<PAGE> 1
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering in the United States and the other to be
used in connection with a concurrent international offering (the "International
Prospectus"). The two prospectuses are identical except for the outside and
inside front cover pages. The alternate pages for the International Prospectus
are included herein and labeled "Alternate Page."
<PAGE> 2
FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION NUMBER 33-57909
PROSPECTUS
5,000,000 Shares
(logo) (LOGO)
COMMON STOCK
------------------------
OF THE 5,000,000 SHARES OF COMMON STOCK BEING OFFERED, 4,000,000 SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND 1,000,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE OF THE
UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." OF THE 5,000,000 SHARES OF COMMON STOCK BEING OFFERED
HEREBY, 3,192,606 SHARES ARE BEING SOLD BY SILICON VALLEY GROUP, INC.
AND 1,807,394 SHARES ARE BEING SOLD BY THE SELLING STOCKHOLDER. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING
STOCKHOLDER. THE COMPANY'S COMMON STOCK IS TRADED IN THE
OVER-THE-COUNTER MARKET UNDER THE NASDAQ NATIONAL MARKET SYMBOL
"SVGI." THE LAST SALE PRICE FOR THE COMMON STOCK ON MARCH 23,
1995, AS REPORTED ON THE NASDAQ NATIONAL MARKET, WAS $29 1/8
PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $28 7/8 A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share.................... $28.875 $1.300 $27.575 $27.575
Total(3)..................... $144,375,000 $6,500,000 $88,036,110 $49,838,890
</TABLE>
------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to 750,000 additional
Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
U.S. Underwriters exercise such option in full, the total price to
public, underwriting discounts and commissions and proceeds to Company
will be $166,031,250, $7,475,000, and $108,717,360, respectively. See
"Underwriters."
------------------------
The Shares are offered subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Morrison & Foerster, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about March 30, 1995 at the offices of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
New York funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
March 23, 1995
<PAGE> 3
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference............................................ 2
Prospectus Summary......................................................................... 3
The Company................................................................................ 4
Recent Developments........................................................................ 5
Risk Factors............................................................................... 6
Use of Proceeds............................................................................ 11
Price Range of Common Stock................................................................ 12
Dividend Policy............................................................................ 12
Capitalization............................................................................. 13
Selected Consolidated Financial Data....................................................... 14
Business................................................................................... 16
Principal and Selling Stockholders......................................................... 23
Underwriters............................................................................... 24
Legal Matters.............................................................................. 27
Experts.................................................................................... 27
Available Information...................................................................... 27
</TABLE>
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") are incorporated herein by
reference: (1) the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994; (2) the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994; (3) the Company's Current Report on Form
8-K filed on March 2, 1995; and (4) the Company's Registration Statement on Form
8-A filed with the Commission on November 23, 1983.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereunder shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. The Company will provide a copy of any or
all of such documents (exclusive of exhibits unless such exhibits are
specifically incorporated by reference herein), without charge, to each person
to whom this Prospectus is delivered, upon written or oral request to the Chief
Financial Officer at the corporate headquarters of the Company, 2240 Ringwood
Avenue, San Jose, California 95131 (telephone 408-434-0500).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
THE U.S. SHARES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, OUTSIDE
THE UNITED STATES OR CANADA OR TO ANY PERSON WHO IS NOT A UNITED STATES OR
CANADIAN PERSON, AS PART OF THE DISTRIBUTION OF THE U.S. SHARES. FOR A
DESCRIPTION OF THIS AND OTHER RESTRICTIONS ON THE OFFERING AND SALE OF THESE
SHARES, SEE "UNDERWRITERS."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITERS."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
THE COMPANY
Silicon Valley Group, Inc. designs, manufactures, markets and services
semiconductor fabrication equipment for the worldwide semiconductor industry.
The Company has three principal product groups which focus primarily on
photolithography, photoresist processing, and deposition for oxidation/diffusion
and low pressure chemical vapor deposition. The Company's products incorporate
proprietary technologies and unique processes, and focus on providing process
and product technologies and productivity enhancements to its customers. SVG
believes that its Micrascan step and scan photolithography exposure system,
which utilizes a deep ultraviolet light source allowing line widths of 0.35
micron and below, is the most technologically advanced machine currently being
shipped to global semiconductor manufacturers. The Company supports its
reliable, cost-effective products through a network of worldwide service and
technical support organizations. The Company's customers consist of leading
semiconductor manufacturers including Advanced Micro Devices, Hewlett-Packard,
Intel, IBM, Motorola, National Semiconductor, SGS-Thomson, Samsung and Texas
Instruments.
The Company works closely with its existing and potential customers,
industry consortia and research institutions to improve current processes and to
define opportunities for new product development. These relationships enable SVG
to participate in the development of new technologies and fabrication processes
and to position itself as a principal supplier for volume equipment orders. As
evidence of the Company's commitment to its customers, in February 1995 the
Company entered into a business relationship with Intel, Motorola, and Texas
Instruments. As part of this relationship, these companies purchased, in equal
amounts, an aggregate of $30 million of the Company's Series B Convertible
Redeemable Preferred Stock and received certain rights to purchase future
generations of the Company's Micrascan photolithography products. The Company
has agreed to use the $30 million proceeds, plus $25 million of additional
Company funds at any time over a five year period, to fund increased Micrascan
production capacity, increased research and development of the Micrascan
technology, the purchase of additional capital equipment and to augment working
capital for growth of the Company's Micrascan photolithography operations. See
"Recent Developments."
THE OFFERING
U.S. Offering...........................
4,000,000 Shares
International Offering..................
1,000,000 Shares
Total(1).......................
5,000,000 Shares (of which 3,192,606
Shares are offered by the Company and
1,807,394 Shares are offered by the
Selling Stockholder).
Common Stock to be outstanding after the
Offering................................
25,001,309 Shares(1)(2)
Use of proceeds.........................
For certain capital expenditures, working
capital, research and development and
other general corporate purposes. See
"Use of Proceeds."
The Nasdaq National Market symbol.......
SVGI
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------- ------------------
1990(3) 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Net sales..................................... $184,289 $234,798 $192,457 $240,633 $319,922 $70,917 $85,971
Gross profit.................................. 73,848 85,461 77,161 93,426 124,411 27,058 33,202
Operating income.............................. 8,269 4,796 1,608 7,384 26,451 4,676 7,302
Net income (loss)............................. 4,449 1,641 (292) 4,485 16,764 2,719 5,330
Net income (loss) applicable to Common
Stock....................................... 4,449 1,641 (501) 3,295 15,574 2,421 5,032
Net income (loss) per share................... $ 0.42 $ 0.12 $ (0.03) $ 0.22 $ 0.84 $ 0.15 $ 0.25
Shares used in per share computation.......... 10,708 13,166 14,754 15,277 18,538 16,400 20,322
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------
PRO FORMA(4) AS ADJUSTED(5)
------------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents........................................................................ $106,302 $193,938
Working capital............................................................................. 208,602 296,238
Total assets................................................................................ 322,425 410,061
Short-term debt and current portion of long-term debt....................................... 846 846
Long-term debt and capital leases........................................................... 1,299 1,299
Stockholders' equity........................................................................ 221,791 309,427
</TABLE>
---------------
(1) Assumes the Underwriters' over-allotment option to purchase 750,000 shares
from the Company is not exercised. See "Underwriters."
(2) Based on shares outstanding on March 20, 1995. Includes (i) 2,494,300 shares
issued upon conversion of the outstanding Series A and Series B Convertible
Redeemable Preferred Stock ("Series A Preferred Stock" and "Series B
Preferred Stock", respectively) and (ii) 12,714 shares of Common Stock
issued as payment of dividends on March 15, 1995 on the outstanding shares
of Series A Preferred Stock. Excludes (i) 1,353,185 shares issuable upon
exercise of outstanding stock options at a weighted average exercise price
of $11.39 per share and (ii) 1,750,000 shares issuable upon exercise of a
warrant with an exercise price of $13.625 per share.
(3) Includes the results of operations of one of the Company's subsidiaries, SVG
Lithography Systems, Inc. ("SVGL") from May 1, 1990.
(4) Pro forma to reflect the sale of Series B Preferred Stock in February 1995.
(5) Gives effect to the sale of the 3,192,606 shares offered hereby by the
Company, the conversion of all of the Series A and Series B Preferred Stock
and the anticipated use of the net proceeds therefrom.
3
<PAGE> 5
THE COMPANY
Silicon Valley Group, Inc. ("SVG" or the "Company") designs, manufactures,
markets and services semiconductor fabrication equipment for the worldwide
semiconductor industry. The Company has three principal product groups which
focus primarily on photolithography, photoresist processing, deposition for
oxidation/diffusion and low pressure chemical vapor deposition ("LPCVD"). The
Company works closely with its existing and potential customers, industry
consortia and research institutions to improve current processes, to define
opportunities for new product development and fabrication processes and to
position itself as a principal supplier for volume equipment orders. The Company
supports its reliable, cost-effective products through a network of worldwide
service and technical support organizations. The Company's customers consist of
leading semiconductor manufacturers including Advanced Micro Devices, Hewlett-
Packard, Intel, IBM, Motorola, National Semiconductor, SGS-Thomson, Samsung and
Texas Instruments.
The Company's products incorporate proprietary technologies and unique
processes and focus on providing process and product technologies and
productivity enhancements to customers. The Company manufactures and markets its
photolithography exposure products through its majority owned subsidiary, SVG
Lithography Systems, Inc. ("SVGL"), its photoresist processing products through
its Track Systems Division ("Track") and its oxidation/diffusion and LPCVD
products through its Thermco Systems Division ("Thermco").
SVG LITHOGRAPHY SYSTEMS, INC. designs, manufactures, markets and
services advanced photolithography exposure systems. SVGL has two broad
families, Micrascan step and scan systems and the more mature Micralign
scanning projection aligners. The Company believes that its Micrascan
photolithography exposure system provides the greater resolution required
for the next generation of complex, fine geometry integrated circuits
through its use of a deep ultraviolet ("Deep UV") light source and
overcomes the throughput and yield limitations of steppers by combining the
elements of both steppers and scanners into the Micrascan's "step and scan"
technology. The Company also believes that its Micrascan step and scan
photolithography exposure system is the most technologically advanced
machine currently being shipped to global semiconductor manufacturers. In
addition, it believes that as larger and more complex logic and memory
devices move from development to production, semiconductor manufacturers
will have a greater incentive to purchase SVGL's step and scan systems
rather than steppers to achieve higher yields and faster throughput.
TRACK SYSTEMS DIVISION designs, manufacturers, markets and services
equipment which performs all the steps necessary to process semiconductor
wafers prior to photolithography exposure, including cleaning, adhesion
promotion and photoresist coating, and which performs all the steps
required to treat wafers after photolithography exposure prior to etching,
including developing and baking. As photoresist processing technology has
evolved, the Company has developed increasingly advanced products for this
market, which are capable of handling integrated circuits with line widths
as narrow as 0.35 micron. Track's most advanced product line, the 90
Series, offers a proprietary wafer transfer system to increase throughput,
features substantially improved contamination control specifications as
compared to the Company's previous products and provides features allowing
it to interface with factory automation systems. The Company believes it is
the only manufacturer to offer a cluster which integrates its
photolithography and photoresist products. In addition, the Track products
are designed to interface with all stepper products in the industry.
THERMCO SYSTEMS DIVISION designs, manufactures, markets and services
large batch thermal products which address the oxidation/diffusion and
LPCVD steps of the semiconductor fabrication process. Thermco products are
used for a broad range of processing applications required in the
fabrication of most semiconductor devices, including growing insulating
layers on wafers, diffusing dopants into the silicon structure and
depositing insulating or conducting films on the wafer surface. Thermco's
products incorporate proprietary technology it has developed in the areas
of thermal control, gas handling, particle control and automated wafer
handling. Thermco offers a full range of both horizontal and vertical
processing systems. The most advanced product currently offered by the
Company is the Series 8000 Advanced Vertical Processor ("AVP"). The Series
8000 single tube systems include
4
<PAGE> 6
advanced process control, leading software for data acquisition and
display, advanced automation, a proprietary process chamber design and an
option for atmosphere control within the wafer handling area.
Because of the highly technical nature of its products, the Company markets
its products primarily through a direct sales force with sales, service and
spare parts offices worldwide. The Company believes that its field service and
process support capabilities are an important factor in its selection as an
equipment supplier. Increasingly, semiconductor manufacturers are requiring
seven-day, around the clock, on site or on call support. To meet this need, the
Company is expanding its field service organization, increasing its technical
and process support personnel and enhancing its training programs. Service
personnel are based in field offices throughout the United States, Western
Europe, Japan and the Pacific Rim and increasingly on site at particularly large
customer locations. In addition, each customer has a single designated service
account manager for all its support needs.
The Company's principal executive office is located on 2240 Ringwood
Avenue, San Jose, California 95131, and its telephone number is (408) 434-0500.
RECENT DEVELOPMENTS
As part of the Company's continuing commitment to work closely with
existing and potential customers to improve the Company's current products and
processes, in February 1995 the Company entered into a business relationship
with Intel Corporation, Motorola Inc. and Texas Instruments Incorporated (the
"Investors") related to the Company's Micrascan photolithography products. As
part of this relationship, the Investors purchased in equal amounts an aggregate
of $30 million of the Company's newly issued Series B Preferred Stock,
convertible into approximately 1,494,300 shares of Common Stock, and received
certain rights to purchase future generations of the Company's Micrascan
products. The Company is obligated to use the $30 million received from the
Investors, as well as an additional $25 million of Company funds at any time
over a five year period, to fund increased Micrascan production capacity,
increased research and development of the Micrascan technology, the purchase of
additional capital equipment and to augment working capital for growth of the
Company's Micrascan photolithography operations. The Company has also agreed to
use commercially reasonable efforts to obtain up to an additional $25 million in
grants from certain agencies of the United States government to further assist
in the research, development and engineering of Micrascan equipment. As a result
of the concurrent effectiveness of a separate registration statement registering
the shares of Common Stock issuable upon conversion of the Series B Preferred
Stock, all of the Series B Preferred Stock has automatically converted into
1,494,300 shares of Common Stock.
5
<PAGE> 7
RISK FACTORS
Prospective purchasers of Shares offered hereby should carefully consider
the following risk factors in addition to the other information presented in
this Prospectus.
Cyclical Nature of the Semiconductor Industry. The semiconductor industry
into which the Company sells its products is highly cyclical and has
historically experienced periodic downturns, which often have had a severe
effect on the semiconductor industry's demand for semiconductor processing
equipment. Prior semiconductor industry downturns have resulted in significant
reductions in the Company's net sales, gross margin and net income. For example,
due in part to weakness in the semiconductor market, demand for the Company's
semiconductor processing equipment declined during fiscal 1992 and the Company
was not profitable for the year. While the Company has been profitable for the
past 12 quarters, there is no assurance that the Company will be able to
maintain profitability. Moreover, the Company's operations as a whole will
continue to be dependent on the capital expenditures of semiconductor
manufacturers, which in turn will be largely dependent on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. Any future weakness in demand in the semiconductor industry
is likely to have a material adverse effect on the Company's business and
results of operations.
Uncertain Development of Market for Micrascan Products. The development of
a market for the Company's Micrascan photolithography products will be highly
dependent on the continued trend towards finer line widths in integrated
circuits and the inability of traditional I-Line stepper manufacturers to keep
pace with this trend through either enhanced technologies or improved processes.
The market for the Company's Micrascan photolithography products has developed
more slowly than the Company anticipated at the time the Company acquired SVGL
in May 1990. From fiscal 1990 to fiscal 1993, SVGL sold an aggregate of 26
Micrascan systems, 20 of which were sold to IBM, a minority shareholder in SVGL,
and three of which were sold to SEMATECH, Inc. ("SEMATECH"). In fiscal 1994
through the first quarter of fiscal 1995, SVGL shipped seven Micrascan systems
to five customers, only one of which was shipped in the first quarter of fiscal
1995. At December 31, 1994, SVGL had a backlog of 20 Micrascan units for
shipment to five global semiconductor manufacturers. While such orders are
encouraging, they are not necessarily indicative of industry-wide acceptance of
the Micrascan technology. The Company and many industry observers initially
believed that I-Line steppers, the most advanced photolithography exposure
equipment in widespread production use at the time the Company acquired SVGL,
could not be modified to be capable of fabricating complex semiconductor devices
with line widths of less than 0.5 micron, such as 64 and 256 megabit dynamic
random access memories ("DRAMs"). Since 1990, however, stepper manufacturers
have extended the capability of their I-Line steppers to 0.5 micron or finer
line widths. The Company believes that, as a consequence, many manufacturers of
complex devices are likely to continue to use steppers for fabricating such
devices. The Company believes that as devices increase in size and complexity
and require finer line widths, the technical advantages of Micrascan systems as
compared to steppers will enable semiconductor manufacturers to achieve finer
line widths, higher yields and increased throughput. The Company believes,
however, that these larger and more complex devices will not be produced in
volume until 1996 or 1997. It is possible that the demand for these larger and
more complex devices, and the fabrication equipment to manufacture them, may
never develop or may develop even later than 1997. The Company believes
semiconductor manufacturers will not require production equipment as advanced as
Micrascan until at least 1996, and that substantial sales of the Company's
Micrascan systems will not begin until late 1996 or 1997, if at all. Stepper
manufacturers have enhanced their machines in the past, and in the future may
further enhance their machines to achieve finer line widths, sufficiently to
erode Micrascan's expected yield and throughput advantages. If this occurs,
demand for Micrascan systems may not develop as the Company expects. SVGL was
not profitable in fiscal 1994 or the first quarter of fiscal 1995 and there can
be no assurance that it will be able to operate profitably in the future.
Failure of SVGL to achieve substantial sales of Micrascan systems or a delay in
achieving such sales could have a material adverse effect on the Company's
ability to continue to operate profitably.
Fluctuations in Quarterly Operating Results. The Company has historically
experienced substantial quarterly fluctuations in its operating results. Due to
the relatively small number of systems sold during each fiscal quarter and the
relatively high revenues per system, production or shipping delays or customer
order rescheduling can significantly affect quarterly revenues and
profitability. The Company has experienced and
6
<PAGE> 8
may again experience quarters during which a substantial portion of the
Company's net sales are realized near the end of the quarter. Accordingly,
delays in shipments near the end of a quarter can cause quarterly net sales to
fall significantly short of anticipated levels. Since most of the Company's
expenses are fixed in the short term, such shortfalls in net sales could have a
material adverse effect on the Company's business and results of operations. The
Company's operating results may also vary from quarter to quarter based upon
numerous factors including the timing of new product introductions, product mix,
levels of sales, proportions of domestic and international sales, activities of
competitors, acquisitions, international events and problems in obtaining
adequate materials or components on a timely basis. Historically, gross margins
in the Thermco and SVGL businesses have been lower than in the Track business.
To the extent sales of Micrascan products, and to a lesser extent Thermco
products, increase as a percentage of total net sales, the Company's overall
gross margins may be unfavorably impacted. In light of these factors and the
cyclical nature of the semiconductor industry, the Company expects to continue
to experience variability in quarterly operating results.
Need to Increase Manufacturing Capacity. The Company is currently expanding
its manufacturing capacity to meet current and expected demand levels. From time
to time, the Company has experienced difficulty in ramping up production or
effecting transitions to new products and, consequently, has suffered delays in
product deliveries. There can be no assurance that the Company will not
experience manufacturing problems as a result of capacity constraints or ramping
up production by upgrading or expanding existing operations. This could result
in product delivery delays and a subsequent loss of future revenues. In
particular, the Company believes that protracted delays in delivering Micrascan
products could result in semiconductor manufacturers electing to install
competitive equipment in their advanced fabrication facilities, which could
impede acceptance of the Micrascan products on an industry-wide basis. The
Company's operating results could also be adversely affected by the increase in
fixed costs and operating expenses related to increases in production capacity
if net sales do not increase commensurately.
Dependence on New Products and Processes; Importance of Timely Product
Introductions and Enhancements. Semiconductor manufacturing equipment and
processes are subject to rapid technological change. The Company believes that
its future success will depend in part upon its ability to continue to enhance
its existing products and their process capabilities and to develop and
manufacture new products with improved process capabilities that enable
semiconductor manufacturers to fabricate semiconductors more efficiently.
Failure to introduce new products or enhancements in a timely manner could
result in loss of competitive position and reduced sales of existing products.
In particular, the Company believes that advanced logic devices and DRAMs will
require increasingly finer line widths. As a consequence, it is important to
develop and introduce a version of the Micrascan capable of exposing line widths
of less than 0.35 micron in the first half of 1996. In addition, new product
introductions could contribute to quarterly fluctuations in operating results as
orders for new products commence and increase the potential for a decline in
orders of existing products, particularly if new products are delayed. In the
past, the Company has experienced significant delays in the introduction of
certain of its products and product enhancements due to technical, manufacturing
and other difficulties and may experience similar delays in the future.
Furthermore, the inability to produce such products or any failure to achieve
market acceptance could have a material adverse effect on the Company's business
and results of operations.
Significant delays can occur between a product's introduction and the
commencement by the Company of volume production of such product. There can be
no assurance that the Company will be successful in the introduction and volume
production of new and enhanced products or that the Company will be able to
develop and introduce new and enhanced products and processes which satisfy a
broad range of customer needs and achieve market acceptance. See
"Business--Products" and "-- Research and Development."
Research and Development Funding; Certain Capital Commitments. The Company
believes that in selecting a photolithography equipment manufacturer, customers
look for a long term product development strategy and the ability to fund that
development because photolithography exposure equipment can represent a
substantial portion of the equipment cost of a fabrication facility.
Semiconductor manufacturers may be unwilling to rely on a relatively small
supplier such as the Company for a critical element of the fabrication process
if the supplier does not have sufficient capital to implement its product
development strategy. The Company depends in part on external sources to fund
its development efforts and capital equipment
7
<PAGE> 9
expenditures. SEMATECH has entered into agreements with the Company to provide a
portion of this funding, but there can be no assurance that the Company will be
able to attain the milestones required by the agreements for such incremental
funding or that SEMATECH will be capable of providing the agreed-upon funding,
either of which could have an unfavorable impact on future photolithography
development. If the Company achieves all milestones, the SEMATECH agreements
provide for an additional $21 million of such funding during fiscal 1995, 1996
and 1997, all of which the Company expects would be an offset to its research
and development expenditures. Were the Company not to fulfill certain
obligations under its agreement with SEMATECH, the Company could be required to
repay all funds received under the agreements. In the event that the Company
does not receive SEMATECH funding for any reason, it would be required to either
curtail development of photolithography products or make up the shortfall from
its own funds or other sources. If the Company was required to make up these
funds, its research and development expenses would increase significantly and
its operating income would be reduced correspondingly. See "Business -- Research
and Development."
In part to address customer concerns about adequately capitalizing the
photolithography business, the Company is obligated under its agreements with
SEMATECH and the Investors to commit funds to the development and production of
Micrascan photolithography equipment, and a portion of the net proceeds of this
offering may be used to satisfy these requirements. Under the terms of its
agreement with SEMATECH, the Company is obligated to fund from its own resources
not less than 120%, up to a maximum of $36 million at any time over a three year
period, of the total amount received from SEMATECH to further the development of
Micrascan technology, to increase the manufacturing capability and capacity for
Micrascan products and to fund related inventory costs. Under the terms of its
agreements with the Investors, the Company is obligated to use the $30 million
from the sale of the Series B Preferred Stock, as well as an additional $25
million of Company funds at any time over a five year period, to fund increased
Micrascan production capacity, increased research and development of the
Micrascan technology, the purchase of additional capital equipment and to
augment working capital for growth of the Micrascan photolithography operations.
No assurance can be given that the Company will be able to obtain the necessary
funding to meet its commitments under these agreements. The Company is obligated
to invest these funds, regardless of the success of the project. As a result,
the Company may be required to use its financial resources to comply with these
commitments even if it believes that such resources would be better utilized in
other areas. Were the Company to breach any of its obligations under its
agreement with the Investors, the Investors could cause the Company to
repurchase their shares, which could have a material adverse effect on the
Company. See "Recent Developments."
Customer Concentration. The Company relies on a limited number of customers
for a substantial percentage of its net sales. In fiscal 1994, Intel, Motorola
and SGS-Thomson represented 20%, 19% and 11%, respectively, of net sales. The
Company's top five customers represented 58% of the 1994 sales. In the first
quarter of 1995, the Company's top five customers represented 61% of sales. In
fiscal 1994 and the first quarter of fiscal 1995, Intel represented 45% and 41%,
respectively, of Track sales. Track operations were responsible for a
substantial portion of the Company's profits in both periods. The loss of a
significant customer (and in particular the loss of Intel as a Track customer),
a delay in shipment due to customer rescheduling or any substantial reduction in
orders by a significant customer, including reductions in orders due to market,
economic or competitive conditions in the semiconductor industry, could
adversely affect the Company's business and results of operations. See
"Business -- Customers."
Competition. The semiconductor processing equipment industry is highly
competitive. The Company faces substantial competition both in the United States
and in other countries for all of its products. The trend toward consolidation
in the semiconductor processing equipment industry has made it increasingly
important to have the financial resources necessary to compete effectively
across a broad range of product offerings, to fund customer service and support
on a worldwide basis and to invest in both product and process research and
development. Significant competitive factors include product performance, price
and reliability, familiarity with each particular manufacturer's products,
established relationships between suppliers and customers, particulate
contamination control and product availability. While the Company believes that
outside Japan and the Pacific Rim it competes favorably with respect to most of
these factors, it has on occasion been subject to intense price competition with
respect to particular orders and has had difficulty establishing new
8
<PAGE> 10
relationships with certain customers who have long-standing relationships with
other suppliers. Certain of the Company's existing and potential competitors
have substantially greater name recognition, financial, engineering,
manufacturing and marketing resources and customer service and support
capabilities than the Company. Due to the Company's position in the
photolithography market, an announcement of a new product by any of these large
competitors may cause customers to delay purchases until the new product is
introduced. See "-- Dependence on New Products and Processes; Importance of
Timely Product Introductions and Enhancements" and "Business -- Competition."
The Company believes that its competitors will continue to improve the design
and performance of their current products and processes, and to introduce new
products and processes with improved price and performance characteristics. For
example, both Nikon and Canon have announced photolithography products using
step and scan technology and a Deep UV illumination source, and Nikon has
indicated that it expects to deliver prototypes in early 1996. In addition, the
Company believes that other potential competitors, including ASM Lithography,
are developing step and scan technologies. There can be no assurance that the
Company will be able to compete effectively in the future.
Importance of the Japanese and Pacific Rim Market. The Japanese and Pacific
Rim market (including fabrication facilities operated outside these areas by
Japanese and Pacific Rim semiconductor manufacturers) represent a substantial
portion of the overall market for semiconductor equipment. To date, the Company
has not been successful in securing an adequate share of these markets. The
Company believes that the Japanese companies with which it competes have a
competitive advantage because their dominance of the Japanese and Pacific Rim
semiconductor equipment market provides them with the sales and technology base
to compete more effectively throughout the rest of the world. The Company is not
engaged in any collaborative effort with any Japanese or Pacific Rim
semiconductor manufacturer regarding process and equipment development. As a
result, the Company may be at a competitive disadvantage to the Japanese
equipment suppliers which are engaged in such collaborative efforts with
Japanese and Pacific Rim semiconductor manufacturers. There can be no assurance
that the Company will be able to compete successfully in the future in Japan,
the Pacific Rim or elsewhere in the world or that competitive pressures will not
adversely affect the Company's results of operations. See
"Business -- Competition."
Termination of Canon Letter of Intent. In April 1993, the Company entered
into a letter of intent with Canon, Inc. ("Canon"), a major Japanese company,
for the purpose of establishing a worldwide strategic alliance based on SVGL's
Micrascan technology. The Company and Canon were unable to reach agreement and
the letter of intent expired on November 30, 1994. Although Canon is
contractually prohibited until April 2003 from manufacturing a specifically
defined step and scan photolithography machine or disclosing related
information, Canon could introduce a product that includes certain step and scan
technology without violating this prohibition. As a result of the expiration of
the letter of intent, the Company believes that Canon has accelerated its
previously suspended development of a step and scan photolithography product
which will compete with Micrascan. See " -- Uncertain Development of Market for
Micrascan Products," and "Business -- Competition."
Patents and Licenses. As is typical in the semiconductor equipment
industry, the Company has from time to time received, and may in the future
receive, communications from third parties asserting patents or copyrights on
certain of the Company's products and technologies. At least one of the
Company's customers has put the Company on notice that it has received a notice
of infringement from Jerome H. Lemelson, alleging that equipment used in the
manufacture of electronic devices infringes patents issued to Mr. Lemelson
relating to "machine vision" or "barcode reader" technologies. The customer has
put the Company on notice it intends to seek indemnification from the Company
for any damages and expenses resulting from this matter if found liable or if
the customer settles the claim. The Company cannot predict the outcome of this
or any similar claim or its effect upon the Company, and there can be no
assurance that any such litigation or claim would not have a material adverse
effect upon the Company's financial condition or results of operations.
Dependence on Key Employees. The Company's future success is dependent upon
its ability to attract and retain qualified management, technical, sales and
support personnel. The competition for such personnel is intense. The loss of
certain key people or the Company's inability to attract and retain new key
employees could materially adversely affect the Company's business and results
of operations.
9
<PAGE> 11
Dependence on Sole or Limited Source Suppliers. Certain of the raw
materials, components and subassemblies included in the Company's products are
obtained from single sources or a limited group of suppliers. Although the
Company seeks to reduce its dependence on these sole and limited source
suppliers, disruption or termination of certain of these sources could occur and
such disruptions could have at least a temporary adverse effect on the Company's
business and results of operations. Moreover, a prolonged inability to obtain
certain components could have a material adverse effect on the Company's
business and results of operations and could result in damage to customer
relationships.
Volatility of Stock Price. The public offering price of the Common Stock
offered hereby may not be indicative of prices that will prevail in the trading
market for the Common Stock. The stock market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. In addition, the market price of the
Company's Common Stock has been and is likely to be highly volatile. Factors
such as fluctuations in the Company's operating results, shortfalls in revenue
or earnings from levels expected by securities analysts, announcements of
technological innovations or new products by the Company or its competitors,
governmental regulation, developments with respect to patents or proprietary
rights and litigation relating thereto and general market conditions may have a
significant adverse effect on the market price of the Common Stock. See "Price
Range of Common Stock."
Shares Eligible for Future Sale. After completion of this offering, the
Company will have approximately 25,001,309 shares of Common Stock outstanding,
of which 24,862,878 shares will be freely tradeable without restriction. The
Company's executive officers and directors beneficially own 1,096,946 shares of
Common Stock, including 958,515 shares issuable upon exercise of options. Such
shares will be restricted from sales until 90 days after this offering pursuant
to agreements with the Underwriters. Thereafter, such shares can be sold in the
public market subject to certain volume and other resale restrictions of Rule
144 under the Securities Act. In addition, SEMATECH holds a warrant, expiring on
September 30, 1998, to purchase 1,750,000 shares of Common Stock at an exercise
price of $13.625 per share. In connection with the exercise of certain
registration rights held by SEMATECH, the Company will, prior to November 24,
1995, register such shares to permit sales by SEMATECH from time to time
thereafter in the open market.
The Company has registered for resale, concurrently with this offering, the
1,494,300 shares of Common Stock issued upon conversion of the Series B
Preferred Stock held by the Investors. The Investors have agreed that they will
not, without the prior written consent of Morgan Stanley & Co. Incorporated,
sell or otherwise dispose of these shares from the date of the offering until
November 22, 1995. After November 22, 1995, the Investors could sell the
1,494,300 shares freely in the market.
Sales of a substantial number of shares in the public market could
adversely affect the market price of the Common Stock and the Company's ability
to raise additional capital at a price favorable to the Company. See
"Underwriters."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
3,192,606 shares of Common Stock offered by the Company hereby are estimated to
be $87,636,110 ($108,317,360 if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use the proceeds of this offering primarily for
general corporate purposes, including purchases of capital equipment, working
capital and research and development for SVGL, Track and Thermco. A portion of
the net proceeds may also be used for future acquisitions of complementary
businesses or product lines as such opportunities may arise, although no such
acquisitions are currently pending or in negotiation. Pending such applications,
the net proceeds from this offering will be invested in bank deposits and short
term and medium term investment grade, interest bearing securities.
Giving pro forma effect to the receipt of the $30,000,000 proceeds from the
sale of the Series B Preferred Stock in February 1995, as of December 31, 1994,
the Company had approximately $106,302,000 in cash and cash equivalents. After
giving effect to the receipt of the anticipated net proceeds of this offering,
the Company would have had $193,938,110 in cash as of such date. The Company is
obligated under its agreements with SEMATECH and the Investors to commit funds
to further the development of the Company's Micrascan photolithography
equipment, and a portion of the net proceeds of this offering may be used to
satisfy these requirements. Under the terms of its agreement with SEMATECH, the
Company is obligated to fund from its own resources not less than 120%, up to a
maximum of $36,000,000 at any time over a three year period, of the total amount
received from SEMATECH to further the development of Micrascan technology, to
increase the manufacturing capability and capacity for Micrascan products and to
fund related inventory costs. See "Business -- Research and Development." Under
the terms of its agreements with the Investors, the Company is obligated to use
the $30,000,000 received from the Investors, as well as an additional
$25,000,000 of Company funds at any time over a five year period, to fund
increased Micrascan production capacity, increased research and development of
the Micrascan technology, the purchase of additional capital equipment and to
augment working capital for growth of Micrascan photolithography operations.
11
<PAGE> 13
PRICE RANGE OF COMMON STOCK
The following table sets forth the range of high and low sales prices of
the Company's Common Stock for the indicated periods, as reported by The Nasdaq
National Market. On March 23, 1995, the last reported sale price for the Common
Stock on The Nasdaq National Market was $29 1/8 per share. As of December 31,
1994, there were approximately 668 holders of record of the Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Fiscal year ended September 30, 1993:
First Quarter........................................... $7 1/4 $4 1/2
Second Quarter.......................................... 8 5/8 6
Third Quarter........................................... 11 1/8 6 1/8
Fourth Quarter.......................................... 12 7/8 9 3/8
Fiscal year ended September 30, 1994:
First Quarter........................................... 12 1/8 9 1/4
Second Quarter.......................................... 13 3/8 9 1/2
Third Quarter........................................... 12 3/8 9 1/4
Fourth Quarter.......................................... 14 7/8 11 3/8
Fiscal year ending September 30, 1995:
First Quarter........................................... 21 1/4 14
Second Quarter (through March 23, 1995)................. 29 5/8 18 3/8
</TABLE>
DIVIDEND POLICY
To date the Company has not declared or paid cash dividends on its Common
Stock. The Board of Directors of the Company presently intends to retain all
earnings for use in the Company's business and therefore does not anticipate
declaring or paying any cash dividends on its Common Stock in the foreseeable
future. The Company's revolving credit facility prohibits the payment of cash
dividends of more than an aggregate of $5,000,000 per year on Common Stock.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth, on an unaudited basis, the actual cash and
equivalents, short-term debt and capitalization of the Company at December 31,
1994, pro forma to reflect the sale of the Company's Series B Preferred Stock in
February 1995 and as adjusted to give effect to the conversion of all of the
Company's outstanding Series A and Series B Preferred Stock into an aggregate of
2,494,300 shares of Common Stock, the sale by the Company of the 3,192,606
shares of Common Stock offered hereby, and the application of the net proceeds
therefrom.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Cash and equivalents...................................... $ 76,502 $ 106,302 $ 193,938
======== ======== =========
Short-term debt and current portion of long-term debt..... $ 846 $ 846 $ 846
======== ======== =========
Long-term debt and capital leases......................... $ 1,299 $ 1,299 $ 1,299
Minority interest in SVGL................................. 3,799 3,799 3,799
Stockholders' equity:
Series A Convertible Redeemable Preferred Stock, $0.01
par value, 1,000,000 shares authorized; 10,000 shares
outstanding actual and pro forma, none as adjusted;
actual and pro forma aggregate liquidation preference
of $17,000........................................... 17,000 17,000 --
Series B Convertible Redeemable Preferred Stock, $0.01
par value, 1,000,000 shares authorized; none actual
and as adjusted; 14,943 shares outstanding pro forma;
pro forma aggregate liquidation preference of
$30,000.............................................. -- 29,800 --
Common Stock, $0.01 par value, 40,000,000 shares
authorized; 19,173,809 shares outstanding actual and
pro forma; 24,873,429 shares outstanding as
adjusted(1).......................................... 107,722 107,722 242,158
Retained earnings....................................... 67,269 67,269 67,269
-------- --------- -----------
Total stockholders' equity......................... 191,991 221,791 309,427
-------- --------- -----------
Total capitalization............................ $197,089 $ 226,889 $ 314,525
======== ======== =========
</TABLE>
---------------
(1) Includes (i) 2,494,300 shares of Common Stock issued upon conversion of the
Series A and Series B Preferred Stock and (ii) 12,714 shares of Common Stock
issued as payment of dividends on March 15, 1995 on the outstanding shares
of Series A Preferred Stock. Excludes (i) as of March 20, 1995, 1,353,185
shares issuable upon exercise of outstanding options at an average exercise
price of $11.39 per share and (ii) as of March 20, 1995, 1,750,000 shares
issuable upon exercise of a warrant with an exercise price of $13.625 per
share.
13
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of September
30, 1993 and 1994 and for each of the years in the three year period ended
September 30, 1994 have been derived from the consolidated financial statements
of the Company, which have been audited by Deloitte & Touche LLP, independent
auditors, which financial statements are incorporated by reference herein. The
selected consolidated financial data as of September 30, 1990, 1991 and 1992 and
for each of the years in the two year period ended September 30, 1991 have also
been derived from audited consolidated financial statements of the Company but
which are not incorporated by reference herein. The selected consolidated
financial data presented below as of December 31, 1994, and for the three month
periods ended December 31, 1993 and 1994, and for each of the nine quarters in
the period ended December 31, 1994, have been derived from unaudited
consolidated financial statements of the Company. In the opinion of the
Company's management, such unaudited consolidated financial data include all
adjustments, consisting of only normal recurring adjustments, necessary to
fairly state the information set forth therein. The following consolidated
financial data should be read in conjunction with the consolidated financial
statements, related notes and other financial information incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------- ------------------
1990(1) 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Net sales................................. $184,289 $234,798 $192,457 $240,633 $319,922 $70,917 $85,971
Cost of sales............................. 110,441 149,337 115,296 147,207 195,511 43,859 52,769
-------- -------- -------- -------- -------- ------- -------
Gross profit.............................. 73,848 85,461 77,161 93,426 124,411 27,058 33,202
Research, development and related
engineering............................. 25,292 30,004 27,009 26,332 30,443 6,546 8,278
Marketing, general and administrative..... 40,287 50,661 48,544 59,710 67,517 15,836 17,622
-------- -------- -------- -------- -------- ------- -------
Operating income.......................... 8,269 4,796 1,608 7,384 26,451 4,676 7,302
Interest and other income (expense),
net..................................... (342) (1,458) (44) (464) 369 (252) 1,053
-------- -------- -------- -------- -------- ------- -------
Income before income taxes and minority
interest................................ 7,927 3,338 1,564 6,920 26,820 4,424 8,355
Provision (credit) for income taxes....... 3,106 (781) 1,089 2,076 10,191 1,770 3,008
Minority interest......................... 372 2,478 767 359 (135) (65) 17
-------- -------- -------- -------- -------- ------- -------
Net income (loss)......................... $ 4,449 $ 1,641 $ (292) $ 4,485 $ 16,764 $ 2,719 $ 5,330
======== ======== ======== ======== ======== ======= =======
Preferred Stock dividend.................. -- -- $ 209 $ 1,190 $ 1,190 $ 298 $ 298
======== ======== ======== ======== ======== ======= =======
Net income (loss) applicable to Common
Stock................................... $ 4,449 $ 1,641 $ (501) $ 3,295 $ 15,574 $ 2,421 $ 5,032
======== ======== ======== ======== ======== ======= =======
Net income (loss) per share............... $ 0.42 $ 0.12 $ (0.03) $ 0.22 $ 0.84 $ 0.15 $ 0.25
======== ======== ======== ======== ======== ======= =======
Shares used in per share computations..... 10,708 13,166 14,754 15,277 18,538 16,400 20,322
======== ======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------- ------------
1990 1991 1992 1993 1994 1994
-------- -------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents........................... $ 30,699 $ 34,070 $ 32,743 $ 17,617 $ 87,829 $ 76,502
Working capital................................ 60,403 84,959 93,084 110,512 173,303 178,802
Property and equipment, net.................... 33,686 28,994 26,861 18,664 13,313 14,709
Total assets................................... 183,423 192,317 180,777 212,284 271,674 292,625
Short-term debt and current portion of
long-term debt............................... 4,367 2,043 4,407 14,971 828 846
Long-term debt and capital leases.............. 26,533 8,200 1,652 2,338 1,510 1,299
Retained earnings.............................. 42,927 44,568 43,651 46,946 62,237 67,269
Stockholders' equity........................... 70,234 103,800 121,116 126,997 185,215 191,991
</TABLE>
---------------
(1) Includes the results of operations of SVGL from May 1, 1990.
14
<PAGE> 16
The following table presents unaudited quarterly results in dollar amounts
and as a percentage of net sales for the last nine quarters.
<TABLE>
<CAPTION>
FISCAL
FISCAL 1993 FISCAL 1994 1995
----------------------------------------- ----------------------------------------- -------
DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Net sales..................... $54,136 $51,602 $64,396 $70,499 $70,917 $85,300 $81,725 $81,980 $85,971
Cost of sales................. 34,198 30,845 39,250 42,914 43,859 52,876 48,991 49,785 52,769
------- ------- ------- -------- ------- ------- ------- -------- -------
Gross profit.................. 19,938 20,757 25,146 27,585 27,058 32,424 32,734 32,195 33,202
Research, development and
related engineering......... 5,734 6,517 7,016 7,065 6,546 7,675 8,454 7,768 8,278
Marketing, general and
administrative.............. 13,101 13,247 16,416 16,946 15,836 16,951 17,516 17,214 17,622
------- ------- ------- -------- ------- ------- ------- -------- -------
Operating income.............. 1,103 993 1,714 3,574 4,676 7,798 6,764 7,213 7,302
Interest and other income
(expense), net.............. 28 (137 ) (116 ) (239 ) (252 ) 36 166 419 1,053
------- ------- ------- -------- ------- ------- ------- -------- -------
Income before income taxes and
minority interest........... 1,131 856 1,598 3,335 4,424 7,834 6,930 7,632 8,355
Provision for income taxes.... 340 257 479 1,000 1,770 3,132 2,773 2,516 3,008
Minority interest............. 100 158 60 41 (65 ) (40 ) (162 ) 132 17
------- ------- ------- -------- ------- ------- ------- -------- -------
Net income.................... $ 691 $ 441 $1,059 $ 2,294 $2,719 $4,742 $4,319 $ 4,984 $5,330
======= ======= ======= ======= ======= ======= ======= ======= =======
Preferred Stock dividend...... $ 298 $ 297 $ 298 $ 297 $ 298 $ 297 $ 298 $ 297 $ 298
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income applicable to
common stock................ $ 393 $ 144 $ 761 $ 1,997 $2,421 $4,445 $4,021 $ 4,687 $5,032
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income per share.......... $ 0.03 $ 0.01 $ 0.05 $ 0.13 $ 0.15 $ 0.23 $ 0.21 $ 0.24 $ 0.25
======= ======= ======= ======= ======= ======= ======= ======= =======
Shares used in per share
computations................ 14,824 14,951 15,298 15,499 16,400 19,032 19,205 19,515 20,322
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................. 63.2 59.8 61.0 60.9 61.8 62.0 59.9 60.7 61.4
------- ------- ------- -------- ------- ------- ------- -------- -------
Gross profit.................. 36.8 40.2 39.0 39.1 38.2 38.0 40.1 39.3 38.6
Research, development and
related engineering......... 10.6 12.6 10.9 10.0 9.2 9.0 10.3 9.5 9.6
Marketing, general and
administrative.............. 24.2 25.7 25.5 24.0 22.3 19.9 21.4 21.0 20.5
------- ------- ------- -------- ------- ------- ------- -------- -------
Operating income.............. 2.0 1.9 2.7 5.1 6.6 9.1 8.3 8.8 8.5
Interest and other income
(expense), net.............. 0.1 (0.3 ) (0.2 ) (0.3 ) (0.4 ) -- 0.2 0.5 1.2
------- ------- ------- -------- ------- ------- ------- -------- -------
Income before income taxes and
minority interest........... 2.1 1.7 2.5 4.7 6.2 9.2 8.5 9.3 9.7
Provision for income taxes.... 0.6 0.5 0.7 1.4 2.5 3.7 3.4 3.1 3.5
Minority interest............. 0.2 0.3 0.1 0.1 (0.1 ) -- (0.2 ) 0.2 --
------- ------- ------- -------- ------- ------- ------- -------- -------
Net income.................... 1.3% 0.9% 1.6% 3.3% 3.8% 5.6% 5.3% 6.1% 6.2%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
15
<PAGE> 17
BUSINESS
SVG designs, manufactures, markets and services semiconductor fabrication
equipment for the worldwide semiconductor industry. The Company has three
principal product groups which focus primarily on photolithography, photoresist
processing, and deposition for oxidation/diffusion and LPCVD. The Company's
products incorporate proprietary technologies and unique processes, and focus on
providing process and product technologies and productivity enhancements to its
customers. The Company believes that its Micrascan step and scan
photolithography exposure system, which utilizes a Deep UV light source allowing
line widths of 0.35 micron and below, is the most technologically advanced
machine currently being shipped to global semiconductor manufacturers. SVG
supports its reliable, cost-effective products through a network of worldwide
service and technical support organizations. The Company's customers consist of
leading semiconductor manufacturers including Advanced Micro Devices,
Hewlett-Packard, Intel, IBM, Motorola, National Semiconductor, SGS-Thomson,
Samsung and Texas Instruments.
The Company works closely with its existing and potential customers,
industry consortia and research institutions to improve current processes and to
define opportunities for new product development. These relationships enable SVG
to participate in the development of new technologies and fabrication processes
and to position itself as a principal supplier for volume equipment orders. As
evidence of the Company's commitment to its customers, in February 1995 the
Company entered into a business relationship, whereby the Investors purchased,
in equal amounts, an aggregate of $30,000,000 of the Company's Series B
Preferred Stock and received certain rights to purchase future generations of
the Company's Micrascan products. SVG is obligated to use the $30,000,000
proceeds, plus $25,000,000 of additional Company funds at any time over a five
year period, to fund increased Micrascan production capacity, increased research
and development of the Micrascan technology, the purchase of additional capital
equipment and to augment working capital for growth of Micrascan
photolithography operations.
INDUSTRY BACKGROUND
Continuous improvements in semiconductor process and design technologies
have led to the production of smaller, more complex and more reliable devices at
a lower cost per function. As performance has increased and size and cost have
decreased, the demand for semiconductors has expanded beyond the primary market
in computer systems to include applications in telecommunications systems,
automotive products, consumer goods and industrial automation and control
systems. Semiconductor content as a percentage of system cost has also
increased. In addition, the demand for electronic systems has expanded
geographically with the emergence of new markets, particularly in the Pacific
Rim. Consequently, semiconductor sales have increased significantly over the
long term (growing at a compound rate of approximately 16% from 1983 to 1993)
but have experienced significant variation in growth rates. The Company believes
that these long-term trends will continue and will be accompanied by a growing
demand for semiconductor production equipment that can produce advanced
integrated circuits in high volumes at the lowest cost of ownership.
The rapid development of advanced semiconductor applications requires
semiconductor manufacturers to continually improve their core technology and
manufacturing capabilities to remain competitive within the industry. As a
consequence, semiconductor manufacturers demand increasingly sophisticated, cost
effective processing equipment from semiconductor equipment suppliers. The
increasing diversity and complexity of semiconductor products, the demands of
technological change and the costs associated with keeping pace with industry
developments have contributed to the emergence of cooperative development and
manufacturing alliances with semiconductor equipment suppliers. The Company
believes it is essential to have customer alliances to provide access to
valuable product and process technologies. These factors result in customers
concentrating their business with a small number of key suppliers.
SILICON VALLEY GROUP, INC.
SVG designs and manufactures sophisticated semiconductor manufacturing
systems for advanced fabrication facilities. The Company has three principal
product groups which focus on photolithography, photoresist processing and
deposition for oxidation/diffusion and LPCVD. SVG believes that its Micrascan
16
<PAGE> 18
step and scan photolithography exposure system, which utilizes a Deep UV light
source allowing line widths of 0.35 micron and below, is the most
technologically advanced machine currently being shipped to global semiconductor
manufacturers. The Company's products incorporate proprietary technologies and
unique processes, and focus on providing process and product technologies and
productivity enhancements to customers. SVG's products are based on proprietary
technologies in photolithography, control software, optics, and particulate
control.
The Company's objective is to strengthen its position as a leading
worldwide semiconductor equipment supplier by offering a broad line of
technologically advanced products and expending substantial resources on
research and development to create new, innovative products and processes. The
Company has close working relationships with leading semiconductor manufacturers
so that it may design its products in conjunction with the development of the
semiconductor manufacturers' advanced processes. SVG works closely with its
existing and potential customers, industry consortia and research institutions
to improve current products and processes and to define new product development
opportunities. These efforts enable the Company to participate in the
development of new technologies, to influence the design of new fabrication
processes and to position itself as a principal supplier for volume equipment
orders. The Company supports its reliable, cost-effective products through a
network of worldwide service and technical support organizations. SVG believes
that these strategies, together with its current market position and product
portfolio, will enable the Company to enhance its position as a leading global
semiconductor equipment supplier.
SVG's business is organized into three principal product groups. The
Company manufactures and markets its photolithography exposure products through
SVGL, its photoresist processing products through Track and its
oxidation/diffusion and LPCVD products through Thermco.
SVG LITHOGRAPHY SYSTEMS, INC.
SVGL designs, manufactures, markets and services advanced photolithography
exposure systems. Photolithography is one of the most critical and expensive
steps in integrated circuit fabrication, representing approximately one-third of
the fabrication cost. Consequently, integrated circuit manufacturers focus on
obtaining photolithography equipment to help them produce increasingly complex
devices reliably, efficiently and cost-effectively.
In the photolithography step of the fabrication process, the integrated
circuit patterns are projected through masks, or reticles, onto the silicon
wafers. As semiconductors have become more complex, the patterns have become
finer, with line widths as narrow as 0.35 micron (approximately 15 millionths of
an inch) in many of today's more advanced integrated circuits. As the patterns
become finer, photolithography exposure systems must be capable of projecting
the patterns through the masks with ever finer resolution. The resolution
capability of a photolithography exposure system is a function of its depth of
focus, numerical aperture (a measure of its light gathering characteristics) and
the wavelength of the light used in pattern projections.
Historically, there have been two major approaches to photolithographic
exposure systems: full field scanners and conventional refractive systems. The
full field scanners project a full scale mask image onto full wafers while the
refractive systems (steppers) sequentially expose small sections of a wafer in a
stepped sequence of exposures, but do so by reducing the size of a mask image by
several fold (typically 5 times). Thus, scanners offer large exposure fields
while steppers offer masks that are easier to make and have a lower cost. These
strengths are combined in the step and scan system.
Other trends are the reduction in wavelength from G-line (436 nanometer) to
I-line (365 nanometer) to Deep UV (248-193 nanometer) and the increase in
numerical aperture from 0.2 to 0.6.
Micrascan. The Company believes that its Micrascan photolithography
exposure system provides the greater resolution required for the next generation
of complex, fine geometry integrated circuits through its use of a Deep UV light
source and overcomes the throughput and yield limitations of steppers by
combining the elements of both steppers and scanners into the Micrascan's "step
and scan" technology.
The Micrascan combines advantages of scanning projection aligners and
steppers by scanning only a portion of the wafer, then "stepping" to another
portion of the wafer and repeating the process as necessary.
17
<PAGE> 19
Each scan has the capability to expose a larger segment of the wafer, or
"field," than a stepper can expose in a single step. The large exposure field
enables Micrascan to fabricate larger devices in a single scan than steppers,
thus avoiding the necessity of "stitching" a circuit together through two
different exposures. In addition, Micrascan continuously modifies the position
of the wafer surface during the scan to keep the wafer in the optimal focal
plane, thereby providing Micrascan a larger usable depth of focus field than
steppers. The larger the usable depth of focus field is, the more tolerant of
variations in the wafer surface the equipment will be. The Company believes
Micrascan's greater tolerance of wafer surface variations can reduce the number
of defective devices on a wafer, thereby contributing to higher yields. Scanning
across the field instead of exposing the entire field at one time also enables
Micrascan to achieve greater uniformity of resolution across the entire exposure
field and contributes to higher yields.
The Company believes that SVGL has substantial technological expertise and
process knowledge in developing Deep UV step and scan photolithography systems.
SVGL has developed internal capability to design and fabricate optical lenses,
mirrors and coatings. This includes its own proprietary optical metrology using
phase measuring interferometry to precisely measure and test the optical
elements it produces. Micrascan incorporates both mirrors and lenses in its
optical system, which the Company believes allows for a higher power optical
projection system, is less sensitive to environmental variants and accommodates
the use of light sources with broader spectral bandwidth (than refractive
optics) with the benefits of reduced running cost and increased reliability.
In addition to the optical system technology described above, SVGL has
developed certain proprietary mechanical systems incorporated in the Micrascan
to control the alignment of the wafer and the reticles prior to and during the
wafer exposure step. These alignment systems contribute to the Micrascan's
ability to scan the exposure field at speeds of 50mm per second or greater with
no significant loss of resolution, thereby increasing the throughput capability
of the machine.
The Company believes that many of the more complex semiconductor devices
currently under development, such as the most advanced microprocessors and
DRAMs, fit within the larger exposure field scanned by the Micrascan but do not
fit within the exposure field of the most advanced steppers currently in
widespread production use. In addition, these more complex devices feature
increasingly narrow line widths, which require greater resolution in exposing
the photoresist. The Company believes that, as these larger and more complex
logic and memory devices move from development to production, the technical
advantages of Deep UV step and scan systems over existing I-Line steppers will
provide a greater incentive to semiconductor manufacturers to purchase step and
scan systems rather than steppers in order to achieve higher yields and faster
throughput. The Company believes, however, that these devices will not be
produced in volume until late 1996 or 1997. Micrascan systems currently sell for
up to approximately $4,500,000, depending upon configuration.
Micralign. SVGL also sells a family of scanning projection aligners known
as "Micralign". The most advanced product in this family, the Micralign 700, is
used primarily in the production of semiconductor devices with minimum feature
sizes above 1.25 microns, or in the fabrication of less critical layers within
more sophisticated semiconductor devices. Micralign products, which have
historically accounted for a significant portion of the revenues of SVGL, are a
mature product family. Sales of Micralign products have declined in recent years
as steppers have supplanted projection aligners. Even with the current upturn in
the semiconductor industry and the resulting expansion of existing facilities,
the Company anticipates that such a decline in sales will continue. A large
installed base of Micralign systems exists throughout the world and a majority
of SVGL's Micralign related revenues is derived from servicing that installed
base and the sales of spare parts and refurbished systems. The list price of
Micralign 700 is approximately $995,000 and refurbished Micralign systems sell
for lesser amounts.
TRACK SYSTEMS DIVISION
Track designs, manufactures, markets and services photoresist processing
equipment which performs all the steps necessary to process semiconductor wafers
prior to photolithography exposure, including cleaning, adhesion promotion and
photoresist coating, and which performs all the steps required to treat wafers
after
18
<PAGE> 20
photolithography exposure prior to etching, including developing and baking. As
photoresist processing technology has evolved, SVG has developed increasingly
advanced product lines for this market, which are capable of handling integrated
circuits with line widths as narrow as 0.35 micron. Each product line includes
the principal processing capabilities described above and is generally sold in
customer-specified configurations that can include specially engineered features
and capabilities. All of the Track products are available in fully automated
cassette-to-cassette configurations either as stand-alone processing stations or
as in-line integrated manufacturing systems. The equipment is modular in design
to allow configuration to customer requirements. Each semiconductor manufacturer
may require certain of the processing stations to effect its proprietary or
specialized processes. SVG believes it is the only manufacturer to offer a
cluster which integrates its photolithography and photoresist products. In
addition, Track products are designed to interface with all stepper products in
the industry.
Track offers three product lines, each corresponding to the development of
successive generations of wafer processing technologies. In general, it has been
the Company's experience that introduction of new Track products has been
followed by lower order levels for older products.
90 Series. Introduced in May 1990, the 90 Series photoresist processing
system is designed for use in advanced fabrication processes for integrated
circuits with line widths as narrow as 0.35 micron, such as is required for 64
and 256 megabit DRAMs. The 90 Series incorporates a proprietary wafer transfer
system to increase throughput, features substantially improved contamination
control specifications as compared to the Company's previous products and
provides features allowing it to interface with factory automation systems, such
as those using automated guided vehicles. The 90 Series can process wafers up to
eight inches in diameter. In June 1992, an additional model of the 90 Series,
the 90-S, was introduced. The 90-S requires less floor space and, in certain
applications, may provide greater productivity than a conventional 90 Series
system. Prices of the 90 Series range from approximately $650,000 to $1,500,000.
8800 Series. The 8800 Series, introduced in late 1987, is designed to meet
market needs for photoresist contamination control and photoresist processing
down to 0.8 micron line widths. The 8800 Series incorporates such automation
features as beltless wafer handling, compatibility with low contamination wafer
storage and movement techniques, advanced software and communications
capabilities and certain process control improvements. The 8800 Series can
process wafers from three to six inches in diameter. Prices of the 8800 Series
range from approximately $350,000 to $750,000.
8600 Series. The 8600 Series is a belt-based wafer transport system capable
of processing wafers with diameters of three to six inches and of supporting the
needs of photoresist processing down to 1.0 micron line widths. The 8600 Series
is typically purchased for expansion of current fabrication capacity. Prices of
the 8600 Series range from approximately $200,000 to $400,000.
THERMCO SYSTEMS DIVISION
Thermco designs, manufactures, markets and services large batch thermal
products which address the oxidation/diffusion and LPCVD steps of the
semiconductor fabrication process. Thermco products are used for a broad range
of processing applications required in the fabrication of most semiconductor
devices, including growing insulating layers on the wafers, diffusing dopants
into the silicon structure and depositing insulating or conducting films on the
wafer surface. Thermco's products incorporate proprietary technology it has
developed in the areas of thermal control, gas handling, particle control and
automated wafer handling.
There are two major configurations of thermal processing equipment,
commonly referred to as vertical and horizontal, corresponding to the
orientation of their reaction chamber(s). Vertical processing systems represent
an increasing portion of the market for oxidation/diffusion and LPCVD processing
equipment. Vertical reactors generally consist of a single, fully automated
cylindrical reaction chamber, individually controlled by a dedicated computer
control system. Vertical systems generally provide greater process uniformity
and lower particle contamination than do horizontal systems, due to improved
thermal control and an increased ability to maintain environmental integrity,
thereby achieving higher yields in wafer processing. Additionally, vertical
systems provide more flexibility in manufacturing configurations. Horizontal
thermal
19
<PAGE> 21
processing systems, which are typically much larger and less automated than
vertical reactors, were the standard of the semiconductor processing equipment
industry and are still used for a broad range of processes.
Series 8000 Advanced Vertical Processor ("AVP"). Initially shipped in
September 1992, the AVP is a vertical furnace designed to meet the eight inch
wafer requirements of sub-half micron processing. The Series 8000 single tube
systems include advanced process control, data acquisition software, advanced
automation, a proprietary process chamber design and an option for atmospheric
control within the wafer handling area. SVG has incorporated design improvements
to address shortcomings of the initial production units. Although the Company
recently began shipping units to customers that it believes satisfy these
shortcomings, no assurance can be given that these improved products will be
successful in meeting customer requirements. The typical price range of an AVP
system is $700,000 to $1,000,000 depending on process configuration.
Vertical Thermal Reactor ("VTR"). Thermco's VTR processes wafers from 100mm
to 200mm in diameter. It operates under computer control, providing specialized
process recipe introduction, cassette-to-cassette automation, monitoring of
critical system functions and automated loading of wafers into the reaction
chamber. In general, the VTR offers comparable reliability, lower contamination
and better process uniformity than horizontal reactors. The VTR can be installed
through-the-wall in a customer's clean room facility and is compatible with
industry standard software interfaces. During fiscal 1994, SVG began shipping an
enhanced version of VTR 7000PLUS. The enhanced VTR 7000PLUS offers improved
process control, uniformity, reduced particle levels, higher throughput,
internal storage capabilities and the industry's standard mechanical interface
(SMIF). The typical price for the Company's VTR products is approximately
$500,000 to $900,000.
Horizontal Processing Systems. The typical horizontal system consists of
four separately controlled cylindrical reaction chambers which are mounted
horizontally, one directly above the other. Horizontal systems are a mature
product family. Sales of these systems have been declining in recent years, as
semiconductor manufacturers have increasingly installed vertical reactors in
their newer fabrication facilities. Thermco expects this decline to continue
despite the current capacity expansion being undertaken by semiconductor
manufacturers. However, manufacturers of less complex devices will continue to
have some need for horizontal processing systems for the foreseeable future. In
addition, a large installed base of horizontal processing systems enables the
Company to generate revenues through the sale of spare parts, upgrades and
retrofits to the installed customer base. Prices for horizontal systems range
from approximately $400,000 to $900,000.
CUSTOMERS
By working closely with its established customer base, SVG is able to
identify new product development opportunities. Repeat sales to existing
customers represent a significant portion of the Company's processing equipment
sales. The Company believes that its installed customer base represents a
significant competitive advantage. SVG's major semiconductor customers during
fiscal 1994 included the following:
<TABLE>
<S> <C>
Advanced Micro Devices Motorola
Atmel National Semiconductor
Harris Semiconductor SGS-Thomson
Hewlett-Packard Samsung
Intel Siemens
IBM Texas Instruments
</TABLE>
The Company relies on a limited number of customers for a substantial
percentage of its net sales. See "Risk Factors -- Customer Concentration." In
fiscal 1994 Intel, Motorola and SGS-Thomson represented 20%, 19% and 11%,
respectively, of net sales. The Company's top five customers represented 58% of
the 1994 sales. In fiscal 1993 and 1994, Intel represented 39% and 45%,
respectively, of Track sales. Track operations were responsible for a
substantial portion of SVG's profits in both fiscal years.
20
<PAGE> 22
SALES, SERVICE AND SUPPORT
Because of the highly technical nature of its products, SVG markets its
products primarily through a direct sales force with sales, service and spare
parts offices worldwide. The Company believes that its field service and process
support capabilities are an important major factor in its selection as an
equipment supplier. Increasingly, semiconductor manufacturers are requiring
seven-day, around the clock, on site or on call support. To meet this need, SVG
is expanding its field service organization, increasing its technical and
process support personnel and enhancing its training programs. Service personnel
are based in field offices throughout the United States, Western Europe, Japan
and the Pacific Rim and increasingly on site at particularly large customer
locations. In addition, each customer has a single designated service account
manager for all its support needs.
BACKLOG
At December 31, 1994, the Company had a backlog of approximately
$252,000,000, which included 20 Micrascan units from five customers. Backlog
increased from approximately $146,000,000 at September 30, 1993 to approximately
$209,000,000 at September 30, 1994 as a result of substantial increases in
orders for SVGL and Thermco products. The Company includes in backlog only those
orders to which a purchase order number has been assigned by the customer and
for which delivery has been specified within 12 months. Such orders are subject
to cancellation by the customer with limited charges. Because of the possibility
of customer changes in delivery schedules, cancellation of orders and potential
delays in product shipments, the Company's backlog as of any particular date may
not be representative of actual sales for any succeeding period.
RESEARCH AND DEVELOPMENT
The market served by the Company is characterized by rapid technological
change. Accordingly, the Company's product and process development programs are
devoted to the development of new systems and processes, including new
generations of products for existing markets, enhancements and extensions of
existing products and custom engineering for specific customers. The Company
believes that its future success will depend, in part, upon its ability to
successfully introduce and manufacture new and enhanced, cost effective
products, which satisfy a broad range of customer needs and achieve market
acceptance. Accordingly, the Company works closely with semiconductor
manufacturers, industry consortia, and research institutions to respond to the
industry's evolving product and process requirements. The Company's research
staff collaborates with key customers in order to evaluate designs,
specifications and prototypes of the Company's new products.
On September 30, 1994, SEMATECH, as part of an overall funding agreement,
purchased warrants for $8,204,000 under which SEMATECH has the right to purchase
1,750,000 shares of the Company's Common Stock at an exercise price of $13.625
per share. The proceeds from the sale of the warrants were received in October
1994 and are to be utilized to increase SVGL's manufacturing capacity to satisfy
anticipated demand for the current and future versions of the Micrascan product.
Additionally, at any time over a three-year period, SEMATECH agreed to fund,
upon SVGL's completion of certain milestones, approximately $22,000,000 for the
future development of Micrascan technology and the increased manufacturing
capacity to build the Micrascan product. During the term of the agreement the
Company is obligated to fund, from its own resources, not less than 120% of the
total amount received from SEMATECH (including the proceeds of the sale of the
warrants) up to a maximum of $36,000,000. To fulfill the Company's obligations,
such amounts must be incurred to further the development of Micrascan
technology, to increase manufacturing capability and capacity for Micrascan
products and to fund related inventory costs.
The Company has historically devoted a significant portion of its personnel
and financial resources to research and development programs. For fiscal years
1992, 1993 and 1994, total gross research and development expenditures were
approximately $42,000,000, $34,000,000, and $32,000,000, respectively, of which
approximately $15,000,000, $8,000,000, and $1,500,000, respectively, was funded
primarily by IBM and SEMATECH for Micrascan technologies and offset against
research and development expenses.
21
<PAGE> 23
COMPETITION
The semiconductor equipment industry is intensely competitive. The Company
faces substantial competition both in the United States and other countries in
all of its products. The trend toward consolidation in the semiconductor
processing equipment industry has made it increasingly important to have the
financial resources necessary to compete effectively across a broad range of
product offerings, to fund customer service and support on a worldwide basis and
to invest in both product and process research and development. Significant
competitive factors include product performance, price and reliability,
familiarity with particular manufacturers' products, established relationships
between suppliers and customers, particulate contamination control and product
availability. While the Company believes that outside Japan and the Pacific Rim
it competes favorably with respect to most of these factors, it has occasionally
been subject to intense price competition with respect to particular orders and
has had difficulty establishing new relationships with certain customers who
have long-standing relationships with other suppliers. Certain of the Company's
existing and potential competitors have substantially greater name recognition,
financial, engineering, manufacturing and marketing resources and customer
service and support capabilities than the Company. Due to the Company's position
in the photolithography market, an announcement of a new product by any of these
large competitors may cause customers to delay purchases until the new product
is introduced.
The Company's competitors can be expected to continue to improve the design
and performance of their current products and processes and to introduce new
products and processes with improved price/performance characteristics. There
can be no assurance that the Company will be able to compete effectively in the
future. The Company faces substantial foreign and domestic competition,
including that from Tokyo Electron, Ltd. ("TEL") and DaiNippon Screen Mfg. Co.,
Ltd. in photoresist processing equipment and TEL and Kokusai Electric Co., Ltd.
in oxidation/diffusion and LPCVD equipment. SVGL competes with other suppliers
of photolithography exposure equipment, including manufacturers of steppers and
projection aligners. SVGL's Micralign products are generally not competitive
with steppers for fabrication of semiconductor devices with line widths smaller
than 1.25 microns. In marketing Micrascan systems, SVGL faces competition from
suppliers employing other technologies, principally I-Line steppers, including
Nikon Corp., Canon and ASM Lithography. Certain stepper manufacturers have
utilized techniques, such as the use of off-axis illumination and phase shift
mask technology, to extend the capabilities of steppers beyond their previously
estimated limits. Although the Company believes that its step and scan system
will compete favorably with steppers employing these techniques, the status of
the development of such techniques is uncertain and the Company expects the
competition from such stepper manufacturers to be intense. For example, both
Nikon and Canon have announced photolithography products using step and scan
technology and a Deep UV illumination source and Nikon has indicated that it
expects to deliver prototypes in early 1996. In addition, the Company believes
that other potential competitors, including ASM Lithography, are developing step
and scan technologies.
22
<PAGE> 24
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the Common
Stock beneficially owned as of February 28, 1995 by (i) each person known by the
Company to own beneficially more than 5% of the Company's Preferred Stock or
Common Stock, (ii) each director of the Company, (iii) the Company's Chief
Executive Officer and each of the other executive officers with an expected
annual compensation in excess of $100,000 and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated in the footnotes
to the table below, the persons or entities identified in this table, based on
information provided by such persons, have sole voting and investment power with
respect to all shares shown as beneficially owned by them, subject to community
property laws, where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
---------------------- SHARES BEING ----------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
-------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
FMR Corporation............................. 2,452,300(2) 11.24% -- 2,452,300(2) 9.81%
82 Devonshire Street
Boston, MA 02109-3614
The Perkin-Elmer Corporation................ 1,807,394(3) 8.29 1,807,394(3) -- --
761 Main Avenue
Norwalk, CT 06859-0071
SEMATECH, Inc............................... 1,750,000(4) 7.43 -- 1,750,000(4) 6.54
2706 Montopolis Drive
Austin, TX 78741-6499
T. Rowe Price Associates, Inc............... 1,434,500(5) 6.58 -- 1,434,500(5) 5.74
100 East Pratt Street
Baltimore, MD 21202
Intel Corporation........................... 498,100(6) 2.28 -- 498,100(6) 1.99
2200 Mission College Boulevard
Santa Clara, CA 95052
Motorola Inc................................ 498,100(6) 2.28 -- 498,100(6) 1.99
1303 East Algonquin
Schaumberg, IL 60195
Texas Instruments Incorporated.............. 498,100(6) 2.28 -- 498,100(6) 1.99
7839 Churchill Way
P.O. Box 650311
Dallas, TX 75265
Papken S. Der Torossian..................... 417,322(7) 1.89 -- 417,322(7) 1.65
Edward A. Dohring........................... 9,000(8) * -- 9,000(8) *
William A. Hightower........................ -- -- -- --
Steven L. Jensen............................ 31,000(9) * -- 31,000(9) *
William L. Martin........................... 3,600(10) * -- 3,600(10) *
John B. McBennett........................... -- (11) * -- --(11) --
Robert J. Richardson........................ 7,000(12) * -- 7,000(12) *
Larry W. Sonsini............................ 6,900(13) * -- 6,900(13) *
Nam P. Suh.................................. -- * -- -- *
Russell G. Weinstock........................ 44,574(14) * -- 44,574(14)
All directors and executive officers as a
group
(14 persons).............................. 551,421(15) 2.48 -- 551,421(15) 2.17
</TABLE>
---------------
* Less than one percent of the outstanding Common Stock.
(1) Gives effect to conversion of all the outstanding shares of Series A and
Series B Preferred Stock.
(2) Based on information in a Schedule 13G dated January 6, 1995 filed by FMR
Corporation.
(3) Includes (i) 1,000,000 shares of Common Stock issued upon conversion
pursuant to the terms of the Series A Preferred Stock held by Perkin-Elmer
and (ii) 12,714 shares of Common Stock issued as payment of dividends on
March 15, 1995 on the outstanding shares of Series A Preferred stock. See
Note (11).
(4) Represents shares of common stock issuable upon exercise of a warrant to
purchase Common Stock at an exercise price of $13.625 per share.
(5) Based on information in a Schedule 13G dated February 14, 1995 filed by T.
Rowe Price Associates, Inc.
(6) Represents shares of Common Stock issued upon conversion of the Series B
Preferred Stock.
(7) Includes 283,215 shares subject to options which are exercisable within 60
days after February 28, 1995.
(8) Includes 9,000 shares subject to options which are exercisable within 60
days after February 28, 1995.
(9) Includes 31,000 shares subject to options which are exercisable within 60
days after February 28, 1995.
(10) Includes 2,100 shares subject to options which are exercisable within 60
days after February 28, 1995.
(11) Does not include 1,807,394 shares held by Perkin-Elmer, as to which Mr.
McBennett disclaims beneficial ownership. See note (3)
(12) Includes 7,000 shares subject to options which are exercisable within 60
days after February 28, 1995.
(13) Includes 6,900 shares subject to options which are exercisable within 60
days after February 28, 1995.
(14) Includes 41,750 shares subject to options which are exercisable within 60
days after February 28, 1995.
(15) Does not include 1,807,394 shares held by Perkin-Elmer, as to which Mr.
McBennett disclaims beneficial ownership. Includes 412,990 shares subject
to options which are exercisable within 60 days after February 28, 1995.
23
<PAGE> 25
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, each of the U.S. Underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Prudential Securities Incorporated and
Cowen & Company are acting as U.S. Representatives (the "U.S. Underwriters"),
have severally agreed to purchase, and the Company and the Selling Stockholder
have severally agreed to sell to them, and the International Underwriters named
below, for whom Morgan Stanley & Co. International Limited, Prudential-Bache
Securities (U.K.) Inc. and Cowen & Company are serving as International
Representatives (the "International Underwriters"), have severally agreed to
purchase, and the Company and the Selling Stockholder have severally agreed to
sell to them, the respective number of shares of Common Stock set forth opposite
their respective names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---------------------------------------------------------------------------------- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................................... 733,334
Prudential Securities Incorporated.............................................. 733,333
Cowen & Company................................................................. 733,333
A.G. Edwards & Sons, Inc. ...................................................... 150,000
Fahnestock & Co. Inc. .......................................................... 75,000
Furman Selz Incorporated........................................................ 75,000
Hambrecht & Quist Incorporated.................................................. 150,000
Janney Montgomery Scott Inc. ................................................... 75,000
Lehman Brothers Inc. ........................................................... 150,000
Loeb Partners Corporation....................................................... 75,000
McDonald & Company Securities, Inc. ............................................ 75,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.............................. 150,000
Montgomery Securities........................................................... 150,000
Needham & Company, Inc. ........................................................ 75,000
PaineWebber Incorporated........................................................ 150,000
Piper Jaffray Inc. ............................................................. 75,000
Smith Barney Inc. .............................................................. 150,000
Sutro & Co. Incorporated ....................................................... 75,000
Unterberg Harris, L.P. ......................................................... 75,000
Van Kasper & Company............................................................ 75,000
---------
Subtotal........................................................................ 4,000,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited...................................... 263,334
Prudential-Bache Securities (U.K.) Inc.......................................... 263,333
Cowen & Company................................................................. 263,333
ABN Amro Bank N.V. ............................................................. 35,000
Bayerische Landesbank Girozentrale.............................................. 35,000
Daiwa Europe Limited............................................................ 35,000
Natwest Securities Limited...................................................... 35,000
Societe Generale................................................................ 35,000
Swiss Bank Corporation.......................................................... 35,000
---------
Subtotal........................................................................ 1,000,000
---------
Total................................................................... 5,000,000
========
</TABLE>
24
<PAGE> 26
The U.S. Underwriters and International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by their counsel and to certain other conditions. The Underwriters
are obligated to take and pay for all of the shares of Common Stock offered
hereby (other than those covered by the over-allotment option described below)
if any such shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (a) it is not purchasing any U.S. Shares (as defined below) for the
account of anyone other than a United States or Canadian Person (as defined
below) and (b) it has not offered or sold, and will not offer or sell, directly
or indirectly, any U.S. Shares or distribute this Prospectus outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions set forth below, (a) it is not purchasing any International Shares
(as defined below) for the account of any United States or Canadian Person and
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any International Shares or distribute this Prospectus within the
United States or Canada or to any United States or Canadian Person. The
foregoing limitations do not apply to stabilization transactions or to certain
other transactions specified in the Agreement Between U.S. and International
Underwriters. As used herein, "United States or Canadian Person" means any
national or resident of the United States or Canada or any corporation, pension,
profit-sharing or other trust or other entity organized under the laws of the
United States or Canada or of any political subdivision thereof (other than a
branch located outside of the United States and Canada of any United States or
Canadian Person) and includes any United States or Canadian branch of a person
who is not otherwise a United States or Canadian Person, and "United States"
means the United States of America, its territories, its possessions and all
areas subject to its jurisdiction. All shares of Common Stock to be offered by
the U.S. Underwriters and International Underwriters under the Underwriting
Agreement are referred to herein as the "U.S. Shares" and the "International
Shares," respectively.
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and the International
Underwriters of any number of shares of Common Stock to be purchased pursuant to
the Underwriting Agreement as may be mutually agreed. The per share price of any
shares of Common Stock so sold shall be the public offering price set forth on
the cover page hereof, in United States dollars, less an amount not greater than
the per share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of such shares in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any shares of Common Stock a notice stating in substance that, by
purchasing such shares, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
shares in Canada in contravention of the securities laws of Canada or any
province or territory thereof and that any offer of shares of Common Stock in
Canada will be made pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made,
and that such dealer will deliver to any other dealer to whom it sells any of
such shares a notice to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented that (i) it has not offered or sold
and will not offer or sell any shares of Common Stock in the United Kingdom by
means of any document (other than to persons whose ordinary business it is to
buy and sell securities or debentures, whether as principal or agent, or in
circumstances that do not constitute an offer to the public within the meaning
of the Companies Act 1985), (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to such shares in, from or otherwise involving
the United Kingdom, and (iii) it has only issued or passed on and
25
<PAGE> 27
will only issue or pass on in the United Kingdom any document received by it in
connection with the issue of such shares, to any person of a kind described in
Article 9(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1988, or to any person to whom the document may otherwise
lawfully be issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any shares of Common Stock acquired in
connection with this offering, except for offers or sales to Japanese
International Underwriters and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of such shares of Common Stock a notice stating in substance that
such dealer may not offer or sell any of such shares, directly or indirectly, in
Japan or to or for the account of any resident thereof, except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
of Japan, and that such dealer will send to any other dealer to whom it sells
any of such shares a notice to the foregoing effect.
The Underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
$0.77 per share under the public offering price. Any Underwriter may allow, and
such dealers may reallow, a concession not in excess of $0.10 per share to other
Underwriters or to certain other dealers.
The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an additional
750,000 shares of Common Stock at the public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with this offering. To the extent
such option is exercised, each U.S. Underwriter will become obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such U.S. Underwriter's name
in the preceding table bears to the total number of U.S. Shares offered hereby.
The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
See "Risk Factors -- Shares Eligible for Future Sale" for a description of
certain arrangements pursuant to which all officers and directors and certain
other stockholders of the Company have agreed that they will not, without the
prior written consent of Morgan Stanley & Co. Incorporated, sell or otherwise
dispose of Common Stock of the Company for 90 days after the date of this
Prospectus. In addition, the Investors have agreed that they will not, without
the prior written consent of Morgan Stanley & Co. Incorporated, sell or
otherwise dispose of Common Stock of the Company until November 22, 1995. The
Company has agreed in the Underwriting Agreement that it will not, without the
prior written consent of Morgan Stanley & Co. Incorporated, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for Common Stock for a period of 90
days after the date of this Prospectus, except pursuant to existing employee
benefit plans and existing warrants.
In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on The Nasdaq National Market, may engage in passive market making
transactions in the Common Stock on The Nasdaq National Market in accordance
with Rule 10b-6A under the Exchange Act during the two business day period
before commencement of offers or sales of the Common Stock. The passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded.
26
<PAGE> 28
LEGAL MATTERS
Wilson, Sonsini, Goodrich & Rosati, P.C., Palo Alto, California, counsel to
the Company, will render an opinion that the shares offered hereby will be duly
authorized, validly issued, fully paid and nonassessable. Larry W. Sonsini, a
member of such firm, is a director of and Secretary of the Company and holds
options to purchase 14,500 shares of Common Stock. Certain legal matters in
connection with the Offering, will be passed upon for the Underwriters by
Morrison & Foerster, Palo Alto, California.
EXPERTS
The consolidated financial statements and a related financial statement
schedule of the Company as of September 30, 1993 and 1994 and for each of the
three years in the period ended September 30, 1994 incorporated by reference in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are incorporated by reference, and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 (referred to herein, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act, with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, in each instance
in which a copy of such contract is filed as an exhibit to the Registration
Statement, reference is made to such copy and each such statement shall be
deemed qualified in all respects by such reference. Copies of the Registration
Statement may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at the address set forth below.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Seven World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's
Common Stock is quoted for trading on The Nasdaq National Market and reports,
proxy statements and other information concerning the Company may be inspected
at the offices of the National Association of Securities Dealers, Inc., 9513 Key
West Avenue, Rockville, Maryland 20850.
27
<PAGE> 29
[LOGO]
<PAGE> 30
[Alternate Page]
Filed Pursuant to Rule 424(b)(4)
Registration Number 33-57909
PROSPECTUS
5,000,000 Shares
(LOGO)
COMMON STOCK
------------------------
OF THE 5,000,000 SHARES OF COMMON STOCK BEING OFFERED, 1,000,000 SHARES ARE
BEING OFFERED INITIALLY OUTSIDE OF THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND 4,000,000 SHARES ARE BEING OFFERED INITIALLY
IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE
"UNDERWRITERS." OF THE 5,000,000 SHARES OF COMMON STOCK OFFERED HEREBY,
3,192,606 SHARES ARE BEING SOLD BY SILICON VALLEY GROUP, INC. AND
1,807,394 SHARES ARE BEING SOLD BY THE SELLING STOCKHOLDER. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING
STOCKHOLDER. THE COMPANY'S COMMON STOCK IS TRADED IN THE
OVER-THE-COUNTER MARKET UNDER THE NASDAQ NATIONAL MARKET SYMBOL
"SVGI." THE LAST SALE PRICE FOR THE COMMON STOCK ON MARCH 23,
1995, AS REPORTED ON THE NASDAQ NATIONAL MARKET, WAS $29 1/8
PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $28 7/8 A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share.................... $28.875 $1.300 $27.575 $27.575
Total(3)..................... $144,375,000 $6,500,000 $88,036,110 $49,838,890
</TABLE>
------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to 750,000 additional
Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
U.S. Underwriters exercise such option in full, the total price to
public, underwriting discounts and commissions and proceeds to Company
will be $166,031,250, $7,475,000, and $108,717,360, respectively. See
"Underwriters."
------------------------
The Shares are offered subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Morrison & Foerster, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about March 30, 1995 at the offices of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
New York funds.
------------------------
MORGAN STANLEY & CO.
International
PRUDENTIAL-BACHE SECURITIES
COWEN & COMPANY
ABN AMRO BANK N.V.
BAYERISCHE LANDESBANK GIROZENTRALE
DAIWA EUROPE LIMITED
NATWEST SECURITIES LIMITED
SOCIETE GENERALE
SWISS BANK CORPORATION
March 23, 1995
<PAGE> 31
[ALTERNATE PAGE]
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference............................................ 2
Prospectus Summary......................................................................... 3
The Company................................................................................ 4
Recent Developments........................................................................ 5
Risk Factors............................................................................... 6
Use of Proceeds............................................................................ 11
Price Range of Common Stock................................................................ 12
Dividend Policy............................................................................ 12
Capitalization............................................................................. 13
Selected Consolidated Financial Data....................................................... 14
Business................................................................................... 16
Principal and Selling Stockholders......................................................... 23
Underwriters............................................................................... 24
Legal Matters.............................................................................. 27
Experts.................................................................................... 27
Available Information...................................................................... 27
</TABLE>
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") are incorporated herein by
reference: (1) the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994; (2) the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994; (3) the Company's Current Report on Form
8-K filed on March 2, 1995; and (4) the Company's Registration Statement on Form
8-A filed with the Commission on November 23, 1983.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereunder shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. The Company will provide a copy of any or
all of such documents (exclusive of exhibits unless such exhibits are
specifically incorporated by reference herein), without charge, to each person
to whom this Prospectus is delivered, upon written or oral request to the Chief
Financial Officer at the corporate headquarters of the Company, 2240 Ringwood
Avenue, San Jose, California 95131 (telephone 408-434-0500).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
THE INTERNATIONAL SHARES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR
INDIRECTLY, IN THE UNITED STATES OR CANADA OR TO ANY PERSON WHO IS A UNITED
STATES OR CANADIAN PERSON, AS PART OF THE DISTRIBUTION OF THE INTERNATIONAL
SHARES. ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT 1986 AND THE
COMPANIES ACT 1985 MUST BE COMPLIED WITH. FOR A DESCRIPTION OF THESE AND OTHER
RESTRICTIONS ON THE OFFERING AND SALE OF SUCH SHARES. SEE "UNDERWRITERS."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITERS."
2
