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Filed pursuant to Rule 424(b)(4)
Registration No. 333-11502
5,000,000 SHARES
[ASM INTERNATIONAL N.V. LOGO]
COMMON SHARES
$29.00 PER SHARE
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ASM International is offering 3,500,000 shares and the selling shareholder
identified in this prospectus is offering 1,500,000 shares. We will not receive
any of the proceeds from the sale of the shares by the selling shareholder. This
is a firm commitment underwriting.
The common shares are listed on the Nasdaq National Market under the symbol
"ASMI" and on the official market of the AEX-Stock Exchange in Amsterdam under
the symbol "ASMI." On April 6, 2000, the last reported sale price of our common
shares was $29.00 per common share on the Nasdaq National Market and (Euro)30.90
per common share on the AEX-Stock Exchange.
INVESTING IN THE COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
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PER SHARE TOTAL
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<S> <C> <C>
Price to the public...................... $29.00 $145,000,000
Underwriting discount.................... 1.52 7,600,000
Proceeds to ASM International............ 27.48 96,180,000
Proceeds to the selling shareholder...... 27.48 41,220,000
</TABLE>
ASM International has granted an over-allotment option to the underwriters.
Under this option, the underwriters may elect to purchase a maximum of 750,000
additional common shares from ASM International within 30 days following the
date of this prospectus to cover over-allotments.
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NONE OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION
OR THE AEX-STOCK EXCHANGE IN AMSTERDAM HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CIBC WORLD MARKETS
ROBERTSON STEPHENS
WARBURG DILLON READ LLC
The date of this prospectus is April 7, 2000.
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Inside Front Cover
Illustration entitled "The Semiconductor Manufacturing Process -- The
Fundamentals in Front-End" showing a schematic and description of the epitaxy,
diffusion/oxidation, low pressure chemical vapor deposition, plasma enhanced
chemical vapor deposition, ion implantation, lithography, etch and clean,
metallization and wafer test steps of the front-end manufacturing process. A
photograph of our A412 product appears on the bottom right portion of the page.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 4
Risk Factors................................................ 7
Special Note Regarding Forward-Looking Statements........... 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Price Range of Common Shares................................ 21
Capitalization.............................................. 22
Selected Consolidated Financial Data........................ 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 34
Management.................................................. 52
Related Party Transactions.................................. 54
Principal and Selling Shareholders.......................... 55
Underwriting................................................ 56
Description of Share Capital................................ 59
Taxation.................................................... 66
Legal Matters............................................... 73
Experts..................................................... 73
Enforceability of Civil Liabilities......................... 74
Other Information........................................... 75
Where You Can Find Additional Information About ASM
International............................................. 76
Documents Incorporated by Reference......................... 76
Index to Consolidated Financial Statements.................. F-1
</TABLE>
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As used in this prospectus, the terms "we," "us," "our" and ASM International
mean ASM International N.V. and its subsidiaries, unless the context indicates
another meaning, and the term "common shares" means our common shares, par value
Nlg. 0.01 per share. Since we are a Netherlands company, the par value of our
common shares is expressed in Netherlands guilders, or "Nlg." We were
incorporated on March 4, 1968 as a Netherlands naamloze vennootschap, or public
limited liability company, and were known as Advanced Semiconductor Materials
International N.V. until November 1996.
Our principal executive offices are located at Jan van Eycklaan 10, 3723 BC
Bilthoven, the Netherlands. Our telephone number at that location is (011) (31)
30 229 84 11.
Rabo Securities N.V. is our listing agent in the Netherlands and ABN AMRO Bank
N.V. is our transfer agent and paying agent in the Netherlands. Our New York
transfer agent and registrar is Citibank, N.A.
Unless otherwise stated in this prospectus, all information contained in this
prospectus assumes no exercise of the over-allotment option granted to the
underwriters.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order. The common shares should be ready for delivery
on or about April 12, 2000 against payment in immediately available funds.
ASM, the ASM logo, Advance, Eagle and Epsilon are registered trademarks of ours.
IDEALine, Levitor, Polygon, Pulsar and SmartTool are trademarks of ours.
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PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this prospectus.
Because it is a summary, it does not contain all of the information that you
should consider before investing in our common shares. You should read the
entire prospectus and the documents incorporated by reference in this prospectus
carefully, including "Risk Factors" and the financial statements and related
notes, before making an investment decision.
ABOUT ASM INTERNATIONAL
We are a leading supplier of equipment and solutions used to produce
semiconductor devices, or integrated circuits, for both the front-end and
back-end segments of the semiconductor market. We enable our customers to lower
their production costs by providing leading-edge technology solutions and
efficient manufacturing processes. Through our front-end facilities in the
United States, the Netherlands, Finland and Japan, we design, manufacture and
sell equipment that deposits thin films, or layers, of electronically insulating
or conductive material onto silicon wafers. Through our back-end facilities in
Hong Kong, Singapore and China, we design, manufacture and sell assembly and
packaging equipment and materials.
To create increased demand for semiconductor devices, semiconductor
manufacturers have sought to enhance the performance, decrease the size and
lower the cost of these devices. These goals are being achieved by introducing
new materials and technologies, reducing line widths, increasing wafer size and
improving production yield. The overall growth of the semiconductor industry and
the increasing complexity of semiconductor devices continuously introduce new
challenges for semiconductor production equipment and solutions.
Our products are designed to respond to the demands of semiconductor
manufacturers to enhance the performance, decrease the size and reduce the cost
of semiconductor devices. The key elements of our solution are:
- Offering our customers new technologies to deposit thin films on wafers,
such as atomic layer chemical vapor deposition, or ALCVD, which enables
the production of smaller semiconductor devices by depositing ultra-thin
films on wafers. We also offer a new plasma enhanced chemical vapor
deposition, or PECVD, process which insulates copper layers in
semiconductor devices.
- Providing our customers that manufacture advanced wireless applications
with the ability to deposit a variety of well-controlled silicon
germanium layers on wafers. The silicon germanium layers produced by our
equipment enhance semiconductor device speed and performance.
- Providing our customers with the means to measure layer thickness,
uniformity and particle count with metrology integrated within our
semiconductor equipment. The benefits of our integrated metrology
equipment include reduced cycle time, increased yield and throughput, and
lower cost of production.
- Allowing our customers to produce smaller semiconductor devices with
increased functionality by offering them gold wire bonders with a fine
pitch capability of 45 microns.
- Enabling our customers to realize cost efficiencies by offering them
equipment capable of processing wafers with a diameter of 300mm, or
twelve inches. This equipment is cost efficient since a 300mm wafer holds
approximately 2.4 times as many dies as a conventional 200mm or eight
inch wafer.
- Passing along cost savings to our back-end customers that we realize from
maintaining our back-end facilities in Asia, which enjoy low labor and
manufacturing costs.
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- Providing our back-end customers with a fully-automated back-end
production line that reduces costs and increases productivity by offering
a solution for most assembly and packaging steps, using our own
equipment.
We intend to enhance our position by continuing to provide our customers with
advanced, cost-effective, reliable products and global customer service and
support. The key elements of our strategy include:
- Enhancing our market leadership in the deposition of thin films by
introducing innovative products such as ALCVD.
- Leveraging our strong technological capabilities to enhance our market
position.
- Expanding our current intellectual property portfolio by filing patent
applications relating to key developments in our equipment, software and
processes.
- Continuing to provide global customer support in order to establish new
and maintain existing long term customer relationships, and building
customer loyalty through the quality of our service and support.
- Enhancing the efficiency and productivity of our back-end business by
continuing to vertically integrate and control all aspects of the
products and services we provide, allowing us to better serve our
customers by increasing the quality and reliability of our products and
services and decreasing our costs and time-to-market.
Our customers include many of the world's largest semiconductor device
manufacturers, foundries and assemblers.
Our front-end business is conducted through wholly-owned subsidiaries, the most
significant of which are ASM Europe, B.V., located in the Netherlands, ASM
America, Inc., located in the United States, ASM Microchemistry Ltd., located in
Finland, and ASM Japan K.K., located in Japan. Our back-end business is
conducted through a majority-owned subsidiary, ASM Pacific Technology Limited,
with principal operations in Hong Kong, Singapore and China. As of April 6,
2000, we owned 50.01% of the outstanding equity of ASM Pacific Technology.
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THE OFFERING
Common shares offered by ASM International...... 3,500,000 shares
Common shares offered by Applied Materials,
Inc., the selling shareholder................... 1,500,000 shares
Common shares to be outstanding after this
offering........................................ 47,992,846 shares(1)
Use of proceeds................................. We intend to use the proceeds
for repayment of indebtedness,
working capital and general
corporate purposes. See "Use
of Proceeds."
Nasdaq National Market symbol................... ASMI
AEX-Stock Exchange symbol....................... ASMI
SUMMARY CONSOLIDATED FINANCIAL DATA
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YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
(EUROS IN THOUSANDS, EXCEPT PER SHARE DATA)(2)
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CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales............................. E 304,419 E 298,695 E 321,582 E 288,111 E 414,495
Earnings (loss) from operations....... 56,315 44,981 (54,021) 12,491 39,355
Earnings (loss)....................... E 33,389 E 31,039 E (70,476) E 232 E 11,099
========= ========= ========= ========= =========
Basic net earnings (loss) per share... E 1.06 E 0.98 E (2.12) E 0.01 E 0.30
========= ========= ========= ========= =========
Diluted net earnings (loss) per
share............................... E 0.98 E 0.92 E (2.12) E 0.01 E 0.29
========= ========= ========= ========= =========
Basic weighted average number of
shares.............................. 31,428 31,566 33,232 33,794 37,301
Diluted weighted average number of
shares.............................. 33,966 33,717 33,232 34,743 40,664
</TABLE>
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DECEMBER 31, 1999
---------------------------
ACTUAL AS ADJUSTED(3)
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(Unaudited)
(Euros in thousands)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... E 14,153 E 49,953
Total assets................................................ 425,035 460,835
Total debt.................................................. 119,893 48,968
Total shareholders equity................................... 65,552 172,277
</TABLE>
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(1) This share number is based on common shares outstanding as of March 31,
2000, but excludes:
- 1,494,295 common shares issuable upon exercise of outstanding options,
which have a weighted average exercise price of $7.21 per share, and
common shares reserved for future grant under our option plan; and
- 200,000 common shares issuable upon exercise of outstanding warrants,
which have an exercise price of approximately $9.81 per share.
(2) The noon buying rate in New York City for cable transfers payable in Euros
as certified for customs purposes by the Federal Reserve Bank of New York
was 1.0070 United States dollars per Euro on December 31, 1999.
(3) The "as adjusted" column reflects (a) the sale by us of 3,500,000 shares in
this offering at the public offering price of $29.00 per share after
deducting the underwriting discount and estimated offering expenses, (b)
the application of the net proceeds from the offering and (c) a reduction
in debt owed to the selling shareholder in payment of the exercise price of
a warrant to purchase 1,500,000 shares at an exercise price of $5.375 per
share. The warrant was exercised by the selling shareholder in order to
purchase the shares being sold by the selling shareholder in the offering.
The net proceeds have been converted into Euros at the noon buying rate in
New York City on April 6, 2000 for cable transfers payable in Euros as
certified for customs purposes by the Federal Reserve Bank of New York,
which was 0.9580 United States dollars per Euro.
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RISK FACTORS
You should carefully consider the following risk factors and other information
contained or incorporated by reference in this prospectus before deciding to
invest in our common shares. Investing in our common shares involves a high
degree of risk. The risks and uncertainties described below may not be the only
ones we face. If any of the following risks actually occur, our business could
be harmed and the trading price of our common shares could decline, and you may
lose all or part of your investment. Please see the "Special Note Regarding
Forward-Looking Statements" on page 19 of this prospectus.
OUR QUARTERLY REVENUES AND OPERATING RESULTS FLUCTUATE DUE TO A VARIETY OF
FACTORS, WHICH MAY RESULT IN VOLATILITY OR A DECREASE IN THE PRICE OF OUR COMMON
SHARES.
Our quarterly revenues and operating results have varied significantly due to a
number of factors, including:
- cyclicality and other economic conditions in the semiconductor industry;
- fluctuation in demand for our products;
- production capacity constraints;
- the timing of customer orders, cancellations and shipments;
- the length and variability of the sales cycle for our products;
- seasonality in demand for our products;
- the introduction of new products and enhancements by us and our
competitors;
- disruptions in sources of supply;
- the timing of our expenditures in anticipation of future orders;
- our ability to fund our capital requirements;
- changes in our pricing and pricing by our suppliers and competitors;
- our product and revenue mix; and
- exchange rate fluctuations.
We expect our operating results to fluctuate in the future as a result of these
factors and a variety of other factors, including:
- the emergence of new industry standards;
- product obsolescence; and
- economic conditions generally or in various geographic areas where we or
our customers do business.
These factors are difficult or impossible to forecast.
In addition, we derive a substantial portion of our net sales from products that
have a high average selling price and significant lead times between the initial
order and delivery of the product. The timing and recognition of net sales from
customer orders can cause significant fluctuations in our operating results from
quarter to quarter. Gross margins realized on product sales vary depending upon
a variety of factors, including the mix of products sold during a particular
period, negotiated selling prices, the timing of new product introductions and
enhancements and manufacturing costs. A delay in a shipment near the end of a
fiscal quarter or year, due, for example, to rescheduling or cancellations by
customers or to unexpected manufacturing difficulties experienced by us, may
cause sales in a particular period to fall significantly
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below our expectations and may materially adversely affect our operations for
that period. In addition, our need to continue expenditures for research,
development and engineering make it difficult for us to reduce expenses in a
particular quarter if our sales goals for that quarter are not met. The
inability to adjust spending quickly enough to compensate for any sales
shortfall would magnify the adverse impact of that sales shortfall on our
results of operations. In addition, announcements by us or our competitors of
new products and technologies could cause customers to defer purchases of our
existing systems, which could negatively impact our earnings and our financial
position.
As a result of these factors, our operating results may vary significantly from
quarter to quarter. Any shortfall in revenues or net income from levels expected
by securities analysts and investors could cause a decrease in the trading price
of our common shares.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY THE CYCLICAL NATURE OF THE
SEMICONDUCTOR INDUSTRY.
We sell our products to the semiconductor industry, which is subject to sudden,
extreme, cyclical variations in product supply and demand. The timing, length
and severity of these cycles are difficult to predict. In some cases, these
cycles have lasted more than a year. Semiconductor manufacturers may contribute
to these cycles by misinterpreting the conditions in the industry and over- or
under-investing in semiconductor manufacturing capacity and equipment. We may
not be able to respond effectively to these industry cycles.
Downturns in the semiconductor industry often occur in connection with, or
anticipation of, maturing product cycles for both semiconductor companies and
their customers and declines in general economic conditions. Industry downturns
have been characterized by reduced demand for semiconductor devices and
equipment, production over-capacity and accelerated decline in average selling
prices. During a period of declining demand, we must be able to quickly and
effectively reduce expenses and motivate and retain key employees. Our ability
to reduce expenses in response to any downturn in the semiconductor industry is
limited by our need for continued investment in engineering and research and
development and extensive ongoing customer service and support requirements. In
addition, although we order materials and subassemblies in response to firm
orders, the long lead time for production and delivery of some of our products
creates a risk that we may incur expenditures or purchase inventories for
products which we cannot sell. A downturn in the semiconductor industry could
therefore harm our sales and revenues if demand drops or our gross margins if
average selling prices decline, for both our front-end and back-end businesses.
Industry upturns have been characterized by abrupt increases in demand for
semiconductor devices and equipment and production under-capacity. During a
period of increasing demand and rapid growth, we must be able to quickly
increase manufacturing capacity to meet customer demand and hire and assimilate
a sufficient number of qualified personnel. Our inability to ramp-up in times of
increased demand could harm our reputation and cause some of our existing or
potential customers to place orders with our competitors rather than us.
OUR ASSEMBLY AND MANUFACTURING FACILITIES MAY REACH FULL CAPACITY, CAUSING US TO
LOSE SOME OF OUR CUSTOMERS.
We have experienced capacity constraints and expect to continue experiencing
capacity constraints at our assembly and manufacturing facilities for the
foreseeable future. Our existing and potential customers have required that we
satisfy delivery schedules that are increasingly demanding. While we are in the
process of completing new plants in Malaysia and China and are considering other
alternatives to alleviate this issue, including increasing the percentage of
outsourced activities to Philips Machinefabrieken and to other third parties,
our capacity will likely remain constrained over the next few quarters until we
can bring new capacity on-line. In the interim, our lead times for shipping
products could increase, which could cause some of our existing and potential
customers to place orders with our competitors rather than us. In
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addition, it is possible that Philips Machinefabrieken and the other companies
to which we outsource may reach full capacity, causing them to be unable to
fulfill our requirements.
OUR INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND WE MAY NOT BE ABLE TO
FORECAST OR RESPOND TO COMMERCIAL AND TECHNICAL TRENDS.
Our growth strategy and future success is dependent upon commercial acceptance
of products incorporating technologies we are developing, such as atomic layer
chemical vapor deposition, rapid thermal processing, low-k dielectrics and
silicon germanium epitaxy. The semiconductor industry and the semiconductor
equipment industry are subject to rapid technological change and frequent
introductions of enhancements to existing products. Technological trends have
had and will continue to have a significant impact on our business. Our results
of operations and ability to remain competitive are largely based upon our
ability to accurately anticipate customer and market requirements. Our success
in developing, introducing and selling new and enhanced products depends upon a
variety of factors, including:
- accurate technology and product selection;
- timely and efficient completion of product design and development;
- timely and efficient implementation of manufacturing and assembly
processes;
- product performance in the field; and
- product support and service and effective sales and marketing.
We may not be able to accurately forecast or respond to commercial and technical
trends in the semiconductor industry or to specific product announcements by our
competitors. Our competitors may be developing technologies and products that
are more effective than ours or that may otherwise achieve more widespread
acceptance. In addition, we may incur substantial unanticipated costs to ensure
the functionality and reliability of our current and future products. If our
products are unreliable or do not meet our customers' expectations, then reduced
orders, higher manufacturing costs, delays in collecting accounts receivable, or
additional service and warranty expense could result. We have experienced delays
from time to time in the introduction of, and some technical and manufacturing
difficulties with, some of our systems and enhancements. We may also experience
delays and technical and manufacturing difficulties in future introductions or
volume production of new systems or enhancements. Significant delays can occur
between a product's introduction and the commencement of volume production of
that product. Any of these events could negatively impact our ability to
generate the return we intend to achieve on our investments in these new
products.
WE FACE COMPETITION OR POTENTIAL COMPETITION FROM COMPANIES WITH GREATER
RESOURCES THAN OURS, AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH THESE
COMPANIES, OUR MARKET SHARE MAY DECLINE AND OUR BUSINESS COULD BE HARMED.
We face competition in both the front-end and back-end segments of the
semiconductor equipment industry from other established companies. Our primary
competitors in the front-end business include Applied Materials, Novellus, Tokyo
Electron, and Kokusai. Our primary competitors in the back-end business include
Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor, Towa, Shinko and
Mitsui. A number of our competitors have significantly greater financial,
technological, engineering, manufacturing, marketing and distribution resources
than we do. Their greater capabilities in these areas may enable them to:
- better withstand periodic downturns in the semiconductor industry;
- compete more effectively on the basis of price and technology;
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- more quickly develop enhancements to and new generations of products; and
- more effectively retain existing customers and obtain new customers.
In addition, new companies may in the future enter the markets in which we
compete, further increasing competition in the semiconductor equipment industry.
We believe that our ability to compete successfully depends on a number of
factors, including:
- performance of our products;
- quality of our products;
- ease of use of our products;
- reliability of our products;
- cost of owning our products;
- our ability to ship products on the schedule required;
- quality of the technical service we provide;
- timeliness of the services we provide;
- our success in developing new products and enhancements;
- existing market and economic conditions; and
- price of our products and our competitors' products.
Many of these factors are outside our control. We may not be able to compete
successfully in the future, and increased competition may result in price
reductions, reduced profit margins, loss of market share, and inability to
generate cash flows that are sufficient to maintain or expand our development of
new products.
IF A SEMICONDUCTOR MANUFACTURER IS LOYAL TO ANOTHER SEMICONDUCTOR EQUIPMENT
SUPPLIER WE MAY BE UNABLE TO SELL OUR PRODUCTS TO THAT POTENTIAL CUSTOMER, AND
OUR SALES AND MARKET SHARE COULD SUFFER AS A RESULT.
We believe that once a semiconductor manufacturer has selected a supplier's
equipment for a particular product line, the general trend is that the
manufacturer will continue to rely on that supplier's equipment for future
equipment requirements, including new generations of similar products. Changing
from one equipment supplier to another is expensive and requires a substantial
investment of resources by the customer. Accordingly, we expect to experience
difficulty in achieving significant sales to a customer using another supplier's
equipment. However, at the same time, we cannot assure you that our existing
customers will continue to use our equipment in the future. Our inability to
sell our products to potential customers using another supplier's equipment
could make it difficult for us to increase our revenues or market share.
OUR RELIANCE ON A PRIMARY SUPPLIER COULD RESULT IN DISRUPTION OF OUR OPERATIONS.
We are currently outsourcing a substantial majority of the manufacturing of our
front-end furnace and epitaxial reactors to a single supplier, Philips
Machinefabrieken Nederlands B.V. based in the Netherlands. Sales of these
products represented 27% of our total sales for 1999. If Philips
Machinefabrieken becomes unable to deliver products to us for any reason,
including natural disaster, labor unrest or supply chain management problems, we
may be unable to fill customer orders on a timely basis, if at all, which could
negatively affect our financial performance and may also harm our reputation.
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WE DERIVE A SIGNIFICANT PERCENTAGE OF OUR REVENUE FROM SALES TO A SMALL NUMBER
OF LARGE CUSTOMERS, AND IF WE ARE NOT ABLE TO RETAIN THESE CUSTOMERS, OR THEY
RESCHEDULE, REDUCE OR CANCEL ORDERS, OUR REVENUES WOULD BE REDUCED AND OUR
FINANCIAL RESULTS WOULD SUFFER.
Our largest customers account for a significant percentage of our revenues. In
1999, sales to our single largest customer accounted for approximately 11% of
our total sales. During 1999, our ten largest customers accounted for
approximately 43% of our total sales. Sales to these large customers have varied
significantly from year to year and will continue to fluctuate in the future.
These sales also may fluctuate significantly from quarter to quarter. We may not
be able to retain our key customers or these customers may cancel purchase
orders or reschedule or decrease their level of purchases from us. Any
substantial decrease or delay in sales to one or more of our key customers could
harm our sales and financial results. In addition, any difficulty in collecting
amounts due from one or more key customers could harm our financial results.
OUR PRODUCTS GENERALLY HAVE LONG SALES CYCLES AND IMPLEMENTATION PERIODS, WHICH
INCREASES OUR COSTS IN OBTAINING ORDERS AND REDUCES THE PREDICTABILITY OF OUR
EARNINGS.
Our products are technologically complex. Prospective customers generally must
commit significant resources to test and evaluate our products and to install
and integrate them into larger systems. In addition, customers often require a
significant number of product presentations and demonstrations, in some
instances evaluating equipment on site, before reaching a sufficient level of
confidence in the product's performance and compatibility with the customer's
requirements to place an order. As a result, our sales process is often subject
to delays associated with lengthy approval processes that typically accompany
the design and testing of new products. The sales cycles of our products often
last for many months or even years. Longer sales cycles require us to invest
significant resources in attempting to make sales and delay the generation of
revenue.
Long sales cycles also subject us to other risks, including customers' budgetary
constraints, internal acceptance reviews and cancellations. In addition, orders
expected in one quarter could shift to another because of the timing of
customers' purchase decisions. The time required for our customers to
incorporate our products into their systems can vary significantly with the
needs of our customers and generally exceeds several months, which further
complicates our planning processes and reduces the predictability of our
operating results.
OUR DEPENDENCE ON KEY PERSONNEL MAY NEGATIVELY IMPACT OUR ABILITY TO MANAGE
GROWTH.
We have historically encountered operational difficulties arising from our
having an insufficient number of key personnel, particularly management and
technical personnel. Our business and future operating results depend in part
upon our ability to attract and retain qualified management, technical, sales
and support personnel for our operations on a worldwide basis. Competition for
qualified personnel is intense, and we cannot guarantee that we will be able to
continue to attract and retain qualified personnel. Availability of qualified
technical personnel varies from country to country, and may affect the
operations of our subsidiaries in some parts of the world. Our operations could
be negatively affected if we lose key executives or employees or are unable to
attract and retain skilled executives and employees as needed. In particular, if
our growth strategies are successful, we may not have sufficient operational
personnel to manage that growth and may not be able to attract the personnel
needed. We do not maintain insurance to protect against the loss of key
executives or employees. Further, we have agreements with some, but not all,
employees, restricting their ability to compete with us after their employment
terminates. Our future growth and operating results will depend on:
- our ability to continue to broaden our senior management group;
- our ability to attract, hire and retain skilled employees; and
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- the ability of our officers and key employees to continue to expand,
train and manage our employee base.
WE ARE DEPENDENT UPON OUR WORLDWIDE SALES AND OPERATIONS; ECONOMIC, POLITICAL,
MILITARY OR OTHER EVENTS IN A COUNTRY WHERE WE MAKE SIGNIFICANT SALES OR HAVE
SIGNIFICANT OPERATIONS COULD INTERFERE WITH OUR SUCCESS OR OPERATIONS THERE AND
HARM OUR BUSINESS.
We market and sell our products and services throughout the world. We have
assembly facilities in the Netherlands, the United States, Japan, Hong Kong and
Singapore, and manufacturing facilities in China.
We are subject to the risks inherent in doing business internationally,
including:
- unexpected changes in regulatory requirements;
- fluctuations in exchange rates and currency controls;
- political and economic conditions and instability;
- imposition of trade barriers and restrictions, including changes in
tariff and freight rates;
- the difficulty of coordinating our management and operations in several
different countries;
- limited intellectual property protection in some countries;
- longer accounts receivable payment cycles in some countries;
- in the case of our operations in Asia, the risk of business interruption
and damage from earthquakes; and
- the burdens of complying with a variety of foreign laws.
In particular, our operations in China will be subject to the economic and
political uncertainties affecting that country. For example, the Chinese economy
has experienced significant growth in the past decade, but such growth has been
uneven across geographic and economic sectors and has recently been slowing.
This growth may continue to decrease and any slowdown may have a negative effect
on our business. The Chinese economy is also experiencing deflation which may
continue in the future.
OUR OPERATIONAL RESULTS COULD BE NEGATIVELY IMPACTED BY CURRENCY FLUCTUATIONS.
As of January 1, 1999, the Netherlands, the location of our international
headquarters, adopted a second legal currency, the Euro, in addition to the
Netherlands guilder. The Euro will become the sole currency in 2002. On December
31, 1998, the European Economic and Monetary Union permanently fixed the
exchange rate of the Netherlands guilder to the Euro at 1 Euro to 2.20371 Nlg.
Our assets, liabilities and operating expenses and those of our subsidiaries are
to a large extent denominated in the currency of the country where each entity
is established, the functional currency. Our financial statements, including our
consolidated financial statements, are expressed in Euros. The translation
exposures that result from the inclusion of financial statements of our
subsidiaries that are expressed in the functional currencies of those
subsidiaries are not hedged. These net translation exposures are taken into
shareholders' equity. As a result, our operational results are exposed to
fluctuations of various exchange rates versus the Euro.
In addition, foreign currency fluctuations may affect the prices of our
products. Prices for our products are currently denominated in United States
dollars, Euros, Netherlands guilders and Japanese yen for sales to our customers
throughout the world. If there is a significant devaluation of the currency in a
specific country, the prices of our products will increase relative to that
country's currency and our products may be less competitive in that country.
Also, we cannot be sure that our international customers will continue
12
<PAGE> 13
to be willing to place orders denominated in these currencies. If they do not,
our revenue and operating results will be subject to foreign exchange
fluctuations.
While our management monitors our exposure to currency fluctuations, these
fluctuations could negatively impact our earnings, cash flow and financial
position.
OUR ABILITY TO COMPETE COULD BE JEOPARDIZED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM CHALLENGES BY THIRD PARTIES.
Our success and ability to compete depend in large part upon protecting our
proprietary technology. We rely on a combination of patent, trade secret,
copyright and trademark laws, non-disclosure and other contractual agreements
and technical measures to protect our proprietary rights. These agreements and
measures may not be sufficient to protect our technology from third-party
infringements, or to protect us from the claims of others. In addition, patents
issued to us may be challenged, invalidated or circumvented, our rights granted
under those patents may not provide competitive advantages to us, and third
parties may assert that our products infringe their patents, copyrights or trade
secrets. Third parties could also independently develop similar products or
duplicate our products.
Monitoring unauthorized use of our products is difficult and we cannot be
certain that the steps we have taken will prevent unauthorized use of our
technology. The laws of some foreign countries in which our products are or may
be developed, manufactured or sold, including various countries in Asia, may not
protect our products or intellectual property rights to the same extent as do
the laws of the United States and thus make the possibility of piracy of our
technology and products more likely in these countries. If competitors are able
to use our technology, our ability to compete effectively could be harmed.
CLAIMS OR LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS COULD SERIOUSLY HARM
OUR BUSINESS OR REQUIRE US TO INCUR SIGNIFICANT COSTS.
In recent years, there has been significant litigation in the United States in
the semiconductor equipment industry involving patents and other intellectual
property rights. In the past, we have been subject to claims and litigation
regarding alleged infringement of our competitors' intellectual property rights.
We could become subject to litigation in the future either to protect our
intellectual property rights or as a result of allegations that we infringe
others' intellectual property rights.
Approximately one year ago we received a notice of a claimed infringement of a
competitor's patent. After consultation with patent counsel, we believe that the
claim is without merit. Nonetheless, we have engaged in discussions with the
claimant concerning other potential business relationships with the intent of
achieving a mutually beneficial resolution of this matter. If such discussions
are not successful, then the allegation, any resulting lawsuit or any relief
which may be granted by the court in any such lawsuit could have adverse effects
of the types described in the list following the next paragraph.
This claim will and any other claims that our products infringe proprietary
rights would force us to defend ourselves and possibly our customers or
manufacturers against the alleged infringement. These claims and any resulting
lawsuit, if successful, have subjected us and could again subject us to
significant liability for damages and invalidation of our proprietary rights.
These lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation could force us to do one or more of
the following:
- lose our proprietary rights;
- stop manufacturing or selling our products that incorporate the
challenged intellectual property;
- obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms or at all and may involve significant
royalty payments;
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<PAGE> 14
- pay damages, including treble damages and attorney's fees in some
circumstances; or
- redesign those products that use such technology.
If we are forced to take any of the foregoing actions, our business could be
severely harmed.
In October 1997, we entered into a settlement agreement to dismiss patent
infringement litigation with Applied Materials, the selling shareholder. We
entered into worldwide, non-exclusive and royalty-bearing license agreements on
all of the litigated patents and on additional patents that were not part of the
litigation. We granted Applied Materials worldwide, non-exclusive license
agreements on a number of our patents that we were enforcing during this
litigation. All licenses expire at the end of the life of the underlying
patents. In addition, the settlement agreement provides covenants for limited
periods during which the parties will not litigate the issue of whether certain
of our products infringe any of Applied Materials' patents that were not
licensed to us under the settlement agreement. The covenants last for different
periods of time for different products and have already expired as to some
products. Applied Materials can file new litigation after these covenants
expire. Also, litigation between the parties on other matters or the operation
of the settlement agreement itself could occur. Future litigation with Applied
Materials, which has greater financial resources than we do, could negatively
impact our earnings and our financial position.
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS THAT MAY EXPOSE US TO
LIABILITIES FOR NONCOMPLIANCE.
We are subject to a variety of governmental regulations relating to the use,
storage, discharge, handling, manufacture and disposal of the toxic or other
hazardous chemical by-products of, and water used in, our manufacturing
processes. Environmental claims against us or our failure to comply with any
present or future regulations could result in:
- the assessment of damages or imposition of fines against us;
- the suspension of production of our products; or
- the cessation of our operations.
New regulations could require us to acquire costly equipment or to incur other
significant expenses. Our failure to control the use or adequately restrict the
discharge of hazardous substances could subject us to future liabilities, which
could negatively impact our earnings and financial position.
IF WE ARE NOT ABLE TO APPLY OUR NET OPERATING LOSSES AGAINST TAXABLE INCOME IN
FUTURE PERIODS, OUR FINANCIAL RESULTS WILL BE HARMED.
Our future net income and cash flow will be affected by our ability to apply our
net operating losses, which totaled approximately (euro)275.0 million for tax
reporting purposes as of December 31, 1999, against taxable income in future
periods. Changes in tax laws in the jurisdictions in which we operate may limit
our ability to utilize our net operating losses. Any limitation on our ability
to utilize our net operating losses could harm our financial results. See Note G
of Notes to Consolidated Financial Statements.
In addition, the use of our net operating losses available in the United States
could become subject to limitation under Section 382 of the United States
Internal Revenue Code in the event of an "ownership change." Under Section 382,
the maximum amount of net operating losses that we could use annually against
our United States taxable income following an "ownership change" would be
limited, generally, to the value of ASM America immediately prior to the
ownership change, subject to certain adjustments, multiplied by a rate published
monthly by the IRS, which was approximately 5.84% in March 2000. We would have
an ownership change generally if the percentage of our common shares owned by 5%
shareholders, counting only 5% shareholders whose ownership has increased and
treating certain public groups as 5% shareholders, increases during a three-year
testing period by more than 50 percentage points.
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<PAGE> 15
ALTHOUGH WE ARE A MAJORITY SHAREHOLDER, ASM PACIFIC TECHNOLOGY IS NOT OBLIGATED
TO PAY DIVIDENDS TO US AND MAY TAKE ACTIONS OR ENTER INTO TRANSACTIONS THAT ARE
DETRIMENTAL TO US.
ASM Pacific Technology is a Cayman Islands limited liability company that is
based in Hong Kong and listed on the Hong Kong Stock Exchange. As of December
31, 1999, we owned 50.01% of ASM Pacific Technology through our wholly-owned
subsidiary, ASM Netherlands Antilles N.V., a Netherlands Antilles company, and
the remaining 49.99% of ASM Pacific Technology was owned by the public.
Although four of the six directors of ASM Pacific Technology are affiliates of
ASM International, they are under no obligation to enter into transactions that
are beneficial to us. Issues and conflicts of interest may arise which might not
be resolved in our best interests.
In addition, the directors of ASM Pacific Technology are under no obligation to
declare a payment of dividends to ASM Pacific Technology's shareholders. As a
shareholder of ASM Pacific Technology, we can approve the payment of dividends,
but cannot compel their payment or size. With respect to the payment of
dividends, the directors must consider the financial position of ASM Pacific
Technology after the dividend. Since a substantial portion of our cash flows
derives from the dividends we receive from ASM Pacific Technology, its failure
to declare dividends in any year would have a significant negative impact on our
cash position for that year.
The directors of ASM Pacific Technology owe their fiduciary duties to ASM
Pacific Technology, and may approve transactions to which we are a party only if
the transactions are commercially beneficial to ASM Pacific Technology. Further,
under the listing rules of the Hong Kong Stock Exchange, directors who are on
the boards of both ASM Pacific Technology and ASM International are not
permitted to vote on a transaction involving both entities. This would
disqualify three of the four affiliates of ASM International who currently serve
on the board of ASM Pacific Technology from voting on any such transaction. In
addition, an independent committee of the board of directors of ASM Pacific
Technology and the shareholders other than ASM International and its affiliates
must approve transactions involving both entities. Therefore, while our
interests and the interests of ASM Pacific Technology may be aligned to the
extent we are both part of the same corporate group, there can be no guarantee
that the directors of ASM Pacific Technology will not take any actions that
could be detrimental to us.
As a shareholder of ASM Pacific Technology, we can vote our shares in accordance
with our own interests. However, we may not be entitled to vote on transactions
involving both us and ASM Pacific Technology under the listing rules of the Hong
Kong Stock Exchange and the Hong Kong Takeover Code. For example, under the Hong
Kong Takeover Code, we would be excluded from voting if we were directly
involved in a takeover of ASM Pacific Technology.
ASM PACIFIC TECHNOLOGY IS A CONSOLIDATED SUBSIDIARY WHICH GENERATES A
SIGNIFICANT PORTION OF OUR NET SALES, EARNINGS FROM OPERATIONS AND NET EARNINGS;
ALTHOUGH WE CURRENTLY ARE A MAJORITY SHAREHOLDER, WE MAY NOT BE ABLE TO MAINTAIN
OUR MAJORITY INTEREST, AND IF OTHER CIRCUMSTANCES ARE SUCH THAT WE DO NOT
CONTROL ASM PACIFIC TECHNOLOGY, WE WOULD NO LONGER BE ABLE TO CONSOLIDATE ITS
RESULTS OF OPERATIONS WITH OURS, WHICH WOULD HAVE A SIGNIFICANT NEGATIVE EFFECT
ON OUR CONSOLIDATED EARNINGS FROM OPERATIONS.
We derive a significant portion of our net sales, earnings from operations and
net earnings from the consolidation of the results of operations of ASM Pacific
Technology with our results. As of December 31, 1999, we owned 50.01% of the
equity of ASM Pacific Technology. As of March 31, 2000, we owned 49.88%.
Subsequent to March 31, 2000, we purchased additional shares of ASM Pacific
Technology such that, as of April 6, 2000, we owned 50.01% of the equity of ASM
Pacific Technology. Under United States generally accepted accounting
principles, any determination of whether we can continue to consolidate the
results of operations of ASM Pacific Technology with ours would be based on
whether we continue to control ASM Pacific Technology. If we do not maintain our
majority interest in ASM Pacific Technology, and if other circumstances are such
that we do not control it through other means, we would no longer be able to
consolidate its results of operations with ours. If we were to become unable to
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<PAGE> 16
consolidate the results of operations of ASM Pacific Technology with our
results, the results of operations of ASM Pacific Technology would no longer be
included in our earnings from operations but would instead be reflected as a
separate line-item called "income from minority interest" in our consolidated
statements of operations. This would have a significant negative effect on our
consolidated earnings from operations. We maintain our majority interest in ASM
Pacific Technology by purchasing shares on the open market from time to time as
necessary. ASM Pacific Technology has an employee share incentive program
pursuant to which it can issue up to an aggregate of five percent of its total
issued shares, excluding shares subscribed for or purchased under the program,
to directors and employees as an incentive. When ASM Pacific Technology issues
shares pursuant to this program, our ownership interest is diluted. In addition,
our controlling interest could be diluted if ASM Pacific Technology issues
additional equity. Although we intend to continue to purchase shares of ASM
Pacific Technology in the open market as necessary to maintain our majority
interest, we could lose our majority position if there is an insufficient number
of shares available for purchase, if we fail to purchase shares in a timely
manner, or if we do not have sufficient financial resources to purchase shares
when our interest falls below 50.0%.
OUR DIRECTORS AND OFFICERS CONTROL APPROXIMATELY 28% OF OUR VOTING POWER AND
THEREFORE HAVE SIGNIFICANT INFLUENCE OVER MATTERS DETERMINED BY OUR
SHAREHOLDERS.
Our directors and officers control approximately 28% of our voting power as of
March 31, 2000. Accordingly, in the event they vote together in connection with
matters submitted to a shareholder vote, such as the appointment of our
management board by the shareholders, they will have significant influence on
the outcome of those matters and on our direction and future operations.
ANY ACQUISITIONS WE MAY MAKE COULD DISRUPT OUR BUSINESS AND SEVERELY HARM OUR
FINANCIAL CONDITION.
We intend to consider investments in complementary companies, products or
technologies. While we have no current agreements or specific plans to do so, we
may acquire businesses, products or technologies in the future. In the event of
any future acquisitions, we could:
- issue stock that would dilute our current shareholders' percentage
ownership;
- incur debt;
- assume liabilities;
- incur amortization expenses related to goodwill and other tangible
assets; or
- incur large and immediate accounting write-offs.
Our operation of any acquired business will also involve numerous risks,
including:
- problems integrating the purchased operations, technologies or products;
- unanticipated costs and liabilities for which we are not able to obtain
indemnification from the sellers;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with customers;
- risks associated with entering markets in which we have no or limited
prior experience; and
- potential loss of key employees, particularly those of the purchased
organizations.
We may not be able to successfully integrate any businesses, products or
technologies or personnel that we might acquire in the future and also may not
realize any anticipated benefits from those acquisitions.
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<PAGE> 17
IF WE FAIL TO ADEQUATELY INVEST IN RESEARCH AND DEVELOPMENT, WE MAY BE UNABLE TO
COMPETE EFFECTIVELY.
We have limited resources to allocate to research and development, and must
allocate our resources among a wide variety of projects in the front-end and
back-end. Because of intense competition in our industry, the cost of failing to
invest in strategic products is high. If we fail to adequately invest in
research and development, we may be unable to compete effectively in the
front-end and back-end markets in which we operate.
WE MAY NEED ADDITIONAL FUNDS TO FINANCE OUR FUTURE GROWTH, AND IF WE ARE UNABLE
TO OBTAIN SUCH FUNDS, WE MAY NOT BE ABLE TO EXPAND OUR BUSINESS AS PLANNED.
In recent years, we have experienced severe capital constraints that may have
seriously harmed our operations and ability to compete. We may require
substantial additional capital to finance our future growth and fund our ongoing
research and development activities beyond 2000. Our capital requirements depend
on many factors, including acceptance of and demand for our products, and the
extent to which we invest in new technology and research and development
projects.
To the extent that our existing sources of liquidity and cash flow from
operations are insufficient to fund our activities, we may need to raise
additional funds. If we raise additional funds through the issuance of equity
securities, the percentage ownership of our existing shareholders would be
diluted. If we finance our capital requirements we may incur significant
interest costs. Additional financing may not be available to us when needed or,
if available, it may not be available on terms favorable to us.
OUR STOCK PRICE HAS FLUCTUATED AND MAY CONTINUE TO FLUCTUATE WIDELY.
The market price of our common shares has fluctuated substantially in the past.
Between January 1, 1999 and March 31, 2000, the sales price of our common
shares, as reported on the Nasdaq National Market, has ranged from a low of
$3.63 to a high of $37.00 and from a low of (euro)3.55 to a high of (euro)36.60
as reported on the AEX-Stock Exchange in Amsterdam. The market price of our
common shares will continue to be subject to significant fluctuations in the
future in response to a variety of factors, including the risk factors discussed
above and the following:
- future announcements concerning our business or that of our competitors
or customers;
- the introduction of new products or changes in product pricing policies
by us or our competitors;
- litigation regarding proprietary rights or other matters;
- changes in analysts' earnings estimates;
- developments in the financial markets;
- quarterly fluctuations in operating results; or
- general conditions in the semiconductor and semiconductor equipment
industries.
Furthermore, stock prices for many companies, and high technology companies in
particular, fluctuate widely for reasons that may be unrelated to their
operating results.
Those fluctuations and general economic, political and market conditions, such
as recessions or international currency fluctuations, may adversely affect the
market price of our common shares.
YOU MAY HAVE DIFFICULTY PROTECTING YOUR RIGHTS AS A SHAREHOLDER AND IN ENFORCING
CIVIL LIABILITIES BECAUSE WE ARE A NETHERLANDS LIMITED LIABILITY COMPANY.
Our affairs are governed by our articles of association and by the laws
governing limited liability companies formed in the Netherlands. Our executive
offices and the majority of our assets are located outside the United States. In
addition, most of the members of our management board and supervisory board,
17
<PAGE> 18
executive officers, and some of the experts named in this prospectus are
residents of jurisdictions other than the United States. As a result, it may be
difficult for investors to serve process within the United States upon us,
members of our management board or supervisory board, our executive officers, or
experts named in this prospectus or to enforce against them in United States
courts judgments of those courts, to enforce outside the United States judgments
obtained against them in United States courts, or to enforce in United States
courts judgments obtained against them in courts in jurisdictions outside the
United States, in any action, including actions that derive from the civil
liability provisions of the United States securities laws. In addition, it may
be difficult for investors to enforce, in original actions brought in courts in
jurisdictions located outside the United States, liabilities that derive from
the United States securities laws. For a more complete discussion of potential
difficulties in protecting your rights, see "Enforceability of Civil
Liabilities" later in this prospectus.
OUR ANTI-TAKEOVER PROVISIONS AND OUR SETTLEMENT AGREEMENT WITH APPLIED MATERIALS
MAY PREVENT A BENEFICIAL CHANGE IN CONTROL.
Our shareholders have granted to Stichting Continuiteit ASMI, or Stichting, a
non-membership organization with a board comprised of our President and Chief
Executive Officer, the Chairman of our Supervisory Board and three independent
members, the right to acquire and vote our preferred shares to maintain the
continuity of our company. Toward that objective, Stichting will evaluate, when
called for, whether a takeover offer is in our best interest, and may if it
determines appropriate acquire preferred shares with voting power equal to 50%
of the voting power of the outstanding common shares. This is likely to be
sufficient to enable it to prevent a change of control from occurring. See
"Description of Share Capital" for additional information regarding Stichting.
Pursuant to a settlement agreement with Applied Materials, one of our
competitors and the selling shareholder under this prospectus, if we desire to
effectuate a change of control transaction, as defined in our settlement
agreement with Applied Materials, with a competitor of Applied Materials, we
must offer the change of control transaction to Applied Materials on the same
terms as we would be willing to accept from that competitor pursuant to a bona
fide arms-length offer made by that competitor. In case Applied Materials
rejects the offer, we are free for 90 days following receipt of Applied
Materials' rejection to enter into an agreement to sell at an equal or greater
price and upon terms which, in the aggregate, are no more favorable to the buyer
than those offered to Applied Materials.
These provisions may prevent us from being offered or entering into change of
control transactions that may otherwise offer you an opportunity to sell your
shares at a premium over the market price.
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<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus and the documents incorporated by
reference in this prospectus contains forward-looking statements within the
meaning of the United States federal securities laws. These statements include,
among others, statements regarding use of proceeds, future expenditures,
sufficiency of cash generated from operations, maintenance of majority interest
in ASM Pacific Technology, business strategy, product development, product
acceptance, market penetration, market demand, return on investment in new
products, facility completion dates and product shipment dates. These statements
may be found under "Prospectus Summary," "Risk Factors," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Forward-looking statements typically are identified
by use of terms such as "believe," "anticipate," "estimate," "expect," "intend,"
"plan," "will," "may" and similar words, although some forward-looking
statements are expressed differently. You should be aware that our actual
results could differ materially from those contained in the forward-looking
statements due to a number of factors, including the matters discussed under
"Risk Factors" and in other sections of this prospectus, which address various
factors that could cause our actual results to differ from those in the
forward-looking statements.
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<PAGE> 20
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,500,000 common shares
we are offering, excluding shares offered by the selling shareholder, will be
approximately $94.2 million (or approximately (euro)98.3 million). If the
underwriters fully exercise the over-allotment option, the net proceeds to us
will be approximately $114.6 million (or approximately (euro)119.6 million).
"Net proceeds" is what we expect to receive after we pay the underwriting
discount and other estimated expenses for this offering. For the purpose of
calculating net proceeds, we are using the public offering price of $29.00 per
share (or (euro)30.27 per share).
We expect to use the net proceeds for repayment of approximately E78.0 million
of indebtedness, working capital and general corporate purposes, which may
include capital expenditures to enlarge manufacturing and assembly capacity,
development of new products or technologies, or the acquisition of or investment
in businesses, licenses, products or technologies that are complementary to our
business. From time to time we have discussed potential strategic acquisitions
or investments with third parties. We are not currently discussing any such
acquisitions or investments and have no agreements or commitments to complete
any such transactions.
The indebtedness that we intend to repay with part of the net proceeds of this
offering includes indebtedness with the following outstanding principal balances
and interest rates as of March 31, 2000:
- $26.9 million (or (euro)28.1 million) at 10.75%;
- Nlg. 40.0 million (or (euro)18.2 million) at 5.67%;
- Nlg. 15.0 million (or (euro)6.8 million) at 6.75%;
- Nlg. 35.0 million (or (euro)15.9 million) at 6.00%; and
- Nlg. 19.8 million (or (euro)9.0 million) at 6.25%.
Pending our use of the proceeds of this offering, we intend to invest the net
proceeds of this offering primarily in short-term, investment-grade,
interest-bearing instruments.
For purposes of calculating net proceeds in this section, United States dollars
have been converted to Euros at the noon buying rate in New York City on April
6, 2000 for cable transfers payable in Euros as certified for customs purposes
by the Federal Reserve Bank of New York, which was 0.9580 United States dollars
per Euro.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common shares and do not
anticipate paying any cash dividends in the foreseeable future. Our current
policy is to retain all of our earnings to finance the growth and development of
our business.
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<PAGE> 21
PRICE RANGE OF COMMON SHARES
Our common shares are quoted on the Nasdaq National Market under the symbol
"ASMI." The high ask and low bid prices of our common shares, as reported on the
Nasdaq National Market, during the past three calendar years were:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997:
First Quarter............................................... $17.38 $ 9.00
Second Quarter.............................................. $13.63 $ 9.25
Third Quarter............................................... $20.63 $10.94
Fourth Quarter.............................................. $20.52 $ 8.44
1998:
First Quarter............................................... $13.13 $ 9.13
Second Quarter.............................................. $11.25 $ 7.88
Third Quarter............................................... $ 9.75 $ 4.25
Fourth Quarter.............................................. $ 6.38 $ 2.44
1999:
First Quarter............................................... $ 6.75 $ 3.63
Second Quarter.............................................. $ 7.88 $ 3.69
Third Quarter............................................... $ 9.00 $ 7.00
Fourth Quarter.............................................. $24.38 $ 7.50
2000:
First Quarter............................................... $37.00 $19.88
Second Quarter (through April 6, 2000)...................... $29.00 $23.25
</TABLE>
On April 6, 2000, the last reported sale price of our common shares on the
Nasdaq National Market was $29.00 per share. As of February 29, 2000, our common
shares listed on the Nasdaq National Market were held by approximately 242
holders of record.
Our shares are also traded on the AEX-Stock Exchange in Amsterdam under the
symbol "ASMI." The high and low closing sales prices of our common shares, as
reported on the AEX-Stock Exchange, during the past three calendar years were:
<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
1997:
First Quarter............................................... Nlg. 35.50 Nlg. 16.00
Second Quarter.............................................. Nlg. 26.40 Nlg. 18.70
Third Quarter............................................... Nlg. 40.70 Nlg. 21.60
Fourth Quarter.............................................. Nlg. 40.80 Nlg. 17.30
1998:
First Quarter............................................... Nlg. 27.80 Nlg. 17.60
Second Quarter.............................................. Nlg. 23.50 Nlg. 16.60
Third Quarter............................................... Nlg. 20.80 Nlg. 7.90
Fourth Quarter.............................................. Nlg. 11.80 Nlg. 4.40
1999:
First Quarter............................................... E 5.60 E 3.55
Second Quarter.............................................. E 7.70 E 3.55
Third Quarter............................................... E 8.40 E 6.75
Fourth Quarter.............................................. E24.00 E 7.00
2000:
First Quarter............................................... E36.60 E18.75
Second Quarter (through April 6, 2000)...................... E31.00 E25.00
</TABLE>
As a consequence of the introduction of the Euro as the second legal currency in
the Netherlands and other European countries, the AEX-Stock Exchange changed the
pricing of our common shares from Netherlands guilders to the Euro effective
January 1, 1999. The Netherlands guilder has a permanently fixed exchange rate
of 1 Euro to 2.20371 Nlg.
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<PAGE> 22
CAPITALIZATION
The following table shows our cash and cash equivalents and our capitalization
as of December 31, 1999 on an actual basis and as adjusted to reflect (a) the
sale by us of the 3,500,000 common shares that we are offering at the public
offering price of $29.00 per share, after deducting the underwriting discount
and estimated offering expenses, (b) the application of the net proceeds from
the offering and (c) a reduction in debt owed to the selling shareholder in
payment of the exercise price of a warrant to purchase 1,500,000 common shares
at an exercise price of $5.375 per share. The warrant was exercised by the
selling shareholder in order to purchase the common shares being sold by the
selling shareholder in the offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------
ACTUAL AS ADJUSTED(3)
--------- ---------------
(Euros in thousands, except
share and per share data)
<S> <C> <C>
Cash and cash equivalents(1)................................ E 14,153 E 49,953
======== ========
Total debt:
Notes payable to banks.................................... E 22,667 E 10,444
Current portion of long-term debt......................... 36,944 11,986
Current portion of subordinated debt...................... 52,285 18,541
Long-term debt............................................ 7,997 7,997
Subordinated debt......................................... -- --
-------- --------
Total debt............................................. 119,893 48,968
Shareholders' equity:
Common shares: Nlg. 0.01 par value; 60,000,000 shares
authorized 40,107,784 issued and outstanding, actual;
45,107,784 shares issued and outstanding, as
adjusted(2)............................................ 182 205
Additional paid-in capital................................ 103,443 210,145
Retained deficit.......................................... (35,454) (35,454)
Accumulated other comprehensive income (loss)............. (2,619) (2,619)
-------- --------
Total shareholders equity.............................. 65,552 172,277
-------- --------
Total capitalization................................. E185,445 E221,245
======== ========
</TABLE>
- ---------------------------
(1) Cash and cash equivalents of ASM Pacific Technology are restricted to use
in the operations of ASM Pacific Technology only. At December 31, 1999,
such restricted cash and cash equivalents amounted to E10.3 million
(actual) and E10.3 million (as adjusted).
(2) The actual share number is based on common shares outstanding as of
December 31, 1999, but excludes:
- 2,366,400 common shares issuable upon exercise of outstanding options,
which have a weighted average exercise price of $5.23 per common share;
and
- 3,737,957 common shares issuable upon exercise of outstanding warrants,
which have a weighted average exercise price of $8.03 per share.
(3) The net proceeds have been converted into Euros at the noon buying rate in
New York City on April 6, 2000 for cable transfers payable in Euros as
certified for customs purposes by the Federal Reserve Bank of New York,
which was 0.9580 United States dollars per Euro.
22
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes thereto included
elsewhere in this prospectus. The following data, insofar as it relates to each
of the years 1995 through 1999, has been derived from annual financial
statements, including the consolidated balance sheets at December 31, 1998 and
1999 and the related consolidated statements of income and of cash flows for the
three years ended December 31, 1999 and notes thereto appearing elsewhere in
this prospectus. The consolidated balance sheets at December 31, 1995, 1996 and
1997 and the consolidated statements of operations for the years ended December
31, 1995 and 1996 are derived from audited consolidated financial statements not
included in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(Euros in thousands, except per share data)(1)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.................................. E 304,419 E 298,695 E 321,582 E 288,111 E 414,495
Costs of sales............................. (168,102) (164,833) (182,259) (179,326) (244,485)
---------- ---------- ---------- ---------- ----------
Gross profit............................... 136,317 133,862 139,323 108,785 170,010
Operating expenses:
Selling, general and administrative...... (59,645) (62,744) (74,675) (60,017) (83,510)
Research and development, net............ (20,357) (26,137) (39,000) (36,277) (47,145)
Litigation settlement.................... -- -- (79,669) -- --
---------- ---------- ---------- ---------- ----------
Total operating expenses.............. (80,002) (88,881) (193,344) (96,294) (130,655)
---------- ---------- ---------- ---------- ----------
Earnings (loss) from operations............ 56,315 44,981 (54,021) 12,491 39,355
---------- ---------- ---------- ---------- ----------
Net interest and other financial income
(expenses)............................... (6,242) (3,236) (3,239) (5,350) (8,608)
Income taxes............................... (2,996) (2,032) (2,761) (648) (1,274)
Minority interest in net earnings of
subsidiaries............................. (13,689) (8,674) (10,455) (6,261) (18,374)
---------- ---------- ---------- ---------- ----------
Net earnings (loss)........................ E 33,388 E 31,039 E (70,476) E 232 E 11,099
========== ========== ========== ========== ==========
Basic net earnings (loss) per share........ E 1.06 E 0.98 E (2.12) E 0.01 E 0.30
========== ========== ========== ========== ==========
Diluted net earnings (loss) per share...... E 0.98 E 0.92 E (2.12) E 0.01 E 0.29
========== ========== ========== ========== ==========
Basic weighted average number of shares.... 31,428 31,566 33,232 33,794 37,301
Diluted weighted average number of
shares................................... 33,966 33,717 33,232 34,743 40,664
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(Euros in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................. E 26,683 E 26,028 E 27,446 E 11,724 E 14,153
Total assets............................... 233,911 277,704 328,589 282,950 425,035
Total debt................................. 77,569 80,145 167,417 148,756 119,893
Total shareholders equity.................. 33,386 80,807 16,019 20,464 65,552
</TABLE>
- ---------------------------
(1) The noon buying rate in New York City for cable transfers payable in Euros
as certified for customs purposes by the Federal Reserve Bank of New York
was 1.0070 United States dollars per Euro on December 31, 1999.
23
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with the financial statements and other
financial information included in this prospectus. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those indicated in the forward-looking
statements. Please see the "Special Note Regarding Forward-Looking Statements"
elsewhere in this prospectus.
OVERVIEW
We are a leader in the design, manufacture and sale of equipment and solutions
used to produce semiconductor devices. Our production equipment and solutions
are used by both the front-end and back-end segments of the semiconductor
market. We were incorporated under the laws of the Netherlands in 1968.
Throughout our history, we have conducted business through subsidiaries located
worldwide. We established our operations in Hong Kong in 1975, in the United
States in 1976, in Japan in 1982, and in Finland in 1999 through the acquisition
of Microchemistry Ltd. We completed our initial public offering in the United
States in 1981 and a secondary public offering in the United States in 1983. Our
common shares were listed on the AEX-Stock Exchange in Amsterdam in 1996.
We conduct our back-end operations through ASM Pacific Technology, which was our
wholly-owned subsidiary until 1988, when we completed an initial public offering
of 25% of its shares on the Hong Kong Stock Exchange. We have since sold shares
of ASM Pacific Technology on the open market, and as of December 31, 1999, we
owned 50.01% of its outstanding shares. ASM Pacific Technology expanded
operations with significant new production facilities in Shenzhen, China in 1989
and Singapore in 1990, and is in the process of completing new plants in China
and Malaysia which we expect will become operational during 2000.
The sales cycle from quotation to shipment for our front-end equipment generally
ranges from five to nine months, depending on capacity utilization and the
urgency of the order. The acceptance period after installation may be as short
as four to five weeks. If customers are unfamiliar with our equipment or are
receiving new product models, the acceptance period may take as long as ten
weeks. The sales cycle is longer for equipment which is installed at the
customer's site for evaluation prior to sale. The typical trial period ranges
from six months to one year after installation.
The sales cycle for back-end products typically is shorter than for front-end.
Generally, the majority of our back-end equipment is built in standard
configurations. We build back-end products that are approximately 85% complete
in anticipation of customer orders. Upon receipt of a customer's order and
specifications, the remaining 15% of the manufacturing is completed. This allows
us to complete the assembly of our equipment in a short period of time. We
therefore require between two to six weeks for final manufacturing, testing,
crating, and shipment of our back-end equipment. Our back-end customers'
acceptance periods generally are shorter than those for front-end equipment. We
provide installation, training and technical support to our customers with local
staff in all of our major markets.
We generally recognize revenue from the sale of products at the time of shipment
following an acceptance process at our own facilities. We rarely experience
equipment returns. We accrue costs for installation and warranty when we
recognize corresponding sales. We recognize revenue for services when we perform
the services.
Our front-end sales are primarily concentrated in the United States, Europe,
Japan and Southeast Asia. During 1999, equipment shipped to destinations in
these regions accounted for sales of (euro)52.1 million, (euro)40.5 million,
(euro)42.0 million, and (euro)47.1 million, respectively. Our back-end sales,
which approximated (euro)232.8 million, are concentrated in Asia. Our ten
largest customers in 1999 accounted for approximately 43% of total sales.
24
<PAGE> 25
We invested approximately (euro)47.1 million in research and development during
1999. As part of our research and development activities, we are engaged in
various development programs with customers and institutes that allow us to
develop products that meet customer requirements and to obtain access to new
technology and expertise. We expense rather than capitalize our research and
development expenses. We charge to costs of sales the costs which relate to
prototype and experimental models which we subsequently sell to customers.
Our reported research and development expenses are after research and
development credits, which approximated (euro)3.3 million in 1999. Our
Netherlands and Singapore operations receive research and development grants and
credits from various governmental sources. The research and development grants
we received in the Netherlands are contingently repayable to the extent we
recognize sales of products to which the credit was related. These repayments
vary and range from 1.0% to 4.0% of the realized sales, depending on the
products sold, up to the amount of the grants plus interest. Our actual and
contingent repayments accrue at interest rates ranging from 5.0% to 8.0% per
annum. Our contingent liability related to these possible repayments
approximated (euro)11.9 million at December 31, 1999.
In 1999, we merged the manufacturing activities of ASM America with those of ASM
Europe. The combined manufacturing activities are now located at our ASM Europe
location. As a consequence, we reduced ASM America's number of employees by
approximately 75, all of which were in manufacturing. Concurrently, we added
approximately 50 new positions at ASM Europe. In the first quarter of 1999 we
incurred a one-time charge of approximately (euro)3.9 million for redundancy,
write-offs and occupancy costs. The remaining accrual at December 31, 1999
totaled (euro)2.5 million. We expect to utilize the majority of the remaining
accrual in 2000. We expect to recover these costs through synergies and
efficiencies by year-end 2000. Subsequent to 2000 we expect that the
restructuring will have a positive impact on earnings and cash flows. Recently,
ASM America began to manufacture the Polygon, a new product line for clustering
CVD processes.
Effective in July 1999, we purchased all of the outstanding shares of
Microchemistry, a company located in Finland, for an approximately (euro)3.9
million promissory note convertible at $10.00 per share into our common shares
and renamed the company ASM Microchemistry. Prior to our purchase,
Microchemistry developed the process to grow or deposit films one layer at a
time by means of ALCVD, and marketed ALCVD processes to manufacturers of flat
panel displays and tape magnetic head products. Following our acquisition, ASM
Microchemistry is shifting its focus to manufacturers of semiconductor devices.
In December 1999, we purchased a 24% interest in NanoPhotonics AG, a German
supplier of precision thin film metrology equipment. The technology supplied by
NanoPhotonics allows for the integration of high-resolution, ellipsometric thin
film metrology directly in a wafer-processing tool. We believe that this
investment will enable us to equip our batch and single wafer equipment with
integrated thin film metrology.
As of December 31, 1999, we had net operating loss tax carryforwards of
(euro)275 million which we can apply against earnings reported in the United
States and the Netherlands.
The market value of our investment in ASM Pacific Technology at the end of 1999
was approximately (euro)333.9 million, which is substantially higher than the
market value at the end of 1998, which was approximately (euro)70.3 million.
25
<PAGE> 26
RESULTS OF OPERATIONS
The following table sets forth the percentage relationships of certain items
from our consolidated statement of operations, as a percentage of net sales for
the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Net sales front-end......................................... 47.4% 46.1% 43.8%
Net sales back-end.......................................... 52.6 53.9 56.2
----- ----- -----
Net sales................................................... 100.0 100.0 100.0
----- ----- -----
Cost of sales............................................... (56.7) (62.2) (59.0)
----- ----- -----
Gross profit................................................ 43.3 37.8 41.0
----- ----- -----
Operating expenses:
Selling, general and administrative....................... (23.2) (20.8) (20.1)
Research and development, net............................. (12.1) (12.6) (11.4)
Litigation settlement..................................... (24.8) -- --
----- ----- -----
Total operating expenses............................... (60.1) (33.4) (31.5)
----- ----- -----
Earnings (losses) from operations........................... (16.8) 4.4 9.5
Net interest and other financial income (expenses).......... (1.0) (1.9) (2.1)
Income taxes................................................ (0.8) (0.2) (0.3)
Minority interest in net earnings of subsidiaries........... (3.3) (2.2) (4.5)
----- ----- -----
Net earnings (loss)......................................... (21.9)% 0.1% 2.6%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Sales. While the market for semiconductor equipment was still weak in the
first quarter of 1999, net sales increased in both front-end and back-end
segments during the second through fourth quarters of 1999 and consolidated
sales increased by 43.9% in 1999 compared to 1998. Front-end sales increased
36.8% from (euro)132.9 million in 1998 to (euro)181.7 million in 1999. Back-end
sales increased 49.9% from (euro)155.2 million in 1998 to (euro)232.8 million in
1999. The front-end sales increase was primarily due to higher sales of our
Eagle 10 products. The back-end sales increase was primarily due to increased
sales of equipment and to a lesser extent, leadframes. Pricing in the leadframe
market, which was depressed in 1998, improved in 1999.
Gross Profit. Our consolidated gross profit increased from 37.8% of net sales in
1998 to 41.0% of net sales in 1999. The front-end business gross profit
increased from 39.4% of net sales in 1998 to 40.5% of net sales in 1999, while
the back-end business gross profit grew from 36.4% of net sales in 1998 to 41.4%
of net sales in 1999. Semiconductor equipment market growth in the second half
of 1999 led to an easing of pricing pressures experienced during 1998. In
addition, our introduction of new process technology helped improve our margins,
as did a technology lead in the wire bonder market.
Selling, General and Administrative. To keep pace with the general semiconductor
market expansion and to meet increasing customer orders in 1999, selling,
general and administrative expenses increased from (euro)60.0 million in 1998 to
(euro)83.5 million in 1999. Front-end and back-end selling, general and
administrative expenses increased from (euro)30.2 million and (euro)29.8 million
in 1998 to (euro)48.9 million and (euro)34.6 million in 1999. Increased costs
primarily reflected expansion in personnel and the restructuring of the ASM
America manufacturing operations. However, selling, general and administrative
expenses as a percentage of net sales declined from 20.8% in 1998 to 20.1% in
1999.
Research and Development. Research and development expenses increased by 30.0%
from (euro)36.3 million in 1998 to (euro)47.1 million in 1999. Front-end
research and development expenses increased by 23.4% from (euro)23.7 million in
1998 to (euro)29.3 million in 1999 while back-end research and development
expenses
26
<PAGE> 27
increased 42.3% from (euro)12.6 million in 1998 to (euro)17.8 million in 1999.
Net research and development expenses declined from 12.6% of net sales in 1998
to 11.4% of net sales in 1999.
Net Interest and Other Financial Income (Expenses). Net interest and other
financial income (expenses) increased by 60.9% from expense of (euro)5.4 million
in 1998 to expense of (euro)8.6 million in 1999 due to the repayment of a
non-interest bearing short-term loan which became due in November 1998 with an
interest-bearing, longer term loan with warrants. In addition, in October 1999
we issued a zero-coupon $14.9 million debenture with a maturity value of $20.0
million which accrued interest at 6% per annum, and which had warrants attached.
We also borrowed more frequently on our revolving lines of credit to finance
receivables and work-in-process which, on average, were larger in 1999 than in
1998.
Taxes. We paid (euro)1.3 million in taxes during 1999, compared to (euro)0.6
million in 1998. As of December 31, 1999, we have a (euro)275 million net
operating loss carryforward which we can apply against future earnings reported
in the United States and the Netherlands.
Net Earnings. Our net earnings in 1999 were approximately (euro)11.1 million
compared to (euro)0.2 million in 1998. Our front-end operation reported a net
loss approximating (euro)7.8 million in 1999, including the (euro)3.9 million
restructuring charge incurred in connection with moving manufacturing operations
from ASM America to ASM Europe. Our front-end operation's net loss in 1999 was
larger than its net loss in 1998 approximating (euro)6.6 million. Our portion of
our back-end operation's net earnings approximated (euro)18.9 million compared
to (euro)6.8 million in 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Sales. During 1998, the market for semiconductor equipment contracted
significantly. Our net sales declined 10.4% from (euro)321.6 million in 1997 to
(euro)288.1 million in 1998. Our net sales declined in both front-end and
back-end segments. Front-end sales declined by 12.9% from (euro)152.6 million in
1997 to (euro)132.9 million in 1998. Net sales declined primarily because of
declining sales of our plasma reactors and A600 UHV equipment. Net sales were
also lower as a result of the divestment of some smaller product lines in 1997.
Net sales of the back-end business declined 8.2% from (euro)169.0 million in
1997 to (euro)155.2 million in 1998. The back-end sales decrease was primarily
due to a decrease in sales of leadframes. Pricing pressures were particularly
severe in the leadframe market.
Gross Profits. Our consolidated gross profits declined from 43.3% of net sales
in 1997 to 37.8% of net sales in 1998. The front-end business gross profits
declined from 44.8% of net sales in 1997 to 39.4% of net sales in 1998, while
the back-end business' gross profits decreased from 40.1% of net sales in 1997
to 36.4% of net sales in 1998. Contraction of the semiconductor equipment market
in 1998 increased competition and created pricing pressures which led to the
decrease in gross profit.
Selling, General and Administrative. Our selling, general and administrative
costs declined by 19.6% from (euro)74.7 million in 1997 to (euro)60.0 million in
1998. Our selling, general and administrative costs declined from 23.2% of net
sales in 1997 to 20.8% of net sales in 1998. During 1998, we took certain cost
reduction measures. Our front-end business reduced the number of full-time
employees from 860 at December 31, 1997 to 756 at December 31, 1998 to match the
decline in manufacturing activity and to take advantage of outsourcing of
non-critical activities.
Research and Development. Research and development expenses declined by 7.0%
from (euro)39.0 million in 1997 to (euro)36.3 million in 1998. In an effort to
control costs during an industry downturn, we froze our hiring of research and
development personnel during 1998. Research and development expenses were 12.6%
of net sales in 1998, an increase compared to research and development costs of
12.1% of net sales in 1997. The increase as a percent of net sales was primarily
due to lower net sales in 1998. Front-end research and development expenses
declined from (euro)27.4 million in 1997 to (euro)23.7 million in 1998. Back-end
research and development expenses increased from (euro)11.6 million in 1997 to
(euro)12.5 million in 1998.
27
<PAGE> 28
Net Interest and Other Financial Income (Expenses). Net interest and other
financial income (expenses) increased by 65.2% from expense of (euro)3.2 million
in 1997 to expense of (euro)5.4 million in 1998 partly because of lower foreign
currency transaction gains and partly as a consequence of the refinancing of a
non-interest bearing short-term loan which became due in November 1998 with an
interest-bearing longer term loan.
Taxes. We paid (euro)0.6 million in taxes during 1998 compared to (euro)2.8
million in 1997.
Net Earnings. Our net earnings in 1998 approximated (euro)0.2 million compared
to our net loss of (euro)70.5 million in 1997. The net loss in 1997 included a
front-end operation litigation settlement expense of approximately (euro)80.0
million. Our front-end business reported a net loss in 1998 of (euro)6.6 million
compared to the front-end net loss of (euro)82.0 million in 1997. Our portion of
our back-end operation's net earnings was (euro)6.8 million in 1998 compared to
(euro)11.5 million in 1997. Back-end earnings were 4.4% of back-end net sales in
1998 compared to a back-end net earnings margin of 6.8% in 1997.
28
<PAGE> 29
QUARTERLY RESULTS OF OPERATIONS
The following tables present unaudited consolidated quarterly data for the eight
quarters ended December 31, 1999, and this data expressed as a percentage of
total sales for such quarters. We believe this information has been presented on
the same basis as the audited consolidated financial statements appearing
elsewhere in this prospectus, and all necessary adjustments have been included
in the amounts stated below to present fairly the unaudited quarterly results
when read in conjunction with our audited consolidated financial statements.
Results of operations for any quarter are not necessarily indicative of the
results to be expected for the entire fiscal year or for any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(Euros in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... E 74,288 E 75,323 E 61,452 E 77,048 E 52,737 E 96,550 E111,826 E153,382
Cost of sales........................... (43,702) (43,523) (39,315) (52,786) (33,820) (56,458) (64,719) (89,488)
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit.......................... 30,586 31,800 22,137 24,262 18,917 40,092 47,107 63,894
Operating expenses:
Selling, general and administrative... (15,436) (15,175) (14,925) (14,481) (19,297) (15,156) (17,660) (31,397)
Research and development, net......... (10,346) (9,249) (7,693) (8,989) (8,906) (10,931) (12,991) (14,317)
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses............ (25,782) (24,424) (22,618) (23,470) (28,203) (26,087) (30,651) (45,714)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) from operations......... 4,804 7,376 (481) 792 (9,286) 14,005 16,456 18,180
Net interest and other financial income
(expenses)............................ (888) (1,297) (1,359) (1,806) (2,563) (2,912) (2,187) (946)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income taxes and
minority interest in net earnings of
subsidiary............................ 3,916 6,079 (1,840) (1,014) (11,849) 11,093 14,269 17,234
Income taxes............................ (181) (535) 230 (162) 166 (456) (1,492) 508
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) before minority interest
in net earnings of subsidiary......... 3,735 5,544 (1,610) (1,176) (11,683) 10,637 12,777 17,742
Minority interest in net earnings of
subsidiary............................ (1,857) (2,654) (835) (915) (36) (5,012) (5,459) (7,867)
-------- -------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..................... E 1,878 E 2,890 E (2,445) E (2,091) E(11,719) E 5,625 E 7,318 E 9,875
======== ======== ======== ======== ======== ======== ======== ========
Basic net earnings (loss) per share..... E 0.06 E 0.09 E (0.07) E (0.06) E (0.32) E 0.15 E 0.19 E 0.25
======== ======== ======== ======== ======== ======== ======== ========
Diluted net earnings (loss) per share... E 0.05 E 0.08 E (0.07) E (0.06) E (0.32) E 0.14 E 0.18 E 0.24
======== ======== ======== ======== ======== ======== ======== ========
Basic weighted average number of
shares................................ 33,389 33,555 33,612 33,794 36,078 36,208 37,078 39,392
Diluted weighted average number of
shares................................ 35,399 35,214 33,612 34,743 36,078 41,790 41,707 41,675
As a Percentage of Net Sales:
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... (58.8) (57.8) (64.0) (68.5) (64.1) (58.5) (57.9) (58.3)
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit.......................... 41.2 42.2 36.0 31.5 35.9 41.5 42.1 41.7
Operating expenses:
Selling, general and administrative... (20.8) (20.1) (24.3) (18.8) (36.6) (15.7) (15.8) (20.5)
Research and development, net......... (13.9) (12.3) (12.5) (11.7) (16.9) (11.3) (11.6) (9.3)
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses............ (34.7) (32.4) (36.8) (30.5) (53.5) (27.0) (27.4) (29.8)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) from operations......... 6.5 9.8 (0.8) 1.0 (17.6) 14.5 14.7 11.9
Net interest and other financial income
(expenses)............................ (1.2) (1.7) (2.2) (2.3) (4.9) (3.0) (2.0) (0.6)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income taxes and
minority interest in net earnings of
subsidiary............................ 5.3 8.1 (3.0) (1.3) (22.5) 11.5 12.7 11.3
Income taxes............................ (0.3) (0.7) 0.4 (0.2) 0.3 (0.5) (1.3) 0.3
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) before minority interest
in net earnings of subsidiary......... 5.0 7.4 (2.6) (1.5) (22.2) 11.0 11.4 11.6
Minority interest in net earnings of
subsidiary............................ (2.5) (3.6) (1.4) (1.2) (0.1) (5.2) (4.9) (5.1)
-------- -------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..................... 2.5% 3.8% (4.0)% (2.7)% (22.3)% 5.8% 6.5% 6.5%
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
29
<PAGE> 30
Net sales fluctuated significantly during the periods presented, reflecting the
cyclical nature of the markets in which we operate. Demand for our equipment is
affected primarily by changes in the semiconductor market, which began a severe
downturn at the end of 1997 that continued through 1998 until the market began
to recover in early 1999. Net sales grew by 83.1% in the second quarter compared
to the first, 15.8% in the third quarter compared to the second, and 37.2% in
the fourth quarter compared to the third.
Our gross profit fluctuated significantly, reflecting both the level at which we
utilized our manufacturing capacity and the extent to which market conditions
allowed us to obtain favorable selling prices and terms for our equipment. As
the semiconductor capital equipment market recovered beginning in the second
quarter of 1999, our capacity utilization increased as a result of better market
conditions and also as a result of greater outsourcing of the manufacture of
certain front-end components. Our pricing and selling terms also improved. As a
result, our quarterly gross margins increased to more than 40% in each of the
last three quarters of 1999.
Operating expenses were affected by a non-recurring charge in the first quarter
of 1999. We recorded a one-time (euro)3.9 million charge to move the production
of our epitaxial reactors from our Phoenix, Arizona facility to the Netherlands.
The fourth quarter 1999 increase in operating expenses was due in part to our
beginning to expand our back-end production and assembly facilities in China and
Malaysia in order to meet an increase in orders and our expectations for an
increase in future demand.
BACKLOG
Our backlog of orders booked increased from approximately (euro)52.8 million at
December 31, 1998 to approximately (euro)183.7 million at December 31, 1999, of
which a substantial majority was for deliveries in the first and second quarters
of 2000. Our backlog at January 31, 2000 had grown to E240.5 million. Our
backlog consists of orders of products by purchase orders or letters of intent
for future periods, typically for up to the next twelve months. In markets such
as Japan it is common practice for letters of intent to be used in place of firm
purchase orders. We sometimes allow customers to cancel or reschedule
deliveries. In addition, purchase orders are subject to price negotiations and
changes in quantities of products ordered as a result of changes in customers'
requirements. Depending on the complexity of an order, we generally ship our
products from one to six months after receipt of an order. We include in the
backlog only orders for which a delivery schedule has been specified and to
which the customer has assigned an order number.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity is affected by many factors, some of which are related to our
ongoing operations and others of which are related to the semiconductor and
semiconductor equipment industries and to the economies of the countries in
which we operate. Although our cash requirements will fluctuate based on the
timing and extent of these factors, we believe that cash generated by
operations, together with the liquidity provided by our existing cash resources
and the arrangements governing our current indebtedness, will be sufficient to
fund working capital, capital expenditures and other ongoing business
requirements.
At December 31, 1999, our principal sources of liquidity consisted of (euro)14.1
million in cash and cash equivalents and (euro)71.3 million in undrawn bank
lines. (euro)10.3 million of the cash and cash equivalents and (euro)46.8
million of the undrawn bank lines are restricted to use in our back-end
operations.
During 1999, operating activities generated a net cash inflow of (euro)46.9
million as compared to (euro)26.0 million during 1998. The increase was
primarily due to higher cash flow from operations, which was partially offset by
a net outflow of (euro)7.9 million in other assets and liabilities in 1999
compared to a (euro)1.6 million outflow in 1998. These outflows resulted
primarily from an increase in accounts receivable and inventories due to the
increase in business activities in 1999. Cash flow used in investment activities
amounted to (euro)26.8 million during 1999, a modest increase compared to
(euro)23.2 million in 1998. We expect to make investments in 2000 to complete
new plants in Malaysia and China and to maintain front-end infrastructure.
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We entered into a Nlg. 45.0 million, 6% subordinated convertible loan on
December 4, 1998 with three lenders. During 1999, all three lenders converted
their loans into common shares which were subsequently listed on the AEX-Stock
Exchange in Amsterdam.
During 1998, we negotiated an extension of the original $80.0 million
convertible note provided by Applied Materials following the settlement of the
patent dispute in 1997. After paying Applied Materials $15.0 million in 1997 and
$20.0 million in 1998, the remaining balance of $45.0 million of the initial
interest-free subordinated convertible loan was replaced by an interest-bearing
note for which we provided security. The note was repayable in two installments:
$10.0 million was paid in 1999 and the remaining $35.0 million is due on
December 16, 2000. We expect to pay the remaining $35 million with the proceeds
of this offering. In addition, we issued a warrant to Applied Materials to
purchase 1.5 million of our common shares at a price of $5.375 per share. The
warrant is currently exercisable. Applied Materials is exercising the warrant
and is offering the common shares issuable upon this exercise as a selling
shareholder pursuant to this prospectus.
During 1998, we also negotiated an increase of Nlg. 15.0 million in our bank
loans in the Netherlands. Also, a term loan of Nlg. 40.0 million which was due
in November 1999 was extended to November 2000. As part of the same agreement,
the Nlg. 40.0 million overdraft facilities were given a fixed termination date
in November 2000. In February 2000, our bank increased our overdraft facilities
by Nlg. 35.0 million.
On October 1, 1999, we placed 6% zero-coupon debentures with a maturity value of
$20.0 million with a group of United States institutional investors. The
debentures have a five year maturity and are not convertible. The debentures
were discounted by 6% annual interest for a net purchase value of approximately
$14.9 million. We used the proceeds of the debenture placement for general
corporate purposes, including debt repayment and working capital.
As part of the debenture purchase agreement, the investors received exercise
warrants to purchase approximately two million common shares at an initial
exercise price of $9.81375 and supplemental warrants to purchase 200,000
additional common shares at the same price. The exercise warrants provided that
if our share price closed above approximately $20.44 for twenty consecutive
trading days, we could require the exercise of the warrants. We forced exercise
of the exercise warrants in February 2000. We issued 2,037,957 common shares
upon exercise of the exercise warrants. The exercise price paid by the investors
consisted of the cancellation of all the outstanding debentures with an accrued
value of approximately $15.2 million and approximately $4.8 million paid in
cash.
The front-end business finances its operations from the cash flows derived from
its business activities and from collateralization of fixed and current assets.
Back-end operations are entirely self-financed by ASM Pacific Technology. The
cash resources and borrowing capacity of ASM Pacific Technology are not
available to our front-end operations.
We support borrowings of our front-end subsidiaries with guarantees and we have
mortgaged our land and buildings and pledged trade receivables and inventory in
the Netherlands and pledged our shareholdings in our primary front-end
subsidiaries and in ASM Pacific Technology to secure our front-end borrowings.
The market value of our investment in ASM Pacific Technology at the end of 1999
was approximately (euro)333.9 million, which is substantially higher than the
market value at the end of 1998, which was approximately (euro)70.3 million.
MARKET RISK DISCLOSURE
We are exposed to currency fluctuations, most notably fluctuations of the United
States dollar, the Hong Kong dollar and the Japanese yen against the Euro. To
the extent that these fluctuations affect the value of our investments in our
affiliates, they are not hedged. The cumulative effect of these fluctuations are
separately reported in shareholders' equity and 1999 showed a positive movement
of (euro)9.5 million.
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Currency
Currency fluctuations that affect operating cash flows are hedged as a policy.
We view exposures on a consolidated basis and sell off or cover excess or short
positions, using spot or forward contracts which are entered into with
commercial banks of good standing.
The operations of our subsidiaries are generally financed with debt issued in
our subsidiaries' respective functional currencies. Thus, we believe we do not
have significant currency exposure related to our borrowings.
Interest Rates
A considerable percentage of our outstanding debt bears interest which is
typically variable in nature. We are exposed to interest rate risk primarily
through our borrowing activities. We do not enter into financial instrument
transactions for trading or speculative purposes or to manage interest rate
exposure. Therefore, an adverse change in the average interest rate from 7% to
8% on the portion of our debt bearing interest at variable rates would result in
an annual increase in interest expense of approximately (euro)1.2 million at
December 31, 1999 borrowing levels.
The Netherlands, our country of domicile, is one of the countries that
participates in the use of the Euro, the new currency unit that has been
available since January 1, 1999. Until 2002, the participating countries will
allow both the Euro and local currencies as legal tender. However, we expect
that most businesses will convert sooner rather than later, stimulated by the
development of a Euro denominated capital market for both public and private
funding. Our European operations will therefore use the Euro as their functional
currency as soon as possible after its introduction. The actual introduction is
not critical for our business but will depend on availability of reliable
software for accounting, payroll and other internal functions and will be
achieved over a period of time, but before 2002. The introduction of the Euro
will not significantly affect our currency profile or risk as the Euro has a
fixed exchange rate against the Netherlands guilder.
Effective for fiscal year 1999, we changed our reporting currency from
Netherlands guilders to Euros. Prior year balances have been restated based on
the fixed exchange rate of (euro)1.00 to Nlg. 2.20371. The comparative balances
reported in Euros depict the same trends as would have been presented if we had
continued to present balances in Netherlands guilders. Balances for periods
prior to January 1, 1999 are not comparable to the balances of other companies
that report in Euros but restated amounts from a different currency than
Netherlands guilders due to the fixing of the exchange rate between the Euro and
the currencies of participating countries. See Note A of the Consolidated
Financial Statements.
UPDATE ON YEAR 2000 COMPLIANCE
We did not experience any material difficulties in connection with the
changeover to the year 2000. Our in-house systems were switched off during the
actual changeover and a phased start-up of our systems and networks on January
1, 2000 did not reveal any issues, nor did the later normalized use of these
systems and networks. Access to and operation of our facilities were not
compromised.
We were asked to assist, and assisted, in the start-up of some older units in
our worldwide installed base. We are not aware of any millennium-related
disruption in connection with our products.
We estimate the total cost of our year 2000 compliance program at approximately
(euro)1.2 million, not including investments in software upgrades that we had
previously planned and accelerated in connection with the year 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
On December 3, 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition." The SEC Staff addresses several issues in SAB No. 101,
including the timing for
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recognizing revenue derived from selling arrangements that involve contractual
customer acceptance provisions where installation of the product occurs after
shipment and transfer of title. Our existing revenue recognition policy is to
recognize revenue at the time the customer takes title to the product, generally
at the time of shipment, because we routinely meet our installation obligations
and obtain customer acceptance. Applying the requirements of SAB No. 101 to our
present selling arrangements may result in a change in our accounting policy for
revenue recognition and the deferral of the recognition of revenues until
installation is complete and accepted by the customer. The effect of any change
would be recognized as a cumulative effect of a change in accounting no later
than the first half of 2000 and may impact the comparability of our revenues and
results of operations in the first half of 2000 with that in previous periods.
To the extent SAB No. 101 is relevant to our future equipment sales
arrangements, we intend to adopt the new accounting with effect from January 1,
2000. At the current time, we have not determined the effect, if any, this
change will have on our results of operations. However, we believe that the
effects on liquidity, cash flow and financial position will not be material. To
the extent it becomes relevant, we may consider potential changes to our
standard contracts for equipment sales that could mitigate the impact of SAB No.
101.
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BUSINESS
INTRODUCTION
We are a leader in the design, manufacture and sale of equipment and solutions
used to produce semiconductor devices, or integrated circuits. We enable our
customers to lower their production costs by providing leading-edge technology
solutions and efficient manufacturing processes. Our production equipment and
solutions are used by both the front-end and back-end segments of the
semiconductor market. Front-end equipment performs various fabrication processes
in which multiple thin films, or layers, of electronically insulating or
conductive material are grown or deposited onto a round slice of silicon, called
a wafer. Back-end equipment separates these processed wafers into numerous
individual dies, each containing the circuitry of a single semiconductor device,
and assembles, packages and tests the dies in order to create semiconductor
devices. We believe that the front-end and back-end react to different market
forces in the highly cyclical semiconductor industry and that operating in both
segments reduces the impact of business cycles on our operations.
Our front-end facilities in the Netherlands, the United States and Japan enable
us to adapt our products to local specifications and to interact closely with
customers in the world's major semiconductor design and wafer processing
markets: Europe, North America and Asia. Our products in the front-end market
segment grow or deposit thin films onto wafers primarily using a process called
chemical vapor deposition, or CVD. CVD deposits films on the wafer's surface
through chemical reactions using gases at high temperatures. Front-end
operations accounted for approximately 44% of our net sales in 1999.
Our back-end business is conducted through our facilities in Hong Kong,
Singapore and China, close to where most assembly and packaging operations are
located. Our products in the back-end market assemble and package individual
dies into finished semiconductor devices using stand alone and automated lines
of equipment. We also manufacture leadframes, copper carriers on which dies are
mounted as part of the back-end assembly process. Back-end operations accounted
for approximately 56% of our net sales in 1999.
INDUSTRY BACKGROUND
General
Semiconductor equipment sales depend significantly upon the level of capital
expenditures by semiconductor manufacturers, which in turn depends significantly
upon the current and anticipated market supply and demand for semiconductor
devices and products using semiconductor devices. Growth in the semiconductor
market is being fueled by rapidly expanding end-user demand for smaller,
less-expensive and better-performing electronic products which has led to an
increased concentration of semiconductor devices in electronic products.
Worldwide semiconductor device sales were expected to reach $155 billion in
1999, as estimated by Dataquest, an independent market research company. From
1999 to 2002, Dataquest estimates that the semiconductor industry will grow at a
compounded annual growth rate, or CAGR, of 17.4% per year. Worldwide
semiconductor equipment sales were expected to reach $28.7 billion in 1999 as
estimated by VLSI Research, Inc., or VLSI, an independent market research
company. From 1999 to 2002, VLSI estimates that the semiconductor equipment
industry will grow at a CAGR of 28.4% per year.
Semiconductor Manufacturing Process
The semiconductor equipment market is comprised of two segments: the front-end
and the back-end.
Front-end Processes. During front-end wafer processing, multiple thin films of
either electronically insulating material, also called dielectrics, or
conductive material are grown or deposited on a wafer measuring 100 mm, or four
inches, to 300mm, or twelve inches, in diameter. A finished wafer may contain a
few dozen to several thousand individual dies. Each die consists of a series of
layers which together form
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the millions of microscopic transistors and other components which interact to
perform specific electronic functions. Front-end processes are performed either
one wafer at a time in single wafer processing systems or many wafers at a time
in batch processing systems. Multiple processes are repeated on each layer as
the wafer is processed. The number and precise order of the process steps varies
depending upon the complexity and design of the device. The performance of the
device is determined in part by the various electrical characteristics of the
materials used in the layers of the device and the wafer. The front-end
production phase is capital intensive, generally requiring multiple units and a
range of different types of processing equipment in a fabrication line. The
various steps involved in front-end processing are described below.
- Epitaxy involves the deposition of silicon or silicon compounds on the
wafer, continuing and perfecting the crystal structure of the bare wafer
underneath. Epitaxy improves the electrical characteristics of the wafer
surface, making it suitable for highly complex microprocessors and memory
devices.
- Ion Implantation is a process in which wafers are bombarded with ions to
introduce dopant atoms, or impurities, into the wafer to improve its
electrical characteristics. Silicon conducts little or no electricity. In
order to have electrical current within a layer, it is necessary to place
small amounts of impurities into the layer.
- Diffusion and Oxidation are high-temperature processes which change the
electrical characteristics of layers. Diffusion is used to make
impurities introduced by ion implantation electrically active. Oxidation
forms a silicon oxide layer on the wafer's surface, which acts as an
insulative or protective layer over the wafer's surface.
- Low Pressure Chemical Vapor Deposition, or LPCVD, performs CVD under high
temperature, low pressure conditions to deposit insulating or conductive
layers.
- Plasma Enhanced Chemical Vapor Deposition, or PECVD, performs CVD
enhanced by the use of an electrically-charged vapor, or plasma, at lower
temperatures. After the first metal layer has been deposited on the
wafer, LPCVD and diffusion can no longer be used because they will melt
the metal. Any subsequent deposition must be performed at low
temperatures.
- Atomic Layer Chemical Vapor Deposition, or ALCVD, is an advanced CVD
technology which deposits single atomic layers on wafers one at a time at
low temperatures. This process is used to create ultra-thin films of
exceptional quality and flatness.
- Rapid Thermal Processing, or RTP, is used to expose single wafers to heat
over a short period of time.
- Physical Vapor Deposition, or PVD, deposits a thin layer of metal on the
wafer surface for electrical contacts and wires through a process called
"sputtering."
- Lithography is used to print the various layer patterns of the
semiconductor device on the uppermost layer of the wafer. These patterns
determine the functions of the semiconductor device.
- Etch reproduces the pattern imprinted by lithography by removing excess
material from the uppermost layer of the wafer.
- Clean removes undesirable contaminants from the wafer's surface.
- Chemical Mechanical Planarazition, or CMP, is a relatively new technology
which planarizes, or levels, layers deposited on wafers by polishing them
with a chemical solution called slurry. Planarization reduces the
vertical height differences of the various layers. This increases the
number of layers which can be processed without introducing reliability
problems.
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- Metrology is used to measure the width of lines on semiconductor devices,
the thickness of layers, the surface profiles of layers, and certain
electrical properties of layers.
- Probing is a process in which electrical and functional tests are
performed on each die and defective ones are marked.
Back-end Processes. The back-end manufacturing process consists of cutting the
processed wafer into individual dies, mounting them on carriers such as
leadframes and connecting them to the appropriate electrical leads. Wire bonding
onto leadframes is the most common interconnection method, although alternative
interconnection techniques and materials, such as ceramic packages, flip chips
and different chip-scale packaging methods, are available. After the assembly
process, the dies are packaged to protect them from environmental influences and
prepare them for use, resulting in completed semiconductor devices. Each of
these steps is described below.
Materials:
- Leadframes are produced by stamping or etching a pattern through a strip
of copper and then plating a portion of the pattern with silver to enable
reliable wire bonding.
Assembly:
- Die Separation separates the dies on the wafer into individual units
using wafer saws.
- Die Bonding mounts the dies onto carriers such as leadframes using a die
bonder.
- Wire Bonding attaches extremely thin gold or aluminum wires between the
die and the leadframe for electrical connections using a wire bonder.
- Unit Inspection inspects each die throughout the assembly process and
prior to packaging.
Packaging:
- Encapsulation or Molding encases the dies in a protective housing, often
epoxy, using transfer molds.
- Plating coats exposed tips of leads in order to improve their ability to
be soldered onto printed circuit boards.
- Trim and Form cuts away the excess portion of the leadframe and bends the
leads into the desired shape, resulting in the completed semiconductor
device.
- Final Testing tests the performance of the completed semiconductor
device.
Industry Trends
To create increased demand for semiconductor devices, semiconductor
manufacturers have sought to enhance the performance, decrease the size, and
lower the cost of semiconductor devices. These goals are being achieved by
introducing new materials and technologies, reducing line widths, increasing
wafer size and improving yield. The number of dies that can be processed in a
fixed number of manufacturing steps is increasing, leading to lower cost by
leveraging the costs of equipment over more units. New technologies and
materials, and line width reductions, require advanced, and frequently changing,
manufacturing solutions, resulting in many challenges for semiconductor
equipment suppliers.
Decreasing the line widths in semiconductor devices makes them both faster and
smaller. Since more devices with smaller line widths can be placed on a wafer,
cost per unit also decreases. Currently, line widths of 0.18 microns are moving
into production and the industry is preparing to transition to 0.13 and 0.10
microns. A micron is 1/25,000 of an inch.
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Semiconductor manufacturers are also seeking to reduce the cost of producing
semiconductor devices by increasing the diameter of the wafers on which the
semiconductor devices are being layered. The maximum diameter of wafers is in
the process of increasing from 200mm, or eight inches, the current industry
standard, which was introduced in the early 1990s, to 300mm, or twelve inches.
The move toward larger wafer sizes is driven by cost efficiency, since a 300mm
wafer holds approximately 2.4 times more dies than a conventional 200mm wafer.
Although this development is still at an early stage, significant investments
are being made by semiconductor equipment manufacturers to develop processes and
equipment compatible with this larger wafer size and pilot lines have been
announced by leading semiconductor manufacturers.
Furthermore, in order to increase performance, new materials are being used to
produce semiconductor devices, such as copper interconnects for better
conductivity, which in turn require new isolation layers. Semiconductor
equipment manufacturers are using existing as well as new manufacturing methods
of deposition, cleaning and lithography to enable the use of such new materials.
To achieve improved yield, semiconductor devices must be manufactured in
environments with very low levels of contaminants. Semiconductor equipment
manufacturers have responded to this requirement by offering equipment that
isolates, within a controlled mini-environment, several chambers corresponding
to different steps of the semiconductor manufacturing process and by developing
factory automation which reduces human involvement. Developments in metrology
are also contributing to improvements in yield. The measurements conducted by
metrology equipment are becoming a more integral part of the semiconductor
manufacturing process. Semiconductor manufacturers are requiring equipment that
can make more precise and new kinds of measurements, and provide results of
these measurements faster by integration of the measurement tools into the
processing equipment.
Technological developments in the front-end have resulted in the need for new
solutions in the back end. For example, shrinking dies and line widths require
wire bonders that are capable of attaching finer wires in smaller spaces. In
addition, semiconductor manufacturers are looking to automation and integration
of back-end equipment as ways to reduce costs and increase productivity.
Over the coming years, these trends, which fuel the growth of the semiconductor
equipment industry, are expected to create the need for new equipment solutions.
THE ASM INTERNATIONAL SOLUTION
Our products offer leading-edge, cost-effective solutions for semiconductor
manufacturing. We leverage our critical mass, broad range of products,
leading-edge technology and strong global infrastructure to develop innovative
product solutions for the front-end and back-end markets. We aim to provide our
customers with the means to manufacture better, smaller and less expensive
semiconductor devices. Examples of where our products have solved critical
manufacturing issues include the following:
Deposition of Thin Films. In response to the technology challenges posed by the
reduction in line widths, we are offering the industry ALCVD, a new method of
depositing very thin films consisting of existing as well as new materials. We
are a leader in the development of process solutions using this technology,
which we are protecting by an expanding portfolio of patents. With ALCVD, we
offer new applications such as diffusion barriers and seed layers, required when
applying copper in semiconductor devices. We also offer new PECVD process steps
resulting in isolation layers with the low electrical constant necessary to
insulate the copper layers in the semiconductor devices.
Deposition of Advanced Materials. Our systems offer semiconductor manufacturers
a flexible solution to a critical step in the manufacture of high frequency
transistors used in broadband wireless applications. We believe we are the
largest supplier of epitaxy systems used to process silicon germanium, which has
been gaining acceptance as a material for communications devices. Our Epsilon
system's reaction chamber is very flexible and can be easily used for depositing
a variety of silicon germanium layers. Our equipment
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consistently provides well-controlled composition of silicon germanium layers
for enhanced semiconductor device speed and performance.
Integrated Metrology. We believe we are one of the only semiconductor equipment
manufacturers that offers metrology integrated within semiconductor equipment to
measure layer thickness, uniformity and particle count. This equipment allows
the customer to reduce cycle time, increase yield and throughput, and lower cost
of production.
300mm Equipment. We enable our customers to realize cost efficiencies by
processing more dies per machine cycle. We have developed equipment capable of
processing wafers with a diameter of 300mm.
Fine Pitch Capability. In order to help our customers increase the functionality
of a semiconductor device at a given constant size and produce smaller
semiconductor devices, we offer gold wire bonders with a pitch of 45 microns,
which we believe is the smallest fine pitch capability in the industry.
Cost Savings in the Back-end. We realize cost savings that we pass on to our
customers. Our back-end facilities are located in Asia. This enables us to take
advantage of low labor and manufacturing costs. Labor costs are a significant
portion of the operating expense associated with producing back-end
manufacturing equipment. Approximately two-thirds of our back-end employees are
located in China, where we have made a significant investment in a large scale
precision machining operation. Asia generally has lower labor costs than the
United States, Europe and Japan, where our principal competitors are located.
Automation in the Back-end. We address our back-end customers' increased need
for automation. As the only producer of a fully-automated back-end production
line including die bonding, wire bonding, encapsulation and trim and form, we
enable our back-end customers to meet their total system requirements by
offering an innovative solution for most assembly and packaging steps, built
with our own modular hardware and software. This integrated and automated
process sequence, called IDEALine, reduces costs and increases productivity for
our customers.
STRATEGY
Our objective is to enhance our position as a leading global semiconductor
equipment manufacturer in both the front-end and back-end segments of the
semiconductor industry. Since the industry cycles in these two segments are
different, our broad participation should reduce the impact of the cyclicality
that is characteristic of our industry. The key elements of our strategy
include:
Enhance Market Leadership in Deposition of Thin Films. We focus our product
offerings in the front-end market on equipment related to the deposition of thin
films. We recently acquired ALCVD technology which complements our epitaxy,
LPCVD and PECVD deposition technologies. We intend to increase the process
capability of our existing deposition products. For example, we plan to continue
our leadership in the silicon germanium market by aggressively investing in
process research and development for our Epsilon products. We also aim to expand
our PECVD market share by developing new processes for our Eagle products.
Leverage Existing and New Technologies to Enhance Market Position.
- We intend to leverage our strong technological capabilities to capture
market share upon shifts in technology. We believe, for example, that we
have successfully implemented this strategy to position ourselves for the
shift to 300mm wafer processing in the front-end market and for the shift
to the integration of multiple processes into in-line systems in the
back-end market. In addition, we intend to enter the market with or
expand the market penetration of our new products such as ALCVD and RTP.
We believe that ALCVD will replace PVD for barrier and seed layers in
copper metallization. VLSI projects the market for barrier films will
reach approximately $867 million in 2002. Our new RTP technology is
positioned to replace existing lamp-heated RTP
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systems in particular applications. VLSI projects the market for all RTP
equipment will reach approximately $742 million in 2002.
- We intend to continue developing process applications with the
Inter-University Center for Microelectronics, also called IMEC, to
enhance our research and development capabilities. Our relationship with
IMEC allows us to compete with semiconductor equipment manufacturers with
greater resources than we have. IMEC is an internationally recognized
independent research laboratory with over 700 employees located in
Leuven, Belgium, which develops and enhances technology and integrated
processes for the semiconductor industry. IMEC is funded by contract
research and European grants. Through our presence at IMEC we have the
means necessary to test integration of our processes into a full process
flow. This ability allows us to develop better processes for our
customers, shortening their time-to-market.
- Although we have a history of successfully developing new technologies
and products internally, and are committing substantial resources to
continue our research and development efforts, we may from time to time
acquire technologies, licenses or products from third parties. In
comparison with internal research, such acquisitions may considerably
speed up the development of products and applications and reduce the time
to market for new solutions.
Continue to Expand Intellectual Property Portfolio. We intend to continue
focusing on protecting our intellectual property. For our front-end business we
have adopted a proactive policy of filing patent applications relating to key
developments in our equipment, software and processes. By patenting our
technological innovations we expect to position ourselves better in the market.
In addition, we aim to minimize costly patent infringement litigation in the
future.
Continue to Provide Global Customer Support. We believe that maintaining
facilities in many parts of the world is an important element in establishing
and maintaining long term customer relationships that are often the basis upon
which a semiconductor manufacturer selects an equipment supplier. Further, we
intend to enhance the benefits provided by our products by continuing to build
customer loyalty through the quality of our service and support. We also intend
to leverage relationships with our customers to allow for wider cross-sales to
these customers of products that they are not currently purchasing from us.
Continue to Vertically Integrate Back-end Production. We will continue to
enhance the efficiency and productivity of our back-end business by controlling
all aspects of the products and services we provide. We maintain our own
production facilities at which we manufacture the various component parts of our
back-end equipment. This vertical integration allows us to better serve our
customers by increasing the quality and reliability of our products and services
and decreasing our costs and time-to-market.
PROCESS TECHNOLOGY
We combine hardware, software and processes to develop innovative product
solutions for the creation of thin films on silicon wafers. These films, etched
in certain well-defined sub-micron patterns, form transistors and
interconnection circuitry connecting those transistors. Our equipment controls
the properties of such films and assures that they are deposited on atomically
clean surfaces.
Films can be formed in several ways. For example, the surface of a wafer can be
exposed to oxygen to form a layer of silicon oxide, an insulator. A film can
also be deposited onto the heated surface of a wafer by introducing gas
compounds, usually at low pressure, in a CVD process. The CVD process can be
used to deposit conductive or insulating films. More complicated technologies
are used to deposit films at lower temperatures using PECVD. ALCVD grows the
films one atomic layer at a time, and is used when extremely high quality and
very flat films are required. We have products which perform all of these
deposition processes.
Generally, the complexity of semiconductor devices has been doubling every 18
months, and we expect this trend to continue. As microprocessors and circuits
become denser and faster, they require new
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structures and materials for the transistor, new interconnect materials such as
copper, and new techniques to contact the terminals of the transistors. Denser
memories require technologies to store more charge per unit area, and the fast
growing wireless market is imposing new demands on transistor speed. We have
equipment that is fulfilling the current needs of our customers, and we are
developing the equipment that should allow our customers to respond to the
evolving needs of the industry.
We believe we have positioned ourselves to supply the equipment for the next
generations of semiconductor devices.
- Gates are the switching terminals that turn a transistor on or off. The
main challenge is to make the gate thinner without sacrificing
reliability. We are working on effective gates that, eventually, should
be less than five atoms thick. This will require new materials and new
cleaning technologies. Our experience in current gate manufacturing by
oxidation in the Advance series vertical batch reactors, and our position
in advanced vapor cleaning technology and ALCVD for atomically controlled
deposition, should position us ideally for responding to this technology
shift.
- Capacitors store electrons as the memory in dynamic random access memory,
or DRAM, or function as passive devices in wireless applications. These
too need to be made smaller and smaller, thus requiring more electrons to
be stored in a smaller area. The enhancement of the surface area of a
capacitor by a special CVD process, which forms hemispherical silicon
grains, was pioneered by us. Our Advance series reactors currently
provide the solutions for this application. As with the manufacturing of
gates, our position in cleaning and ALCVD should allow us to develop new
materials for capacitors that store more electrons.
- Interconnect uses conductors and insulators to connect the millions of
transistors to form functional devices. A typical logic device has six to
ten interconnect levels. As more and more interconnect lines are being
packed in a smaller space, interaction between electrical signals in
adjacent lines becomes a problem. Our Eagle product line with its Aurora
2.7 PECVD process provides solutions for deposition of a new insulator
that minimizes this interaction. The industry is also moving to copper as
the conductor of choice, replacing aluminum. Copper has a lower
resistance than aluminum, increasing speed. Trenches in which the copper
will have to be deposited will get narrower and deeper, making it very
difficult to deposit a good quality film in the bottom of a trench with
conventional CVD or PVD technology. We believe our ALCVD technology will
ultimately replace PVD technologies for the barriers and seed layers
needed for a copper based interconnect.
- Terminals of the silicon transistor will have to be connected to the
metal based interconnect structure. This contact from silicon to metal
will become increasingly shallower as devices shrink, and it will be
increasingly difficult to make good electrical contact. Alternative
annealing technologies with faster ramp rates and better temperature
control will become important. We believe the Levitor RTP system has much
better temperature control and faster ramp rates than current lamp-heated
RTP techniques, thus allowing our customers to manufacture and contact
even smaller transistors.
- Silicon germanium deposition is fast becoming a critical process step for
the manufacturing of high frequency transistors for many broadband
wireless and internet related applications. Devices will need to be
processed at lower temperatures with better control of layer composition
to increase the frequency at which transistors can operate. We believe
that our Epsilon reactor is the current leader in the field for the
epitaxial deposition of silicon germanium. We are working on lower
temperature cleaning and deposition processes, as well as on improving
the silicon germanium layers by adding small amounts of carbon. These
efforts should enable our customers to make the devices for future
wireless communications.
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<PAGE> 41
These examples focus on single wafer technology. However, we believe many
customers will continue to use vertical batch furnace technology for many years,
and that this market will continue to grow. We believe we are positioned to meet
the needs of customers both for batch and single wafer processing.
Where applicable, we have developed 300mm versions of our products and are
testing them in customers' sites. Products in development are mostly designed as
bridge tools, compatible with both 200 and 300mm, or designed for easy scale-up
from 200 to 300mm.
PRODUCTS
We design, manufacture and sell products used in both front-end wafer processing
and back-end assembly, packaging and materials. The following table sets forth
the main manufacturing processes used in the front-end and back-end market
segments and indicates the markets in which we participate.
<TABLE>
<CAPTION>
FRONT-END BACK-END
-------------------------------------------------- ---------------------------------------------------
DEPOSITION OTHER PROCESSES TESTING MATERIALS ASSEMBLY PACKAGING
--------------- ------------------ --------------- -------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Diffusion
Epitaxy* and Metrology* Leadframe Die Separation Encapsulation*
Oxidation* Manufacture*
-------------------------------------------------------------------------------------------------------
Low Pressure Ion Probing Manufacture Die Bonding* Package
CVD* Implantation of Other Plating
Materials
--------------- ------------------ --------------- -------------- ------------------- ----------------
Plasma Lithography Wire Bonding* Trim and Form*
Enhanced CVD*
--------------- ------------------ --------------- -------------- ------------------- ----------------
Atomic Etch Unit Final Testing
Layer CVD* Inspection*
--------------- ------------------ --------------- -------------- ------------------- ----------------
Physical
Vapor Clean**
Deposition
(PVD)
--------------- ------------------ --------------- -------------- ------------------- ----------------
Chemical
Rapid Thermal Mechanical
Processing* Planarization
(RTP) (CMP)
--------------- ------------------ --------------- -------------- ------------------- ----------------
</TABLE>
* Indicates markets in which we participate.
** We participate in advanced cleaning technologies integrated within our
deposition equipment.
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<PAGE> 42
Front-end Products
The following table lists our principal front-end equipment and the years in
which initial production units were first made available to customers.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
KEY YEAR
PRODUCT FAMILY PROCESSES PRODUCTS INTRODUCED
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Epsilon One(1) 1988
Epsilon Two(1) 1990
Single Wafer Thermal - Epitaxy Epsilon 2000 1997
CVD Systems - CVD Epsilon 2500 1997
Epsilon 3000 (300mm) 1997
- --------------------------------------------------------------------------------------------------
- LPCVD Advance 400 series 1994
Vertical Batch - Diffusion Advance 600 UHV 1996
Processing Systems - Oxidation Advance 412 (200 and 300mm) 1998
- --------------------------------------------------------------------------------------------------
Eagle 10 (2 chambers)
Single Wafer Plasma Eagle 10 Trident (3 1993
Enhanced CVD - PECVD chambers) 1997
Systems Eagle 12 Rapid Fire (300mm) 1998
- --------------------------------------------------------------------------------------------------
F 120(3) 1998
Single Wafer Atomic - ALCVD F 450 and F 950(3) 1997
Layer CVD Systems Pulsar 2000 (200 and 300mm) 1999(2)
- --------------------------------------------------------------------------------------------------
Single Wafer RTP - Anneal
Systems - Oxidation Levitor 1999(2)
- --------------------------------------------------------------------------------------------------
Polygon 8200 1997(2)
Single Wafer Cluster - Cluster Vapor Clean Module 1999(2)
Systems and Modules Epsilon 2500 Module(4) 1997(2)
Processes Pulsar 2000 Module(4) 1999(2)
- --------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
(1) This product has been replaced by the Epsilon 2000 and Epsilon 2500.
Although it is no longer sold, it still forms an important part of our
installed base and generates service and spare parts revenue.
(2) We have introduced this product and expect to ship the first commercial unit
sometime in 2000.
(3) Used for non-wafer applications such as flat panel displays and magnetic
heads.
(4) The Epsilon and Pulsar modules share the same reactor section as the Epsilon
and Pulsar single wafer stand-alone systems.
Single Wafer Thermal CVD Systems. Our Epsilon products heat wafers to high
temperatures using infrared lamps, forming a film on the surface of the wafer by
applying CVD. The main current use of the Epsilon is for epitaxy of silicon and
silicon germanium alloys. Silicon germanium alloys are used in the fast-growing
telecommunications market. We believe that the Epsilon 2000 is leading the
industry in silicon germanium applications with a large installed base. We also
believe that a high productivity version of the Epsilon, the Epsilon 2500,
offers the highest throughput in the industry for epitaxial silicon
applications. Our Epsilon 3000 produced the first commercial 300mm wafers with
epitaxial layers in 1997.
Vertical Batch Processing Systems. The Advance 400 series and Advance 412
vertical batch processing systems process up to 150 wafers at a time at high
temperatures. These reactors load wafers into a carrier, which is pushed into
the heated reactor for diffusion, oxidation or LPCVD processing. The Advance
reactors feature dual carriers and a large work in process wafer storage
station. We believe our Advance reactors achieve the lowest production cost per
wafer in the industry. The Advance 600 is an ultra-high vacuum, or UHV, vertical
batch reactor. The Advance 600 processes up to 100 wafers per carrier. Wafers
are handled and processed in an extremely clean UHV atmosphere to guarantee
cleanliness of the deposited material. Up to two reactors can be clustered on a
single UHV wafer handler. The Advance 600
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<PAGE> 43
is mainly used in a process to enhance the surface area in a DRAM capacitor
structure. This product enables our customers to make smaller memory cells, and
therefore smaller semiconductor devices.
Single Wafer Plasma Enhanced CVD Systems. The Eagle 10 and Eagle 12 series
reactors are single wafer systems which deposit films on wafers using PECVD. The
Eagle systems are mostly used for depositing insulators, such as silicon oxide
and silicon nitride, used in interconnect circuits. The Eagle 10 Trident and
Eagle 12 Rapidfire (300mm) have three chambers configured for enhanced
productivity. The simplicity of these systems results in low cost, high
reliability and low maintenance requirements. The Eagle reactors also perform a
new insulating film deposition process with a low dielectric constant, or "k"
value, of 2.7 called Aurora 2.7. This process reduces the interaction between
adjacent conductors such as copper lines, and increases the speed of the
circuitry.
Single Wafer Atomic Layer CVD Systems. Our ALCVD product is being introduced in
the semiconductor market but is already in commercial production in the markets
for flat panel displays and magnetic heads. We offer both stand alone equipment
and modules that can be integrated with our cluster systems. At the end of 1999,
our installed base amounted to approximately 40 systems, many of which are in
research and development areas.
Single Wafer RTP Systems. We are bringing to the market a new hardware solution
for process steps that require RTP. This new product is called Levitor. In the
Levitor, the wafer floats on a cushion of gas and does not require lamps for
heating. Compared to existing lamp-based RTP systems, we believe the Levitor
allows very fast heating and cooling of the wafers and offers an efficient and
cost-effective solution. We expect to install the first systems during 2000 with
some selected customers to further test and finalize the concept. We do not
expect to make commercial sales of RTP before the end of 2000.
Single Wafer Cluster Systems and Modules. For selected new processes such as
gate stacks and barrier and seed layers for dual damascene, several layers have
to be deposited on the wafer without allowing them to be contaminated by air.
Our Polygon single wafer systems allow the integration of up to four modules on
a single vacuum handler. We currently have available the Epsilon 2500 module,
based on the Epsilon 2500 reaction chamber, the Pulsar 2000 ALCVD module, and a
vapor clean module to clean unwanted oxide from the incoming wafer with a
patented process.
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<PAGE> 44
Back-end Products
The following table lists our principal back-end products, and the years in
which initial production units were first made available to customers.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
KEY YEAR
PRODUCT FAMILY PROCESSES PRODUCTS INTRODUCED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AD809 1990
-------------------------------------------
AD829 1994
-------------------------------------------
Die Bonding AD819 1998
-------------------------------------------
AD889 1998
----------------------------------------------------------------------------------
Assembly Epoxy Curing CO109 1990
----------------------------------------------------------------------------------
AB356 1995
-------------------------------------------
AB510 1997
-------------------------------------------
Wire Bonding AB559A 1997
-------------------------------------------
AB339 1997
- -------------------------------------------------------------------------------------------------------------------
EM649 1997
-------------------------------------------
Encapsulation PMC109 1999
-------------------------------------------
Packaging IDEALmold 2000
----------------------------------------------------------------------------------
Trim and Form MP209 1996
-------------------------------------------
BGA209 1996
- -------------------------------------------------------------------------------------------------------------------
Full integration of the above
Automated Systems assembly and packaging steps into one IDEALine 1999
system
- -------------------------------------------------------------------------------------------------------------------
Manufacture of carriers on which dies
Materials are mounted Leadframes 1975
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Die bonding. We manufacture several die bonding models to address several
markets including semiconductor and optoelectronic devices. The AD889 features
an automatic wafer handling system, programmable epoxy dispensing system and
sophisticated inspection and pattern recognition systems. The AD889 has a high
throughput at relatively low cost. The AD829 and AD809 models address the large
market for die sizes under 30 mils square. A mil is 1/1000 of an inch. In
addition to the simple semiconductor device market, the small die category
includes optoelectronic devices. The model AD819 is a high precision machine
designed for laser diode optoelectronic devices. Machines may be configured to
operate stand-alone or connected to epoxy curing ovens and wire bonders.
Wire bonding. We introduced our AB339 gold wire bonder in early 1997. The AB339
has fine pitch capability, an ultralight bond head, advanced pattern recognition
software and automatic wire bond inspection capability. We have enjoyed market
success with the AB339 due to its industry leading fine pitch capability and
favorable price/performance ratio. The AB510 and AB559A are ultrasonic wedge
bonders used for aluminum wire bonding at room temperature on printed circuit
boards. These machines address the consumer products market which focuses on
cost effective solutions. The AB356 is a gold wire bonder that serves the large
substrate/hybrid device market. In 2000, we will launch a new generation of gold
wire bonder, the AB339 Eagle. This machine will offer significant output
increase over existing models.
Encapsulation. The EM649 features a very fast load/unload time, and uses modular
components for rapid product conversion and adaptable system configuration,
which makes it very flexible. The EM649 is offered in stand alone and in-line
configurations. In 2000 we have introduced the IDEALmold, specifically designed
to be manufactured in a modular format allowing customers to specify the system
capacity from two to eight leadframes. This product specifically addresses the
in-line market which requires molding
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<PAGE> 45
systems of varying capacities to allow for proper line balancing. The PMC109
allows customers to directly transfer encapsulated semiconductor devices to a
high capacity multi-chamber oven for continuous automatic post mold curing of
epoxy molding compound.
Trim and Form. Our MP209 is a high speed, motorized trim and form equipment
catering to different packages. The modular set-up of the system allows
integration of third party testing, marking and inspection functions, which in
turn allows more cost efficient production for our customers. These systems may
also be integrated into our IDEALine.
Automated Systems. The IDEALine integrates back-end assembly and packaging
equipment. We believe we are the only manufacturer of back-end equipment capable
of offering such an extensive integrated line using our own equipment. These
lines integrate serial process steps with mechanical and software linkages.
Offered in a modular format, customers may integrate some or all of the
following processes that we supply: die bonding and inspection, epoxy curing,
wire bonding and inspection, encapsulation, post mold curing and trimming and
forming. In addition we work with third party suppliers to offer various
additional processes.
CUSTOMERS
We sell our products predominantly to manufacturers of semiconductor devices and
manufacturers of silicon wafers. Our customers include most leading
semiconductor and wafer manufacturers. Our customers vary from independent
semiconductor manufacturers that sell their products on the open market, to
large electronic system companies that manufacture semiconductor devices for
their own use. While some semiconductor manufacturers have consolidated in
recent years, the number of foundries and semiconductor assemblers has been
expanding rapidly.
The following table lists customers accounting for (euro)2.5 million or more of
our net sales in 1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TYPE OF
SEGMENT CUSTOMER CUSTOMERS
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Infineon Technologies Motorola Sony
Institut Fuer Halbleite Nan-ya ST Microelectronics
Front-end Semiconductor Device Maxim NEC Texas Instruments
Manufacturers Mitsubishi Philips UMC Group
Seiko Epson Corp. VLSI Technology
----------------------------------------------------------------------------------------------
Wafer Manufacturers Wacker
- ---------------------------------------------------------------------------------------------------------------------
Fairchild Linear Nichia
Back-end Semiconductor Device Lite-On Lucent Philips
Manufacturers Microchip ST Microelectronics
----------------------------------------------------------------------------------------------
AIC ASE NS Electronics
Alphatec Carsem OSE
Assemblers Amkor Anam Hana PT Astra
ST Assembly Test Services
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Our largest customer accounted for approximately 11% of our net sales in 1999.
Our ten largest customers accounted for approximately 43% of our net sales in
1999. Historically, a significant percentage of our net sales in each year has
been attributable to a limited number of customers; however, the largest
customers for our products may vary from year to year depending upon, among
other things, a customer's budget for capital expenditures, plans for new
fabrication facilities and new product introductions.
45
<PAGE> 46
CUSTOMER SERVICE
We provide responsive customer technical assistance to support our marketing and
sales. Technical assistance is becoming an increasingly important factor in our
business as most of our equipment is used in critical phases of semiconductor
manufacturing. Field engineers install the systems, perform preventive
maintenance and repair services, and are available for assistance in solving
customer problems. Our global presence permits us to provide these functions in
proximity to our customers. We also maintain local spare part supply centers to
facilitate quick support.
We provide maintenance during the product warranty period, usually one to two
years, and thereafter perform maintenance pursuant to individual orders issued
by the customer. In addition to providing ongoing service, our customer service
operations are responsible for customer training programs, spare parts sales and
technical publications. In appropriate circumstances, we will send technical
personnel to customer locations to support the customers for extended periods of
time to optimize the use of the equipment for the customer's specific processes.
For front-end, where the availability of field support is particularly important
for a sale, there are approximately 190 support staff employees, or 23.8% of our
total employees.
RESEARCH AND DEVELOPMENT
We believe that our future success depends to a large extent upon our ability to
develop new products and to add improved features to existing products.
Accordingly, our centralized product development policies and local activities
are directed toward expanding and improving present product lines to incorporate
technological advances and enable timely penetration of new markets for
automated semiconductor processing, assembly and packaging equipment. These
activities require the application of physics, chemistry, process technology,
electrical engineering, precision mechanical engineering and software
development. We are also continuing to develop new applications as well as
software and hardware for our back-end products.
Our net research and development expenses were 11.4% of net sales during 1999,
12.6% of net sales during 1998 and 12.1% of net sales during 1997. We expect to
continue investing significant resources in research and development to enhance
our product solutions.
Our research and development activities are conducted in the principal
semiconductor markets of the world, which enables us to draw on innovation and
technical capabilities on an international basis. Each geographic center
provides expertise for specific products or technologies. This approach,
combined with interactions between the individual centers, permits efficient
allocation of technical resources and allows for customer orientation combined
with the necessary product specialization.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NUMBER OF R & D
BUSINESS SEGMENT LOCATION EMPLOYEES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Bilthoven, the Netherlands 32
Leuven, Belgium (IMEC) 19
Front-end Espoo, Finland 14
Phoenix, Arizona, United States 36
Tama, Japan 32
- ----------------------------------------------------------------------------------------------------
Back-end Hong Kong 246
Singapore 155
- ----------------------------------------------------------------------------------------------------
</TABLE>
As part of our research and development activities, we are engaged in various
formal and informal arrangements with customers and institutes. These
arrangements are made on a development program basis and allow us to develop
products that meet customer requirements and obtain access to new technology and
expertise. We currently are engaged in a development program with several
customers for
46
<PAGE> 47
300mm applications of our Eagle products. The Eagle 10 was developed in close
collaboration with Japanese customers, while the Advance 400 product performance
was enhanced in cooperation with a number of customers. The A-600 UHV was
further upgraded in cooperation with a major Japanese customer. In cooperation
with Semitool Inc., a United States supplier of copper plating equipment, and
IMEC, we are developing production solutions for copper applications.
We participate in European programs focusing on developing the production
technology for semiconductor devices with line widths of 0.13 and 0.10 microns.
We are the project manager in a number of projects that were awarded under the
European Strategic Program for Research and Development in Information
Technology, or ESPRIT, an initiative of the European Union. Furthermore, since
1990, the board of Micro Electronics Development for European Applications, or
MEDEA, an initiative of the European Union, and its predecessor approved
extensive development programs in which we are a leading partner. We are
currently working on a project with MEDEA in connection with possible uses of
our ALCVD technology. Mr. Arthur H. del Prado, our President and Chief Executive
Officer, is a member of the board of MEDEA.
The integration of new product solutions into process modules is done in ASM
Europe's application lab, which shares IMEC's clean rooms in Leuven, Belgium.
This integration within the IMEC facilities gives us access to all additional
process steps needed to create sub-micron devices, including sub-micron
patterning. Development programs on process for a customer application are
usually done with active participation of IMEC, suppliers of complementary and
non-critical equipment, and end-users of our products.
In addition to cooperating with third parties such as customers and other
equipment companies in research and development projects, we enter into projects
with technical universities, in particular in the Netherlands, Japan and
Finland. As part of these projects, we may sell our equipment to customers who
will use grants or research loans to acquire these products or we may receive
grants or research loans directly. We have received such loans in the past from
the Netherlands government, of which (euro)11.9 million was outstanding at
December 31, 1999, and are repaying these loans from the sales proceeds of the
products developed with their assistance up to one hundred percent of the
amounts of the loans. Our subsidiary, ASM Microchemistry, received similar loans
from the Finnish government.
MARKETING AND SALES
We sell and market our products with the objective of developing and maintaining
an ongoing, highly interactive service and support relationship with our
customers. Our marketing strategy includes advertising and participating in
various industry trade shows. We provide prospective customers with extensive
process and product data, provide opportunities for tests on demonstration
equipment and, if required, make evaluation equipment available at the
customer's site. Once equipment has been installed, we support our customers
with, among other things, extensive training, on-site service, spare parts and
process support. All of this is further supported by in-house development to
enhance the productive life of existing equipment. We make hardware improvements
available in the form of retrofit kits as well as joint development with our
customers of new applications. We encourage our engineers to submit technical
papers in relevant magazines and to give lectures in symposia.
We also install our equipment with semiconductor manufacturers for evaluation in
order to strengthen our existing customer relationships as well as develop new
customers.
Because of the significant investment required to purchase our systems and their
highly technical nature, the sales process is complex, requiring interaction
with several levels of a customer's organization and extensive technical
exchanges, product demonstrations and commercial negotiations. As a result, the
full sales cycle can be as long as 12 to 18 months for sales of front-end
equipment and three to six months for sales of back-end equipment. Purchase
decisions are generally made at a high level within a customer's
47
<PAGE> 48
organization, and the sales process involves broad participation across our
organization, from senior executive management to the engineers who designed the
product.
Our sales process usually starts with high-level introduction meetings. Early in
the process we also meet with operational personnel to discuss the intended uses
of our equipment, technical requirements, solutions, and the overall production
process of the customer. Demonstrations and evaluation of test results take
time. Once we agree upon the technological terms of the sale, the process
continues with price and delivery negotiations and, when completed successfully,
with the issuance by the customer of a letter of intent to secure a slot in the
manufacturing and assembly planning schedule, followed by a purchase order.
To market our products, we operate demonstration and training centers where
customers can examine our equipment in operation and can, if desired, process
their wafers or individual dies for further in-house evaluation. Customers are
also trained to properly use purchased equipment.
Each of our major product lines has a dedicated product manager, responsible for
positioning the product in the market, developing it over time and evaluating
its relative performance compared to the competition. Each product manager sets
priorities in terms of technical development and sales support.
To execute the sales and service functions, we have established a direct sales
force for front-end products reporting on a geographical basis to the managers
in charge of Europe, North America, Southeast Asia and Japan. At the end of
1999, the front-end units had 73 employees fully dedicated to sales and
marketing, representing 9.3% of total front-end staff. Dedicated support and
sales forces are maintained for our various geographic units, enabling us to
serve our global customers with an equally global organization. Each of our
geographic front-end units is responsible for sales of all of our front-end
products in its region.
In addition to the sales activities undertaken at the principal offices of our
various manufacturing units, we have sales offices located in Europe in the
United Kingdom, France and Germany, and in the United States in California,
Texas and Pennsylvania. In Japan, our sales offices are located in Tokyo and
Osaka.
We use sales agents in Malaysia and China for front-end products and to support
our sales efforts for ALCVD in the non-semiconductor markets, such as flat panel
displays and magnetic heads.
Sales of back-end equipment and materials are provided by our principal offices
in Hong Kong and Singapore, through direct sales offices in Taiwan, the
Philippines, Malaysia, Thailand, Japan, Europe and North America, and through
sales representatives in Korea and some parts of the United States. There are
241 staff members employed in sales and marketing of back-end products,
representing 5.2% of total back-end staff.
MANUFACTURING
Our manufacturing operations consist of the fabrication and assembly of various
critical components, product assembly, quality control and testing.
In the front-end, we outsource the manufacture of major subsystems and
subassemblies and some design, assembly and testing functions to specialized
companies. We believe that outsourcing enables us to minimize our fixed costs
and capital expenditures while also providing the ability to rapidly increase
production capacity. We also work closely with our suppliers to achieve mutual
cost reduction through joint design efforts.
Philips Machinefabrieken supplies a substantial majority of the major
subassemblies used in the manufacture of the Advance 400 and of the major
subassemblies used in the manufacturing of our Epsilon products. Although we
work with a limited number of suppliers, we seek not to rely on a sole supplier,
and have back-up suppliers for all subsystems and subassemblies that are
outsourced.
48
<PAGE> 49
In addition, we purchase the metrology equipment that we integrate into some of
our front-end products from NanoPhotonics. We have a 24% equity interest in
NanoPhotonics and our President has a 44.5% interest. See "Related Party
Transactions."
Our back-end operations are vertically integrated to insure quality production
of component parts where the quality of subassemblers does not otherwise meet
our standards. The manufacturing activities in Hong Kong and Singapore consist
primarily of assembling and testing components and subassemblies manufactured at
our main manufacturing facility in China. We expect a new component
manufacturing plant to commence production in Malaysia in 2000.
COMPETITION
The semiconductor equipment industry is intensely competitive, and is fragmented
among companies of varying size, each with a limited number of products serving
a particular segment of the semiconductor process. Technical specifications of
the individual products are an important competitive factor, especially
concerning capabilities for manufacturing of new generations of semiconductor
devices. As each product category encompasses a specific blend of different
technologies, our competitive position from a technology standpoint may vary
within each category. Customers are evaluating manufacturing equipment based on
a mixture of technical performance and cost of ownership over the life of the
product. Main competitive factors include overall product performance, yield,
reliability, maintainability, service, support and price. We believe that we are
competitive with respect to each of these factors, and that our products are
cost effective.
As the variety and complexity of available machinery increases, some
semiconductor manufacturers are looking to limit their suppliers. In addition,
semiconductor manufacturers are located throughout the world, and expect their
equipment suppliers to have offices worldwide to meet their supply and service
needs. Semiconductor equipment manufacturers with a more limited local presence
are finding it increasingly difficult to compete in an increasingly global
industry.
Our primary competitors in the front-end business are from the United States and
Japan. Our primary competitors in the back-end business are from the United
States, Europe and Japan. In each of our product lines, we compete primarily
with two or three companies which vary from small to large firms in terms of the
size of their net sales and range of products. Our primary competitors in the
front-end business include Applied Materials, Novellus, Tokyo Electron and
Kokusai. Our primary competitors in the back-end business include Kulicke &
Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor, Towa, Shinko and Mitsui.
PATENTS AND TRADEMARKS
Because of the rapid technological advances in the microelectronics field, we
believe that our products will be subject to continuing change and enhancement.
Accordingly, we believe that our success will depend upon the technical
competence and creative ability of our personnel and the ownership of patents.
We have patents some of which cover key technologies, features and operations of
our major front-end products, with many patents registered in every major
country where semiconductor devices or equipment are manufactured. We own a
number of patents and we have filed a number of patent applications for
semiconductor wafer processing equipment. We also own patents and have filed
patent applications for LPCVD, PECVD, ALCVD and epitaxial technology. The total
number of United States patents on our front-end products was approximately 60
at the end of 1999 compared to approximately 50 at the end of 1998. The total
number of United States and foreign patents on our front-end products was
approximately 130 at the end of 1999.
We have entered into worldwide, non-exclusive, non-transferable and
non-assignable licenses with Applied Materials for patents related to epitaxy
and some chemicals used to deposit insulating layers for PECVD.
49
<PAGE> 50
To maintain these licenses, we pay Applied Materials a royalty on sales of
equipment that use the patented technology. Upon expiration of the patents, the
technology may be used royalty-free by the public, including us.
In the back-end industry, technological advancement is generally more
evolutionary than revolutionary in nature. Companies generally compete on their
cumulative expertise in applying well known technologies to improve productivity
and cost-efficiency, rather than their innovation of new technologies. In
practice, these skills are more difficult to patent. As a result, we do not file
many patents related to our back-end business, nor do we believe it would be
cost-effective or provide a competitive advantage to do so. We also own certain
trademarks and other proprietary information that we consider important to our
business.
There has been substantial litigation regarding patent and other intellectual
property rights in semiconductor-related industries. In the future, additional
litigation may be necessary to enforce patents issued to us, to protect trade
secrets or know-how owned by us or to defend us against claimed infringement of
the rights of others and to determine the scope and validity of the proprietary
rights of others. Any such litigation could result in substantial cost and
diversion of effort by us, which could have a material adverse effect on our
business, financial condition and operating results. Furthermore, adverse
determinations in this litigation could result in our loss of proprietary
rights, subject us to significant liabilities to third parties, require us to
seek licenses from third parties or prevent us from manufacturing or selling our
products, any of which could have a material adverse effect on our business,
financial condition and operating results.
LITIGATION
From time to time, we may be subject to litigation and claims incident to our
business. As of the date hereof, we are not involved in any litigation which
could materially affect our financial position.
EMPLOYEES
As of December 31, 1999 we had 5,426 employees, including 534 employees
primarily involved in research and development activities, 314 in marketing and
sales, 295 in customer service, 275 in finance and administration, and 4,008 in
manufacturing.
The following table lists the total number of our employees and the number of
our employees in our front-end and back-end business segments at the dates
indicated.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DECEMBER 31, FRONT-END BACK-END TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 860 3,654 4,514
- -----------------------------------------------------------------------------------------------------------
1998 756 3,680 4,436
- -----------------------------------------------------------------------------------------------------------
1999 798 4,628 5,426
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Our Netherlands operation, which employs approximately 240 persons, is subject
to standardized industry bargaining under Netherlands law, and is required to
pay wages and meet conditions established as a result of negotiations between
all Netherlands employers in their industry and unions representing employees of
those employers. Additionally, management personnel in the Netherlands
facilities meet as required by Netherlands law with a works council consisting
of elected representatives of the employees to discuss working conditions and
personnel policies as well as to explain major corporate decisions and to
solicit their advice on major issues.
Many of our employees are highly skilled, and our continued success will depend
in part upon our ability to continue to attract and retain these employees, who
are in great demand. We believe that our employee relations are good. As a
consequence of our decision to merge the manufacturing operations of ASM
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<PAGE> 51
America with those of ASM Europe in 1999, our number of employees in the United
States was reduced by approximately 75, whereas the number of employees in the
Netherlands was increased by approximately 50.
FACILITIES
To develop and manufacture products to local specifications and to market and
service products more effectively in the worldwide semiconductor market, our
front-end manufacturing facilities are located in Europe, the United States and
Japan and our back-end facilities are located in Hong Kong, China and Singapore.
In addition, we lease approximately 30,000 square feet of back-end manufacturing
space in Malaysia. The principal facilities are summarized below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
APPROXIMATE
BUSINESS AGGREGATE
SEGMENT LOCATION PRIMARY USES SQUARE FOOTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
151,000
Bilthoven, the Wafer processing equipment
Netherlands manufacturing, marketing, research and
executive offices
----------------------------------------------------------------------------
204,000
Wafer processing equipment
Phoenix, Arizona manufacturing, marketing, research and
offices
Front-end
----------------------------------------------------------------------------
132,000
Tama and Niigata, Wafer processing equipment
Japan manufacturing, marketing, research and
offices
----------------------------------------------------------------------------
35,000
Wafer processing equipment
Espoo, Finland manufacturing, marketing, research and
offices
- -------------------------------------------------------------------------------------------------
211,000
Assembly and encapsulation equipment
Hong Kong manufacturing, leadframe plating,
marketing, research and offices
----------------------------------------------------------------------------
Back-end 362,000
Assembly equipment and etched leadframe
Singapore manufacturing, marketing, research and
offices
----------------------------------------------------------------------------
523,000
Precision metal part and subassembly
Shenzhen, China fabrication, stamped leadframe
manufacturing and offices
- -------------------------------------------------------------------------------------------------
</TABLE>
Our principal facilities in Arizona, Hong Kong, Singapore and China are subject
to leases expiring at various times from 2000 to 2020. Our Bilthoven facilities
are constructed on leased land with the earliest leases expiring in the year
2029. The facilities we own are subject to mortgages. We believe that our
facilities are maintained in good operating condition and are adequate for our
present level of operations.
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<PAGE> 52
MANAGEMENT
The names of our directors and executive officers and those of some of our
subsidiaries and the years of their birth are as follows:
<TABLE>
<CAPTION>
NAME YEAR OF BIRTH POSITION
- ---- ------------- --------
<S> <C> <C>
Paul C. van den Hoek.............. 1939 Chairman of the Supervisory Board
Jacobus den Hoed RA............... 1937 Supervisory Director
Ferdinand C. Rauwenhoff........... 1930 Supervisory Director
Frans W. Saris.................... 1942 Supervisory Director
Arthur H. del Prado............... 1931 Chairman of Management Board, President and Chief
Executive Officer
Patrick Lam See-Pong.............. 1948 Member of the Management Board, Vice President Asian
Operations and Managing Director of ASM Pacific
Technology
Daniel Queyssac................... 1940 Chief Operating Officer of Front-end Operations and
President of ASM America
Rinse de Jong..................... 1948 Vice President of Finance and Chief Financial
Officer
Fukumi Tomino..................... 1949 Vice President Japanese Operations and Managing
Director of ASM Japan
Hans Wunderl...................... 1951 General Manager and Executive Vice President of ASM
America
Ernst Granneman................... 1946 Business Unit Manager for Rapid Thermal Processing
Ivo Raaijmakers................... 1957 Director of Research and Development and Chief
Technology Officer of Front-end Operations
Han Westendorp.................... 1956 General Manager of ASM Europe
</TABLE>
Paul C. van den Hoek became a Supervisory Director in March 1981 and is now
Chairman of the Supervisory Board. Mr. van den Hoek is a partner in the European
law firm of Stibbe Simont Monahan Duhot, which is our general legal counsel. Mr.
van den Hoek has been with Stibbe since 1965. Mr. van den Hoek further serves on
the boards of directors of various European companies.
Jacobus den Hoed RA became a Supervisory Director in June 1999. Mr. den Hoed is
a certified accountant. He joined AKZO Nobel N.V., a global chemical company in
1969, and served in various financial management positions, most recently as
Vice President and Chief Financial Officer from 1996 to 1998 when he retired.
Mr. den Hoed serves on the boards of directors of various European companies and
since 1998 as a member of the board of directors of the International Accounting
Standards Committee, or IASC.
Ferdinand C. Rauwenhoff became a Supervisory Director in October 1991 and
Vice-Chairman in 1999. Mr. Rauwenhoff holds an Engineering degree in physics
from Delft Technical University as well as a law degree from Leiden University.
He joined Philips in 1958 and served in various executive capacities worldwide.
In 1984 he was appointed chairman of the senior management committee of the
Netherlands Philips Companies, and retired in October 1990. Mr. Rauwenhoff
further serves on the boards of directors of various European companies.
Frans W. Saris became a Supervisory Director in June 1987. Professor Saris was
the director of the FOM Institute of Atomic and Molecular Physics in Amsterdam
from 1986 until 1995 and is now Director of the Netherlands Energy Research
Foundation at Petten, the Netherlands. He has served us as a consultant in
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<PAGE> 53
a number of technological areas. He holds a doctorate degree from Leiden
University in physics and is currently a professor of physics at the University
of Utrecht. Mr. Saris will retire at our annual meeting of shareholders in 2000.
He is not available for an additional term as Supervisory Director.
Arthur H. del Prado, our founder, has served as a Managing Director, President
and Chief Executive Officer since our formation in 1968. Mr. del Prado is also a
founder of ASM Lithography N.V. through a joint venture with Philips Electronics
N.V. He serves as a director of MEDEA, and previously served for many years as a
director of its predecessor, JESSI. Mr. del Prado further serves on the board of
directors of various European companies and on the board of the
Netherlands-Japanese Trade Federation.
Patrick Lam See-Pong became Vice President of our Asian Operations in March 1981
and a Managing Director in June 1995. Mr. Lam has been employed in various
capacities with us since 1975. He holds a B.Sc. degree in electrical engineering
from the University of Manitoba in Canada and an MBA from the Chinese University
of Hong Kong.
Daniel Queyssac joined us as Chief Operating Officer for front-end operations
and President of ASM America in November 1996. Mr. Queyssac joined us after a
career at Motorola and SGS Thomson, now STMicroelectronics. His previous
positions included Vice President and Assistant General Manager of the New
Venture Group of SGS Thomson Microelectronics from 1993 to 1996, and President
of SGS Thomson Microelectronics in Phoenix, Arizona from 1980 to 1991.
Rinse de Jong joined us as Vice President of Finance and Chief Financial Officer
in February 1997. Mr. de Jong is a registered accountant. He previously held
senior management positions in Corporate Controlling, Treasury and Corporate
Finance at Reed Elsevier, the Anglo-Netherlands publishing group, from 1978 to
the end of 1996.
Fukumi Tomino became Vice President Japanese Operations and Managing Director of
ASM Japan in 1994 after having held roles in sales, marketing, engineering and
process development since the founding of ASM Japan in 1982. He holds a
Bachelor's Degree in electro-communication from the University of
Electro-Communication (Tokyo).
Hans Wunderl joined us in January 1991 as Director-Technical Operations of the
A-600 business unit. Mr. Wunderl started his international career at Data
General in the United States, France and the Netherlands and worked previously
at IBM in the Netherlands. In November 1992, Mr. Wunderl became General Manager
of ASM Europe located in Bilthoven, the Netherlands and in July 1999 he became
General Manager and Executive Vice President of ASM America. Mr. Wunderl holds
an engineering degree in electronics from the Technical University in Eindhoven.
Ernst Granneman became Business Unit Manager for Rapid Thermal Processing in
July 1999. He previously served as Director of Research and Development and
Chief Technology Officer for our front-end businesses from May 1992 to July
1999. Mr. Granneman joined us in October 1984 as Director of Research and
Development for ASM Europe, and previously was employed at the Institute of
Atomic and Molecular Physics in Amsterdam, the Netherlands. Mr. Granneman also
serves as a part-time professor at the Technical University at Delft, the
Netherlands. Mr. Granneman holds an engineering degree in physics from the
Technical University at Delft and a doctorate degree in physics from the
University of Amsterdam.
Ivo Raaijmakers became Director of Research and Development and Chief Technology
Officer of Front-end Operations in July 1999. He served as Vice President of
Development for ASM America from July 1996 to July 1999. He previously held
various positions of increasing responsibility in technology development and
management at Philips Research Labs, Novellus and Applied Materials since 1982,
most recently with Applied Materials from 1993 to 1996. Mr. Raaijmakers holds a
Ph.D. and Master's Degree in Physics from Eindhoven University of Technology in
the Netherlands.
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<PAGE> 54
Han Westendorp joined us as General Manager of ASM Europe in July 1999. Mr.
Westendorp worked in various management capacities at Tokyo Electron
Massachusetts from 1991 to mid-1999, most recently as Vice President of Metal
CVD and Administration General Manager. Before joining Tokyo Electron, he worked
with us on the development of our ion implantation technology. Mr. Westendorp
holds a Ph.D. in Physics and Mathematics from the University of Utrecht in the
Netherlands.
Under Netherlands law, supervisory directors have the duty to supervise and
advise the managing directors. The supervisory directors are appointed by our
shareholders generally for terms of four years, as more fully described in
"Description of Share Capital." The supervisory directors can be re-elected
twice, but are subject to mandatory retirement under Netherlands law at the age
of 72. For further information on the supervisory board, see "Description of
Share Capital."
The managing directors are entrusted with our management under the supervision
of the supervisory board and have the general authority to enter into binding
agreements with third parties. Managing directors serve for indefinite terms and
are appointed and dismissed by the shareholders, as more fully described in
"Description of Share Capital," but they may also be suspended by the
supervisory board. Compensation of managing directors is determined by the
supervisory board. Currently, our managing directors are Arthur H. del Prado and
Patrick Lam See-Pong. For further information on the managing board, see
"Description of Share Capital."
Our other officers serve at the discretion and under the direction of the
managing directors.
For the year ended December 31, 1999, the aggregate compensation we paid to the
members of our management board equaled E1.4 million and the aggregate paid to
the members of the supervisory board amounted to E64,000. The members of our
management board owned 867,000 options to purchase common shares with a weighted
average exercise price of $3.19 per share. The options expire at various dates
through December 2004. The members of our supervisory board do not hold any
options. We have no outstanding loans to our officers, directors or founders,
and have issued no guarantees for their benefit.
RELATED PARTY TRANSACTIONS
In December 1999 we acquired 24% and our President acquired 44.5% of the
outstanding equity of NanoPhotonics, a German supplier of precision metrology
equipment. We have a five-year option to purchase our President's 44.5% interest
at the price he paid in the initial transaction. In exchange for this option, we
granted him a five-year option to purchase 25,000 of our common shares at
$15.4375 per share, representing fair market value at the date the option was
granted. Our President entered into this transaction at our request in order to
enable NanoPhotonics to retain certain beneficial financing arrangements. See
Note E of Notes to Consolidated Financial Statements.
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<PAGE> 55
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to the ownership of our
common shares as of March 31, 2000 and after the offering, assuming the
over-allotment option is not exercised, by each owner of more than 5% of our
common shares, by all of our officers and directors as a group and by the
selling shareholder:
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO OFFERING NUMBER AFTER OFFERING
-------------------- OF SHARES --------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Stichting Administratiekantoor ASMI
Jan van Eycklaan 10,
3723 BC Bilthoven,
the Netherlands(1)..................... 7,692,039 17.3% -- 7,692,039 16.0%
Applied Materials, Inc. (the selling
shareholder)........................... 1,500,000 3.4% 1,500,000 -- --
All officers and directors as a group
(13 persons)(2)........................ 12,251,425 27.5% -- 12,251,425 25.5%
</TABLE>
- ---------------
(1) Our President, Arthur H. del Prado, controls Stichting Administriekantoor
ASMI, a foundation incorporated under the laws of the Netherlands which has
issued depositary receipts (certificaten van aandelen) for the common
shares held by it.
(2) Includes (a) the 7,692,039 common shares shown in the table above that are
owned by Stichting Administratiekantoor ASMI, a foundation controlled by
our President, Arthur H. del Prado, (b) 3,762,253 common shares owned by
Mr. del Prado including some shares owned indirectly through members of his
immediate family, and (c) 797,133 common shares owned directly or
indirectly by other officers and directors, 300,000 of which are owned by
supervisory directors.
On May 28, 1997, we entered into an agreement with Stichting Continuiteit ASMI,
or Stichting, pursuant to which Stichting was granted an option to acquire up to
that number of our preferred shares that has a total par value equal to 50% of
the par value of our common shares issued and outstanding at the date of the
exercise. Stichting is a non-membership organization organized under Netherlands
law. The objective of Stichting is to own and vote our preferred shares in order
to maintain our continuity in case of a takeover attempt. Toward that objective,
Stichting will evaluate, when called for, whether a takeover offer is in our
best interests. The AEX-Stock Exchange in Amsterdam requires that a majority of
the board members of Stichting be unrelated to us. As of December 31, 1999, the
members of the board of Stichting are:
<TABLE>
<S> <C>
Arthur H. del Prado.................. President and Chief Executive Officer, ASM International
Paul C. van den Hoek................. Chairman of the Supervisory Board, ASM International
Michael J.C. van Galen............... Consultant
Rinze Veenenga Kingma................ Consultant to the Executive Board, Delft Instruments N.V.
Laurus Traas......................... Emeritus Professor, Amsterdam University
</TABLE>
For further information on Stichting, see "Description of Share Capital."
55
<PAGE> 56
UNDERWRITING
ASM International and the selling shareholder have entered into an underwriting
agreement with the underwriters named below. CIBC World Markets Corp.,
FleetBoston Robertson Stephens Inc. and Warburg Dillon Read LLC are acting as
representatives of the underwriters.
This is a firm commitment underwriting. This means that the underwriting
agreement provides for the purchase of a specific number of common shares by
each of the underwriters. The underwriters' obligations are several, which means
that each underwriter is required to purchase a specified number of common
shares, but is not responsible for the commitment of any other underwriter to
purchase common shares. Subject to the terms and conditions of the underwriting
agreement, each underwriter has severally agreed to purchase the number of
common shares opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
CIBC World Markets Corp. ................................... 1,720,000
FleetBoston Robertson Stephens Inc. ........................ 1,290,000
Warburg Dillon Read LLC..................................... 1,290,000
Chase H&Q................................................... 75,000
A.G. Edwards & Sons, Inc. .................................. 75,000
Prudential Securities Incorporated.......................... 75,000
SG Cowen Securities Corporation............................. 75,000
Adams, Harkness & Hill, Inc. ............................... 40,000
Advest, Inc. ............................................... 40,000
Brean Murray & Co., Inc. ................................... 40,000
Dain Rauscher Wessels....................................... 40,000
Fahnestock & Co. Inc. ...................................... 40,000
Jefferies & Company......................................... 40,000
Josephthal & Co. Inc. ...................................... 40,000
C.L. King & Associates, Inc. ............................... 40,000
Tucker Anthony Incorporated................................. 40,000
H.G. Wellington & Co. Inc. ................................. 40,000
----------
Total.................................................. 5,000,000
==========
</TABLE>
The underwriters have agreed to purchase all of the common shares offered by
this prospectus, other than those covered by the over-allotment option described
below, if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase common shares, the commitments of
non-defaulting underwriters may be increased or the underwriting agreement may
be terminated, depending on the circumstances.
The common shares should be ready for delivery on or about April 12, 2000
against payment in immediately available funds. The representatives have advised
ASM International and the selling shareholder that the underwriters propose to
offer the common shares directly to the public at the public offering price that
appears on the cover page of this prospectus. In addition, the representatives
may offer some of the common shares to other securities dealers at such price
less a concession of $0.91 per share. The underwriters may also allow, and such
dealers may allow, a concession not in excess of $0.10 per share to other
dealers. After the common shares are released for sale to the public, the
representatives may change the offering price and other selling terms at various
times.
ASM International has granted the underwriters an over-allotment option. This
option, which is exercisable for up to 30 days after the date of this
prospectus, permits the underwriters to purchase a maximum of 750,000 additional
common shares from ASM International to cover over-allotments. If the
56
<PAGE> 57
underwriters exercise all or part of this option, they will purchase common
shares covered by the option at the initial public offering price that appears
on the cover page of this prospectus, less the underwriting discount. Assuming
this option is exercised in full, the total price to the public will be $166.8
million, the total proceeds to ASM International will be $116.8 million, and the
total proceeds to the selling shareholder will be $41.2 million. ASM
International will not receive any proceeds from the sale of shares by the
selling shareholder. The underwriters have severally agreed that, to the extent
the over-allotment option is exercised, they will each purchase a number of
additional common shares proportionate to the underwriter's initial amount
reflected in the foregoing table.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by ASM International and the selling shareholder:
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE OF TOTAL WITH FULL EXERCISE
PER SHARE OVER-ALLOTMENT OPTION OF OVER-ALLOTMENT OPTION
--------- ------------------------- ------------------------
<S> <C> <C> <C>
ASM International.................. $1.52 $5,320,000 $6,460,000
Applied Materials, Inc. (the
selling shareholder)............. $1.52 $2,280,000 $2,280,000
---------- ----------
Total............................... $7,600,000 $8,740,000
</TABLE>
CIBC World Markets Corp. will pay a finder's fee to Seidman & Co., Inc. in
connection with this offering. A non-executive officer of ASM International is
affiliated with Seidman.
ASM International estimates that its portion of the total expenses of the
offering, excluding the underwriting discount, will be approximately $2,000,000.
ASM International has granted to CIBC World Markets Corp. a right of first
refusal on the performance of investment banking services for ASM International
during a specified time period, subject to limited exceptions.
ASM International and the selling shareholder have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
ASM International, its officers and directors and the selling shareholder have
agreed to a 90-day "lock up" with respect to approximately 12,693,125 common
shares that they beneficially own, including securities that are convertible
into common shares and securities that are exchangeable or exercisable for
common shares. This means that, subject to certain exceptions, for a period of
90 days following the date of this prospectus, ASM International and such
persons may not offer, sell, pledge or otherwise dispose of these ASM
International securities without the prior written consent of CIBC World Markets
Corp. CIBC World Markets Corp., however, may in its sole discretion and at any
time without notice, release all or any portion of the common shares subject to
these agreements.
The representatives have informed ASM International that they do not expect
discretionary sales by the underwriters to exceed five percent of the common
shares offered by this prospectus.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase common shares before the distribution of the
common shares is completed. However, the underwriters may engage in the
following activities in accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price of
the common shares, so long as stabilizing bids do not exceed a specified
maximum.
- Over-allotments and syndicate covering transactions -- The underwriters
may create a short position in the common shares by selling more common
shares than are set forth on the cover page of this prospectus. If a
short position is created in connection with the offering, the
representatives may engage in syndicate covering transactions by
purchasing common shares in the open market.
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<PAGE> 58
The representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
- Penalty bids -- If the representatives purchase common shares in the open
market in a stabilizing transaction or syndicate covering transactions,
they may reclaim a selling concession from the underwriters and selling
group members who sold those common shares as part of this offering.
- Passive market making -- Market makers in the common shares who are
underwriters or prospective underwriters may make bids for or purchases
of common shares, subject to some limitations, until the time, if ever,
at which a stabilizing bid is made.
Stabilization and syndicate covering transactions may cause the price of the
common shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
common shares if it discourages resales of the common shares.
Neither ASM International nor the underwriters makes any representation or
prediction as to the effect that the transactions described above may have on
the price of the common shares. These transactions may occur on the Nasdaq
National Market or otherwise. If such transactions are commenced, they may be
discontinued without any notice at any time.
58
<PAGE> 59
DESCRIPTION OF SHARE CAPITAL
Set forth below is a summary of some relevant provisions of our Articles of
Association and Netherlands law in effect at the date of this prospectus. This
summary does not purport to be complete and is qualified in its entirety by
reference to the full Articles of Association. The full text of the Articles of
Association is available, in Dutch and English, at our principal executive
offices in Bilthoven, the Netherlands.
GENERAL
Our Articles of Association were last amended by a notarial deed, executed by a
deputy of H.B.H. Kraak, civil law notary, practicing in Amsterdam, on July 28,
1997, pursuant to a resolution of our general meeting of shareholders approved
on May 28, 1997. The statement of no-objection of the Ministry of Justice on the
proposed amendments to the Articles of Association was issued by the Ministry of
Justice under no. N.V. 97.183.
SHARES
Our total authorized share capital consists of 60,000,000 common shares, Nlg.
0.01 par value per share, 6,900 preferred shares, Nlg. 100 par value per share,
and 900 financing preferred shares, Nlg. 100 par value per share, of which
42,220,979 common shares and no preferred or financing preferred shares were
outstanding on February 29, 2000. There are currently no preferred or financing
preferred shares issued. All shares have one vote per Nlg. 0.01 par value,
except for shares we or our subsidiaries own, which have no voting rights.
Common shares and financing preferred shares are issued only upon full payment
for the shares.
Preferred shares may be issued against partial payment of at least 25% of par
value, subject to our right to demand payment of the remaining par value. Our
management board must follow special rules established in our Articles of
Association to issue and grant the right to subscribe for or to repurchase
preferred shares. Generally, these rules require that, if the management board
has been authorized by the general meeting of shareholders to issue shares,
subject to the approval of the supervisory board, and the management board
issues preferred shares, it must call a shareholder meeting within four weeks
after the issuance to explain the motives for issuing preferred shares, unless
the motives were given at a prior shareholders' meeting. However, the management
board must receive prior consent of shareholders for any issuance of preferred
shares in the aggregate in excess of 100% of the aggregate par value of issued
common shares. In addition, if the management board has issued preferred shares
without the prior consent of the general meeting of shareholders, it must
convene a meeting within two years for the shareholders to act upon a proposal
to repurchase or cancel the preferred shares. If not accepted by the
shareholders, this proposal must be submitted to the shareholders every two
years thereafter.
Pursuant to the procedure in the Articles of Association, the management board
provided the shareholders during the annual general meeting of shareholders held
on May 28, 1997 with information regarding our grant to Stichting of a right to
acquire preferred shares having a maximum aggregate par value of 50% of the
aggregate par value of all common shares outstanding as of the date of exercise
of such right. The object of Stichting is to own and vote our preferred shares
in order to maintain our continuity. Toward that objective, Stichting will
evaluate, when called for, whether a takeover offer is in our best interests. In
accordance with the applicable regulations of the AEX-Stock Exchange in
Amsterdam, Stichting is managed by majority vote of a five-person board, not
more than two of which (Directors A) may be officers of ASM International and at
least three of which (Directors B) must be independent from ASM International.
Directors A are appointed by our management board, subject to approval of our
supervisory board, from among our management and supervisory boards. Directors B
must be independent from us and
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<PAGE> 60
are appointed by the board of Stichting, subject to approval of our management
board with the consent of our supervisory board.
Financing preferred shares are designed to allow us to finance equity with an
instrument paying a dividend linked to government bonds without the dilutive
effects of issuing additional common shares. As of the date of this prospectus
we anticipate that these shares will be issued, if at all, primarily to eligible
corporate investors interested in the Netherlands participation exemption. The
exemption allows certain corporate investors who own 5% or more of our capital
to receive dividends and capital gains exempt from Netherlands corporate tax.
Preferred and financing preferred shares are issued in registered form only and
are subject to transfer restrictions. Essentially, a preferred or financing
preferred shareholder must obtain the approval of our supervisory board to
transfer shares. If the approval is denied, the supervisory board will provide a
list of acceptable prospective buyers who are willing to purchase the shares at
a cash price to be fixed by consent of the supervisory board and seller within
two months after the approval is denied. If the transfer is approved, the
shareholder must complete the transfer within three months, at which time the
approval expires.
The issuance of preferred and financing preferred shares may have the effect of
delaying, deferring or preventing a change in control of ASM International
without further action by the shareholders, may discourage bids for our common
shares at a premium over the market price of the common shares and may adversely
affect the market price and voting or other rights of the holders of common
shares. At present, we have no plans to issue any of the preferred or financing
preferred shares.
DIVIDENDS
Dividends may be paid out of annual profits shown on our annual accounts, as
adopted by our general meeting of shareholders, and/or out of existing reserves
that are distributable in accordance with Netherlands law. At its discretion,
however, subject to statutory provisions, our management board may, with prior
approval of our supervisory board, distribute, in either stock or in cash, one
or more interim dividends on shares before the annual accounts for any fiscal
year have been adopted by the general meeting of shareholders, but only to the
extent of our profits. Dividends may only be paid to the extent that our
shareholders equity exceeds the amount of the paid up portion of our share
capital, and also the portion of our share capital that has been called for
payment by our management board, plus the reserves that may not be distributed.
We have not previously paid dividends on our common shares. We intend to retain
any earnings for use in the business and therefore do not anticipate paying any
cash dividends on common shares in the foreseeable future.
Distributions and dividends must be made within 14 days of the date we declare
the distribution or dividend and, when certificates for the relevant shares have
been issued, will be paid in the currency used in the country where our shares
with our consent are traded on a stock exchange. The right to any dividends and
cash distributions shall lapse if such dividends or distributions are not
claimed within five years following the day after the date on which they were
made available and thereafter revert back to us.
Preferred shareholders, if any, will have a preferred right to any distribution
from our profits over the other classes of shares. If we had a net loss for the
year, the distribution on the preferred shares would be charged to the reserves.
After any distribution to preferred shareholders, we may pay a dividend to the
financing preferred shareholders, if any. If the profits are insufficient to
cover the dividend, we may charge the reserves. Such dividend shall be equal to
a percentage of the par value of the financing preferred shares plus any premium
paid at subscription for those shares. The percentage shall be related to the
average effective return on Dutch government bonds with a weighted average
remaining life of no more than ten years, as determined by our management board
with approval of the supervisory board, which percentage shall be calculated as
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<PAGE> 61
provided in our Articles of Association and increased or decreased by no more
than three percent. After the life of the government bonds as aforesaid expires,
the financing preferred dividend will be based on the current average effective
return of government bonds of a weighted average remaining life of no more than
ten years. If we withdraw or repurchase the financing preferred shares, we will
make any distribution to the previous shareholders calculated on a pro-rata
basis from the time of the last distribution.
Dividends on outstanding preferred shares and on outstanding financing preferred
shares are cumulative to the effect that if in any year no dividend is paid on
preferred shares, the dividend must be paid in the following year before any
dividends are paid on financing preferred shares or common shares. In addition,
if in any year no dividend is paid on financing preferred shares, the dividend
must be paid in the following year after the dividend on preferred shares but
before the dividend on common shares. There are no preferred shares and no
financing preferred shares currently outstanding.
After any distributions have been made to any preferred or financing preferred
shareholders, our management board, with the approval of the supervisory board,
may set aside part of the profits as reserves. Any amounts remaining thereafter
are at the disposal of the general meeting of shareholders. These distributions
on common shares may be made in cash, common shares, or a combination of both.
SHAREHOLDER POWERS
Appointment of Supervisory Board and Management Board. Our supervisory board and
management board are appointed by the general meeting of shareholders from a
binding nomination prepared by the supervisory board, which has at least two
candidates for each vacancy. The general meeting of shareholders must follow the
nomination by the supervisory board but may appoint another candidate of its
choosing, provided that such other candidate is chosen by a shareholders'
resolution adopted by a two-thirds majority of the votes cast, representing more
than 50% of our issued share capital. The term of office of each member of the
supervisory board is generally four years but can be shorter, and expires in the
year he or she attains the age of 72. Members of the supervisory board can be
re-elected twice. There is no term limitation for management board members.
Shareholders do not have cumulative voting rights. This means the shareholders
controlling more than 50 percent of the voting power represented in person or by
proxy and voting on the issue of election of directors at a general meeting have
the power to elect all the directors, subject to the binding nomination rights
of the supervisory board.
General Meetings of Shareholders. We hold our general meetings of shareholders
at least once a year, not later than six months after the end of the fiscal
year. Although we are exempt from certain of the Securities and Exchange
Commission's proxy rules under the Securities Exchange Act of 1934, as amended,
we solicit proxies from our United States shareholders in connection with
shareholder meetings.
Other general meetings of shareholders are held as often as deemed necessary by
the supervisory board or the management board or if one or more shareholders or
other persons entitled to attend the general meeting of shareholders jointly
representing at least 10% of the issued share capital make a written request to
that effect to the supervisory board or the management board specifying in
detail the business to be dealt with.
Meetings of holders of preferred and financing preferred shares may be held at
their discretion or as called by the management or supervisory boards. These
meetings permit the class of shareholders to decide issues that do not involve
the other classes. Unanimous approval of all such shareholders is required at
meetings for which prior notice of the time, place, and subjects to be discussed
has not been given. Preferred and financing preferred shareholders may also take
action without a meeting by unanimous written consent in favor of a proposal, if
the management and supervisory boards have been given the opportunity to give
advice about the proposal. Common shareholders may not act without a meeting.
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Actions at our shareholders' meetings may generally be taken by affirmative vote
of the majority of the shareholders present in person or by proxy. In general,
our Articles of Association do not require a minimum quorum to conduct business
at our shareholders' meeting. Certain actions, however, such as dismissal of a
member of the management board or the supervisory board, may only be taken by
affirmative vote of at least two thirds of the votes cast, which majority must
represent in the aggregate at least half of the issued share capital, unless the
dismissal has been proposed by the supervisory board. Also, certain actions,
such as an amendment to the Articles of Association or dissolution of ASM
International, may only be taken upon a proposal by the management board and the
supervisory board.
In the case of a vote to appoint a person to office, the Articles of Association
provide for a second ballot if no nominee receives a majority of the votes. If
no nominee receives a majority on the second ballot, the Articles provide a
procedure for a run-off ballot. If no decision is reached because the same
number of votes is cast on the run-off ballot, the appointment is decided by
drawing lots. In the case of a tie on subjects other than appointments, the
proposal will be rejected.
Shareholders have the power to reduce the outstanding capital by cancelling
shares or by reducing the par value of the shares in an amendment to the
Articles of Association. If the reduction of capital would impair a group or
class of shareholders, the decision thereto also requires such approval from
that impaired group. If less than half of the issued shares are represented at a
shareholder meeting, adoption of such a decision requires approval of two-thirds
of the relevant votes cast.
ADOPTION OF ANNUAL ACCOUNTS
Our auditors must be appointed by the general meeting of shareholders. After
appointment, the auditors report to the supervisory board and the management
board; however, the balance sheet, the income statement and the notes thereto
are subject to revisions and final adoption by the shareholders.
Annually, our consolidated statutory accounts are submitted to the general
meeting of shareholders for adoption. Our Articles of Association provide that
the shareholders' adoption of our annual accounts discharges the management
board and the supervisory board from liability for the performance of their
respective duties for the past financial year. Under Netherlands law, this
discharge is not absolute and will not be effective as to matters not disclosed
to the shareholders.
LIQUIDATION RIGHTS
In the event of our dissolution and liquidation, the assets remaining after
payment of all debts and liquidation expenses are to be distributed first to the
preferred shareholders and then to the financing preferred shareholders to the
extent of the amount paid for such shares, if any. Holders of common shares are
entitled to receive, in the event of our liquidation, prorated distributions of
assets after satisfaction of liabilities to creditors and preferred and
financing preferred shareholders.
ISSUES OF SHARES; PREEMPTIVE RIGHTS
Our management board has the power to issue, set the price and determine other
conditions to the issuance of common, preferred and financing preferred shares
if and to the extent that it has been authorized for this purpose by the general
meeting of shareholders. The class of shares that will be affected negatively by
a shareholder resolution to issue shares or a shareholder resolution to give our
management board the power to issue shares must approve such a resolution. A
resolution authorizing the management board to issue, set the price and
determine other conditions of the issuance of shares was approved at the 1999
annual general meeting of shareholders for a period of three years beginning
June 16, 1999. The management board, however, can only authorize an issuance,
including the price and other conditions thereof, with the approval of the
supervisory board.
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Common and financing preferred shareholders have a pro rata preemptive right to
any newly issued common shares and financing preferred shares and any rights or
options to acquire such shares in proportion to the shareholders' percentage
ownership, unless issued for a contribution other than cash or in the case of
common shares issued to our employees or our affiliates' employees. The
management board has been authorized for a period of three years beginning June
16, 1999 to limit or exclude such pre-emptive rights.
The preemptive rights described above apply to the issuances of rights to
subscribe for common shares and financing preferred shares.
There are no conversion rights or sinking fund provisions with respect to our
shares.
REPURCHASE AND CANCELLATION OF SHARES
We may repurchase our shares, subject to compliance with certain Netherlands law
requirements, and provided the aggregate par value of the shares we acquire,
hold or hold in pledge and which are held by subsidiaries at any one time
amounts to no more than one-tenth of our issued share capital. Shares we own are
not counted in any vote of the shareholders. Any resolution to repurchase our
shares must be adopted by the management board, which must be authorized by the
general meeting of shareholders. On June 16, 1999, the general meeting of
shareholders authorized the management board, for a period of eighteen months to
repurchase up to 10% of our issued share capital. We may resell shares we have
purchased, subject to approval of the supervisory board. As of February 29,
2000, we own no shares.
STOCK OPTION PLAN
For a description of our stock option plan, see Note P of Notes to Consolidated
Financial Statements.
LIMITATIONS ON RIGHT TO HOLD OR VOTE THE COMMON SHARES
There are currently no limitations imposed by Netherlands law or by our Articles
of Association on the right of non-resident owners to own, hold or vote the
common shares.
TRANSFER AGENT AND REGISTRAR
Of our 44,492,846 common shares outstanding as of March 31, 2000, 9,067,039
shares are registered with us in the Netherlands, 10,923,298 shares are
registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and
24,502,509 shares are registered with our transfer agent in the United States,
Citibank N.A., New York. The common shares registered in the United States are
quoted on the Nasdaq National Market under the symbol ASMI. Since December 11,
1996, our common shares also are traded on the AEX-Stock Exchange under the
symbol ASMI.
In the Netherlands, our common shares can be issued as either bearer shares or
registered shares at the option of the shareholder. Financing preferred shares
and preferred shares must be registered shares. Only shares registered in the
United States may be traded on Nasdaq and only bearer shares may be traded on
the AEX-Stock Exchange.
Registered shares in the United States are recorded in book-entry form.
Registered shares may be evidenced by certificates, but only if the relevant
stock exchange upon which the shares are traded requires the issuance of a share
certificate. Bearer shares are represented by certificates printed in Dutch with
a dividend sheet attached without separate dividend coupons and talon. These
certificates are known as CF-certificates and are available in denominations of
1, 10, 100, 10,000 and 100,000 common shares. The CF-certificates must remain
deposited with an authorized custodian as referred to in the Dutch 'Centrum voor
Fondsenadministratie' rules and may only be transferred through the book-entry
transfer systems
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maintained by Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V., or
NECIGEF, Euroclear or Cedel Bank, S.A., or Cedel.
The transfer of registered shares requires the written acknowledgment of the
transfer from us, except when we are a party to the transfer or, in the case of
registered shares in the United States, the acknowledgment of the United States
transfer agent Citibank N.A., New York.
Bearer shares may be converted into registered shares, and vice versa at the
request of the holder, subject to the rules and regulations to be set by our
management board. A holder may convert bearer shares to registered shares by
providing a written request and surrendering the bearer shares at the principal
office of ABN AMRO Bank N.V., Herengracht 595, 1017 CE Amsterdam, the
Netherlands. ABN AMRO Bank, N.V. will instruct Citibank N.A., New York to issue
the former bearer shares as registered shares and to deliver the corresponding
share certificates. Similarly, a holder may convert registered shares to bearer
shares by presenting a written request and surrendering the registered shares to
Citibank N.A., New York. Registered shares registered in the United States may
also be exchanged into shares in registered form registered with us and vice
versa. A fee will be charged to shareholders for the exchange of registered
shares for bearer shares, and for the reverse.
EUROCLEAR AND CEDEL
Euroclear eligible shares are freely transferable in Euroclear. Morgan Guaranty
Trust Company of New York, Brussels office, as operator of the Euroclear system
holds securities on behalf of participants of Euroclear. All participants of
Euroclear are banks, broker-dealers and other financial institutions. The
operator has information about the positions held by the various participants;
however, it has no knowledge of, or information on, the beneficial holders or
owners of the securities in question. Under the general principles of the
Belgian Banking Secrecy rules, the operator may not disclose any information
about a participant's account or positions in such account without having first
obtained the participant's prior written authorization. Euroclear participants
are not likely to authorize disclosure of such information. Therefore, no
ownership nor any transfer restrictions will be monitored by the operator.
Cedel eligible securities are freely transferable in Cedel. Cedel holds
securities on behalf of customers of Cedel. All customers of Cedel are banks,
broker-dealers and other financial institutions. Cedel has information about the
positions held by the various customers; however, it has no knowledge of, or
information on, the beneficial holders or owners of the securities in question.
Under general principles of Luxembourg Banking Secrecy Law, Cedel may not
disclose any information about a customer's account or positions in such account
without having first obtained such customer's prior written authorization. Cedel
customers are not likely to authorize disclosure of such information. Therefore,
no ownership nor any transfer restrictions will be monitored by Cedel.
OBLIGATIONS OF SHAREHOLDERS TO DISCLOSE HOLDINGS AND TRANSACTIONS
Under the 1996 Disclosure of Holdings Act (Wet melding zeggenschap 1996) any
person who, directly or indirectly, acquires or disposes of an interest in the
capital or the voting rights of a public limited liability company incorporated
under Dutch law with an official listing on a stock exchange within the European
Economic Area must give a written notice of such acquisition or disposal, if as
a result of such acquisition or disposal the percentage of capital interest or
voting rights held by such person falls within another percentage range as
compared to the percentage range held by such person prior to such acquisition
or disposal. The percentage ranges referred to in the 1996 Disclosure of
Holdings Act are 0-5, 5-10, 10-25, 25-50, 50-66 2/3 and over 66 2/3. New
regulations under the Dutch 1995 Act on the Supervision of the Securities Trade
(Wet toezicht effectenverkeer 1995) regarding insider trading provide, among
other things, for an additional notification duty for shareholders holding,
directly or indirectly, an interest in more than 25% of the capital in a listed
company. Such shareholders are obliged to notify the Securities Board of the
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Netherlands of any and all transactions they enter into with respect to
securities of a company in which they hold an interest of more than 25%. If a
shareholder with more than a 25% interest is a legal entity and not an
individual, the obligation is extended to the managing directors and supervisory
directors of the legal entity.
Notification in writing under the 1996 Disclosure of Holdings Act must be given
to us and the Securities Board of the Netherlands (Stichting Toezicht
Effectenverkeer), which will disclose the information as notified to the public
by publication in a newspaper distributed throughout the member state or states
of the European Economic Area in which we are officially listed on a stock
exchange.
Non-compliance with the obligations of the 1996 Disclosure of Holdings Act
constitutes an economic offense, and may result in civil penalties including
suspension of voting rights and administrative penalties.
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TAXATION
The following is a brief summary of relevant Netherlands and United States tax
provisions. This summary does not address Netherlands tax consequences for
security holders who are residents of jurisdictions other than the United States
or the Netherlands. Such persons should consult their own tax advisors regarding
the tax consequences to them of purchasing, owning and disposing of common
shares.
SUMMARY OF NETHERLANDS TAX PROVISIONS APPLICABLE TO UNITED STATES SECURITY
HOLDERS
The following statements below represent a brief summary of the current
Netherlands tax laws, based on the law as in force at December 31, 1999. The
description is limited to the tax implications for a shareholder who is, or is
deemed to be, a resident of the United States and not the Netherlands for
purposes of the relevant tax codes. The description does not address residents
of other countries or special rules that may apply to special classes of holders
of shares and is not to be read as extending by implication to matters not
specifically referred to herein. As to individual tax consequences, each
shareholder should consult his own tax counsel.
Withholding Tax
In general, a dividend distributed by a company resident in the Netherlands is
subject to a withholding tax imposed by the Netherlands at a statutory rate of
25%. Dividends include dividends in cash or in kind, constructive dividends,
repayment of paid-in capital not recognized for Netherlands tax purposes and
liquidation proceeds in excess of paid-in capital recognized for Netherlands tax
purposes. Share dividends paid out of our paid-in-share premium, recognized as
capital for Netherlands tax purposes, are not subject to the above withholding
tax.
Any individual or corporation or any entity for Netherlands tax purposes, which
holds common shares and does not reside and is not deemed to reside in the
Netherlands, owning, or deemed to own, common shares may be eligible for a
partial or complete exemption from or a refund of the above withholding tax
under a tax convention that is in effect between the country of residence of
such individual or corporation and the Netherlands. The Netherlands has
concluded such tax conventions with several countries, including the United
States, Canada, Switzerland, Japan, all European Union member states, except
Portugal, and many other countries. For residents of the Netherlands Antilles
and Aruba, the tax arrangements of the Kingdom of the Netherlands may be
applicable.
Under the Tax Convention of December 18, 1992 concluded between the Netherlands
and the United States, or the U.S. Tax Treaty, dividends paid by us to a
resident of the United States, other than an exempt organization or exempt
pension trust, as discussed below, are generally eligible for a reduction of the
25% Netherlands withholding tax to 15%, or to 5% in the case of certain U.S.
corporate shareholders owning at least 10% of the voting power, provided that
such shareholder does not have an enterprise or an interest in an enterprise
that is, in whole or in part, carried on through a permanent establishment or
permanent representative in the Netherlands and to which enterprise or part of
an enterprise the common shares are attributable. The U.S. Tax Treaty provides
for a complete exemption from Netherlands withholding tax for dividends received
by exempt pension trusts and exempt organizations, as defined therein. Except in
the case of exempt organizations, such reduced dividend withholding rate, or
exemption from withholding for exempt pension trusts, can be applied at the
source upon payment of the dividends, provided that the proper forms have been
filed in advance of the payment. Exempt organizations remain subject to the
statutory withholding rate of 25% and are required to file for a refund of such
withholding.
A person may not claim the benefits of the U.S. Tax Treaty unless (i) he or she
is a resident of the United States as defined therein and (ii) such person's
entitlement to such benefits is not limited by the provisions of Article 26
("limitation on benefits") of the U.S. Tax Treaty.
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No withholding tax applies to the sale or disposition of common shares to
persons other than us or our affiliates, as defined for purposes of Netherlands
tax law.
Income Tax and Corporation Income Tax on Dividends
In the case of common shares held by a Netherlands-resident entity, any gains
derived from the transfer of common shares are subject to Netherlands
corporation tax, unless the entity in question qualifies for the participation
exemption. A non-resident individual or corporate shareholder will not be
subject to Netherlands income tax with respect to dividends distributed by us on
the or with respect to capital gains derived from the sale or disposition of our
common shares, provided that:
(a) the non-resident shareholder does not have an enterprise or an interest
in an enterprise that is, in whole or in part, carried on through a
permanent establishment or a permanent representative in the Netherlands to
which or to whom the common shares are attributable;
(b) the non-resident shareholder does not have a direct or indirect
substantial or deemed substantial interest in our share capital as defined
in the Netherlands tax code or, in the event the shareholder does have such
a substantial interest, such interest is a business asset; and
(c) the non-resident shareholder is not entitled to a share in the profits
of an enterprise effectively managed in the Netherlands other than by way
of securities or through an employment contract to which enterprise the
common shares are attributable.
In general terms, a substantial interest in our share capital does not exist if
the shareholder alone or together with certain relatives does not own, and has
not owned in the preceding five years, 5% or more of the aggregate paid-in
capital or of the paid-in capital of any class of our shares.
Net Wealth Tax
Corporations and other entities are not subject to wealth tax.
In general, an individual shareholder will be liable for 0.7% Netherlands wealth
tax regarding the common shares. A tax free threshold applies. Corporate
shareholders are not subject to Netherlands net wealth tax. A non-resident
individual shareholder is not subject to Netherlands net wealth tax with respect
to the common shares, provided that:
(a) the non-resident shareholder does not have an enterprise or an interest
in an enterprise that is, in whole or in part, carried on through a
permanent establishment or a permanent representative in the Netherlands to
which or to whom the common shares are attributable; and
(b) the non-resident shareholder is not entitled to a share in the profits
of an enterprise effectively managed in the Netherlands other than by way
of securities or through an employment contract to which enterprise the
common shares are attributable.
Gift and Inheritance Tax
In principle, liability for Netherlands gift tax or inheritance tax arises in
respect of any gifts of common shares by, or inheritance of common shares from
any person who resides at the time of the gift or death in the Netherlands.
A gift or inheritance of common shares from a non-resident shareholder will not
be subject to Netherlands gift and inheritance tax, provided that;
(a) the non-resident shareholder does not have an enterprise or an interest
in an enterprise that is, in whole or in part, carried on through a
permanent establishment or a permanent representative in the Netherlands to
which or to whom the common shares are attributable;
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(b) the non-resident shareholder is not entitled to a share in the profits
of an enterprise effectively managed in the Netherlands other than by way
of securities or through an employment contract, the common shares being
attributable to that enterprise; and
(c) the non-resident shareholder makes a gift of shares and dies within 180
days after the date of the gift, while being resident or deemed to be
resident in the Netherlands at the moment of his death.
For the purposes of Netherlands gift and inheritance tax, a Netherlands national
is deemed to be a resident of the Netherlands if he has been a resident thereof
at any time during the ten years preceding the date of the gift or death, as the
case may be. In addition, for the purposes of Netherlands gift tax, a person not
possessing Netherlands nationality is also deemed to be a Netherlands resident,
irrespective of his nationality, if he was a Netherlands resident therein at any
time in the twelve months preceding the time on which the gift was made.
SUMMARY OF NETHERLANDS TAX PROVISIONS APPLICABLE TO NETHERLANDS SECURITY HOLDERS
The following summary is intended as a general guide only. It is based on
certain aspects of current Netherlands tax law, including jurisprudence and
other regulations, in force on December 31, 1999, without prejudice to any
amendments introduced at a later date and implemented with a possible
retroactive effect. No conclusions may be drawn from the following summary as
regards topics that have not been included in this summary. This summary only
relates to prospective holders of common shares resident in the Netherlands for
tax purposes who hold their common shares as investments, and not as assets to
be realized in the course of a trade, and does not deal with certain categories
of shareholders.
This summary does not deal with all categories of shareholders and is not
intended as an exhaustive review of all tax aspects of holding our shares. Any
shareholder who is in doubt about his tax position is strongly recommended to
consult an appropriate professional tax advisor for information on the tax
consequences that the purchase, ownership and disposition of our common shares
may involve.
Dividend Tax
In general, under the 1965 Dividend Tax Act (Wet op de dividendbelasting 1965)
we are required to withhold 25% dividend tax on distributions payable by us to
our shareholders. The tax is withheld by us and paid to the Netherlands Tax
Authorities. The dividend tax withheld by us can generally be credited against
the Netherlands individual income tax and Netherlands corporate income tax.
Dividend tax does not apply to stock dividends that are debited from our share
premium account, to the extent that the share premium account has been
recognized as paid-in capital for Netherlands tax purposes.
We are generally not required to withhold dividend tax on dividend distributions
when the dividend is paid to corporate shareholders whose shareholding qualifies
for the participation exemption as defined in the 1969 Corporate Income Tax Act
(Wet op de vennootschapsbelasting 1969). Furthermore, dividend tax is not levied
when the dividend is paid to qualifying corporate shareholders resident in
European Union Member States, provided that these corporate shareholders have a
qualifying interest in our share capital, as defined in the 1965 Dividend Tax
Act and certain other conditions are met.
Individual and Corporate Income Tax for Resident Shareholders
When shares are owned by individual shareholders who are resident, or deemed
resident in the Netherlands, the taxation of income derived from the
shareholding and/or capital gains realized on the disposal of the shares depends
on various circumstances, including the tax status of the individual, the
percentage of the interest in our share capital held by the individual, and
certain other factors.
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In general, a resident, or deemed resident, individual shareholder will be
subject to Netherlands individual income tax on the income derived from the
shareholding. Stock dividends, or bonus shares are not subject to Netherlands
individual income tax, provided that the stock dividends are debited from our
share premium account, as recognized for Netherlands tax purposes, and the
shareholder does not have an enterprise to which the shares are attributable.
For a resident or deemed resident individual shareholder, capital gains realized
on the disposal of shares are generally not subject to Netherlands taxation,
provided that the shareholder does not have an enterprise to which the shares
are attributable; or a substantial interest in us as described below.
The resident, or deemed resident, individual shareholder who holds, or is deemed
to hold, a substantial interest in our share capital, will in general be subject
to Netherlands individual income tax on both dividend income derived from the
shareholding and on capital gains realized on the disposal of the shares. Both
the dividend income and capital gains will be taxed at a flat rate of 25%. In
general, a substantial interest is considered to be held by a natural person
when he or she together with his or her spouse holds a direct or indirect
participating interest of 5% or more in our issued share capital. An option to
obtain at least 5% of the shares or a certificate that gives the right to at
least 5% of the profits also qualifies as a substantial interest. In this
context, the term "spouse" refers to any partner with whom the taxpayer
concerned has maintained a joint household for an uninterrupted period of at
least six months during a single calendar year, and who is registered as a
resident at the same address as the taxpayer concerned. Holders of common shares
who do not hold a substantial interest themselves also come under the
substantial interest regime if their spouse and/or first degree relatives and
in-laws directly related to them do hold a substantial interest.
Provided that for Netherlands individual income tax purposes the shares
constitute a source of income, interest payments relating to the financing of
the acquisition of a substantial shareholding are generally deductible at a rate
of 25%.
A resident, or deemed resident, individual shareholder who does not hold a
substantial interest in us may use his dividend exemption of Nlg. 1,000 per
annum, Nlg. 2,000 for married individuals.
When shares are owned by a corporate shareholder resident, or deemed resident,
in the Netherlands, income derived from the shareholding and capital gains
realized on the disposal of the shares are in principle subject to Netherlands
corporate income tax, unless the shareholding qualifies for the participation
exemption. In general the participation exemption applies when the shareholding
constitutes at least 5% of our nominal issued and paid-in share capital.
Net Wealth Tax
Netherlands net wealth tax applies to individuals only. Individuals who are
resident, or deemed resident, in the Netherlands are subject to Netherlands net
wealth tax on their net assets, when those assets comprise our shares. The
applicable tax rate is 0.7%. Certain exemptions are available and a tax-free
allowance is applicable.
Gift Tax, Estate or Inheritance Tax
Gift tax and estate or inheritance tax is generally due in the Netherlands when
shares are given as a gift or inherited, provided that the donor or deceased is
or was a resident or is or was deemed resident of the Netherlands. Here certain
deeming rules apply if the donor or deceased has, or had the Netherlands
nationality and was, or has been a resident of the Netherlands. Gift tax and
estate or inheritance tax is levied against the acquiring party. If the donor or
deceased is not or was not a resident, or is not or was not deemed resident, of
the Netherlands, no gift tax, or estate or inheritance tax will be levied,
provided that the donor or deceased does not or did not own an enterprise, or an
interest in an enterprise, whose business is entirety or partly carried on
through a permanent establishment, or representative in the
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Netherlands, to which, or to whom, the shares are or were attributable.
Furthermore, inheritance tax will be levied in case of a gift of shares by an
individual who at the time of the gift was neither resident nor deemed to be
resident in the Netherlands and such individual dies within 180 days after the
date of the gift, while being resident or deemed to be resident in the
Netherlands at the time of death.
Capital Tax
Capital tax at the rate of 0.9% will generally be due by our shareholders on
payments on shares issued by us.
Taxes in the 21st Century
A legislative proposal on mainly individual income taxation was approved on
February 1, 2000 by the Second Chamber of Parliament. After approval by the
First Chamber of Parliament it will enter into force as of January 1, 2001.
This proposal will substantially change the taxation of investment income for
Netherlands resident individual shareholders not holding a substantial interest
in the common shares. Tax at a rate of 30% will be based on a fictitious yield
of 4% of the average market value of the common shares minus associated debt.
The fictitious yield will apply irrespective of actual income or capital gains.
The existing net wealth tax will be abolished.
The Netherlands income tax position for individuals holding our shares not
resident in the Netherlands will in principle remain unaltered.
SUMMARY OF US FEDERAL TAX PROVISIONS APPLICABLE TO UNITED STATES SECURITY
HOLDERS
The following is a general description of the material United States federal
income tax consequences of the ownership and disposition of the common shares.
This discussion does not purport to deal with all aspects of U.S. federal income
and estate taxation that may be relevant to holders in view of their particular
circumstances, nor does it deal with holders subject to special rules, such as
dealers in securities or currencies, financial institutions, tax exempt
organizations, insurance companies, persons holding common shares as part of a
hedging or conversion transaction or a straddle or holders of common shares
whose "functional currency" is not the U.S. dollar. Furthermore, this discussion
is based on current provisions of the Internal Revenue Code, and administrative
and judicial interpretations thereof as of the date hereof, all of which are
subject to change, possibly with retroactive effect. Prospective holders of
common shares should consult their own tax advisors as to the application of the
U.S. federal income tax laws to their particular situation as well as any state,
local and foreign tax consequences of the ownership and disposition of the
shares.
As used in this prospectus, "U.S. Holder" means a beneficial owner of shares
that is (i) an individual who is a citizen or resident of the U.S., (ii) a
corporation, partnership or other entity created or organized in the U.S. or
under the laws of the U.S. or of any state thereof, (iii) an estate the income
of which may be included in gross income for U.S. federal income tax purposes
regardless of its source, (iv) a trust if a court within the U.S. is able to
exercise primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control all substantial decisions of the
trust, or some trusts in existence on August 20, 1996 that were treated as U.S.
persons under the law in effect immediately prior to that date and that make a
valid election to be treated as a U.S. person or (v) any other person or entity
that would be subject to U.S. federal income tax on a net income basis in
respect of the common shares.
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Taxation of Dispositions
A U.S. Holder will recognize gain or loss for U.S. federal income tax purposes
upon the sale or other disposition of the shares in an amount equal to the
difference between the amount realized and the U.S. Holder's tax basis in the
shares. For these purposes, a U.S. Holder's tax basis in the shares generally
will equal the U.S. dollar cost of such shares to such U.S. Holder. Gain or loss
realized by a U.S. Holder on such sale or other disposition generally will be
treated as capital gain or loss, and will be long-term capital gain or loss if
the shares were held for more than one year. Any such gain generally would be
treated as U.S. source income for U.S. foreign tax credit purposes. Net
long-term capital gain recognized by a U.S. Holder who is an individual
generally is subject to a maximum U.S. federal income tax rate of 20%. The
deduction of capital losses is subject to certain limitations. Prospective
investors should consult their own tax advisors in this regard.
Taxation of Dividends
The gross amount of any distribution, including any Netherlands taxes withheld
therefrom, with respect to the shares generally should be included in the gross
income of a U.S. Holder as foreign source dividend income to the extent paid out
of our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. To the extent that the amount of any distribution
exceeds our current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital to the extent
of the U.S. Holder's adjusted tax basis in the shares, and to the extent that
such distribution exceeds the U.S. Holder's adjusted tax basis in the shares
such excess will be taxed as capital gain. Distributions treated as dividends
will not be eligible for the dividends received deduction generally allowed to
corporations under the Internal Revenue Code. If a U.S. Holder receives a
dividend in Netherlands guilders or in Euros, the amount of the dividend for
U.S. federal income tax purposes will be the U.S. dollar value of the dividend,
determined at the spot rate in effect on the date of such payment, regardless of
whether the payment is later converted into U.S. dollars. In the case of such
later conversion, the U.S. Holder may recognize U.S. source ordinary income or
loss as a result of currency fluctuations between the date on which the dividend
is paid and the date the dividend amount is converted to U.S. dollars.
Credit for Foreign Taxes Withheld
Subject to certain conditions and limitations set forth in Sections 901 and 904
of the Code, including certain holding period requirements, foreign tax withheld
or paid with respect to dividends on common shares generally will be eligible
for credit against a U.S. Holder's U.S. federal income tax liability.
Alternatively, a U.S. Holder may claim a deduction for such amount of withheld
foreign taxes, but only for a year for which such U.S. Holder elects to do so
with respect to all foreign income taxes. The overall limitation on foreign
taxes eligible for credit is calculated separately with respect to specific
classes of income. U.S. Holders should consult their own tax advisors with
respect to the availability of a foreign tax credit or deduction for foreign,
including Netherlands, taxes withheld.
Passive Foreign Investment Company
The foregoing discussion assumes that we are not currently, and will not be in
the future, classified as a "passive foreign investment company," or PFIC,
within the meaning of the Internal Revenue Code. Based on our current and
projected income, assets and activities, we do not believe we will be classified
as a PFIC for our current or any succeeding taxable year. However, if during any
taxable year, 75% or more of our gross income consists of certain types of
"passive" income, or if the average value during a taxable year of our "passive
assets," which generally are assets that produce passive income or assets held
for the production of passive income, is 50% or more of the average value of all
assets held by us, we will be classified as a PFIC for that year and in
succeeding years.
71
<PAGE> 72
If we were classified as a PFIC, a U.S. Holder holding common shares generally
would be subject to increased tax liability (possibly including an interest
charge) upon the sale or other disposition of the shares or upon the receipt of
certain dividends, unless such U.S. Holder makes an election (1) to be taxed
currently on its pro rata portion of our income and gain, whether or not we
distribute such income or gain in the form of dividends or otherwise, or (2) to
mark its shares to market by accounting for any difference between such shares'
fair market value and adjusted basis at the end of the taxable year by either an
inclusion in income or a deduction from income. U.S. Holders should consult
their own tax advisors with respect to the PFIC issue and its applicability to
their particular situation.
Backup Withholding
In general, information reporting requirements will apply to dividends paid in
respect of the common shares and the proceeds received on the disposition of the
shares paid within the United States (and in certain cases, outside the United
States) to U.S. Holders, and such amounts may be subject to a 31% U.S. backup
withholding tax. Backup withholding will not apply, however, to a U.S. Holder
who (1) is a corporation or comes within certain other exempt categories and,
when required, demonstrates that fact, or (2) furnishes a correct taxpayer
identification number or certificate of foreign status and makes certain other
required certifications as provided by the backup withholding rules. The amount
of any backup withholding from a payment to a U.S. Holder will be allowed as a
credit against the U.S. Holder's U.S. federal income tax liability provided that
the required information is furnished to the Internal Revenue Service.
SUMMARY OF US FEDERAL TAX PROVISIONS APPLICABLE TO NON-UNITED STATES SECURITY
HOLDERS
Holders of our shares that are not U.S. Holders ("Non-U.S. Holders") generally
will not be subject to U.S. federal income taxes, including U.S. withholding
taxes, on any gain realized on a sale, exchange or other disposition of the
shares unless, in the case of such sale, exchange or other disposition of the
shares, (i) such gain is effectively connected with the conduct by the Non-U.S.
Holder of a trade or business in the United States, and is attributable to a
permanent establishment maintained in the United States by such Non-U.S. Holder,
if an applicable tax treaty so requires as a condition for such Non-U.S. Holder
to be subject to U.S. taxation on a net income basis in respect of gain from the
sale or other disposition of shares, or (ii) in the case of gain realized by an
individual Non-U.S. Holder, the Non-U.S. Holder is present in the United States
for 183 days or more in the taxable year of sale and certain other conditions
are met.
A Non-U.S. Holder generally will not be subject to U.S. federal income or
withholding tax on dividends received on common shares, unless such income is
effectively connected with a trade or business of the Non-U.S. Holder in the
United States, and is attributable to a permanent establishment maintained in
the United States by such Non-U.S. Holder, if an applicable tax treaty so
requires as a condition for such Non-U.S. Holder to be subject to U.S. taxation
on a net income basis in respect of income from the shares.
Non-U.S. Holders may be required to comply with certification procedures in
order to establish non-U.S. status for purposes of the information reporting and
backup withholding rules. Treasury regulations recently issued by the IRS, that
are scheduled to be effective for payments after December 31, 2000, modify such
certification procedures in certain respects. Prospective investors should
consult their own tax advisors regarding the certification requirements for
Non-U.S. Holders owning shares.
The discussion set forth above is included for general information only and may
not be applicable depending upon a holder's particular situation. Holders should
consult their tax advisors with respect to the tax consequences to them of the
purchase, ownership and disposition of shares including the tax consequences
under state, local and other tax laws and the possible effects of changes in
United States federal and other tax laws.
72
<PAGE> 73
LEGAL MATTERS
The legality of the common shares offered hereby will be passed upon for us by
Stibbe Simont Monahan Duhot of the Netherlands. We are being represented as to
some United States legal matters by Quarles & Brady LLP of Phoenix, Arizona.
Certain legal matters relating to the offering will be passed upon for the
underwriters by Gibson, Dunn & Crutcher LLP of San Francisco, California.
The chairman of our board of supervisory directors is a partner at Stibbe Simont
Monahan Duhot and owns 300,000 common shares.
EXPERTS
The financial statements as of December 31, 1999 and 1998 and for each of the
three years in the period ended December 31, 1999 included in this prospectus
have been audited by Deloitte & Touche Accountants, independent auditors, as
stated in their report, which is included herein, and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
73
<PAGE> 74
ENFORCEABILITY OF CIVIL LIABILITIES
Our affairs are governed by our articles of association and by the laws
governing limited liability companies formed in the Netherlands. The rights of
our shareholders and the responsibilities of members of our management board and
supervisory board under Netherlands law are not as clearly established as under
statutes or judicial precedent existing in some United States jurisdictions.
Therefore, our public shareholders may have more difficulty in protecting their
interests in the face of actions by our management, members of our management
board or supervisory board or our controlling shareholders than they would as
shareholders of a corporation incorporated in a United States jurisdiction.
Under our articles of association, adoption of our annual accounts at our annual
meeting of shareholders discharges the members of our management board and
supervisory board from liability in respect of the exercise of their duties
during the financial year concerned, unless an explicit reservation is made at
our annual meeting of shareholders. This discharge is without prejudice to the
provisions of Netherlands law, including provisions relating to liability of
members of supervisory boards and management boards upon bankruptcy of a company
pursuant to articles 138 and 149 of book 2 of the Dutch Civil Code. This
discharge is not absolute and is not effective as to matters not disclosed to
the shareholders.
We are a Netherlands limited liability company and our executive offices and the
majority of our assets are located outside the United States. In addition, most
of the members of our management board and supervisory board, our executive
officers, and some of the experts named in this prospectus are residents of
jurisdictions other than the United States. As a result, it may be difficult for
investors to serve process within the United States upon us, members of our
management board or supervisory board, our executive officers, or experts named
in this prospectus or to enforce against them in United States courts judgments
of those courts, to enforce outside the United States judgments obtained against
them in United States courts, or to enforce in United States courts judgments
obtained against them in courts in jurisdictions outside the United States, in
any action, including actions that derive from the civil liability provisions of
the United States securities laws. In addition, it may be difficult for
investors to enforce, in original actions brought in courts in jurisdictions
located outside the United States, liabilities that derive from the United
States securities laws.
We have been advised by Stibbe Simont Monahan Duhot, our Netherlands legal
counsel, that the United States and the Netherlands do not currently have a
treaty providing for reciprocal recognition and enforcement of judgments, other
than arbitration awards, in civil and commercial matters. Therefore, a final
judgment for the payment of money rendered by any federal or state court in the
United States based on civil liability, whether or not it is derived solely from
the federal securities laws of the United States, would not be directly
enforceable in the Netherlands. However, if the party in whose favor a final
judgment for the payment of money is rendered brings a new suit in a competent
court in the Netherlands, that party may submit to the Netherlands court the
final judgment that has been rendered in the United States. If the Netherlands
court finds that the jurisdiction of the federal or state court in the United
States has been based on grounds that are internationally acceptable and that
proper legal procedures have been observed, the court in the Netherlands may
give binding effect to the final judgment that has been rendered in the United
States unless that judgment contravenes the Netherlands' public policy. We have
been further advised by our Netherlands legal counsel that there is some doubt
as to whether a Netherlands court might impose civil liability on us, on members
of our supervisory board or management board or on the experts named in this
prospectus in an action that is derived solely from the federal securities laws
of the United States brought in a court in the Netherlands against us or them.
74
<PAGE> 75
OTHER INFORMATION
We are registered with the Trade Register of the Chamber of Commerce of Utrecht,
the Netherlands, under number 30037466. Our corporate seat, and the domicile of
our management board and supervisory board, are at Bilthoven, Municipality of De
Bilt, the Netherlands.
The resolution to issue the common shares offered by this prospectus was adopted
by our management board on April 6, 2000 and was approved in writing by our
supervisory board on April 6, 2000.
There have been no material adverse changes in our financial condition since
December 31, 1999.
To the best of our knowledge, the information contained in this prospectus is
true and complete and does not omit any material facts necessary to make such
information, in the light of the circumstances in which it is presented, not
misleading. We are responsible for the information in this prospectus, except
for the information on pages 55 through 57 regarding concession and reallowance
amounts, stabilization, the finder's fee to be paid in connection with this
offering, and discretionary sales by the underwriters, for which we have relied
on information provided by the underwriters.
We have taken appropriate measures to comply with Netherlands law and
regulations for prevention of insider trading which were introduced on January
1, 1999.
We have assumed joint and several liability under Article 403 Book 2 of the
Netherlands Civil Code for all our wholly-owned subsidiaries in the Netherlands.
The address of Rabo Securities N.V., our listing agent in the Netherlands, is
Amstelplein 1, Amsterdam, the Netherlands.
We have applied for the admission of these securities on the AEX-Stock Exchange
and to the book-entry facilities of NECIGEF, Euroclear and Cedel.
75
<PAGE> 76
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT ASM INTERNATIONAL
We have filed with the SEC a registration statement on Form F-3, including
exhibits and schedules, in connection with the common shares to be sold in this
offering. This prospectus is part of the registration statement and does not
contain all the information included in the registration statement. For further
information about us and the common shares to be sold in this offering, please
refer to the registration statement. Whenever a reference is made in this
prospectus to any contract, agreement or other document, the reference may not
be complete and you should refer to the copy of that contract, agreement or
other document filed as an exhibit to the registration statement or to one of
our previous SEC filings.
We also file annual and special reports and other information with the SEC. You
may read and copy all or any portion of the registration statement and any other
document we file with the SEC at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room. Commencing with filings
made this year, such material may also be obtained at the Internet site the SEC
maintains at http://www.sec.gov which contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus, and information that we file later with the SEC will
automatically update and supersede the information contained in this prospectus.
We incorporate by reference the documents listed below:
- our annual report on Form 20-F for the year ended December 31, 1999;
and
- the description of our share capital contained in our Form 8-A
Registration Statement filed on April 3, 1985, which is updated by
our Form 6-K filed on March 14, 2000.
We also incorporate by reference any annual reports filed on Form 20-F and any
special reports filed on Form 6-K until all of the common shares that are part
of this offering have been sold. We may incorporate the Forms 6-K by stating in
those forms that they are being incorporated into this prospectus.
Any statement contained in a document that is incorporated by reference will be
modified or superseded for all purposes to the extent that a statement contained
in this prospectus, or in any other document that is subsequently filed with the
SEC and incorporated by reference, modifies or is contrary to that previous
statement. Any statement so modified or superseded will not be deemed a part of
this prospectus except as so modified and superseded.
You may request a copy of these filings, at no cost, by contacting us at the
following address and telephone number:
ASM International N.V.
Jan van Eycklaan 10
3723 BC Bilthoven
The Netherlands
Attention: Rinse de Jong
Vice President of Finance and Chief Financial Officer
(011) (31) 30 229 8506
76
<PAGE> 77
ASM INTERNATIONAL N.V.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-2
Consolidated Statements of Operations for each of the three
years ended December 31, 1997, 1998 and 1999.............. F-3
Consolidated Statements of Comprehensive Income for each of
the three years ended December 31, 1997, 1998, and 1999... F-3
Consolidated Statements of Shareholders' Equity for each of
the three years ended December 31, 1997, 1998 and 1999.... F-4
Consolidated Statements of Cash Flows for each of the three
years ended December 31, 1997, 1998 and 1999.............. F-5
Notes to Consolidated Financial Statements.................. F-6
Independent Auditors' Report................................ F-28
</TABLE>
F-1
<PAGE> 78
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(thousands except share data) EUR
- ---------------------------------------------------------------------------------------------------------------------------------
December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
Assets 1998 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents 11,724 14,153
Marketable securities 7,293 5,709
Accounts receivable (less allowance for doubtful
accounts of E1,839 and E1,432) 84,194 149,115
Inventories 64,636 107,280
Other current assets 8,753 15,844
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 176,600 292,101
Property, plant and equipment, net 105,551 127,176
Goodwill, net 799 5,758
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 282,950 425,035
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Notes payable to banks 38,039 22,667
Accounts payable 28,947 108,922
Accrued expenses 25,613 48,566
Advance payments from customers 3,127 4,595
Income taxes 1,983 3,887
Current portion of long-term debt 9,990 36,944
Current portion of subordinated debt 15,991 52,285
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 123,690 277,866
Long-term debt 39,601 7,997
Subordinated debt 45,135 -
Deferred income taxes 3,613 3,490
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 212,039 289,353
Minority interest in subsidiary 50,447 70,130
Shareholders' Equity:
Common shares
Authorized 60,000,000 shares, par value NLG.01,
issued and outstanding 34,540,843 and 40,107,784
shares 157 182
Financing preferred shares
Authorized 900 shares, par value NLG100, issued none
Preferred shares
Authorized 6,900 shares, par value NLG100, issued
none
Capital in excess of par value 78,927 103,443
Retained earnings (deficit) (46,553) (35,454)
Accumulated other comprehensive income (loss) (12,067) (2,619)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 20,464 65,552
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity 282,950 425,035
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
Prior-year balances were restated from Netherlands guilders into Euros using the
fixed exchange rate as of January 1, 1999 (EUR1.00 = Nlg2.20371).
F-2
<PAGE> 79
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
(thousands except per share data) EUR
- ---------------------------------------------------------------------------------------------------
Year ended December 31,
- ---------------------------------------------------------------------------------------------------
1997 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 321,582 288,111 414,495
Cost of sales (182,259) (179,326) (244,485)
- ---------------------------------------------------------------------------------------------------
Gross profit 139,323 108,785 170,010
Operating expenses:
Selling, general and administrative costs (74,675) (60,017) (83,510)
Research and development, net (39,000) (36,277) (47,145)
Litigation settlement (79,669) - -
- ---------------------------------------------------------------------------------------------------
Total operating expenses (193,344) (96,294) (130,655)
- ---------------------------------------------------------------------------------------------------
Earnings (loss) from operations (54,021) 12,491 39,355
Net interest and other financial income (expenses) (3,239) (5,350) (8,608)
- ---------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes and minority
interest in net earnings of subsidiary (57,260) 7,141 30,747
Income taxes (2,761) (648) (1,274)
- ---------------------------------------------------------------------------------------------------
Earnings (loss) before minority interest in net
earnings of subsidiary (60,021) 6,493 29,473
Minority interest in net earnings of subsidiary (10,455) (6,261) (18,374)
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) (70,476) 232 11,099
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) per share:
Basic (2.12) 0.01 0.30
Diluted (2.12) 0.01 0.29
- ---------------------------------------------------------------------------------------------------
Weighted average number of shares:
Basic 33,232 33,794 37,301
Diluted 33,232 34,743 40,664
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
Prior-year balances were restated from Netherlands guilders into Euros using the
fixed exchange rate as of January 1, 1999 (EUR1.00 = Nlg2.20371).
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(thousands) EUR
- -------------------------------------------------------------------------------------------------
Year ended December 31,
- -------------------------------------------------------------------------------------------------
1997 1998 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss)......................................... (70,476) 232 11,099
Other comprehensive income (loss)
Exchange rate changes for the year........................ 5,636 137 9,448
------- ---- ------
Total other comprehensive income (loss)................... 5,636 137 9,448
- -------------------------------------------------------------------------------------------------
Comprehensive income (loss)................................. (64,840) 369 20,547
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
Prior-year balances were restated from Netherlands guilders into Euros using the
fixed exchange rate as of January 1, 1999 (EUR1.00 = Nlg2.20371).
F-3
<PAGE> 80
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(thousands, except for number of common shares) EUR
- ------------------------------------------------------------------------------------------------------------
Accumulated Total
Number of Capital in Retained other com- Share-
common Common excess of earnings prehensive holders'
shares shares par value (deficit) income (loss) Equity
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 33,058,293 150 74,807 23,691 (17,840) 80,808
Issuance of common shares:
For stock options 320,750 1 51 - - 52
Net earnings (loss) - - (70,476) - (70,476)
Exchange rate changes for the year - - - 5,636 5,636
- ------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 33,379,043 151 74,858 (46,785) (12,204) 16,020
Issuance of common shares:
For stock options 961,800 5 436 - - 441
Other 200,000 1 702 - - 703
Net earnings - - 232 - 232
Fair value of warrants issued - 2,455 - - 2,455
Debt conversion discount - 476 - 476
Exchange rate changes for the year - - - 137 137
- ------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 34,540,843 157 78,927 (46,553) (12,067) 20,464
ISSUANCE OF COMMON SHARES:
FOR STOCK OPTIONS 169,900 1 495 - - 496
CONVERSION OF SUBORDINATED NOTES 5,397,041 24 24,021 - - 24,045
NET EARNINGS - - 11,099 - 11,099
EXCHANGE RATE CHANGES FOR THE YEAR - - - 9,448 9,448
- ------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1999 40,107,784 182 103,443 (35,454) (2,619) 65,552
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
Prior-year balances were restated from Netherlands guilders into Euros using the
fixed exchange rate as of January 1, 1999 (EUR1.00 = Nlg2.20371).
F-4
<PAGE> 81
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
(thousands) EUR
- -------------------------------------------------------------------------------------------
Year ended December 31,
- -------------------------------------------------------------------------------------------
1997 1998 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net earnings (loss) (70,476) 232 11,099
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Subordinated convertible note issued in settlement of
litigation 72,289 - -
Depreciation and amortization 19,626 22,688 24,487
Amortization of discounted interest on subordinated
notes -- -- 1,421
Deferred income taxes 1,168 (56) (123)
Minority interest in net earnings of subsidiary 10,455 6,261 18,374
Increase (decrease) in allowance for doubtful
receivables 2,090 (1,492) (407)
Changes in other assets and liabilities:
Accounts receivable (22,214) 12,831 (64,514)
Inventories (15,159) 14,230 (42,644)
Other current assets (1,534) 850 (7,091)
Accounts payable and accrued expenses 15,716 (25,002) 102,928
Advance payments from customers 2,033 (2,573) 1,468
Income taxes 1,559 (1,935) 1,904
- -------------------------------------------------------------------------------------------
Net cash provided by operating activities 15,553 26,034 46,902
- -------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (35,171) (24,142) (30,587)
Acquisition of business - - (1,267)
Proceeds from sale of property, plant and equipment 8,385 2,448 2,453
Proceeds from (purchase of) marketable securities 258 (1,538) 2,607
Investment in subsidiary (570) - -
- -------------------------------------------------------------------------------------------
Net cash (used in) investing activities (27,098) (23,232) (26,794)
- -------------------------------------------------------------------------------------------
Cash flows from financing activities:
Notes payable to banks, net 16,760 (8,567) (15,372)
Proceeds from long-term debt and subordinated debt(1) 17,502 27,574 16,652
Repayments of long-term debt and subordinated debt(1) (19,838) (29,730) (19,690)
Proceeds from issuance of common shares 52 1,144 496
Dividends paid to minority shareholders (5,672) (5,526) (8,384)
- -------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 8,804 (15,105) (26,298)
Exchange rate effects 4,159 (3,418) 8,619
- -------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,418 (15,721) 2,429
Cash and cash equivalents at beginning of year 26,027 27,445 11,724
- -------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year 27,445 11,724 14,153
- -------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest 5,777 7,232 8,859
Income taxes 34 2,638 (505)
- -------------------------------------------------------------------------------------------
Non cash investing activities:
Acquisition of business through issuance of convertible
note - - (3,868)
- -------------------------------------------------------------------------------------------
Non cash financing activities:
Conversion of subordinated notes into common shares - - 24,045
- -------------------------------------------------------------------------------------------
</TABLE>
(1) In 1998 the subordinated convertible note due to Applied Materials, Inc. was
restructured into a subordinated note including 1,500,000 warrants issued to
purchase 1.5 million of the Company's common shares. The net effect of the
restructuring has no impact on the cash flow statement.
See Notes to Consolidated Financial Statements.
Prior-year balances were restated from Netherlands guilders into Euros using the
fixed exchange rate as of January 1, 1999 (EUR1.00 = Nlg2.20371).
F-5
<PAGE> 82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EUR in thousands)
NOTE A Summary of significant Accounting Policies
General - ASM International N.V. ('ASMI' or 'the Company') is a corporation
domiciled in the Netherlands with principal operations in Europe, the United
States, South East Asia and Japan. The Company dedicates its resources to the
research, development, manufacturing, marketing and servicing of equipment and
materials used to produce semiconductor devices. ASMI provides production
solutions for the main areas of semiconductor production: wafer processing
(Front-End), assembly and packaging (Back-End). The Company follows accounting
principles generally accepted in the United States of America. Effective
beginning of the year ended December 31, 1999, the Company changed its reporting
currency from Netherlands guilders to Euros (EUR or E). Prior-year balances have
been restated using the fixed exchange rate as of January 1, 1999
(EUR1.00 = Nlg2.20371).
The comparative balances reported in Euros depict the same trends as would have
been presented if the Company had continued to present balances in Netherlands
guilders. Balances for periods prior to January 1, 1999 are not comparable to
the balances of other companies that report in Euros having restated amounts
from a different currency than Netherlands guilders.
Principles of Consolidation - The Consolidated Financial Statements include the
accounts of ASMI and its subsidiaries ('the Company'), all of which are more
than 50 percent owned. The minority interest of third parties is disclosed
separately in the Financial Statements. All material intercompany profits,
transactions and balances have been eliminated in consolidation.
Foreign Currency Translation - Assets and liabilities of foreign subsidiaries
are translated into Euros at exchange rates prevailing at the end of the year.
Revenues and costs relating to the operation of such subsidiaries are translated
at average exchange rates during the period. Resulting translation adjustments
are directly recorded in Shareholders' Equity. Foreign currency transaction
gains and losses generally are included in determining net earnings. From time
to time the Company enters into foreign currency exchange contracts as a hedge
against transactions denominated in foreign currencies. Gains and losses in
market value of such contracts are recognized as an offset against foreign
exchange gains or losses on the underlying transactions. A change in the market
value of a foreign exchange contract that is a hedge of a firm commitment is
deferred and included in the valuation of the completed transaction.
Revenue Recognition - The Company recognizes revenue from the sale of products
when the risks and rewards of ownership transfer to customers, which is
generally at the time of shipment. No significant obligations remain after the
product is shipped. Cost for installation and warranty are accrued when
corresponding sales revenues are recognized. Revenues for services are
recognized when performed.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand,
amounts due from banks on demand, and short-term deposits with a maturity of
three months or less at the date of purchase.
Marketable Securities - The Company classifies all its investments in marketable
securities as available for sale which requires the Company to report these
investments at fair market value and record the unrealised gains and losses,
after tax, as a component of Shareholders' Equity. In the accompanying Financial
Statements the marketable securities are carried at cost which approximates fair
market value.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
method) or market. Costs include net prices paid for materials purchased,
charges for freight and custom duties, direct wages
F-6
<PAGE> 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
of employees and charges for factory production overhead.
Property, Plant and Equipment - Property, plant and equipment are carried at
cost (net of government grants), less accumulated depreciation. Capital leased
assets are recorded at the present value of future lease obligations.
Depreciation and amortization are calculated using the straight-line method over
the estimated useful lives.
Goodwill - The excess of the purchase price over the fair market value of net
assets acquired is amortized on a straight line basis over 10 years.
Recoverability of Long-lived Assets - In evaluating useful lives and carrying
values of long-lived assets, the Company uses undiscounted cash flows to assess
if it has impairment of assets. In the event that an impairment seems likely,
the fair value of the related asset is determined, and the Company would record
a charge to earnings based on comparing the asset's carrying value to the
estimated fair value.
Income Taxes - Deferred income taxes are provided for differences between the
tax base of certain assets and liabilities and the reported amounts in the
Financial Statements that will result in taxable or deductible amounts in future
years. The Company accounts for income taxes under the provision of SFAS No.
109, 'Accounting for Income Taxes'.
Stock-Based Compensation - In 1995, Statement of Financial Accounting Standards
No. 123 (FASB 123), 'Accounting for Stock-Based Compensation', was issued. This
is a standard that allows the Company to choose to apply the accounting method
as described in this Statement. However, the Company has decided not to apply
this accounting method, but instead to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees'. Accordingly, no compensation expense has been recognized for its
stock based compensation plan (see Note P).
Research and Development Expenses - Research and development costs are expensed
as incurred. Costs which relate to prototype and experimental models which are
sold to customers are charged to cost of sales. Subsidies and other governmental
credits to cover research and development costs relating to approved projects
are recorded as research and development credits in the period when such project
costs occur. Technical development credits (Technische Ontwikkelings Kredieten
or 'TOK's') received from the Netherlands government to offset the cost of
certain research and development projects are contingently repayable to the
extent sales of equipment developed in such projects occur. Such repayments are
calculated as a percentage of sales and are charged to cost of sales. No such
repayments are required if such sales do not occur (see Note M).
Comprehensive Income - Effective fiscal year 1998, the Company adopted Statement
of Financial Accounting Standards No. 130 (FASB 130), 'Reporting Comprehensive
Income'.
Segment Information - In June 1997, Statement of Financial Accounting Standards
No. 131 (FASB 131), 'Disclosures about Segments of an Enterprise and Related
Information' was issued. This statement was adopted by the Company in fiscal
1998 and redefines how operating segments are determined and requires
qualitative disclosures of certain financial and descriptive information about
the Company's operating segments. As a result of the adoption of this Standard,
the previously reported segmentation and related disclosure changed (see Note
Q).
New Accounting Pronouncements - In June 1998, the FASB issued SFAS No. 133,
'Accounting for Derivative Instruments and Hedging Activities', which
establishes accounting and reporting
F-7
<PAGE> 84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
standards for derivative instruments and requires that all derivatives be
recognized as either assets or liabilities in the statements of financial
position. This pronouncement will become effective for the Company for the year
ending December 31, 2001. The Company has not yet completed its analysis of the
specific additional information which may be required under this new standard.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
necessarily requires Management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates and the reported amounts of
revenue and expense during the reported periods. Actual results could differ
from those estimates.
Reclassifications - Certain reclassifications have been made to prior year
Financial Statements to conform to the current year presentation.
NOTE B Cash and Cash Equivalents, Marketable Securities
At December 31, 1999, cash and cash equivalents and marketable securities
of the Company's subsidiary ASM Pacific Technology Ltd ('ASMPT') amounting to
E16,002 are restricted to use in the operations of this company only.
NOTE C Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------------
1998 1999
- -------------------------------------------------------------------------------------
<S> <C> <C>
Components and raw materials 26,005 41,052
Work in process 29,195 50,612
Finished goods 9,436 15,616
- -------------------------------------------------------------------------------------
Inventories 64,636 107,280
- -------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE> 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
NOTE D Property, Plant and Equipment
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Land, Machinery,
buildings equipment,
and im- furniture
provements and fixtures Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At cost:
Balance January 1, 1999 62,424 153,681 216,105
Capital expenditures 1,207 29,380 30,587
Retirements and sales (2) (8,087) (8,089)
Translation effect 10,760 26,756 37,516
- -----------------------------------------------------------------------------------------------------
Balance December 31, 1999 74,389 201,730 276,119
- -----------------------------------------------------------------------------------------------------
Accumulated depreciation:
Balance January 1, 1999 22,074 88,480 110,554
Depreciation for the year 4,790 19,357 24,147
Retirements and sales (70) (5,566) (5,636)
Translation effect 3,935 15,943 19,878
- -----------------------------------------------------------------------------------------------------
Balance December 31, 1999 30,729 118,214 148,943
- -----------------------------------------------------------------------------------------------------
Property, plant and equipment, net:
January 1, 1999 40,350 65,201 105,551
December 31,1999 43,660 83,516 127,176
- -----------------------------------------------------------------------------------------------------
</TABLE>
Useful lives in years:
<TABLE>
<S> <C>
-- Buildings and improvements 25 year
-- Machinery and equipment 2-10 year
-- Furniture and fixtures 2-10 year
</TABLE>
F-9
<PAGE> 86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
NOTE E Goodwill
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
<S> <C>
At cost:
Balance January 1, 1999 892
Acquired 5,135
Translation effect 175
- -----------------------------------------------------------------------
Balance December 31, 1999 6,202
- -----------------------------------------------------------------------
Accumulated amortization:
Balance January 1, 1999 93
Amortization for the year 340
Translation effect 11
- -----------------------------------------------------------------------
Balance December 31, 1999 444
- -----------------------------------------------------------------------
Goodwill, net:
January 1, 1999 799
December 31, 1999 5,758
- -----------------------------------------------------------------------
</TABLE>
On August 27, 1999, the Company acquired all the outstanding shares of
Microchemistry Ltd. The acquisition was accounted for using the purchase method.
Total consideration paid amounted to FIM (Finnish Marks) 23.2 million
(approximately Euro 3.9 million) and after adding the asset deficiency recorded
goodwill totalled (euro)4,747.
In December 1999, the Company purchased a 24% interest in NanoPhotonics AG
for US$0.4 million. An officer in the Company also purchased a 44.5% interest at
the same time and at the same price per share. The Company has the option to
purchase the 44.5% interest from the officer at the same purchase price per
share as paid by the officer. In exchange for this option, the Company granted
the officer a five-year option to purchase 25,000 common shares in the Company
at the fair market value of the shares at the option grant date.
NOTE F Notes Payable to Banks
ASMI and its individual subsidiaries borrow under separate short-term lines of
credit with banks in the countries where they are located. The lines bear a
weighted average interest of 3.9 percent at December 31, 1999.
Total short-term lines of credit available amounted to (euro)93,937 at December
31, 1999. The amount outstanding at December 31, 1999 was (euro)22,667 and the
unused portion totalled (euro)71,270. The unused portion includes (euro)46,810
relating to ASMPT and is solely authorized for use in that Company's operations.
F-10
<PAGE> 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
The lines contain general provisions concerning renewal and continuance at the
option of the banks.
Information on notes payable to banks is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Short-term debt outstanding in: December 31,
- -----------------------------------------------------------------------------------------
1998 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
The Netherlands 6,078 12,223
U.S.A. 4,281 -
Japan 17,708 10,274
Hong Kong 9,972 170
- -----------------------------------------------------------------------------------------
38,039 22,667
- -----------------------------------------------------------------------------------------
</TABLE>
Short-term debt outstanding in local currencies:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(thousands) December 31,
- -----------------------------------------------------------------------------------------
1998 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Netherlands Guilders 13,393 26,935
United States Dollars 4,999 -
Japanese Yens 2,350,000 1,053,140
Hong Kong Dollars 90,214 1,323
- -----------------------------------------------------------------------------------------
</TABLE>
ASM International N.V. has guaranteed short term facilities and other
obligations of certain subsidiaries approximating (euro)18.2 million.
NOTE G Income Taxes
The components of earnings (loss) before income taxes, non-operating income and
minority interest consist of:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year ended December 31,
- ---------------------------------------------------------------------------------------------------
1997 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Netherlands (9,290) (1,218) (11,159)
Other countries (47,970) 8,359 41,906
- ---------------------------------------------------------------------------------------------------
(57,260) 7,141 30,747
- ---------------------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE> 88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
The provisions for income taxes consist of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------------
1997 1998 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Netherlands (29) 33 (37)
Other countries (3,492) (344) (968)
- ------------------------------------------------------------------------------------------------
(3,521) (311) (1,005)
Deferred:
Netherlands - - -
Other countries 760 (337) (269)
- ------------------------------------------------------------------------------------------------
760 (337) (269)
- ------------------------------------------------------------------------------------------------
Provision for income taxes (2,761) (648) (1,274)
- ------------------------------------------------------------------------------------------------
</TABLE>
The provisions for income taxes as shown in the accompanying Consolidated
Statements of Operations differ from the amounts computed by applying the
Netherlands' statutory income tax rates to earnings before taxes. A
reconciliation of the provisions for income taxes and the amounts that would be
computed using the statutory Netherlands' income tax rates is set forth below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year ended December 31,
- ---------------------------------------------------------------------------------------------------
1997 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes on earnings (loss) before income taxes and minority
interest at the Netherlands' statutory income tax rate
(35%) 20,041 (2,499) (10,761)
Non-deductible expenses (638) (569) (1,126)
Foreign taxes at a rate other than the Netherlands'
statutory rate 9,159 3,110 6,576
Net operating loss benefits not realized for tax purposes
nor recognized for financial statement purposes (31,335) (6,058) (8,531)
Utilisation of net operating loss carry forwards 103 538 3,513
Non-taxable income 109 2,176 8,215
Other (200) 2,654 840
- ---------------------------------------------------------------------------------------------------
Provision for income taxes (2,761) (648) (1,274)
- ---------------------------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year ended December 31,
- --------------------------------------------------------------------------------------------------
1997 1998 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation (5,121) (5,257) (5,274)
Reserves and allowances 168 64 51
Development credits (4,402) (4,223) (4,152)
Net operating loss carryforwards 5,718 5,873 5,909
Other (32) (70) (24)
- --------------------------------------------------------------------------------------------------
Total deferred income tax (3,669) (3,613) (3,490)
- --------------------------------------------------------------------------------------------------
</TABLE>
Substantially all of the net deferred tax liabilities are of a long term
nature.
Based on tax filings, ASMI and its individual subsidiaries have net
operating losses available at December 31, 1999, of (euro)275 million for tax
return purposes to reduce future income taxes. After deduction of a valuation
reserve for financial reporting purposes of (euro)90.2 million in 1999 and
(euro)79.9 million in 1998, the resulting deferred tax asset amounts to
(euro)5.9 million at the end of 1999 and to (euro)5.9 million at the end of
1998.
The Company has not provided for deferred foreign withholding taxes, if
any, on undistributed earnings of its foreign subsidiaries, because it considers
such earnings to be indefinitely invested in those subsidiaries.
NOTE H Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
December 31,
- -----------------------------------------------------------------------------------
1998 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Term loans:
The Netherlands, 5.16 - 6.75%, due 2000 24,958 24,958
Japan, 3.3%, due 2006 802 800
Hong Kong, 7.3 - 7.5%, due 2000 16,957 10,975
Finland, 1.0 - 3.0%, due 2004 - 2005 - 2,545
Mortgage loans:
The Netherlands, 5.35 - 6.75%, due 2007 - 2026 2,369 2,121
Japan, 2.625%, due 2005 - 2006 2,897 3,232
Singapore, 6.075%, due 1999 1,285 -
Lease commitments, 5.75 - 9.23%, due 1999 - 2002 323 310
- -----------------------------------------------------------------------------------
49,591 44,941
Current portion 9,990 36,944
- -----------------------------------------------------------------------------------
39,601 7,997
- -----------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
Long-term debt outstanding in local currencies:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(thousands) December 31,
- -------------------------------------------------------------------------------------
1998 1999
- -------------------------------------------------------------------------------------
<S> <C> <C>
Including current portion:
Netherlands Guilders 60,220 59,674
Finnish Marks - 15,135
United States Dollars 349 311
Japanese Yen 491,050 413,270
Hong Kong Dollars 153,618 85,521
Singapore Dollars 2,476 -
- -------------------------------------------------------------------------------------
</TABLE>
Aggregate annual principal repayments for years subsequent to December 31,
1999 are:
<TABLE>
<S> <C>
- --------------------------------------------
2000 36,944
2001 1,431
2002 1,699
2003 1,641
2004 1,496
Thereafter 1,730
- --------------------------------------------
44,941
- --------------------------------------------
</TABLE>
The Company has pledged its majority ownership of ASMPT as collateral for
the NLG55.0 million ((euro)25.0 million) term loan and certain credit facilities
in the Netherlands. The quoted market value of this ownership in ASMPT at
December 31, 1999 was (euro)333.9 million or NLG735.8 million (using a year-end
share price of HK$13.80 per share and an exchange rate of HK$1 = (euro)0.1283).
The long-term facilities offered by Japanese banks to ASM Japan are secured
by the real estate and other assets of ASM Japan, with guarantees provided by
the Company. In Hong Kong and Singapore, ASMPT's term loans are self-secured by
the machinery and real estate they cover. ASMPT is precluded to provide loans
and advances other than trade receivables in the normal course of business, to
other ASM units under the rules of the Stock Exchange of Hong Kong. There are no
guarantees from ASMPT to secure indebtedness of the Company; nor does the
Company provide guarantees for the borrowings of ASMPT. In the U.S.A. the
long-term obligations relate to lease commitments on property, equipment and
machines.
Interest income, which is included in net interest and other financial
income (expenses), amounted to (euro)913, (euro)1,569 and (euro)1,157 in 1999,
1998 and 1997, respectively, and interest expense, which is also included in net
interest and other financial income (expenses), amounted to (euro)13,210,
(euro)7,566 and (euro)5,838 in 1999, 1998 and 1997, respectively.
NOTE I Subordinated Debt
The Company has a subordinated loan from 'De Nationale Investeringsbank
N.V.' (NIB) in the amount of NLG4.5 million bearing interest at 8.25 percent.
Repayments on the outstanding balance will be in equal bi-annual installments of
NLG1.5 million ending December 2000.
In 1994, the Company received a subordinated loan from an officer of the
Company who is
F-14
<PAGE> 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
also a major shareholder, in the amount of NLG3.0 million. This subordinated
loan enabled the Company to repurchase shares issued for the repayment of
principal and interest of the subordinated mandatory convertible debentures, and
thus limit shareholder dilution. This loan was originally due no later than
December 1997. However, repayment has been scheduled to the year 2000. Interest
is payable quarterly based on three months AIBOR ('Amsterdam InterBank Offered
Rate') plus 2 percent.
In connection with the settlement with Applied Materials, Inc. (see Note
N), the Company issued a subordinated convertible note to Applied Materials,
Inc. for US$80 million, of which US$15 million was paid in 1997. This note was
subordinated to notes payable to certain banks and was originally due November
2, 1998. Applied Materials, Inc. and ASM International N.V. have restructured
this note, with ASM paying US$20 million on December 23, 1998, and agreeing to
pay US$10 million on or before December 16, 1999 and US$35 million on or before
December 16, 2000. Applied Materials, Inc. received warrants to acquire 750,000
shares of ASM (see Note J) as well as security for the note in the form of a
pledge on the shares of ASM Europe B.V., ASM America, Inc. and ASM Japan K.K.
Applied Materials, Inc. received a warrant to purchase an additional 750,000
shares contingent upon ASM International not repaying the outstanding balance on
or before February 15, 1999. Interest on this subordinated note is based on
prime rate of a major US financial institution plus 2 percentage points and is
due quarterly. The warrants issued represented a fair value at the date of
issuance of (euro)2.5 million, which has been added to Shareholders' Equity in
1998. The amount has been recorded as a discount to the outstanding note and is
amortized as an interest expense over the term of the note.
In December 1998, the Company issued a NLG45 million, 6% subordinated
convertible note, due December 4, 2003, which has been purchased by strategic
and financial investors. The conversion price has been set at NLG9.00 per common
share, the average of the share price on the AEX-Stock Exchange in Amsterdam
during a set period previous to concluding the contract, with protection clauses
for below market price stock issues and stock dividends. At the date of
issuance, the quoted market price of the common shares on the Amsterdam Exchange
exceeded the conversion price creating a debt conversion discount. The discount
amounted to (euro)476 of which (euro)334 has been expensed in 1998 and (euro)142
has been expensed in 1999 based on the terms of the contract. The note was fully
converted in 1999.
On August 27, 1999, the Company issued a FIM23 million (Finnish marks), 5%
subordinated convertible note, due August 26, 2002. The note was issued in
conjunction with the acquisition of all of the outstanding shares of
Microchemistry Ltd. The conversion price was set at US$10 per share, a premium
to market at the time of issuance of 33%. The note was fully converted in
November 1999.
On October 1, 1999, the Company issued US$20 million, five-year,
zero-coupon debentures. The debentures are discounted by 6% annual interest and
the Company received net proceeds of US$14.9 million. As part of the agreement,
the investors received 2,037,957 non-detachable exercise warrants and 200,000
supplemental warrants on common shares of the Company with an exercise price of
US$9.81 per share, a premium to market at the date of issuance of 20%. In
February 2000 the Company called the exercise of the 2,037,957 warrants and
cancelled the debentures in partial payment of the exercise price of the
warrants. The remaining portion of the exercise price of the warrants was
fulfilled by the investors contributing US$4.8 million in cash.
F-15
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
Subordinated Debt:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
(thousands) December 31,
- -----------------------------------------------------------------------------------
1998 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Current:
subordinated loan NIB 2,042 2,042
subordinated loan related party - 1,361
subordinated note Applied Materials 7,285 33,744
6% subordinated convertible note 6,664 -
6% zero-coupon debentures, less of E4,817 unamortized
discount - 15,138
- -----------------------------------------------------------------------------------
15,991 52,285
- -----------------------------------------------------------------------------------
Non-current:
subordinated loan NIB 1,361 -
subordinated loan related party 1,361 -
subordinated note Applied Materials 28,799 -
6 % subordinated convertible note 13,614 -
- -----------------------------------------------------------------------------------
45,135 -
- -----------------------------------------------------------------------------------
</TABLE>
NOTE J Shareholders' Equity
The authorized capital of the Company amounts to NLG1,380,000. It is
divided into sixty million common shares, each with a par value of NLG0.01, nine
hundred financing preferred shares, each with a par value of NLG100, and six
thousand nine hundred preferred shares, each with a nominal value of NLG100.
Article 32 of the Articles of Association of ASM International N.V. (the
Company) provides the following with regard to distribution of profit:
Para 1-3:
First, a dividend equal to the promissory discount rate as established by De
Nederlandsche Bank N.V. (the Dutch Central Bank) as applicable on the first
stock exchange day of the financial year over which the dividend is distributed,
increased by one and a half, is paid on the paid up amount which had to be paid
on the preferred shares. If profits are insufficient, the dividend will be paid
from retained earnings with priority over any dividends. If retained earnings
are insufficient, the dividend deficit has to be made up in future years;
Para 4-6:
Second, a dividend is paid on financing preferred shares. The dividend is a
percentage of the par value, plus share premium paid, on the financing preferred
shares. The percentage and the period for its payment (the tenure of the
financing preferred shares) is determined by the Management Board, subject to
approval of the Supervisory Board. The percentage depends on the weighted
average return of Dutch government bonds with a weighted average remaining life
of no more than ten years, plus a premium not to exceed three percent. If
profits are insufficient, the dividend shall be paid from retained earnings. If
retained earnings are insufficient, the dividend deficit has to be made up in
future years;
F-16
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
Para 7:
After application of the provisions in the foregoing paragraphs, the Management
Board, subject to approval from the Supervisory Board, shall determine which
portion of the remaining profits is to be reserved. The profits which remain
after reservation are at the disposal of the General Meeting;
Para 9:
The Company can only make distributions to shareholders and other entitled
parties from the profits subject to distribution to the extent its Shareholders'
Equity exceeds the amount of the paid up and called up portion of the capital
increased by the reserves which must be maintained by virtue of the law;
Article 33, para 3 provides that dividend claims expire after the lapse of
five years.
SPECIAL STATUTORY CONTROL RIGHTS
Article 27, para 1 provides that each shareholder shall be entitled to cast
a number of votes equal to the nominal amount of his shares, such that each
share with a par value of one cent (NLG0.01) entitles the holder to a single
vote and each share with a par value of one hundred guilders (NLG100) entitles
the holder to ten thousand votes;
Article 29 provides that meetings of holders of preferred shares or of
financing preferred shares shall be convened as often as a decision by the
meeting of preferred shares or of financing preferred shares is desired, and
also as often as the Management Board and or the Supervisory Board shall decide
to hold such a meeting. Decisions at such meetings shall be made with an
absolute majority of votes and in the event of a tie, no decision shall be made;
The following resolutions and actions can only be taken on a proposal by
the Management Board and the Supervisory Board:
- - the amendment of the Articles of the Company;
- - the dissolution of the Company.
INFORMATION REGARDING STICHTING CONTINUITEIT ASM INTERNATIONAL
The object of 'Stichting Continuiteit ASM International' ('Stichting') is
to own and vote the Company's preferred shares in order to maintain the
continuity of the Company. Toward that objective, Stichting will evaluate, when
called for, whether a take-over offer is in the best interest of the Company. In
accordance with the applicable regulations of the AEX-Stock Exchange, Stichting
is managed by majority vote of a five-person Board, not more than two of which
(Directors A) may be officers of the Company and at least three of which
(Directors B) must be independent from the Company. Directors A are appointed by
the Management Board, subject to the approval of the Supervisory Board, from
among the Management and Supervisory Boards. Directors B must be independent
from the Company and are appointed by the board of Stichting, subject to
approval of the Management Board with the consent of the Supervisory Board. The
Company may not provide financial support to Stichting.
The Company has, as approved in the General Meeting of May 28, 1997,
granted a right to purchase preferred shares to Stichting for a par value equal
to the par value of half of the outstanding common shares at the time of
purchase. The minimum purchase price of the preferred shares is 25% of the par
value. The shareholders must be informed about the Company's motives within four
weeks after issuance of preferred shares. Within two years after issuing
preferred shares, a proposal to withdraw or repurchase the shares must be
F-17
<PAGE> 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
submitted to shareholders and, if not accepted, every two years thereafter. No
preferred shares are outstanding as per December 31, 1999.
The two directors of the Company who have been appointed to the Board of
Stichting are Messrs. P.C. van den Hoek, Chairman of the Supervisory Board and
A.H. del Prado, Chief Executive Officer.
WARRANTS
In December 1998, in conjunction with the restructuring of the subordinated
convertible note with Applied Materials, Inc. ('Applied Materials'), the Company
issued to Applied Materials warrants to purchase 1,500,000 of the Company's
common shares at a price of US$5.375 per share. As of December 31, 1998, Applied
Materials had a right to purchase 750,000 shares. They also had a right to
purchase an additional 750,000 shares, contingent upon the Company not repaying
all outstanding debt due to Applied Materials by February 15, 1999. At December
31, 1998 it was determined that the Company would be unable to repay the
outstanding debt by February 15, 1999 and, therefore, the entire fair value of
the warrants amounting to E2.5 million has been added to Shareholders' Equity in
1998. The warrant became exercisable with respect to the additional 750,000
shares on February 15, 1999. As of December 31, 1999 no warrants have been
exercised.
In conjunction with the US$20 million five-year zero-bond debentures issued
on October 1, 1999 (see Note I to Consolidated Financial Statements), the
Company has issued 2,037,957 non-detachable exercise warrants and 200,000
supplemental warrants on common shares of the Company at a price of US$9.81 per
share, a premium to market at the date of issuance of 20%. In February 2000 the
Company has called the exercise of the 2,037,957 warrants and cancelled the
debentures in partial payment of the exercise price of the warrants. The
remaining portion of the exercise price of the warrants was fulfilled by the
investors contributing US$4.8 million in cash.
NOTE K Pension Plans
The Company and its subsidiaries have retirement plans covering
substantially all employees. The principal plans are defined contribution plans,
except that of the Company's Japanese operations, which is a defined benefit
pension plan. The Company has no major continuing obligations other than the
payment of annual contributions. Aggregate retirement plan contributions
including those for the Japanese operations which are determined by an actuary
were (euro)3,225 in 1999, (euro)3,117 in 1998 and (euro)795 in 1997.
Employees of the Company's Japanese operations terminating their employment
are usually entitled to a lump-sum severance payment or to pension plan benefits
based on years of service and certain other factors. Plan assets are held as
general assets by a life insurance company. There are no unrecognized prior
service costs. The impact of the Japanese plan is not material to the Company.
The Company does not provide any post retirement benefits other than
pensions.
F-18
<PAGE> 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
NOTE L Financial Instruments and Risk Management
For cash, cash equivalents, marketable securities, accounts receivable,
notes payable, accounts payable and accrued expenses, the carrying amounts
approximate fair value due to their short maturities.
The estimated fair values of the Company's other financial instruments are as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1998 1999
- -------------------------------------------------------------------------------------------------------
Carrying Fair CARRYING FAIR
Amount Value AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forward exchange contracts:
Sell foreign currency - - 10,674 10,381
Buy foreign currency - - 2,431 2,422
Long-term debt, including current portion:
Long-term debt 49,591 50,698 44,941 44,828
Subordinated debt 61,126 65,664 52,285 50,660
- -------------------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1998 the Company did not have any forward exchange
contracts of significant value.
Financial Instruments which potentially subject the Company to
concentration of credit risk consisted principally of trade receivables.
Concentration of credit risk with respect to these receivables is limited due to
the large number of customers comprising the Company's customer base and their
dispersion across different geographic areas.
NOTE M Research and Development Credits
The Company's Netherlands and Singapore operations receive research and
development grants and credits from various governmental sources.
The amount of research and development credits offset against research and
development expenses amounted to (euro)3,293, (euro)5,235 and (euro)1,612 in
1999, 1998 and 1997, respectively.
The amounts received by the Company's Netherlands operations for TOK's are
contingently repayable to the extent sales of the products to which the credit
was related occur. The amount of repayment as a percentage of the realized sales
of the associated products varies from 1.0 to 4.0 percent. Actual and contingent
amounts repayable accrue interest varying from 5.0 to 8.0 percent per year. The
remaining amount contingently repayable was (euro)11,863 and (euro)12,067 at
December 31, 1999 and December 31, 1998, respectively.
In 1999, 1998 and 1997 the Company made TOK repayments in the amount of
(euro)1,411, (euro)1,319 and (euro)852 respectively.
F-19
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
NOTE N Commitments and Contingencies
The Company is liable under operating lease commitments for office and
plant facilities and equipment with lease terms ranging from one to fifteen
years. Capital leases included in property, plant and equipment are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------
1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment 483 225
Furniture and fixtures 304 354
- -------------------------------------------------------------------------------
787 579
Less accumulated depreciation (353) (292)
- -------------------------------------------------------------------------------
434 287
- -------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, minimum rental commitments under capital leases and
operating leases having initial or remaining non-cancellable terms in excess of
one year are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Capital Operating
leases leases
- -----------------------------------------------------------------------------------
<S> <C> <C>
2000 158 7,758
2001 147 6,233
2002 64 4,378
2003 - 3,698
2004 - 2,864
Thereafter - 19,575
- -----------------------------------------------------------------------------------
Total 369 44,506
Less amount representing interest 59
- -----------------------------------------------------------------------------------
Present value of net minimum lease payments 310
- -----------------------------------------------------------------------------------
</TABLE>
Aggregate rental expense for operating leases in 1999 was (euro)8,039, in
1998 (euro)6,925 and in 1997 (euro)4,331.
Effective October 31, 1997, the Company, Advanced Semiconductor Materials
America, Inc. and Epsilon Technology, Inc. (collectively 'ASM') and Applied
Materials, Inc. ('Applied Materials') signed an agreement that resolved all
outstanding legal disputes with Applied Materials and dismissed with prejudice
all pending litigation between the companies.
The settlement required the Company to pay Applied Materials US$80 million
in the form of a convertible note due November 2, 1998 against which the Company
paid US$15 million in November 1997 (see Note I).
Effective December 16, 1998, following the restructuring of the convertible
note (see Note I), ASM and Applied Materials entered into an amended settlement
agreement, the terms of which are not materially different of the agreement,
dated October 31, 1997. The changes
F-20
<PAGE> 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
included the conversion of ASM's covenants not to sue into licenses and an
increase in certain TEOS related royalties.
The settlement agreement provides a cross license between the parties of
the patents in suit and certain other CVD and TEOS patents and requires ASM to
pay an ongoing royalty on certain semiconductor equipment for epitaxial and
plasma TEOS technologies. The settlement also provides covenants not to sue for
patent infringement for periods up to five years from the date of the settlement
for certain semiconductor systems and applications that are essentially
unchanged from those commercially available on July 1, 1997. If at the end of a
covenant period the product or application is no longer infringing, Applied
Materials cannot recover more than a reasonable royalty from the Company
retroactive to October 31, 1997. Applied Materials may not recover damages for
such products that were sold prior to October 31, 1997.
ASM and Applied Materials also represented and warranted that as of October
31, 1997, neither party was aware of any infringement of its patents by the
other party except for the patents that were asserted in the lawsuits that were
resolved by the settlement. The original settlement agreement was filed with the
United States Securities Exchange Commission on a 6-K-A on November 18, 1997.
The amended settlement agreement was filed on a 6-K-A on February 11, 1999.
NOTE O Restructuring
In early 1999, the Company committed to a formal plan to exit its U.S.
manufacturing activities by merging the manufacturing related activities of ASM
America, Inc. with those of ASM Europe B.V. in the Netherlands. As a consequence
of the merger, ASM America's number of employees have been reduced by 75 with
approximately 50 new positions having been created in the Netherlands. The
Company incurred a one-time charge covering redundancy, write-offs and occupancy
costs of (euro)3,854. These restructuring costs have been recorded as selling,
general and administrative expenses in the first quarter of 1999. The
(euro)1,855 accrual for contract terminations relates primarily to lease
obligations for property to be vacated. The utilization of this amount and the
remaining accrual as of December 31, 1999 can be summarized as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Non Amount Translation Remaining
Cash Cash Total utilized effect accrual
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lay-off and severance
payments 665 - 665 585 13 93
Asset write-offs - 708 708 - 117 825
Legal contract terminations 1,855 - 1,855 608 205 1,452
Other 626 - 626 511 19 134
- ----------------------------------------------------------------------------------------------
Total 3,146 708 3,854 1,704 354 2,504
- ----------------------------------------------------------------------------------------------
</TABLE>
The Company expects the remaining cash payments and asset write-offs to be
made in the second quarter of 2000. For the legal contract terminations that
relate to lease obligations, such payments may be extended into future periods.
F-21
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
NOTE P Employee Stock Option Plan
During the past several years, the Company has adopted various stock option
plans and has entered into stock option agreements with various key management
personnel. Under these plans, key employees may purchase a specific number of
shares of the Company's common stock. Options are generally priced at market
value in Euro or US Dollars on the date of grant and generally expire after five
or ten years. Shares subject to these agreements, which expire at various dates
through 2008, totalled 2,366,400 shares at December 31, 1999.
Following is a summary of changes in shares under option:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Option price Option price
Number of per share in Number of per share in
shares US dollars shares EUR
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1996 2,531,950 0.250 - 13.625 - -
options granted 668,500 8.250 - 12.375 287,000 8.44 - 11.98
options cancelled (19,500) 0.750 - 0.501 - -
options exercised (320,750) 0.250 - 2.333 - -
- --------------------------------------------------------------------------------------------------------
Balance December 31, 1997 2,860,200 0.250 - 13.625 287,000 8.44 - 11.98
options granted 142,500 3.625 - 10.750 234,000 2.41 - 7.67
options cancelled (48,600) 1.458 - 7.000 (193,000) 11.98
options exercised (961,800) 0.500 - 2.333 - -
- --------------------------------------------------------------------------------------------------------
Balance December 31, 1998 1,992,300 0.250 - 13.625 328,000 2.41 - 8.44
options granted 230,000 5.625 - 15.625 75,000 6.90 - 19.20
options cancelled (80,000) 3.625 - 12.375 (9,000) 7.67
options exercised (114,700) 0.250 - 8.688 (55,200) 2.41 - 7.67
- --------------------------------------------------------------------------------------------------------
Balance December 31, 1999 2,027,600 0.250 - 15.625 338,800 6.90 - 19.20
- --------------------------------------------------------------------------------------------------------
</TABLE>
F-22
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
Had compensation cost been determined consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), pro forma net earnings, basic and diluted earnings per share would have
been as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Fiscal year Fiscal year FISCAL YEAR
1997 1998 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 3 - 10 3 - 8 3 - 10
Risk free interest rate 6.5% 5.0% 5.0%
Volatility 55% 60% 85%
Assumed forfeitures - - -
Net earnings (loss):
As reported (70,476) 232 11,099
Pro forma (71,541) (1,389) 9,621
Basic earnings (loss) per share:
As reported (2.12) 0.01 0.30
Pro forma (2.15) (0.04) 0.26
Diluted earnings (loss) per share:
As reported (2.12) 0.01 0.29
Pro forma (2.15) (0.04) 0.25
- -------------------------------------------------------------------------------------------------
</TABLE>
The average remaining contractual life of the outstanding options granted in
1999 is 7.3 years at December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding at Remaining Average Exercisable at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Prices in US$ 1999 Life, in years Price in US$ 1999 Price in US$
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0.25 - 0.75 249,500 3.09 0.30 249,500 0.30
0.75 - 1.50 3,000 4.38 0.96 3,000 0.96
1.50 - 3.00 783,600 0.20 2.26 783,600 2.26
3.00 - 6.00 367,000 8.36 5.22 163,400 5.31
6.00 - 9.00 603,500 4.91 8.23 381,600 8.45
9.00 - 14.00 324,800 5.51 9.26 105,360 10.21
14.00 - 20.00 35,000 5.61 18.15 - -
- ------------------------------------------------------------------------------------------------
0.25 - 20.00 2,366,400 3.79 5.23 1,686,460 4.16
- ------------------------------------------------------------------------------------------------
</TABLE>
F-23
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
In 1989, the shareholders of ASMPT approved a plan to issue up to 5 percent
of the total issued shares of ASMPT to directors and employees. The directors
annually may approve an amount of supplemental compensation to the designated
directors and officers which will be used to issue or purchase ASMPT's capital
shares for the designees at current market value.
In 1999 1,796,000 common shares of ASMPT were issued, for cash at par,
pursuant to the Employee Share Incentive Scheme of ASMPT, thus diluting ASMI's
ownership from 50.25 to 50.01 percent. In 1998 and 1997, respectively 1,610,000
and 1,553,000 ASMPT shares were issued to certain directors and employees under
the plan (respectively 0.2% and 0.4% of the shares outstanding after the
issuance) and compensation of respectively HK$7.9 million ((euro)888) and HK$9.3
million ((euro)1,088) was charged to operations. The effect of this transaction
on ASMI was a dilution of its ownership interest in ASMPT from 50.5 to 50.3
percent in 1998, and from 50.7 to 50.5 percent in 1997 taking into consideration
ASMI's purchase of shares at the end of 1997.
NOTE Q Disclosures about Segments and Related Information
The Company organizes its activities in two operating segments, Front-End
and Back-End.
The Front-End segment manufactures and sells equipment used in wafer
processing, encompassing the fabrication steps in which silicon wafers are
layered with semiconductor devices. The segment is a product driven
organizational unit comprised of manufacturing, service, and sales operations in
Europe, the United States, Japan and South East Asia.
The Back-End segment manufactures and sells equipment and materials used in
assembly and packaging, encompassing the processes in which silicon wafers are
separated into individual circuits and subsequently assembled, packaged and
tested. The segment is organized in ASM Pacific Technology Ltd., in which the
Company holds a majority of 50.01 % interest, whilst the remaining shares are
listed on the Stock Exchange of Hong Kong. The segment's main operations are
located in Hong Kong, Singapore and the People's Republic of China.
F-24
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Front-End Back-End Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended 31 December, 1997
Net sales to unaffiliated customers 152,550 169,032 321,582
Earnings (loss) from operations (79,663) 25,642 (54,021)
Net interest and other financial income (expenses) (2,100) (1,139) (3,239)
Income tax (194) (2,567) (2,761)
Minority interest - (10,455) (10,455)
Net earnings (loss) (81,957) 11,481 (70,476)
Capital expenditures 21,882 13,289 35,171
Total assets 142,899 185,690 328,589
Short term debt 64,428 9,772 74,200
Long term debt 27,058 19,553 46,611
- -------------------------------------------------------------------------------------------
Year ended 31 December, 1998
Net sales to unaffiliated customers 132,858 155,253 288,111
Earnings (loss) from operations (1,604) 14,095 12,491
Net interest and other financial income (expenses) (4,966) (384) (5,350)
Income tax (17) (631) (648)
Minority interest - (6,261) (6,261)
Net earnings (loss) (6,587) 6,819 232
Capital expenditures 9,212 14,930 24,142
Total assets 119,060 163,890 282,950
Short term debt 17,136 8,845 25,981
Long term debt 75,315 9,421 86,736
- -------------------------------------------------------------------------------------------
</TABLE>
F-25
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Front-End Back-End Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended 31 December, 1999
Net sales to unaffiliated customers 181,737 232,758 414,495
Earnings (loss) from operations (805) 40,160 39,355
Net interest and other financial income (expenses) (6,841) (1,767) (8,608)
Income tax (141) (1,133) (1,274)
Minority interest - (18,374) (18,374)
Net earnings (loss) (7,787) 18,886 11,099
Capital expenditures 8,996 21,591 30,587
Total assets 182,268 242,767 425,035
Short term debt 78,254 10,975 89,229
Long term debt 7,997 - 7,997
- -------------------------------------------------------------------------------------------
</TABLE>
There are no inter-segment transactions, other than charges for management
services which are based on actual cost. The accounting policies used to measure
the net earnings and total assets in each segment are identical to those used in
the Consolidated Financial Statements. The measurement methods used to determine
reported segment earnings are consistently applied for all periods presented.
There were no asymmetrical allocations to segments.
Segmentation of the business by geographic area, in which the Company has
operating units, in sales to unaffiliated customers and fixed assets is
summarised as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Europe United States Far East Japan Consolidated
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Sales to unaffiliated customers 40,435 39,789 167,145 74,213 321,582
Fixed assets 9,886 12,445 72,958 16,097 111,386
- ------------------------------------------------------------------------------------------------
Year ended December 31, 1998
Sales to unaffiliated customers 47,320 40,238 153,619 46,934 288,111
Fixed assets 8,055 10,339 69,665 18,291 106,350
- ------------------------------------------------------------------------------------------------
Year ended December 31, 1999
Sales to unaffiliated customers 49,299 55,650 231,471 78,075 414,495
Fixed assets 16,286 9,230 87,048 20,370 132,934
- ------------------------------------------------------------------------------------------------
</TABLE>
In 1999 one single customer accounted for 11 percent of the total net sales. In
1998 no transactions with a single customer exceeded 10 percent of total net
sales.
F-26
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(EUR in thousands)
NOTE R Basic and Diluted Average Number of Shares Outstanding
The weighted average number of shares outstanding for 1999, 1998 and 1997
is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Year ended December 31,
- ------------------------------------------------------------------------------------------
1997(1) 1998 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic weighted average number of shares outstanding at the
end of period 33,232 33,794 37,301
Dilutive effect of stock options - 949 934
Diluted effect of convertible notes - - 2,429
- ------------------------------------------------------------------------------------------
Diluted weighted average number of shares outstanding 33,232 34,743 40,664
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Due to the net loss reported in 1997, no dilutive common stock equivalents
have been reflected in the dilutive weighted average number of shares for
that year.
F-27
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ASM International N.V.
Bilthoven, The Netherlands
We have audited the accompanying consolidated balance sheets of ASM
International N.V. and subsidiaries (collectively, the 'Company') as of December
31, 1999 and 1998, and the related consolidated statements of operations,
comprehensive income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ASM
International N.V. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles in the United States of America.
/s/ DELOITTE & TOUCHE ACCOUNTANTS
- ------------------------------------------------------
Deloitte & Touche
Accountants
Amsterdam, the Netherlands,
February 18, 2000
F-28
<PAGE> 105
Inside Back Cover
Illustration entitled "The Semiconductor Manufacturing Process -- The
Fundamentals in Back-End" showing a schematic and description of the material
supply (including leadframe stamping, leadframe etching and leadframe plating),
assembly (including die inspection, die separation, die bonding, wire bonding
and unit inspection) and packaging (including encapsulation, trim and form and
product test) steps of the back-end manufacturing process. A photograph of our
IDEALine product including a die bonder, a curing oven, two wire bonders and
automold equipment appears at the bottom of the page.
<PAGE> 106
- --------------------------------------------------------------------------------
[ASM INTERNATIONAL LOGO]
5,000,000 SHARES
COMMON SHARES
---------------------------
PROSPECTUS
---------------------------
April 7, 2000
CIBC WORLD MARKETS
ROBERTSON STEPHENS
WARBURG DILLON READ LLC
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE
INFORMATION THAT IS NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN
OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
