d<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 November 30, 1999
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.
<TABLE>
<CAPTION>
Title of Each Class Outstanding at December 31, 1999
- ------------------- --------------------------------
<S> <C>
Preferred shares, par value
NLG 0.96 per share --
Common shares, par value
NLG 0.96 per share 13,066,761
</TABLE>
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 Six Months
Ended November 30, 1998 and 1999 3
Condensed Consolidated Statements of
Comprehensive Income(Loss) (Unaudited)
for the Three Months and Six Months Ended November 30, 1998 and November 1999 4
Condensed Consolidated Balance Sheets
as of May 31, 1999 and November 30, 1999 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended November 30, 1998 and 1999 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18-26
Part II. Other Information
Item 1. Legal Proceedings 27
Item 2. Changes in Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 28
Signature 30
</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 SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------- ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue.................................................. $51,296 $74,163 $108,218 $143,636
Cost of revenue.............................................. 42,851 61,013 89,447 118,345
------- ------- -------- --------
Gross profit................................................. 8,445 13,150 18,771 25,291
Selling, general, administrative, and other expenses......... 10,531 11,069 21,852 21,558
Restructuring and merger costs............................... 509 - 1,315 -
------- ------- -------- --------
Operating income (loss)...................................... (2,595) 2,081 (4,396) 3,733
Equity in net income (loss) of joint ventures................ 98 (44) 142 (129)
Other income (expense), net.................................. 143 302 (69) 104
------- ------- -------- --------
Income (loss) before income taxes............................ (2,354) 2,339 (4,323) 3,708
Provision (benefit) for income taxes......................... (841) 853 (1,544) 1,319
------- ------- -------- --------
Net income (loss)............................................ $(1,513) $1,486 $(2,779) $2,389
======= ======= ======== ========
Earnings (loss) per common share
Basic..................................................... $(0.15) $0.14 $(0.27) $0.23
Diluted................................................... $(0.15) $0.13 $(0.27) $0.21
</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 SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss)............................................ $(1,513) $1,486 $(2,779) $2,389
Other comprehensive income (loss)............................ 292 (196) 285 (223)
------- ------- -------- --------
Comprehensive income (loss )................................. $(1,221) $1,290 $(2,494) $2,166
======= ======= ======== ========
</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 NOVEMBER 30
1999 1999
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................................................... $10,601 $14,093
Short-term investments............................................................. - 21,833
Accounts receivable, net........................................................... 42,150 58,660
Inventories, net................................................................... 24,079 29,046
Prepaid expenses and other current assets.......................................... 10,126 9,087
------- -------
Total current assets.......................................................... 86,956 132,719
Property, plant, and equipment, net................................................ 8,152 7,515
Intangible assets, net............................................................. 2,572 2,352
Investments in joint ventures...................................................... 185 217
Other assets....................................................................... 1,760 1,642
------- -------
Total Assets.................................................................. $99,625 $144,445
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable................................................................... $21,507 $29,502
Amounts due affiliates............................................................. 13,125 18,800
Accrued wages and employee-related expenses........................................ 5,304 5,558
Deferred revenue for installation and warranty..................................... 4,611 5,310
Short term borrowings and current portion of long-term debt........................ 11,086 13,507
Amounts payable to shareholders.................................................... 1,016 216
Other current liabilities.......................................................... 7,677 7,205
------- -------
Total current liabilities..................................................... 64,326 80,098
Long-term debt, excluding current portion............................................. 1,141 1,077
Deferred credits and other long-term liabilities...................................... 2,230 2,134
------- -------
Total liabilities............................................................. 67,697 83,309
------- -------
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 32,045
Retained earnings.................................................................. 30,186 32,575
Cumulative other comprehensive loss................................................ (3,130) (3,353)
Treasury shares.................................................................... (131) (131)
------- -------
Total shareholders' equity.................................................... 29,955 61,136
------- -------
Total Liabilities and Shareholders' Equity.................................... $99,625 $144,445
======= =======
</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>
SIX MONTHS
ENDED NOVEMBER 30,
-------------------
1998 1999
---- ----
<S> <C> <C>
Cash flows from (used for) operating activities:
Net income (loss).................................................................. $(2,779) $2,389
Adjustments to reconcile net income for items currently not affecting operating cash
flows:
Depreciation and amortization................................................... 1,494 1,073
Provision for inventory valuation and bad debts................................. 1,045 206
Deferred income taxes........................................................... (545) 157
Amortization of deferred compensation expense................................... 138 -
Equity in net (income) loss of joint venture.................................... (142) 129
Loss (gain) on disposition of assets............................................ 7 (29)
Changes in assets and liabilities:
Accounts receivable, net...................................................... 12,578 (16,669)
Inventories, net.............................................................. 5,728 (5,035)
Prepaid expenses and other current assets..................................... 1,002 988
Accounts payable.............................................................. (14,309) 7,995
Amounts due affiliates........................................................ (5,947) 5,675
Accrued wages and employee-related expenses................................... (650) 254
Deferred revenue for installation and warranty................................ (1,617) 699
Other current liabilities..................................................... 1,520 (472)
-------- --------
Net cash flows used for operating activities............................ (2,477) (2,640)
-------- --------
Cash flows (used for) from investing activities:
Additions to property, plant, and equipment..................................... (827) (860)
Proceeds from the sale of property, plant, and equipment........................ 101 595
Equity investment in joint venture.............................................. - (161)
Other assets.................................................................... 34 72
Other long-term liabilities..................................................... 118 (158)
-------- --------
Net cash flows used for investing activities............................ (574) (512)
-------- --------
Cash flows (used for) from financing activities:
Purchase of short-term investments.............................................. - (21,833)
Increase in short-term borrowings............................................... 1,639 2,509
Proceeds from issuance of long-term debt........................................ 181 62
Principal payments on long-term debt............................................ (62) (163)
Amounts payable to shareholders................................................. (148) (862)
Purchase of treasury stock...................................................... (352) -
Proceeds from issuance of common shares......................................... 15 27,043
-------- --------
Net cash flows from financing activities................................ 1,273 6,756
-------- --------
Effect of exchange rate changes on cash and cash equivalents.......................... 101 (112)
-------- --------
Net change in cash and cash equivalents............................................... (1,677) 3,492
Beginning cash and cash equivalents................................................... 10,387 10,601
-------- --------
Ending cash and cash equivalents...................................................... $8,710 $14,093
======== ========
</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 six months ended November 30, 1998 and 1999,
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
In the opinion of management, the accompanying unaudited interim consolidated
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of
the Company at November 30, 1999, and the results of its operations and its
cash flows for the three and six month periods ended November 30, 1998 and
1999. 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 SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(SHARES IN THOUSANDS)
Shares used for basic earnings per common share............ 10,325 10,430 10,329 10,268
Shares used for stock options having a dilutive effect..... - 1,017 - 996
-------- ------- ------- -------
Shares used for diluted earnings per share................. 10,325 11,447 10,329 11,264
======== ======= ======= =======
</TABLE>
As of November 30, 1998 there were 1,885,000 shares of stock options
outstanding to purchase the Company's common shares with a weighted-average
exercise price of approximately $5.07. These securities were not included in
diluted earnings per share for the three and six months ended November
30,1998 as their effect was anti-dilutive.
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 November 30, 1999 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 operating officer, and on the nature of the
products offered to customers. Reportable segments are the equipment division
(which includes equipment including certain specialized process chemicals,
and spare part sales, and equipment service), the materials division (which
includes components used in construction and maintenance), and other which
includes finance, administration and corporate functions.
The accounting policies of the segments are the same as those
described in Note 1 Summary of Significant Accounting Policies. Segment
operating results are measured based on profit (loss) before tax, adjusted if
necessary, for certain segment specific items. There are no inter-segment
sales. Identifiable assets are the Company's assets that are identified with
classes of similar products or operations in each geographic region.
Corporate assets include primarily cash, equity investments and
administrative headquarters assets of the Company.
SEGMENT INFORMATION
<TABLE>
<CAPTION>
EQUIPMENT MATERIALS
DIVISION DIVISION OTHER TOTAL
--------- --------- ----- -----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Three months ended November 30, 1998
Net revenues............................................ $27,506 $23,790 $- $51,296
Income (loss) before tax................................ $78 $1,460 $(3,892) $(2,354)
Three months ended November 30, 1999
Net revenues............................................ $36,835 $37,328 $- $74,163
Income before tax....................................... $2,644 $3,045 $(3,350) $2,339
Six months ended November 30, 1998
Net revenues............................................ $61,481 $46,737 $- $108,218
Income (loss) before tax................................ $874 $3,693 $(8,890) $(4,323)
Assets.................................................. $35,874 $26,424 $29,138 $91,436
Six months ended November 30, 1999
Net revenues............................................ $73,642 $69,994 $- $143,636
Income before tax....................................... $4,531 $6,241 $(7,064) $3,708
Assets.................................................. $47,252 $31,173 $66,020 $144,445
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net revenues:
United States............................................. $11,477 $17,953 $25,074 $36,375
Germany................................................... 6,352 9,978 15,359 19,620
United Kingdom............................................ 6,592 7,988 13,388 15,668
France.................................................... 4,524 6,946 9,997 11,824
Hong Kong................................................. 7,002 2,638 13,178 10,942
Singapore................................................. 6,721 11,586 13,554 20,196
The Netherlands........................................... 2,066 6,024 5,544 8,594
Other nations............................................. 6,562 11,050 12,124 20,417
------- ------- -------- --------
Geographic totals............................................ $51,296 $74,163 $108,218 $143,636
======= ======= ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
MAY 31 NOVEMBER 30
1999 1999
---- ----
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Assets:
United States...................................................................... $23,171 $31,554
Germany............................................................................ 12,330 12,825
United Kingdom..................................................................... 13,868 13,543
Singapore.......................................................................... 24,910 16,385
Hong Kong.......................................................................... 11,821 8,587
The Netherlands.................................................................... 5,787 33,014
Other nations...................................................................... 7,738 28,537
------- --------
Geographic totals..................................................................... $99,625 $144,445
======= ========
</TABLE>
4. SUBSEQUENT EVENT
In December 1999, the Company sold an additional 562,500 common shares to cover
the exercise of the underwriters' over-allotment option.
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 its 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 43.0% of our shares, and certain of
our current and former management. In 1995, we reorganized Metron to combine
three Asian companies as a reorganization under common control, and purchased
Transpacific Technology Corporation and its subsidiaries, referred to as TTC.
TTC was founded in California in 1982 as a semiconductor equipment
manufacturers' representative company and expanded into the distribution
business in 1990. In July 1998, we acquired T.A. Kyser Co., which we refer to
as Kyser, in a transaction accounted for as a pooling of interests. Founded
in 1977, Kyser markets and sells materials in nine states within the United
States principally to the semiconductor industry.
We derive our revenue from sales of materials, equipment, service
and spare parts to the semiconductor industry, as well as from commissions on
sales of equipment and materials. We recognize revenue for most of an
equipment sale and all other product sales upon the shipment of goods to
customers. We defer the portion of our equipment revenue associated with our
estimate of our installation and warranty obligations. We amortize the
deferred revenue over the applicable installation and warranty periods. We
recognize service revenue in the periods the services are rendered to
customers.
In each of our three and six month periods ended November 30, 1998
and 1999, a majority of our revenue came from the sale of products from five
or fewer of the semiconductor materials and equipment companies we represent,
who we refer to as our principals. Revenue from the sale of products
manufactured by FSI were 18.4% and 21.7% of total revenue for the three
months ended November 30, 1998 and 1999, and 19.2% and 23.6% of total
revenues for the comparable six months, respectively. Revenue from the sale
of products manufactured by Entegris were 22.4% and 24.0% of total revenue
for the three months ended November 30, 1998 and 1999, while 22.0% and 23.4%
of total revenues were for the comparable six 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 six month periods ended November 30, 1998
and 1999:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net revenue
Europe.................................................... $25,184 $39,776 $54,224 $71,482
Asia...................................................... 14,635 16,434 28,920 35,779
United States............................................. 11,477 17,953 25,074 36,375
------- ------- -------- --------
Total net revenue...................................... $51,296 $74,163 $108,218 $143,636
======= ======= ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(PERCENTAGE OF NET REVENUE)
Net revenue
Europe.................................................... 49.1% 53.6% 50.1% 49.8%
Asia...................................................... 28.5 22.2 26.7 24.9
United States............................................. 22.4 24.2 23.2 25.3
------ ------ ------ ------
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.
Our quarterly operating results have fluctuated significantly and are
likely to continue to fluctuate significantly due to a number of factors
including:
- the timing of significant customer orders and customer spending
patterns;
- the timing of product shipments by our principals;
- the loss of any significant customer or principal;
- the timing of new product and service announcements by our principals
and their competitors;
- the mix of products sold and the market acceptance of our new product
lines;
- the efficiencies we are able to achieve in managing inventories of
materials and spare parts;
11
<PAGE>
- 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
six month periods ended November 30, 1998 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue.................................................. 100.0% 100.0% 100.0% 100.0%
Cost of revenue.............................................. 83.5 82.3 82.7 82.4
------ ------ ------ ------
Gross margin................................................. 16.5 17.7 17.3 17.6
Selling, general, administrative, and other expenses......... 20.5 14.9 20.2 15.0
Restructuring and merger costs............................... 1.0 - 1.2 -
------ ------ ------ ------
Operating margin............................................. (5.0)% 2.8% (4.1)% 2.6%
====== ====== ====== ======
</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 SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue (Dollars in millions)
Equipment division........................................ $27.5 $36.8 $61.5 $73.6
Materials division........................................ 23.8 37.3 46.7 70.0
Net revenue
Equipment division........................................ 53.6% 49.7% 56.8% 51.3%
Materials division........................................ 46.4 50.3 43.2 48.7
Gross margins
Equipment division........................................ 15.1% 15.2% 15.6% 14.6%
Materials division........................................ 18.1 20.2 19.7 20.7
</TABLE>
12
<PAGE>
THREE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED NOVEMBER 30,
1998
NET REVENUE.
EQUIPMENT DIVISION. The equipment division's net revenue for the three months
ended November 30, 1999 was $36.8 million, an increase of $9.3 million or 33.8%
from the three months ended November 30, 1998. Revenues were higher in Europe
and the United States due to the general semiconductor equipment industry
recovery. Revenues in Asia were lower, primarily due to the divestiture by FSI
in July 1999 of its Chemical Management Division. Service revenue increased
19.6% between the two three month periods, principally as a result of an
increase in service contracts and service calls made by engineers. 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 November 30, 1999 was $37.3 million, an increase of $13.5 million or 56.7%
from the three months ended November 30, 1998. 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 was flat for the
three months ended November 30, 1999 compared to the three months ended November
30, 1998. An increase in our spare parts and service margins offset the decrease
in our average equipment margin and lower commission revenue for the three
months ended November 30, 1999 when compared to the three months ended November
30, 1998.
MATERIALS DIVISION. The gross margin of the materials division increased 2.1
percentage points for the three months ended November 30, 1999 compared to the
three months ended November 30, 1998. Gross margins in Asia were reduced for the
three months ended November 30, 1998 because the Company took a provision
against certain inventory purchased for customers who subsequently cancelled
their orders. These increases in margin were offset a slight margin decline in
Europe.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses for
the three months ended November 30, 1999 were $11.1 million, up $0.6 million or
5.7% from the $10.5 million incurred in the three months ended November 30,
1998. The increase is primarily due to increased provisions for profit related
incentive plans.
SIX MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO SIX MONTHS ENDED NOVEMBER 30,
1998
NET REVENUE
EQUIPMENT DIVISION. The equipment division's net revenue in the six months ended
November 30, 1999 was $73.6 million, up $12.1 million or 19.7% from the six
months ended November 30, 1998. 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 six 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 six months
ended November 30, 1999 was $70.0 million, up $23.3 million or 49.90% from the
six months ended November 30, 1998. In fiscal 2000, materials revenue was higher
in all geographic areas. The increase was primarily due to revenue growth in
Europe and the United States, with a smaller amount of revenue growth in Asia.
13
<PAGE>
GROSS MARGINS
EQUIPMENT DIVISION. The equipment division's gross margin declined in the six
months ended November 30, 1999 when compared to the six months ended November
30, 1998. The decline in gross margin in fiscal 1999 was due principally to
provisions taken for higher than expected costs incurred in providing warranty
service on customer sales made of products of FSI's chemical management
division. In July 1999, FSI sold its chemical management division, and we have
now exited this business. Gross margins were also lower owing to the lower
proportion of division revenue represented by commission sales. This reflected
both the closure of our United States manufacturers' representative sales
business in December 1998 and the decline in equipment sales in South Korea,
most of which are structured as commission sales.
MATERIALS DIVISION. The gross margin of the materials division increased for
the six months ended November 30, 1999 when compared to the six months ended
November 30, 1998. The increase was due principally to increases in Asia and the
United States which were partially offset by a margin decrease in Europe. Gross
margins in Asia were reduced for the six months ended November 30, 1998 because
the Company took a provision against certain inventory purchased for customers
who subsequently cancelled their orders.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER (SG&A) EXPENSES. SG&A expenses for
the six months ended November 30, 1999 were $21.6 million, down $0.3 million or
1.4% from the $21.9 million incurred for the six months ended November 30, 1998.
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 SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
-------------------- -------------------
1998 1999 1998 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Restructuring costs.......................................... $446 $- $543 $-
Merger costs................................................. 63 - 772 -
----- ----- ----- -----
Restructuring and merger costs............................ $509 $- $1,315 $-
===== ===== ===== =====
</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 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 SIX MONTHS
ENDED NOVEMBER 30, ENDED NOVEMBER 30,
------------------ ------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Foreign exchange gain (loss)................................. $(60) $260 $(2) $146
Interest income.............................................. 179 226 262 284
Interest expense............................................. (239) (465) (492) (728)
Miscellaneous income......................................... 263 281 163 402
---- ---- ---- ----
Other income (expense)....................................... $143 $302 $(69) $104
==== ==== ==== ====
</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 six month periods ended
November 30, 1998 and 1999, we entered into contracts to hedge firm purchase
commitments, to hedge the maturities of foreign currency denominated liabilities
with foreign currency denominated assets and to hedge differences existing
between foreign currency assets and liabilities. The currencies in which we
purchase forward exchange contracts have numerous market makers to provide ample
depth and liquidity for our hedging activities.
Interest income represents primarily earnings on our available cash
balances. The slight increase in our interest income for the three and six
months ending November 30, 1999 is primarily the result of the initial public
offering being invested in short-term investments. Our interest expense for the
same periods increased primarily as the result of increased borrowings.
Other income for the three months ending November 30, 1999 increased
when compared to the three months ending November 30, 1998 primarily from the
exercise of stock warrants from 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, our
principal sources of liquidity to date 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 November 30, 1999 was $52.6 million. Our working capital
at May 31, 1999 was $22.6 million. As the result of our initial public offering,
our working capital increased 132.7% from May 31, 1999, and our current ratio,
current assets divided by current liabilities, was 1.4 at May 31, 1999 and 1.7
at November 30, 1999.
OPERATING ACTIVITIES. Cash used for operating activities in the six months
ended November 30, 1998 and 1999 was $2.5 million and $2.6 million,
respectively. The net total of items which did not affect operating cash
flows, $2.0 million, was significantly offset by changes in assets and
liabilities in the six months ended November 30, 1998. This reflected a
significant reduction in receivables caused by the reduction in revenue, and
was offset by reductions in accounts payable and amounts due to affiliates,
which are also accounts payable. The negative cash flows from operating
activities for the six months ended November 30, 1998 were largely as the
result of Metron's net loss of $2.8 million. In six months ended November 30,
1999, the net total of items which did not affect operating cash flows
decreased to $1.5 million. The decrease was principally due to the fact that
we provided additional inventory provisions in the 1998 period against
inventory purchased for customers in Asia who subsequently deferred or
canceled their orders. The net effect of increases in accounts receivables
and inventories offset by reductions in prepaid expenses, accounts payable
including payables to affiliates and other liabilities for the first six
months in fiscal 2000 was approximately $6.6 million. The net effect of all
these items caused operating activities to use $2.6 million of cash.
INVESTING ACTIVITIES. Our capital expenditures for property, plant and
equipment totaled $0.8 million for the first six months of fiscal 1999, and $0.9
million for the same period in fiscal 2000. Most of our capital expenditures are
for leasehold improvements and computer and communications equipment. We expect
that our total capital expenditures in fiscal 2000
15
<PAGE>
will be about $2.5 million, excluding whatever portion we incur this year of
the costs of a new operations management information system which we estimate
could total $3.0 to $4.0 million over a 24 to 36 month period.
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 six month period ending November 30, 1998, 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 shareholders for a total of $352,000 pursuant to
the Amended and Restated Buy and Sell Agreement.
During November 1999 we completed our initial public offering and received net
proceeds of $27.0 million and invested $21.8 million in short-term securities.
In December 1999, the Company sold an additional 562,500 common shares to cover
the exercise of the underwriter over-allotment option. We expect that the net
proceeds from the initial public offering, along with cash generated from
operations, will be sufficient to meet our anticipated needs for working capital
both in the short-term and the long-term. We do not anticipate that we will need
to raise additional capital to permit us to conduct our operations in the
ordinary course 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
November 30, 1999:
<TABLE>
<CAPTION>
U.S. $
EQUIVALENT AMOUNT RECENT
FACILITY CURRENTLY AMOUNT INTEREST
LENDER AMOUNT OUTSTANDING AVAILABLE RATE
------ ------ ----------- --------- ----
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Deutsche Bank.............................................. $4,131 $1,692 $2,439 7.50%
Royal Bank of Scotland..................................... 4,908 1,914 2,994 7.25%
Silicon Valley Bank........................................ 4,000 2,100 1,900 8.00%
Compass Bank............................................... 8,500 7,218 1,282 7.50%
ING Bank................................................... 1,146 552 594 7.50%
All Others................................................. 4,955 1,108 3,847 5.0 to 8.5%
-------- -------- ---------
Total...................................................... $27,640 $14,584 $13,056
======== ======== =========
</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, we recognize the need to remain vigilant
and are continuing our assessment of year 2000 issues.
We utilize many third party software packages for our business
applications and computer systems that support our day-to-day operations. To
date, we have not experienced any significant year 2000 issues with respect to
these third party software packages.
We intend to support our customers with spare parts and technical
support after the year 2000 commences 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. However, we may
experience material unanticipated problems and costs caused by undetected errors
or defects in the technology used in our internal IT and non-IT systems. The
occurrence of one or more of the risks described above could have a material
adverse effect on our business, financial condition or results of operations.
While we have made efforts to notify our customers who have purchased
potentially non-compliant products, we cannot be sure that these customers will
not assert claims against us alleging that the purchased products should have
been year 2000 compliant at the time of purchase, which could result in costly
litigation and divert management's attention. We cannot be sure that we will not
encounter unforeseen problems related to year 2000 issues. We are currently
incurring staff costs and may incur other costs to complete our program to
resolve year 2000 issues, but we do not account for these costs separately.
Although we do not separately account for year 2000 expenses, we estimate that
the expenses we have incurred to date to address year 2000 issues have not been
material, and 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
The fair value of our aggregate forward exchange contracts has not
changed significantly since May 31, 1999.
17
<PAGE>
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 November 30, 1999, 23% of our total revenue was
generated from the sale of products manufactured by FSI and 20% 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;
- 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
18
<PAGE>
expenditures. During this downturn, some of our customers delayed or canceled
purchases of semiconductor materials and equipment, which had a negative
impact on our sales, gross profits and operating results. We cannot predict
when downturns will occur and how we will be affected by future downturns.
IF WE ARE UNABLE TO SUCCESSFULLY IDENTIFY NEW PRODUCTS AND ENTER INTO AND
IMPLEMENT ARRANGEMENTS WITH THE SUPPLIERS OF THESE PRODUCTS, OUR BUSINESS WILL
BE SERIOUSLY HARMED.
Any failure by us to enter into relationships with principals that
anticipate or respond adequately to technological developments or customer
requirements, or any significant delays in product development or introductions
by these principals, could result in a loss of competitiveness and could
materially adversely effect our business. The semiconductor materials and
equipment market is subject to rapid technological change, changing customer
requirements and frequent new product introductions. Because of this, the life
cycle of products that we market and sell is difficult to determine. Our future
success will depend to a significant extent on our principals' ability to keep
pace with changes in the market and on our ability to identify and carry
successful new product lines, particularly because we generally do not carry
competing product lines.
WE FACE INTENSE COMPETITION FROM COMPANIES WITH SIGNIFICANTLY GREATER FINANCIAL,
TECHNICAL AND MARKETING RESOURCES, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
MAINTAIN OR INCREASE SALES.
We face intense competition on two distinct fronts: competition for
product lines and competition for customers.
IF WE ARE UNABLE TO COMPETE SUCCESSFULLY FOR PRODUCT LINES AGAINST
INDEPENDENT SALES AND DISTRIBUTION COMPANIES THAT HAVE GREATER
FINANCIAL RESOURCES, ARE MORE ESTABLISHED OR HAVE LONG-STANDING
RELATIONSHIPS WITH SEMICONDUCTOR MATERIALS AND EQUIPMENT MANUFACTURERS,
WE WILL BE UNABLE TO OFFER COMPETITIVE PRODUCTS, WHICH WILL NEGATIVELY
IMPACT OUR SALES.
We compete with independent sales and distribution companies for the
right to sell specific product lines in specific territories. We believe that
our most formidable competition comes from regionally established semiconductor
materials and equipment distribution companies. Some of these independent sales
and distribution companies have substantially greater financial resources to
devote to a particular region than we do, are better established in particular
regions than we are, have greater name recognition in their chosen markets than
we have and have long-standing collaborative business 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.
19
<PAGE>
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;
- 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
20
<PAGE>
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.
We bear inventory risk because we generally take title to our products
when we receive them from our principals, and we cannot always return products
to the principal in the event the products are not sold. Our customers do not
always purchase at the time or in the quantities we originally anticipated. For
example, as a result of the industry downturn in 1997 and 1998, we had excess
inventory for which we booked reserves in both the United States and Asia.
Typically, products cannot be returned to principals after they have been in our
inventory for a certain period of time; this time period varies depending on the
product and the principal. In addition, although it is typical when a
relationship with a principal terminates for that principal to repurchase most
of the inventory we have of that principal's products, it is possible under
certain circumstances that a principal may be unable or unwilling to repurchase
our inventory. If we fail to manage our inventory and accumulate substantial
product that cannot be returned, our operating results could be adversely
affected. Furthermore, if a principal cannot provide refunds in cash for the
inventory we desire to return, we may be forced to dispose of inventory below
cost, and this may have a material adverse effect on our financial condition.
OUR REVENUE AND OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, WHICH COULD
ADVERSELY AFFECT OUR SHARE PRICE.
In the past, we have experienced fluctuations in our quarterly and
annual operating results and anticipate that these fluctuations will continue in
the future due to a variety of factors, many of which are out of our control.
Fluctuations in our results could cause our share price to decline
substantially. We believe that period-to-period comparisons of our results of
operations may not be meaningful, and you should not rely upon them as
indicators of our future performance. Our sales in, and the operating results
for, a particular quarter can vary significantly due to a variety of factors,
including those described elsewhere in this prospectus and the following:
- THE TIMING OF SIGNIFICANT CUSTOMER ORDERS AND CUSTOMER
SPENDING PATTERNS. During industry downturns, our customers
may ask us to delay or even cancel the shipment of previously
firm orders. Delays and
21
<PAGE>
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 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
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<PAGE>
- 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:
- 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.
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<PAGE>
The volatility of general economic conditions and fluctuations in
currency exchange and interest rates can lead to decreased demand in countries
in which we sell product. For example, in 1997 and 1998 many Asian countries
experienced economic and financial difficulties. During this period, we
experienced cancellation or delay of orders for our products from customers in
Asia, thus adversely affecting our results of operations. Moreover, any
economic, banking or currency difficulties experienced by countries in which we
have sales may lead to economic recession in those countries. This in turn may
result in the cancellation or delay of orders for our products from customers in
these countries, thus adversely affecting our results of operations.
MOST OF OUR PRODUCT SALES ARE OUTSIDE THE UNITED STATES, AND CURRENCY
FLUCTUATIONS MAY IMPAIR OUR FINANCIAL RESULTS.
While most of our international sales are denominated in dollars, some
are denominated in various foreign currencies. To the extent that our sales and
operating expenses are denominated in foreign currencies, our operating results
may be adversely affected by changes in exchange rates. For example, in fiscal
1997, we recorded exchange losses of approximately $600,000. Given the number of
currencies involved, the substantial volatility of currency exchange rates, and
our constantly changing currency exposures, we cannot predict the effect of
exchange rate fluctuations on our future operating results. Although we engage
in foreign currency hedging transactions from time to time, these hedging
transactions can be costly, and therefore, we do not attempt to cover all
potential foreign currency exposures. These hedging techniques do not eliminate
all of the effects of foreign currency fluctuations on anticipated revenue.
In addition, the transition period from legacy currencies to the Euro
currently is set to expire January 1, 2002. We are assessing our information
technology systems to determine whether they will accommodate the eventual
elimination of the legacy currencies. If our information technology systems are
unable to do so, they would have to be upgraded or replaced.
IF WE OR OUR NON-UNITED STATES SUBSIDIARIES ARE DEEMED SUBJECT TO UNITED STATES
TAXES, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS MAY SUFFER.
Metron and its non-United States subsidiaries conduct most of their
activities in a manner which we believe does not constitute the conduct of a
trade or business in the United States. Accordingly, although we report taxable
income and pay taxes in the countries where we operate, including the United
States, we believe that income earned by Metron and its non-United States
subsidiaries from operations outside the United States is not reportable in the
United States for tax purposes and is not subject to United States income tax.
If income earned by us or our non-United States subsidiaries from operations
outside the United States is determined to be income effectively connected to an
United States trade or business and as a result becomes taxable in the United
States, we could be subject to United States taxes on this income. If we were to
be deemed to be subject to these taxes, our business, financial condition and
results of operations might be materially and adversely affected.
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 November 30, 1999, FSI owned 21.5% and Entegris owned 21.5% 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
24
<PAGE>
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.
SUBSTANTIAL SALES OF SHARES MAY IMPACT THE MARKET PRICE OF OUR COMMON SHARES.
If our shareholders sell substantial amounts of our common shares,
including shares issued upon the exercise of outstanding options, the market
price of our common shares may fall. These sales also might make it more
difficult for us to sell equity or equity-related securities in the future at
a time and price that we deem appropriate. As of November 30, 1999, we had
outstanding 12,507,073 common shares. 139,341 shares are eligible to be sold
immediately, of these 12,300 are subject to volume limitations, under federal
securities laws. 5,012 restricted shares will be eligible for sale 90 days
after the date of our initial public offering. 8,690,945 shares are subject
to lock-up arrangements between the shareholders and us or the underwriters.
8,690,945 shares will be eligible for sale in the public market 180 days
following the date of our initial public offering. Of these shares 8,160,867
shares will be subject to volume limitations, under federal securities laws.
The remaining 5,000 shares will be eligible for sale in the public market
subject to volume restrictions on March 17, 2000.
If our shareholders sell substantial amounts of common shares
(including shares issued upon the exercise of outstanding options) in the public
market, the market price of our common shares could fall.
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never declared or paid any cash dividends on our capital
shares. We currently intend to retain any future earnings for funding growth
and, therefore, do not expect to pay any dividends in the foreseeable future.
RISKS RELATED TO BEING A DUTCH COMPANY.
OUR SUPERVISORY BOARD HAS THE AUTHORITY TO ISSUE SHARES WITHOUT SHAREHOLDER
APPROVAL, WHICH MAY MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
As a Netherlands "NAAMLOZE VENNOOTSCHAP," or N.V., we are subject to
requirements not generally applicable to corporations organized in United States
jurisdictions. Among other things, under Netherlands law the issuance of shares
of a N.V. company must be approved by the shareholders unless the shareholders
have delegated this authority to issue shares to another corporate body. Our
articles of association provide that the shareholders have the authority to
resolve to issue shares, common or preferred, and may designate the Metron board
of supervisory directors as the corporate body with the authority to adopt the
resolution to issue shares, but this designation may not exceed a period of five
years. Our articles also provide that as long as the supervisory board has the
authority to adopt a resolution to issue shares, the shareholders shall
25
<PAGE>
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.
26
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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) Use of Proceeds.
The Company's Registration Statement on Form S-1 (Registration No. 333-87665)
was declared effective on November 18, 1999. The Company sold 2,862,500 common
shares at an initial public offering price of $13.00 per share, including
562,500 shares pursuant to the exercise of the underwriters' over-allotment
option. The Company received net proceeds of approximately $33,547,000 after
deducting underwriting discounts, commissions and offering expenses. The Company
intends to use the net proceeds for working capital and general corporate
purposes, including sales, marketing, customer support and other activities
related to its business. The Company is currently assessing the specific uses
and allocations for these funds.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual General Meeting of Shareholders of the Company held on November
15, 1999, shareholders representing approximately 96.3% of the outstanding share
capital of the Company unanimously approved the following items:
1. Confirmation of the annual accounts for the fiscal year ended May 31,
1999 and the allocation of profits to the effect that the profits will
be reserved;
2. Confirmation of the annual report for the fiscal year ended May 31,
1999;
3. Conversion of the Company from a B.V. corporation into an N.V.
corporation and approval of the amendment of the Company's Articles of
Association;
4. Authorization of each member of the Managing Board and each lawyer
practicing with Nauta Dutilh to seek a certificate of non-objection
from the Ministry of Justice for the conversion and amendment
referenced in item 3 above and to have the notarial deed of conversion
and amendment of the Company's Articles of Association executed before
a Dutch civil law notary;
5. Election of Mr. Sho Nakanuma as a Supervisory Director of the Company
and the re-election of Mr. Joel Elftmann, Mr. James Dauwalter and Mr.
Robert Anderson as Supervisory Directors of the Company;
6. Authorization to prepare, file and publish all of the Company's
reports, annual accounts and consolidated annual accounts in the
English language;
7. Approval of the 1999 Employee Stock Purchase Plan;
8. Approval of an amendment to the Company's 1997 Supervisory Directors'
Stock Option Plan (increasing the number of shares available for
issuance under the plan by 112,500 shares); and
27
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9. Approval of an amendment to the Company's Employee Stock Option Plan
(providing that no employee or consultant may be awarded options to
acquire more than 1,000,000 shares in any year and providing the
Company with the ability to grant options to consultants).
Item 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Item Description
- ---- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
November 30, 1999.
28
<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: January 12, 2000 /s/ Peter V. Leigh
------------------
Peter V. Leigh
Vice President, Finance
Signing on behalf of the registrant
and as principal accounting officer
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METRON
TECHNOLOGY N.V. CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED
INCOME STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> MAY-31-1999 MAY-31-2000 MAY-31-1999 MAY-31-2000
<PERIOD-START> AUG-01-1998 AUG-01-1999 JUN-01-1998 JUN-01-1999
<PERIOD-END> NOV-30-1998 NOV-30-1999 NOV-30-1998 NOV-30-1999
<CASH> 0 0 0 14,093
<SECURITIES> 0 0 0 21,833
<RECEIVABLES> 0 0 0 59,842
<ALLOWANCES> 0 0 0 (1,182)
<INVENTORY> 0 0 0 29,046
<CURRENT-ASSETS> 0 0 0 132,719
<PP&E> 0 0 0 17,804
<DEPRECIATION> 0 0 0 (10,288)
<TOTAL-ASSETS> 0 0 0 144,445
<CURRENT-LIABILITIES> 0 0 0 80,098
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 0 0 32,045
<OTHER-SE> 0 0 0 29,091
<TOTAL-LIABILITY-AND-EQUITY> 0 0 0 144,445
<SALES> 51,296 74,163 108,218 143,636
<TOTAL-REVENUES> 51,296 74,163 108,218 143,636
<CGS> 42,851 61,013 89,447 118,345
<TOTAL-COSTS> 42,851 61,013 89,447 118,345
<OTHER-EXPENSES> 11,040 11,069 21,852 21,558
<LOSS-PROVISION> 0 0 642 151
<INTEREST-EXPENSE> 239 465 492 728
<INCOME-PRETAX> (2,354) 2,339 (4,323) 3,708
<INCOME-TAX> (841) 853 (1,544) 1,319
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (1,513) 1,486 (2,779) 2,389
<EPS-BASIC> (0.15) 0.14 (0.27) 0.23
<EPS-DILUTED> (0.15) 0.13 (0.27) 0.21
</TABLE>
