shieldcare is an
authorized supplier of critical parts cleaning services to major device
manufacturing and OEM companies worldwide. The company also operates as an
authorized re-manufacturer of physical vapor deposition (PVD) equipment for a
well-known supplier of automated systems for PVD and chemical vapor deposition
(CVD). Metron intends to use the assets acquired in the transaction to continue
the operations of Shieldcare.
9
<PAGE>
ITEM 2. 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, included in Metron's
Registration Statement on Form S-1 filed with the SEC for our initial public
offering of common shares.
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 FSI International ("FSI") and Entegris,
who together own 40.8% of our shares, and certain of our current and former
management. In 1995, we reorganized Metron to combine three Asian companies as
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 our US materials division, in a
transaction accounted for as a pooling of interests. Founded in 1977, our US
materials division 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 and nine month periods ended February 28, 1999 and
February 29, 2000, a majority of our revenue came from the sale of products from
five or fewer of the semiconductor materials and equipment companies we
represent, whom we refer to as our principals. Revenue from the sale of products
manufactured by FSI was 9.0% and 23.4% of total revenue for the three months
ended February 28, 1999 and February 29, 2000, and 15.8% and 23.5% of total
revenues for the comparable nine months, respectively. Revenue from the sale of
products manufactured by Entegris were 20.6% and 30.0% of total revenue for the
three months ended February 28, 1999 and February 29, 2000, while 21.5% and
25.9% of total revenues were for the comparable nine months, respectively.
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 percentage of net revenue
for each of the three and nine month periods ended February 28, 1999 and
February 29, 2000:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenue
Europe.................................................. $27,109 $39,365 $81,333 $110,847
Asia.................................................... 15,032 24,439 43,952 60,218
United States........................................... 14,418 17,176 39,492 53,551
----------- ----------- ---------- ----------
Total net revenue.................................... $56,559 $80,980 $164,777 $224,616
=========== =========== ========== ==========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
(PERCENTAGE OF NET REVENUE)
<S> <C> <C> <C> <C>
Net revenue
Europe................................................... 47.9% 48.6% 49.3% 49.4%
Asia..................................................... 26.6 30.2 26.7 26.8
United States............................................ 25.5 21.2 24.0 23.8
----------- --------- ---------- ----------
Total net revenue..................................... 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 revenue in fiscal 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. Beginning with our fourth quarter of fiscal
year 1999, demand for semiconductor capital equipment and materials increased
sales, which in turn allowed the Company to return to profitability.
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;
11
<PAGE>
- 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.
The following tables present certain consolidated statements of
operations data in dollars and as a percentage of net revenue for the three
and nine month periods ended February 28, 1999 and February 29, 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue................................................. 100.0% 100.0% 100.0% 100.0%
Cost of revenue............................................. 84.0 80.4 83.1 81.7
----------- ----------- ----------- -----------
Gross margin................................................ 16.0 19.6 16.9 18.3
Selling, general, administrative, and other expenses........ 19.7 15.5 20.1 15.2
Restructuring and merger costs.............................. 1.3 - 1.2 -
----------- ----------- ----------- -----------
Operating margin............................................ (5.0)% 4.1% (4.4)% 3.1%
=========== =========== =========== ===========
</TABLE>
The following table shows our materials division and equipment division
revenue as an amount and as a percent of net revenue, together with the related
gross margins:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue (Dollars in millions)
Materials division........................................ $24.7 $44.5 $71.5 $114.8
Equipment division........................................ 31.9 36.5 93.2 109.8
Net revenue
Materials division........................................ 43.6% 54.9% 43.4% 51.1%
Equipment division........................................ 56.4 45.1 56.6 48.9
Gross margins
Materials division........................................ 20.2% 21.6% 20.0% 21.3%
Equipment division........................................ 12.7 17.1 14.5 15.2
</TABLE>
12
<PAGE>
THREE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO THREE MONTHS ENDED
FEBRUARY 28, 1999
NET REVENUE.
EQUIPMENT DIVISION. The equipment division's net revenue for the three
months ended February 29, 2000 was $36.5 million, an increase of $4.6 million or
14.4% from the three months ended February 28, 1999. Revenues were higher in
Europe and Asia due to the recovery of the semiconductor equipment industry.
These increases were offset by lower revenue in the United States for the three
month period, where revenue is particularly dependent on a small number of
high-dollar transactions. Service revenue increased 18.0% between the two three
month periods, principally due to an increase in realized installation and
warranty revenue deriving from increased equipment sales for the previous 3 to 4
quarters. The division's revenue decreased as a percentage of total revenue
owing to the even higher growth of materials division revenue.
MATERIALS DIVISION. The materials division's net revenue for the three
months ended February 29, 2000 was $44.5 million, an increase of $19.8 million
or 80.4% from the three months ended February 28, 1999. The division recorded
higher revenue in all regions, with particularly strong growth coming from Asia.
GROSS MARGINS
EQUIPMENT DIVISION. The equipment division's gross margin of 17.1%
increased 4.4 percentage points for the three months ended February 29, 2000
compared to the three months ended February 28, 1999. Owing to higher
utilization rates, service was profitable in the current quarter, and gross
margins were higher on spare parts for the three months ended February 29, 2000
when compared to the three months ended February 28, 1999.
MATERIALS DIVISION. The gross margin of the materials division increased
1.4 percentage points for the three months ended February 29, 2000 compared to
the three months ended February 28, 1999. Gross margins improved in all
geographic regions. The increase in commissions earned for the three months
ended February 29, 2000, contributed a significant portion of the increase in
the materials division gross margin.
EXPENSES
SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses for
the three months ended February 29, 2000 were $12.5 million, up $1.4 million or
12.6% from the $11.1 million incurred in the three months ended February 28,
1999. The increase is due principally to higher travel expenses and to an
increase in the number of employees.
NINE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO NINE MONTHS ENDED FEBRUARY 28,
1999
NET REVENUE
EQUIPMENT DIVISION. The equipment division's net revenue in the nine
months ended February 29, 2000 was $109.8 million, up $16.6 million or 17.8%
from the nine months ended February 28, 1999. The net revenue increased in both
Europe and Asia. However, the increase was primarily the result of the recovery
of equipment sales in Europe, our largest geographic segment, following the
prolonged downturn in the semiconductor industry. These increases were offset by
lower revenue in the United States for the nine month period, where revenue is
particularly dependent on a small number of high-dollar transactions.
MATERIALS DIVISION. The materials division's net revenue in the nine months
ended February 29, 2000 was $114.8 million, up $43.3 million or 60.4% from the
nine months ended February 28, 1999. In fiscal 2000, materials revenue was
higher in all geographic areas. The increase was primarily due to strong growth
in the United States and Asia where materials revenue more than doubled.
13
<PAGE>
GROSS MARGINS
EQUIPMENT DIVISION. The equipment division's gross margin increased 0.7
percentage points for the nine months ended February 29, 2000 when compared to
the nine months ended February 28, 1999. Margins were higher in Europe and Asia,
but were lower in the United States. Profitable service activities and higher
margins on spare parts offset lower margins on equipment and lower commission
revenues.
MATERIALS DIVISION. The materials division gross margin increased 1.2
percentage points for the nine months ended February 29, 2000 when compared to
the nine months ended February 28, 1999. The gross margin of the materials
division increased in all regions. The increase was due principally to increases
in Asia and the United States. Increased commission revenue in fiscal 2000 also
contributed the increase in the division's gross margins. Gross margins in Asia
were lower than normal for the nine months ended February 28, 1999 because the
Company took a provision against certain inventory purchased for customers who
subsequently cancelled their orders.
EXPENSES
SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses for
the nine months ended February 29, 2000 were $34.1 million, up $1.1 million or
3.3% from the $33.0 million incurred for the nine months ended February 28,
1999. The increase is primarily due to increased provisions for profit related
incentive plans. 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.
RESTRUCTURING AND MERGER COSTS.
The following table summarizes the restructuring and merger costs we
incurred in fiscal 1999. There were no restructuring and merger costs our
current fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Restructuring costs......................................... $709 $- $1,284 $-
Merger costs................................................ - - 740 -
----------- ----------- ----------- -----------
Restructuring and merger costs........................... $709 $- $2,024 $-
=========== =========== =========== ===========
</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 that had been duplicated under the previous subsidiary
structure. The reorganization was substantially accomplished by the end of
fiscal 1999.
All of 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.
OTHER INCOME (EXPENSE). The following table summarizes the components of
other income (expense) for the periods indicated.
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28 FEBRUARY 29
----------- ----------- ----------- -----------
1999 2000 1999 2000
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Foreign exchange gain (loss)................................ $53 $205 $51 $350
Interest income............................................. 65 468 327 752
Interest expense............................................ (210) (434) (702) (1,162)
Miscellaneous income........................................ 73 101 236 504
----------- ----------- ----------- -----------
Other income (expense)...................................... $(19) $340 $(88) $444
=========== =========== =========== ===========
</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 and nine month periods ended
February 28, 1999 and February 29, 2000, 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 and amounts invested in short-term investments, which primarily
resulted from the proceeds of our initial public offering. Our interest expense
for the same periods increased primarily as the result of increased borrowings
to support the increased working capital requirements associated with higher
revenues.
Other income for the nine months ending February 29, 2000, increased
when compared to the nine months ending February 28, 1999, primarily from the
exercise and sale of stock warrants held in a non-related principal.
LIQUIDITY AND CAPITAL RESOURCES
We define liquidity as our ability to generate resources to pay our
current obligations and to finance our growth during periods of business
expansion. Until we completed our initial public offering in late November 1999,
our principal sources of liquidity were cash flow from operations and bank
borrowings. Our principal requirement for capital is for working capital to
finance receivables and inventories. Our working capital, current assets less
current liabilities, at February 29, 2000 was $63.1 million. Our working capital
at May 31, 1999 was $22.6 million. This increase was principally due to our
initial public offering in which we raised net proceeds of $33.5 million. Our
current ratio, current assets divided by current liabilities, was 1.4 at May 31,
1999 and 1.8 at February 29, 2000.
OPERATING ACTIVITIES. Cash used for operating activities in the nine months
ended February 28, 1999 and February 29, 2000 was $6.7 million and $9.6 million,
respectively. In the nine months ended February 28, 1999 the net total of income
statement items not affecting operating cash flows, $3.5 million, was more than
offset by decreases in assets and liabilities. The decreases in assets and
liabilities included a significant reduction in receivables caused by the
reduction in our revenue, and significant reductions in accounts payable, both
those due to affiliates, and those due to unrelated vendors. Metron's net loss
of $4.7 million for the nine months ended February 28, 1999 also had a large
negative impact on cash flow from operating activities. In the nine months ended
February 29, 2000, the net total of items which did not affect operating cash
flows, decreased to $2.3 million primarily as a result of a reduction in the
amounts provided for reserves for inventory valuation and bad debts. The
increase in revenues this year required significant increases in accounts
receivable, inventories and prepaid expenses, which were only partially offset
by increased accounts payable including payables to affiliates and other
liabilities. For the first nine months in fiscal 2000 the net effect of changes
in assets and liabilities was approximately $16.9 million, and the total effect
of all these items together with our net income caused operating activities to
use $9.6 million of cash.
INVESTING ACTIVITIES. Our capital expenditures for property, plant and
equipment totaled $1.1 million for the first nine months of fiscal 1999, and
$1.5 million for the same period in fiscal 2000. Most of our capital
expenditures are for leasehold
15
<PAGE>
improvements and computer and communications equipment. We expect that our
total capital expenditures in fiscal 2000 will be about $3.0 million,
excluding whatever portion we incur this year of the costs of a new operations
management information system which we estimate could total $4.0 to $5.0
million over a 24 to 36 month period. In November 1999, we contributed
$161,000 to increase our investment in Metron Atkins Partnership Limited, a
joint venture with WS Atkins Plc.
FINANCING ACTIVITIES. During the nine-month period ending February 28, 1999, we
satisfied our funding requirements principally from internally generated funds
and our various borrowing facilities. In September 1998, we repurchased common
shares from a former employee shareholder for a total of $352,000 pursuant to
the Amended and Restated Buy and Sell Agreement.
In November 1999 we completed our initial public offering with the
issuance of 2,300,000 common shares, and in December 1999, the Company sold an
additional 562,500 common shares to cover the exercise of the underwriters'
over-allotment option. We received net proceeds of $33.5 million, and invested
the majority of the proceeds in short-term securities. Additionally, we received
$1.0 million from the exercise of stock options by our employees.
We expect that the net proceeds from the initial public offering, 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
of business. 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
February 29, 2000:
<TABLE>
<CAPTION>
U.S. $
EQUIVALENT AMOUNT RECENT
FACILITY CURRENTLY AMOUNT INTEREST
LENDER AMOUNT OUTSTANDING AVAILABLE RATE
- ------- ------------- ------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Deutsche Bank.............................................. $3,976 $2,329 $1,647 7.25%
Royal Bank of Scotland..................................... 3,249 2,459 790 7.25%
Silicon Valley Bank........................................ 4,000 180 3,820 8.00%
Compass Bank............................................... 8,500 7,164 1,336 7.50%
ING Bank 1,103 - 1,103 7.50%
All Others................................................. 2,407 1,050 1,357 5.0 to 8.5%
----------- ----------- -----------
Total...................................................... $23,235 $13,182 $10,053
=========== =========== ===========
</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 between 20th and 21st century dates,
which may cause errors in information or system failures. In addition, these
systems and programs were not designed to recognize the year 2000 as a "leap"
year. Although to date we have not experienced significant incidents relating to
the date rollover to the 21st century or for the leap year, we recognize the
need to remain vigilant and are continuing our assessment of year 2000 issues.
We have continued to support our customers with spare parts and
technical support since the beginning of the 2000 in order to respond to their
needs. To date, we have received reports from a limited number of customer sites
that they have
16
<PAGE>
experienced minor problems relating to year 2000 issues. We have provided
these customers with temporary fixes and do not believe that we will incur
significant costs in order to fix these problems.
Our internal systems include both information technology, or IT, and
non-IT systems. To date, we have not experienced any significant problems with
these systems relating to the rollover to the year 2000 or the leap year.
We have incurred staff costs 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 we do not expect to incur
material expenses in connection with any required future remediation efforts.
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 February 29, 2000 we had aggregate forward exchange contracts in
various currencies as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE FAIR
------------------ ----------
CONTRACT AMOUNT US$ BUY SELL CONTRACT RATE VALUE EXPIRATION DATE
- ------------------- --- ---- ------------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$2,443 - Japanese Yen 103.75 $79 March 2000
3,784 Japanese Yen - 99.95 13 August 2000
1,000 Israeli Shekel - 4.04 (42) February 2001
2,500 Italian Lira - 1,992.03 (93) March 2000
1,000 Deutsch Mark - 2.01 (89) April 2000
2,000 French Franc - 6.75 (367) August 2000
-----------
$(499)
===========
</TABLE>
17
<PAGE>
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Effect of Currency Exchange Rate and Exchange Rate Risk
Management" and "Market Risk" under Item 2 of this report.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION.
RISK FACTORS
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 quarter ended February 29, 2000, 23.4% of our total revenue
was generated from the sale of products manufactured by FSI and 30.0% from the
sale of products manufactured by Entegris. 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;
19
<PAGE>
- 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 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
20
<PAGE>
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 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 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;
21
<PAGE>
- 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.
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.
22
<PAGE>
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 report 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 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
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<PAGE>
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.
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 20th and 21st century dates,
which may cause errors in information or system failures. In addition, these
systems and programs were not designed to recognize the year 2000 as a "leap"
year. 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:
24
<PAGE>
- 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; and
- 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.
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.
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
25
<PAGE>
to be deemed to be subject to these taxes, our business, financial condition
and results of operations might be materially and adversely affected.
WE ARE SIGNIFICANTLY CONTROLLED BY FSI AND ENTEGRIS, WHICH MAY LIMIT YOUR
ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER SHAREHOLDER
MATTERS.
At February 29, 2000, FSI owned 20.4% and Entegris owned 20.4% of our
outstanding shares. By 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 MAY NEED TO RAISE ADDITIONAL CAPITAL, AND ANY INABILITY TO RAISE REQUIRED
FUNDS COULD HARM OUR BUSINESS.
We expect the net proceeds from our initial public 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.
OUR SHARE PRICE MAY BE VOLATILE.
Prior to the effective date of our initial public offering on November
18, 1999, there was no public market for our common shares. 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:
- 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;
- 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.
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
26
<PAGE>
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 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
ITEM DESCRIPTION
----- ------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed on March 17, 2000, a report on Form 8-K regarding the
March 3, 2000, acquisition of Shieldcare Limited.
27
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
METRON TECHNOLOGY N.V.
Date: April 13, 2000 /s/ Peter V. Leigh
------------------
Peter V. Leigh
Vice President, Finance
Signing on behalf of the registrant
and as principal accounting officer
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METRON
TECHNOLOGY N.V CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED
INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> MAY-31-1999 MAY-31-2000
<PERIOD-START> JUN-01-1998 JUN-01-1999
<PERIOD-END> FEB-28-1999 FEB-29-2000
<CASH> 0 14,103
<SECURITIES> 0 20,245
<RECEIVABLES> 0 62,976
<ALLOWANCES> 0 1,190
<INVENTORY> 0 34,664
<CURRENT-ASSETS> 0 143,518
<PP&E> 0 7,555
<DEPRECIATION> 0 10,540
<TOTAL-ASSETS> 0 154,446
<CURRENT-LIABILITIES> 0 80,418
<BONDS> 0 1,037
0 0
0 0
<COMMON> 0 39,547
<OTHER-SE> 0 30,585
<TOTAL-LIABILITY-AND-EQUITY> 0 143,518
<SALES> 164,777 224,616
<TOTAL-REVENUES> 164,777 224,616
<CGS> 136,984 183,481
<TOTAL-COSTS> 136,984 183,481
<OTHER-EXPENSES> 35,021 34,093
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 327 752
<INCOME-PRETAX> (7,276) 7,327
<INCOME-TAX> (2,598) 2,381
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,678) 4,946
<EPS-BASIC> (0.45) 0.44
<EPS-DILUTED> (0.45) 0.40
</TABLE>
