e20vf
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2007
Commission file number 025566
ASML HOLDING
N.V.
(Exact Name of Registrant as Specified in Its Charter)
THE NETHERLANDS
(Jurisdiction of Incorporation or Organization)
DE RUN 6501
5504 DR VELDHOVEN
THE NETHERLANDS
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to
Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Ordinary Shares
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The NASDAQ Stock Market LLC
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(nominal value EUR 0.09 per share)
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Securities registered or to be registered pursuant to
Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the
issuers classes of
capital or common stock as of the close of the period covered by
the annual report.
435,625,934 Ordinary Shares
(nominal value EUR 0.09 per share)
Indicate by check mark if the registrant is a well-known
seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes
(ü) No
( )
If this report is an annual or transition report, indicate by
check mark if the registrant
is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
Yes ( ) No
(ü)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports),
and (2) has been subject to such filing requirements for
the past 90 days.
Yes
(ü) No
( )
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer.
See definition of accelerated filer and large accelerated
filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer
(ü) Accelerated
filer ( ) Non-accelerated filer ( )
Indicate by check mark which financial statement item the
registrant has elected to follow
Item 17 ( ) Item 18
(ü)
If this is an annual report, indicate by check mark whether the
registrant is a
shell company (as defined in
Rule 12b-2
of the Exchange Act)
Yes ( ) No
(ü)
Name and address of person authorized to receive notices and
communications
from the Securities and Exchange Commission:
Richard A. Ely
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
40 Bank Street, Canary Wharf
London E14 5DS England
ASML ANNUAL REPORT 2007
Contents
ASML ANNUAL REPORT 2007
Part I
Special Note
Regarding Forward-Looking Statements
In addition to historical information, this annual report on
Form 20-F
contains statements relating to our future business
and/or
results. These statements include certain projections and
business trends that are forward-looking within the
meaning of the Private Securities Litigation Reform Act of 1995.
You can generally identify these statements by the use of words
like may, will, could,
should, project, believe,
anticipate, expect, plan,
estimate, forecast,
potential, intend, continue
and variations of these words or comparable words.
Forward-looking statements do not guarantee future performance
and involve risks and uncertainties. Actual results may differ
materially from projected results as a result of certain risks
and uncertainties. These risks and uncertainties include,
without limitation, those described under Item 3.D.
Risk Factors and those detailed from time to time in
our other filings with the United States Securities and Exchange
Commission (the Commission or the SEC).
These forward-looking statements are made only as of the date of
this annual report on
Form 20-F.
We do not undertake to update or revise the forward-looking
statements, whether as a result of new information, future
events or otherwise.
Presentation of
Financial and Operational Information
On December 18, 2002, we announced our decision to divest
our Thermal business, including related customer support
activities, and the termination of our manufacturing activities
in the Track business. As a result of this decision our selected
financial data for the years ended December 31, 2003, 2004
and 2005 presented in this annual report on
Form 20-F
present these businesses as discontinued operations, instead of
as a separate segment as they had been reported prior to the
divestiture announcement.
Item 1
Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2 Offer
Statistics and Expected Timetable
Not applicable.
Item 3 Key
Information
The following selected consolidated financial data should be
read in conjunction with Item 5 Operating and
Financial Review and Prospects and Item 18
Financial Statements.
ASML ANNUAL REPORT 2007
1
Five-Year
Financial Summary
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Year ended December 31
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2003
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2004
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2005
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2006
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2007
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(in thousands, except per share data)
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EUR1
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EUR1
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EUR1
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EUR
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EUR
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Consolidated statements of operations data
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Net sales
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1,542,737
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2,465,377
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2,528,967
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3,597,104
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3,808,679
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Cost of sales
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1,173,955
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1,559,738
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1,554,772
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2,135,086
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2,248,335
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Gross profit on sales
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368,782
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905,639
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974,195
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1,462,018
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1,560,344
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Research and development costs
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305,839
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352,920
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347,901
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413,708
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510,503
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Amortization of in-process research and development costs
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23,148
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Research and development credits
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(19,119
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(21,961
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(24,027
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(27,141
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(24,362
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Selling, general and administrative costs
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212,609
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201,629
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201,204
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204,799
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225,668
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Restructuring and merger and acquisition costs (credits)
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24,485
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(5,862
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)
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Income (loss) from operations
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(155,032
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378,913
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449,117
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870,652
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825,387
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Interest income (expense), net
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(29,149
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(16,073
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(14,094
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)
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(854
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33,451
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Income (loss) from continuing
operations before income taxes
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(184,181
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)
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362,840
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435,023
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869,798
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858,838
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(Provision for) benefit from income taxes
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59,675
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(127,380
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(123,559
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(245,109
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(170,995
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Income (loss) from continuing operations
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(124,506
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235,460
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311,464
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624,689
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687,843
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Loss from discontinued operations before income taxes
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(59,026
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Benefit from income taxes
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23,316
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Loss from discontinued operations
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(35,710
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Net income (loss)
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(160,216
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)
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235,460
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311,464
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624,689
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687,843
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Earnings per share
data2
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Basic net income (loss) from continuing
operations per ordinary share
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(0.26
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0.49
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0.64
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1.32
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1.49
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Basic and diluted net loss from discontinued
operations per ordinary share
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(0.07
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Basic net income (loss) per ordinary share
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(0.33
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0.49
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0.64
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1.32
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1.49
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Diluted net income (loss) per ordinary share
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(0.33
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0.49
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0.64
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1.27
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1.44
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Number of ordinary shares used in
computing per share amounts (in thousands)
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Basic
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482,240
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483,380
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484,103
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474,860
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462,406
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Diluted
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482,240
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484,661
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542,979
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503,983
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485,643
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1
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The selected consolidated data for
2003, 2004 and 2005 reflect the effects of our decision in
December 2002 to discontinue our Track business and divest our
Thermal business which we substantially divested in October 2003.
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2
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The calculation of the number of
ordinary shares used in computing diluted net income per
ordinary share (i) in 2003 and 2004 does not assume
conversion of ASMLs outstanding Convertible Subordinated
Notes and (ii) in 2003 does not assume the exercise of
options issued under ASMLs stock option plans, as such
conversions and exercises would have an anti-dilutive effect.
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ASML ANNUAL REPORT 2007
2
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As of December 31
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2003
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2004
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2005
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2006
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2007
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(in thousands)
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EUR
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EUR
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EUR
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EUR
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EUR
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Consolidated balance sheets data
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Cash and cash equivalents
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1,027,806
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1,228,130
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1,904,609
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1,655,857
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1,271,636
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Working
capital3
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1,463,308
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1,868,871
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1,785,836
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2,244,625
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2,014,601
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Total assets
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2,868,282
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3,243,766
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3,756,023
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3,951,035
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4,067,752
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Long-term liabilities
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1,040,556
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1,039,023
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624,203
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613,167
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855,367
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Total shareholders equity
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1,141,207
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1,391,602
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1,711,837
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2,156,455
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1,907,617
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Capital stock
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9,651
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9,675
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9,694
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10,051
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39,206
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Consolidated statements of cash flows data
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Purchases of property, plant and equipment
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(48,567
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)
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(74,979
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)
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(72,660
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)
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(70,619
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)
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(179,152
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)
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Depreciation, amortization and impairment
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156,900
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93,144
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98,881
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104,446
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|
135,366
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Net cash provided by continuing operating activities
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532,659
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257,147
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713,511
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477,507
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670,295
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Net cash provided by (used in) discontinued operating activities
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12,736
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(5,880
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)
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(2,018
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)
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Net cash provided by total operating activities
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545,395
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251,267
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711,493
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477,507
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670,295
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Acquisition of subsidiary (net of cash acquired)
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(188,011
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)
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Net cash used in total investing activities
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(49,028
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)
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(60,398
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)
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(60,803
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)
|
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(65,523
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)
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|
(347,942
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)
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Net cash provided by (used in) continuing financing activities
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|
(68,156
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)
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|
18,871
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|
2,879
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|
(647,957
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)4
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|
|
(698,857
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)4
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Net increase (decrease) in cash and cash equivalents
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|
359,046
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|
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|
200,324
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|
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|
676,479
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|
|
|
(248,752
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)
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|
|
(384,221
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)
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Ratios and other data
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Increase (decrease) net sales (in percent)
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(21.2
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)
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59.8
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2.6
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42.2
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5.9
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Gross profit as a percentage of net sales
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23.9
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|
36.7
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|
38.5
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40.6
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|
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|
41.0
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Income (loss) from operations as a percentage of net sales
|
|
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(10.0
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)
|
|
|
15.4
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|
|
|
17.8
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|
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|
24.2
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|
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21.7
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Net income (loss) as a percentage of net sales
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(8.1
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)
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|
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9.6
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|
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12.3
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|
|
17.4
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|
|
|
18.1
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Shareholders equity as a percentage of total assets
|
|
|
39.8
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|
|
|
42.9
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|
|
|
45.6
|
|
|
|
54.6
|
|
|
|
46.9
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|
|
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Average selling price systems sales
|
|
|
7.6
|
|
|
|
7.7
|
|
|
|
11.4
|
|
|
|
12.1
|
|
|
|
13.0
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|
|
|
Backlog of new systems (in units) at year end
|
|
|
103
|
|
|
|
119
|
|
|
|
86
|
|
|
|
153
|
|
|
|
79
|
|
|
|
Backlog of used systems (in units) at year end
|
|
|
21
|
|
|
|
12
|
|
|
|
9
|
|
|
|
10
|
|
|
|
10
|
|
|
|
Backlog of systems (in units) at year end
|
|
|
124
|
|
|
|
131
|
|
|
|
95
|
|
|
|
163
|
|
|
|
89
|
|
|
|
Sales of systems (in units)
|
|
|
169
|
|
|
|
282
|
|
|
|
196
|
|
|
|
266
|
|
|
|
260
|
|
|
|
Number of employees at year end for continuing operations
|
|
|
5,059
|
|
|
|
5,071
|
|
|
|
5,055
|
|
|
|
5,594
|
|
|
|
6,582
|
|
|
|
Number of ordinary shares outstanding (in thousands) at year end
|
|
|
482,514
|
|
|
|
483,676
|
|
|
|
484,670
|
|
|
|
477,099
|
|
|
|
435,626
|
5
|
|
|
Share price ASML at year
end6
|
|
|
15.72
|
|
|
|
11.81
|
|
|
|
16.90
|
|
|
|
18.84
|
|
|
|
21.66
|
|
|
|
Volatility % ASML shares
(260 days)7
|
|
|
60.9
|
|
|
|
37.4
|
|
|
|
26.0
|
|
|
|
28.08
|
|
|
|
27.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
Working capital is calculated as
the difference between total current assets, including cash and
cash equivalents, and total current liabilities.
|
4
|
Net cash used in financing
activities includes an amount of EUR 678 million with
respect to share buyback programs in 2006 and EUR
360 million with respect to share buyback programs and EUR
1,012 million with respect to the return of capital to
shareholders in 2007.
|
5
|
In 2007, as part of a capital
repayment program, EUR 1,012 million of share capital was
repaid to our shareholders and the number of outstanding
ordinary shares was reduced by 11 percent (synthetic share
buyback).
|
6
|
Closing price of ASMLs
ordinary shares listed on the Official Segment of the stock
market of Euronext Amsterdam (source: Bloomberg Finance LP). In
2007, as part of a capital repayment program, EUR
1,012 million of share capital was repaid to our
shareholders and the number of outstanding ordinary shares was
reduced by 11 percent (synthetic share buyback).
|
7
|
Volatility represents the
variability in our share price on the Official Segment of the
stock market of Euronext Amsterdam as measured over the last 260
business days of each year presented (source: Bloomberg Finance
LP).
|
ASML ANNUAL REPORT 2007
3
Exchange Rate
Information
We publish our consolidated financial statements in euro. In
this Annual Report, references to ,
EUR or euro are to euro, and references
to $, dollars,
U.S. dollars, U.S. dollar,
USD or US$ are to United States dollars.
Solely for the convenience of the reader, certain
U.S. dollar amounts have been translated into euro amounts
using an exchange rate in effect on December 31, 2007 of
US $1.00 = EUR 0.67986.
A portion of our net sales and expenses is, and historically has
been, denominated in currencies other than the euro. For a
discussion of the impact of exchange rate fluctuations on our
financial condition and results of operations, see
Item 5.A. Operating Results, Foreign Exchange
Management and Note 1 to our consolidated financial
statements.
The following are the Noon Buying Rates certified by the Federal
Reserve Bank of New York for customs purposes (the Noon
Buying Rate) expressed in U.S. dollars per euro.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2008 (through
|
Calendar year
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
January 23, 2008)
|
|
Period End
|
|
|
1.26
|
|
|
1.35
|
|
|
1.18
|
|
|
1.32
|
|
|
1.46
|
|
|
1.46
|
Average1
|
|
|
1.13
|
|
|
1.24
|
|
|
1.24
|
|
|
1.26
|
|
|
1.37
|
|
|
1.47
|
High
|
|
|
1.26
|
|
|
1.36
|
|
|
1.35
|
|
|
1.33
|
|
|
1.49
|
|
|
1.49
|
Low
|
|
|
1.04
|
|
|
1.18
|
|
|
1.17
|
|
|
1.19
|
|
|
1.29
|
|
|
1.46
|
|
|
|
1
|
The average of the Noon Buying
Rates on the last business day of each month during the period
presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
|
|
August
|
|
September
|
|
October
|
|
November
|
|
December
|
|
January 2008 (through
|
Months of
|
|
2007
|
|
2007
|
|
2007
|
|
2007
|
|
2007
|
|
2007
|
|
January 23, 2008)
|
|
High
|
|
|
1.38
|
|
|
1.38
|
|
|
1.42
|
|
|
1.45
|
|
|
1.49
|
|
|
1.48
|
|
|
1.49
|
Low
|
|
|
1.36
|
|
|
1.34
|
|
|
1.36
|
|
|
1.41
|
|
|
1.44
|
|
|
1.43
|
|
|
1.46
|
|
B. Capitalization
and Indebtedness
Not applicable.
C. Reasons for
the Offer and Use of Proceeds
Not applicable.
D. Risk
Factors
In conducting our business, we face many risks that may
interfere with our business objectives. Some of these risks
relate to our operational processes, while others relate to our
business environment. It is important to understand the nature
of these risks and the impact they may have on our business,
financial condition and results of operations. Some of the more
relevant risks are described below.
Risks Related to
the Semiconductor Industry
The
Semiconductor Industry is Highly Cyclical and We May Be
Adversely Affected by Any Future Downturns
As a supplier to the global semiconductor industry, we are
subject to the industrys business cycles, the timing,
duration and volatility of which are difficult to predict. The
semiconductor industry has historically been cyclical. Sales of
our photolithography systems depend in large part upon the level
of capital expenditures by semiconductor manufacturers. These
capital expenditures depend upon a range of competitive and
market factors, including:
|
|
|
the current and anticipated market demand for semiconductors and
for products utilizing semiconductors;
|
|
semiconductor prices;
|
|
semiconductor production costs; and
|
|
general economic conditions.
|
Changes in demand for our products as a result of these business
cycles have been affected by the timing and amounts of
customers capital equipment purchases and investments in
new technology. Future reductions or delays in capital equipment
purchases by our customers could have a material adverse effect
on our business, financial condition and results of operations.
In anticipation of periods of increasing demand for
semiconductor manufacturing equipment, we must maintain
sufficient manufacturing capacity and inventory, and we must
attract, hire, integrate and retain a sufficient number of
qualified employees to
ASML ANNUAL REPORT 2007
4
meet customer demand. Our ability to predict the timing and
magnitude of industry fluctuations is limited and our products
require significant lead time to complete. Accordingly, we may
not be able to effectively increase our production capacity to
respond to an increase in customer demand in an industry upturn
resulting in lost revenues and damage to customer relationships.
Conversely, in an industry downturn, our ability to maintain
profitability will depend substantially on whether we are able
to lower our costs and break-even level, which is the number of
lithography systems we must sell in a year to achieve net
income. If we are unable to lower costs in an industry downturn,
our net income may decline significantly or we may suffer
losses. As we need to keep certain levels of inventory on hand
to meet anticipated product demand, we also incur increased
costs related to inventory obsolescence in an industry downturn.
In addition, industry downturns generally result in
overcapacity, resulting in downward pressure on prices, which
has had in the past, and could have in the future, a material
adverse effect on our business, financial condition and results
of operations.
Our Business
Will Suffer If We Do Not Respond Rapidly to Commercial and
Technological Changes in the
Semiconductor Industry
The semiconductor manufacturing industry is subject to:
|
|
|
rapid change towards more complex technologies;
|
|
frequent new product introductions and enhancements;
|
|
evolving industry standards;
|
|
changes in customer requirements; and
|
|
continued shortening of product life cycles.
|
Our products could become obsolete sooner than anticipated
because of a faster than anticipated change in one or more of
the technologies related to our products or in market demand for
products based on a particular technology. Our success in
developing new products and in enhancing our existing products
depends on a variety of factors, including the successful
management of our research and development programs and timely
completion of product development and design relative to
competitors. If we do not develop and introduce new and enhanced
systems at competitive prices and on a timely basis, our
customers will not integrate our systems into the planning and
design of new fabrication facilities and upgrades of existing
facilities, which would have a material adverse effect on our
business, financial condition and results of operations.
In addition, we may invest considerable financial and other
resources to develop and introduce new products and product
enhancements, such as Extreme Ultraviolet lithography
(EUV), that our customers may not ultimately adopt.
If our customers do not adopt these new technologies, products
or product enhancements that we develop due to a preference for
more established or alternative new technologies and products or
for other reasons, we would not recoup any return on our
investments in these technologies or products, which may result
in charges to our statement of operations and materially and
adversely affect the future growth of the Company.
We Face
Intense Competition
The semiconductor equipment industry is highly competitive. The
principal elements of competition in our market segments are:
|
|
|
the technical performance characteristics of a photolithography
system;
|
|
the value of ownership of that system based on its purchase
price, maintenance costs, productivity and customer service and
support; and
|
|
the strength and breadth of our portfolio of patents and other
intellectual property rights.
|
Our competitiveness increasingly depends upon our ability to
develop new and enhanced semiconductor equipment that is
competitively priced and introduced on a timely basis, as well
as our ability to protect and defend our intellectual property
rights. See Item 4.B. Business Overview, Intellectual
Property and Note 15 to our consolidated financial
statements.
The costs to develop new systems, in particular photolithography
systems, are extremely high and accordingly, the
photolithography equipment industry is characterized by fierce
competition among a few suppliers. ASMLs primary
competitors are Nikon Corporation (Nikon) and Canon
Kabushika Kaisha (Canon). Nikon and Canon are the
leading suppliers in Japan, which accounts for a significant
portion of worldwide semiconductor production. This region
historically has been difficult for non-Japanese companies to
penetrate.
Both Nikon and Canon have substantial financial resources and
broad patent portfolios. Each continues to introduce new
products with improved price and performance characteristics
that compete directly with our products, and may cause a decline
in our sales or loss of market acceptance for our
photolithography systems. In addition, adverse market
conditions, industry overcapacity or a decrease in the value of
the Japanese yen in relation to the euro or the U.S. dollar
could further intensify price-based competition in those regions
that account for the majority of our sales, resulting in lower
prices and margins and a material adverse effect on our
business, financial condition and results of operations.
ASML ANNUAL REPORT 2007
5
Industry
Alliances May Not Select our Equipment
Increasingly, our customers are entering into alliances or other
forms of cooperation with one another to expedite the
development of processes and other manufacturing technologies.
One of the results of such a form of cooperation may be the
definition of a system or particular tool set for a certain
function or a series of process steps that use a specific set of
manufacturing equipment. These decisions could work to our
disadvantage if a competitors equipment becomes the
standard equipment for such function or process. Even if
ASMLs equipment was previously used by a customer, that
equipment may be displaced in current and future applications by
the equipment standardized by the form of cooperation. These
forms of cooperation may have a material adverse effect on our
business, financial condition and results of operations.
Risks Related to
ASML
The Number of
Systems We Can Produce Is Limited by Our Dependence on a Limited
Number of Suppliers of Key Components
We rely on outside vendors for the components and subassemblies
used in our systems, each of which is obtained from a single
supplier or a limited number of suppliers. Our reliance on a
limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required
components and the risk of untimely delivery of these components
and subassemblies.
The number of photolithography systems we have been able to
produce has occasionally been limited by the production capacity
of Carl Zeiss SMT AG (Zeiss). Zeiss is our single
supplier of lenses and other critical optical components. If
Zeiss were unable to maintain and increase production levels or
if we are unable to maintain our business relationship with
Zeiss in the future we could be unable to fulfill orders, which
could damage relationships with current and prospective
customers and have a material adverse effect on our business,
financial condition and results of operations. If Zeiss were to
terminate its relationship with us or if Zeiss were unable to
maintain production of lenses over a prolonged period, we would
effectively cease to be able to conduct our business. See
Item 4.B. Business Overview, Manufacturing, Logistics
and Suppliers.
In addition to Zeiss current position as our single
supplier of lenses, the excimer laser illumination systems that
provide the ultraviolet light source, referred to as deep
UV, used in our high resolution steppers and
Step & Scan systems are available from only a limited
number of suppliers. In particular, we rely both on Cymer, Inc.,
a United States based company, and Gigaphoton, Inc., a Japanese
based company, to provide excimer laser illumination systems.
Although the timeliness, yield and quality of deliveries to date
from our other subcontractors generally have been satisfactory,
manufacturing of certain of these components and subassemblies
that we use in our manufacturing processes is an extremely
complex process and delays caused by suppliers may occur in the
future. A prolonged inability to obtain adequate deliveries of
components or subassemblies, or any other circumstance that
requires us to seek alternative sources of supply, could
significantly hinder our ability to deliver our products in a
timely manner, which could damage relationships with current and
prospective customers and have a material adverse effect on our
business, financial condition and results of operations.
A High
Percentage of Net Sales Is Derived from a Few
Customers
Historically, we have sold a substantial number of lithography
systems to a limited number of customers. While the identity of
our largest customers may vary from year to year, we expect
sales to remain concentrated among relatively few customers in
any particular year. In 2007, sales to our largest customer
accounted for EUR 833 million, or 21.9 percent of
net sales, compared to EUR 730 million, or
20 percent of net sales, in 2006. The loss of any
significant customer or any significant reduction in orders by a
significant customer may have a material adverse effect on our
business, financial condition and results of operations.
Additionally, as a result of the limited number of our
customers, credit risk on our receivables is concentrated. Our
three largest customers accounted for 40.1 percent of
accounts receivable at December 31, 2007, compared to
35 percent at December 31, 2006. As a result, business
failure or insolvency of one of our main customers may have a
material adverse effect on our business, financial condition and
results of operations.
The Pace of
Introduction of Our New Products Is Accelerating and Is
Accompanied by Potential Design and Production Delays and by
Significant Costs
The development and initial production, installation and
enhancement of the systems we produce is often accompanied by
design and production delays and related costs of a nature
typically associated with the introduction and transition to
full-scale manufacturing of complex capital equipment. While we
expect and plan for a corresponding learning curve effect in our
product development cycle, we cannot predict with precision the
time and expense required to overcome these initial problems and
to ensure full performance to specifications. There is a risk
that we may not be able to introduce or bring to full-scale
production new products as quickly as we expected in our product
introduction plans, which could have a material adverse effect
on our business, financial condition and results of operations.
ASML ANNUAL REPORT 2007
6
In order for the market to accept technology enhancements, our
customers, in many cases, must upgrade their existing technology
capabilities. Such upgrades from established technology may not
be available to our customers to enable volume production using
our new technology enhancements. This could result in our
customers not purchasing, or pushing back or canceling orders
for our technology enhancements, which could negatively impact
our business, financial condition and results of operations.
We Derive Most
of Our Revenues from the Sale of a Relatively Small Number of
Products
We derive most of our revenues from the sale of a relatively
small number of lithography equipment systems (260 units in
2007; 266 units in 2006), with an average selling price
(ASP) in 2007 of EUR 13.0 million (EUR
14.0 million for new systems and EUR 3.9 million
for used systems) and an ASP in 2006 of
EUR 12.1 million (EUR 14.0 million for new
systems and EUR 3.2 million for used systems). As a
result, the timing of recognition of revenue from a small number
of product sales may have a significant impact on our net sales
and other operating results for a particular reporting period.
Specifically, the failure to receive anticipated orders, or
delays in shipments near the end of a particular reporting
period, due, for example, to:
|
|
|
a downturn in the highly cyclical semiconductor business
industry;
|
|
unanticipated shipment rescheduling;
|
|
cancellation or order push back by customers;
|
|
unexpected manufacturing difficulties; and
|
|
delays in deliveries by suppliers,
|
may cause net sales in a particular reporting period to fall
significantly below net sales in previous periods or our
expected net sales, and would have a material adverse effect on
our operating results for that period.
In particular our published quarterly earnings have varied
significantly from quarter to quarter and may vary in the future
for the reasons discussed above.
Failure to
Adequately Protect the Intellectual Property Rights Upon Which
We Depend Could Harm Our Business
We rely on intellectual property rights such as patents,
copyrights and trade secrets to protect our proprietary
technology. However, we face the risk that such measures could
prove to be inadequate because:
|
|
|
intellectual property laws may not sufficiently support our
proprietary rights or may change in the future in a manner
adverse to us;
|
|
patent rights may not be granted or construed as we expect;
|
|
patent rights will expire;
|
|
the steps we take to prevent misappropriation or infringement of
our proprietary rights may not be successful; and
|
|
third parties may be able to develop or obtain patents for
similar competing technology.
|
In addition, litigation may be necessary to enforce our
intellectual property rights or to determine the validity and
scope of the proprietary rights of others. Any such litigation
may result in substantial costs and diversion of resources, and,
if decided unfavorably to us, could have a material adverse
effect on our business, financial condition and results of
operations.
Defending
Against Intellectual Property Claims Brought by Others Could
Harm Our Business
In the course of our business, we are subject to claims by third
parties alleging that our products or processes infringe upon
their intellectual property rights. If successful, such claims
could limit or prohibit us from developing our technology and
manufacturing our products, which could have a material adverse
effect on our business, financial condition and results of
operations.
In addition, our customers may be subject to claims of
infringement from third parties, alleging that our products used
by such customers in the manufacture of semiconductor products
and/or the
processes relating to the use of our products infringe one or
more patents issued to such parties. If such claims were
successful, we could be required to indemnify customers for some
or all of any losses incurred or damages assessed against them
as a result of such infringement, which could have a material
adverse effect on our business, financial condition and results
of operations.
We may also incur substantial licensing or settlement costs
where doing so would strengthen or expand our intellectual
property rights or limit our exposure to intellectual property
claims brought by others, which may have a material adverse
effect on our business, financial condition and results of
operations.
We Are Subject
to Risks in Our International Operations
The majority of our sales are made to customers outside Europe.
There are a number of risks inherent in doing business in some
of those regions, including the following:
|
|
|
potentially adverse tax consequences;
|
|
unfavorable political or economic environments;
|
|
unexpected legal or regulatory changes; and
|
|
an inability to effectively protect intellectual property.
|
ASML ANNUAL REPORT 2007
7
If we are unable to manage successfully the risks inherent in
our international activities, our business, financial condition
and results of operations could be materially and adversely
affected.
In particular, approximately 21 percent of our 2007
revenues and approximately 20 percent of our 2006 revenues
were derived from customers in Taiwan. Taiwan has a unique
international political status. The Peoples Republic of
China asserts sovereignty over Taiwan and does not recognize the
legitimacy of the Taiwan government. Changes in relations
between Taiwan and the Peoples Republic of China,
Taiwanese government policies and other factors affecting
Taiwans political, economic or social environment could
have a material adverse effect on our business, financial
condition and results of operations.
We Are
Dependent on the Continued Operation of a Limited Number of
Manufacturing Facilities
All of our manufacturing activities, including subassembly,
final assembly and system testing, take place in one clean room
facility located in Veldhoven, the Netherlands, and one clean
room facility in Wilton, Connecticut, the United States. These
facilities are subject to disruption for a variety of reasons,
including work stoppages, fire, energy shortages, flooding or
other natural disasters. We cannot ensure that alternative
production capacity would be available if a major disruption
were to occur or that, if it were available, it could be
obtained on favorable terms. Such a disruption could have a
material adverse effect on our business, financial condition and
results of operations.
Because of
Labor Laws and Practices, Any Workforce Reductions That We May
Wish to Implement in Order to Reduce Costs Company-Wide May Be
Delayed or Suspended
The semiconductor market is highly cyclical and as a consequence
we may need to implement workforce reductions in case of a
downturn, in order to adapt to such market changes. In
accordance with labor laws and practices applicable in the
jurisdictions in which we operate, a reduction of any
significance may be subject to certain formal procedures, which
can delay, or may result in the modification of our planned
workforce reductions. For example, in the Netherlands, if our
Works Council renders adverse advice in connection with a
proposed workforce reduction in the Netherlands, but we
nonetheless determine to proceed, we must temporarily suspend
any action while the Works Council determines whether to appeal
to the Enterprise Chamber of the Amsterdam Court of Appeal. This
appeal process can cause a delay of several months and may
require us to address any procedural inadequacies identified by
the Court in the way we reached our decision. Such delays could
impair our ability to reduce costs company-wide to levels
comparable to those of our competitors. See Item 6.D.
Employees.
Fluctuations
in Foreign Exchange Rates Could Harm Our Results of
Operations
We are exposed to currency risks. We are particularly exposed to
fluctuations in the exchange rates between the U.S. dollar,
Japanese yen and the euro as we incur manufacturing costs and
price our systems predominantly in euro while a portion of our
net sales and cost of sales is denominated in U.S. dollars
and Japanese yen.
In addition, a substantial portion of our assets and liabilities
and operating results are denominated in U.S. dollars, and
a small portion of our assets, liabilities and operating results
are denominated in currencies other than the euro and the
U.S. dollar. Our consolidated financial statements are
expressed in euro. Accordingly, our results of operations and
assets and liabilities are exposed to fluctuations in various
exchange rates.
Furthermore, a strengthening of the euro particularly against
the Japanese yen could lead to intensified price-based
competition in those regions that account for the majority of
our sales, resulting in lower prices and margins and a material
adverse effect on our business, financial condition and results
of operations.
Also see Item 5.A. Operating Results, Foreign
Exchange Management, Item 5.F. Tabular
Disclosure of Contractual Obligations, Item 11
Quantitative and Qualitative Disclosures About Market
Risk and Note 4 to our consolidated financial
statements.
We May Be
Unable to Make Desirable Acquisitions or to Integrate
Successfully Any Businesses We Acquire
Our future success may depend in part on the acquisition of
businesses or technologies intended to complement, enhance or
expand our current business or products or that might otherwise
offer us growth opportunities. Our ability to complete such
transactions may be hindered by a number of factors, including
potential difficulties in obtaining government approvals.
Any acquisition that we do make would pose risks related to the
integration of the new business or technology with our business.
We cannot be certain that we will be able to achieve the
benefits we expect from a particular acquisition or investment.
Acquisitions may also strain our managerial and operational
resources, as the challenge of managing new operations may
divert our staff from monitoring and improving operations in our
existing business. Our business, financial condition and results
of operations may be materially and adversely affected if we
fail to coordinate our resources effectively to manage both our
existing operations and any businesses we acquire.
ASML ANNUAL REPORT 2007
8
Our Business
and Future Success Depend on Our Ability to Attract and Retain a
Sufficient Number of Adequately Educated and Skilled
Employees
Our business and future success significantly depends upon our
employees, including a large number of highly qualified
professionals, as well as our ability to attract and retain
employees. Competition for such personnel is intense, and we may
not be able to continue to attract and retain such personnel,
which could adversely affect our business, financial condition
and results of operations.
In addition, the increasing complexity of our products results
in a longer learning curve for new and existing employees
leading to an inability to decrease cycle times and incurring
significant additional costs, which could adversely affect our
business, financial condition and results of operations.
Risks Related to
Our Ordinary Shares
The Price of
Our Ordinary Shares is Volatile
The current market price of our ordinary shares may not be
indicative of prices that will prevail in the future. In
particular, the market price of our ordinary shares has in the
past experienced significant fluctuation, including fluctuation
that is unrelated to our performance. This fluctuation may
continue in the future.
Restrictions
on Shareholder Rights May Dilute Voting Power
Our Articles of Association provide that we are subject to the
provisions of Netherlands law applicable to large corporations,
called structuurregime. These provisions have the
effect of concentrating control over certain corporate decisions
and transactions in the hands of our Supervisory Board. As a
result, holders of ordinary shares may have more difficulty in
protecting their interests in the face of actions by members of
our Supervisory Board than if we were incorporated in the United
States or another jurisdiction.
Our authorized share capital also includes a class of cumulative
preference shares and ASML has granted Stichting
Preferente Aandelen ASML, a Netherlands foundation, an
option to acquire, at their nominal value of EUR 0.02 per
share, such cumulative preference shares. Exercise of the
cumulative preference share option would effectively dilute the
voting power of our outstanding ordinary shares by one-half,
which may discourage or significantly impede a third party from
acquiring a majority of our voting shares.
See further Item 6.C. Board Practices and
Item 10.B. Memorandum and Articles of
Association.
Item 4
Information on the Company
A. History and
Development of the Company
We commenced business operations in 1984. ASM Lithography
Holding N.V. was incorporated in the Netherlands on
October 3, 1994 to serve as the holding company for our
worldwide operations, which include operating subsidiaries in
the Netherlands, the United States, Italy, France, Germany, the
United Kingdom, Ireland, Belgium, Korea, Taiwan, Singapore,
China (including Hong Kong), Japan, Malaysia, Israel and India.
In 2001, we changed our name from ASM Lithography Holding N.V.
to ASML Holding N.V. Our registered office is located at De Run
6501, 5504 DR Veldhoven, the Netherlands, telephone +31 40 268
3000.
In May 2001, we merged with SVG (now part of ASML US, Inc.), a
company that was active in the Lithography, Track and Thermal
businesses. In December 2002, we announced the termination of
our manufacturing activities in the Track business and the
divestiture of our Thermal business. In October 2003, we
substantially completed the divestiture of our Thermal business.
From time to time, ASML pursues acquisitions of smaller
businesses that it believes will complement or enhance
ASMLs core lithography business. Acquisitions have
included the acquisition of MaskTools in July, 1999 and the
acquisition of Brion Technologies, Inc. (Brion) in
March 2007. See Item 4.B. Business Overview, Market
and Technology Overview.
Capital
Expenditures and Divestitures
Our capital expenditures for 2007, 2006 and 2005 amounted to
EUR 232.2 million, EUR 99.4 million and
EUR 79.8 million, respectively. The related cash
outflows for 2007, 2006 and 2005 amounted to
EUR 179.2 million, EUR 70.7 million and
EUR 74.0 million, respectively. Our capital
expenditures in these years generally related to the
construction of new facilities in Veldhoven and Taiwan,
purchases of machinery and equipment mainly from our own product
portfolio (e.g. prototypes, demonstration and training systems),
information technology investments, leasehold improvements to
our facilities and licenses of patents related to lithography
equipment. See Item 4.D. Property, Plants and
Equipment for capital expenditures currently in progress.
ASML ANNUAL REPORT 2007
9
Divestitures within continued operations, principally comprising
machinery and equipment (more specifically prototypes,
demonstration and training systems), amounted to
EUR 20.4 million for 2007, EUR 5.6 million
for 2006 and EUR 30.3 million for 2005. See
Note 10 to our consolidated financial statements.
B. Business
Overview
We are one of the worlds leading providers of advanced
technology systems for the semiconductor industry, based on
revenue. We offer an integrated portfolio of lithography systems
mainly for manufacturing complex integrated circuits
(semiconductors or ICs). We supply
lithography systems to IC manufacturers throughout the United
States, Asia and Europe and also provide our customers with a
full range of support from advanced process and product
applications knowledge to complete round-the-clock service
support.
Our Business
Model
Our business model is derived from our Value of
Ownership concept which is based on the following
principles:
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offering ongoing improvements in productivity, imaging and
overlay by introducing advanced technology based on modular
platforms resulting in lower costs per product for our customers;
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providing customer services that ensure rapid, efficient
installation and superior
on-site
support and training to optimize manufacturing processes of our
customers and improve productivity;
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maintaining appropriate levels of research and development to
offer the most advanced technology suitable for high-throughput
and low-cost volume production at the earliest possible date;
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enhancing the capabilities of the installed base of our
customers through ongoing field upgrades of key value drivers
(productivity, imaging and overlay) based on further technology
developments;
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reducing the cycle time between a customers order of a
system and the use of that system in volume production
on-site;
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expanding operational flexibility in research and manufacturing
by reinforcing strategic alliances with world-class partners;
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improving the reliability and uptime of our installed system
base; and
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providing re-marketing services that effectively increase
residual value by extending the life of equipment.
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Market and
Technology Overview
The worldwide electronics and computer industries have
experienced significant growth since the commercialization of
ICs in the 1960s, largely due to the continual reduction in the
cost per function performed by ICs. Improvement in the design
and manufacture of ICs with higher circuit or
packing densities has resulted in smaller and lower
cost ICs capable of performing a greater number of functions at
faster speeds and with reduced power consumption. We believe
that these long-term trends will continue for the foreseeable
future and will be accompanied by a continuing demand, subject
to ongoing cyclical variations, for production equipment that
can accurately produce advanced ICs in high volumes at the
lowest possible cost. Photolithography is used to print complex
circuit patterns onto the wafers that are the primary raw
material for ICs and is one of the most critical and expensive
steps in their fabrication. It is therefore a significant focus
of the IC industrys demand for cost-efficient enhancements
to production technology.
We primarily design, manufacture, market and service
semiconductor processing equipment used in the fabrication of
ICs. Our photolithography equipment includes Step &
Scan systems, which combine stepper technology with a
photoscanning method.
Our TWINSCAN product platform was introduced in July 2000 and
applies the production-proven elements of our PAS 5500 product
family to the industry shift toward larger (300 millimeter
(mm)) wafers. In 2003, the TWINSCAN platform became
the vehicle to introduce improved resolution products both for
300 mm and 200 mm wafer size factories. Our PAS 5500 product
family, which supports a maximum wafer size of 200 mm in
diameter, comprises advanced wafer steppers and Step &
Scan systems suitable for i-line and deep UV (including 248
nanometer (nm) and 193 nm wavelengths) processing of
wafers. In the fourth quarter of 2007, we shipped our 750th
TWINSCAN system, demonstrating the acceptance of the TWINSCAN
platform as the semiconductor industrys standard for 300
mm lithography.
In 2005, we intensified our research and development in
immersion lithography as we believed this was the most probable
solution to reduce the manufacturing cost per wafer while
increasing resolution. In 2007 we shipped over 35 immersion
systems compared to 23 in 2006 and 13 in 2005.
In 2006, we shipped the industrys first EUV Alpha Demo
Tools to two research institutions, which work closely with most
of the worlds major IC manufacturers in developing
manufacturing processes and materials. EUV combines a wavelength
of 13.5 nm and a lens system with a numerical aperture
(NA) of 0.25 to provide imaging at a resolution of
32 nm. EUV will provide a large process window compared to
current approaches and we expect it to be a multi-generation
lithography solution. Through the end of 2007, ASML received
four orders for a total of four next generation EUV systems, the
first of which is scheduled for shipment in late 2009 and
targeted for production of ICs down to 32 nm. In 2007, we
significantly increased development resources to support the
development of this product.
ASML ANNUAL REPORT 2007
10
In March 2007, we completed the acquisition of Brion, a
manufacturer of computational lithography products used for the
implementation of optical proximity correction OPC
to design data and verification before mask (reticle)
manufacture. The acquisition of Brion is expected to enable ASML
to improve the implementation of OPC and resolution enhancement
techniques such as Double Patterning in the masks to be used on
ASML systems. These improvements in turn are expected to enable
the extension of the practical resolution limits of ASML ArF
immersion products. Use of Brions computational
lithography capability is also expected to enable us to offer
products to further improve the
set-up and
control of ASML lithography systems.
We are also performing research on maskless lithography (the
mask contains the pattern which is imaged onto the wafer).
Maskless lithography is one of the possible solutions for
managing increasing mask costs or to increase the flexibility of
the imaging. Designs resulting in small quantities of wafers,
designs with many changes or designs that require a fast
time-to-market
will particularly benefit from maskless technology. In December
2004, Micronic Laser Systems AB (Micronic) and ASML
agreed to a license agreement relating to the development of
optical maskless lithography technology for semiconductor
manufacturing.
Products
We develop lithography systems and related products for the
semiconductor industry and related patterning applications. Our
product development strategy focuses on the development of
product families based on a modular, upgradeable design.
Our older PAS 2500 and PAS 5000 lithography systems, which we no
longer manufacture but refurbish, are used for g-line and
i-line
processing of wafers up to 150 mm in diameter and are employed
in manufacturing environments and in special applications for
which design resolutions no more precise than 0.5 microns are
required.
Our PAS 5500 product family comprises advanced wafer steppers
and Step & Scan systems suitable for
i-line and
deep Ultra Violet (UV) processing of wafers up to
200 mm in diameter. In mid-1997, we introduced the PAS 5500
Step & Scan systems with improved resolution and
overlay. Since then, we have further developed and expanded this
Step & Scan product family. This modular upgradeable
design philosophy has been further refined and applied in the
design of our most advanced product family, the TWINSCAN
platform, which is the basis for our current and next generation
Step & Scan systems, producing wafers up to 300 mm in
diameter and capable of extending shrink technology down to 40
nm.
The PAS 5500 series is the most suitable product range for
processing of 200 mm wafers using
step-and-scan
technology. We offer PAS 5500 systems based on
i-line
(using light with a 365 nm wavelength), KrF (using light with a
248 nm wavelength) and ArF (using light with a 193 nm
wavelength) technology. For high end 200 mm applications we also
offer TWINSCAN ArF tools.
We are the leader in the innovation of immersion technologies
and we were the worlds first producer of dual-stage design
(TWINSCAN) systems. Wafer measurement, including focus and
alignment, is completed on the dry stage, while the imaging
process, using water applied between the wafer and the lens, is
completed on the wet stage. The dual-stage advantage of TWINSCAN
systems enables our customers to gain the process enhancements
of immersion and to continue with familiar and proven metrology
technology.
For processing of 300 mm wafers, we offer TWINSCAN systems based
on i-line,
KrF and ArF technology. In 2003, we introduced the second
generation of TWINSCAN systems based on the XT body with a
reduced footprint and a 50 percent reduction in the main
production area occupied by our system. In 2004, we shipped our
first lithography systems based on immersion technology. These
shipments marked the delivery of the industrys first high
productivity immersion scanners for production applications.
In the second quarter of 2006, we started volume production of
the TWINSCAN XT:1700i, a 193 nm immersion scanner capable of
imaging at the 45 nm node in volume production environments.
This system featured an NA of 1.2, substantially higher than the
XT:1400s NA of 0.93, exceeding the pre-immersion barrier
of 1.0, which is enabled by a new catadioptric lens design. The
XT:1700i has enabled chipmakers to improve resolution by
30 percent and has been employed in the development and
manufacturing of the latest advanced generation of ICs.
In July 2006, we announced plans to introduce a next generation
immersion system, the XT:1900i, with a new industry benchmark of
1.35 NA, which we believe is close to the practical limit for
water-based immersion technology. In the third quarter of 2007,
ASML began volume shipment of the XT:1900i. This new optical
lithography system is capable of volume production of ICs down
to 40 nm and below and has already been deployed by several of
our advanced manufacturing customers. In 2007 we shipped over 18
XT:1900i systems.
In July 2007, ASML announced plans for a new product, the
XT:1000, which will use the new catadioptric lens technology
developed for the XT:1700i and XT:1900i to extend the maximum
numerical aperture (NA) of the previous generation of 248 nm
wavelength, KrF, systems to 0.93 NA from the previous maximum
available of 0.8 NA. The XT:1000s high NA of 0.93 can
resolve 80 nm device features, far smaller than the 100 nm of
todays KrF systems. The XT:1000 also improves value to
customers, with
ASML ANNUAL REPORT 2007
11
an increased throughput of
165-300 mm
wafers per hour under volume manufacturing conditions while
maintaining the same industry-leading 6 nm overlay as
leading-edge ArF systems. ASML expects to ship XT:1000 systems
from mid-2008.
We also continually develop and sell a range of product options
and enhancements designed to increase productivity, imaging and
overlay to optimize value of ownership over the entire life of
our systems. The table below sets forth our current product
portfolio of Steppers and Scan & Step Systems by
resolution and wavelength.
Current ASML
lithography product portfolio of Steppers and Step &
Scan
Systems1
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Resolution
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Wavelength
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lightsource
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NA
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PAS 5500 SYSTEMS
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PAS 5500/4X0
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280 nm
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365 nm
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i-line
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0.48-0.65
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PAS 5500/750
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130 nm
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248 nm
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KrF
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0.50-0.70
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PAS 5500/850
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110 nm
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248 nm
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KrF
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0.55-0.80
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PAS 5500/1150
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90 nm
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193 nm
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ArF
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0.50-0.75
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TWINSCAN SYSTEMS
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TWINSCAN XT:400
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350 nm
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365 nm
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i-line
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0.48-0.65
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TWINSCAN XT:450
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220 nm
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365 nm
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i-line
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0.48-0.65
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TWINSCAN XT:760
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130 nm
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248 nm
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KrF
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0.50-0.70
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TWINSCAN XT:8X0
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110 nm
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248 nm
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KrF
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0.55-0.80
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TWINSCAN XT:875
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90 nm
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248 nm
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KrF
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0.55-0.80
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TWINSCAN XT:1000
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80 nm
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248 nm
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KrF
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0.50-0.93
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TWINSCAN XT:14X0
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65 nm
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193 nm
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ArF
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0.65-0.93
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TWINSCAN XT:1700 immersion
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45 nm
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193 nm
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ArF
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0.75-1.20
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TWINSCAN XT:1900 immersion
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40 nm
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193 nm
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ArF
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0.85-1.35
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1
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This table does not include the
older (including pre-used) products sold on the PAS 2500, PAS
5000 and PAS 5500 platforms
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XT is a TWINSCAN system for wafer
sizes of up to 200 and 300 mm;
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Wavelength refers to the length of
light going through projection lens; the shorter the wavelength,
the smaller the line width and the finer the pattern on the IC;
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1 nanometer is equal to one
billionth of a meter;
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The X in the number represents
different models in the product portfolio within the same
resolution. For example XT:8X0 can either represent XT:800 or
XT:850;
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NA is the abbreviation of numerical
aperture.
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Sales and
Customer Support
We market and sell our products principally through our direct
sales staff.
We support our customers with a broad range of applications,
services, and technical support products to maintain and
maximize the performance of our systems at customer sites. We
also offer refurbished and remanufactured tools, system upgrades
and enhancements, and technical training.
Our field engineers and applications, service and technical
support specialists are located throughout the United States,
Europe and Asia.
In 2006, ASML started an initiative to establish the ASML Center
of Excellence (ACE) in Asia. The primary goal of ACE
is to serve as a supplementary engine to propel ASMLs long
term growth. ACE will feature customer support, training,
logistics, development and engineering, refurbishment and
semiconductor application development. ACE will also enable
sourcing of selected equipment modules, components and services
in the region. Finally, ACE will be used as a training center to
develop worldwide talent for ASMLs workforce. In the
fourth quarter of 2007, we started construction of the building
and facility that will house ACE near Taipei, Taiwan.
Construction is expected to be finished at the end of 2008. See
Item 4.D. Property, Plants and Equipment.
Customers and
Geographic Regions
In 2007, sales to our largest customer accounted for EUR
833 million, or 21.9 percent of net sales, compared to
EUR 730 million, or 20 percent of net sales, in 2006.
We expect that sales to relatively few customers will continue
to account for a high percentage of our net sales in any
particular period for the foreseeable future. See Item 3.D.
Risk Factors A High Percentage of Net Sales Is
Derived from a Few Customers and Note 17 to our
consolidated financial statements for a breakdown of our sales
by geographic location.
Manufacturing,
Logistics and Suppliers
Our business model is based on outsourcing production of a
significant part of the components and modules that comprise our
lithography systems, working in partnership with suppliers from
all over the world. Our manufacturing activities comprise the
ASML ANNUAL REPORT 2007
12
assembly, fine tuning and testing of a finished system from
components and subassemblies that are manufactured to our
specifications by third parties and by us, and which we test
prior to assembly. All of our manufacturing activities
(subassembly, final assembly and system testing) are performed
in one clean room facility located in Veldhoven, the
Netherlands, and one clean room facility in Wilton, Connecticut,
United States. We procure stepper and scanner system components
and subassemblies from a single supplier or a limited group of
suppliers in order to ensure overall quality and timeliness of
delivery. We jointly operate a formal strategy with suppliers
known as value sourcing which is based on
competitive performance in quality, logistics, technology and
total cost. The essence of value sourcing is to maintain a
supply base that is world class, globally competitive and
globally present.
Our value sourcing strategy is based on the following strategic
principles:
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maintaining long-term relationships with our suppliers;
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sharing risks and rewards with our suppliers;
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dual sourcing of knowledge, globally, together with our
suppliers; and
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single, dual or multiple sourcing of products, where possible or
required.
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Value sourcing is intended to align the performance of our
suppliers with our requirements on quality, logistics,
technology and total costs.
Zeiss is our sole external supplier of main optical systems and
one of the suppliers of other components. In 2007, approximately
40 percent of our aggregate cost of sales was purchased
from Zeiss.
Zeiss is highly dependent on its manufacturing and testing
facilities in Oberkochen and Wetzlar, Germany, and its
suppliers. Moreover, Zeiss has a finite production capacity for
production of lenses and optical components for our stepper and
scanner systems. The expansion of this production capacity may
require significant lead time. From time to time, the number of
systems we have been able to produce has been limited by the
capacity of Zeiss to provide us with lenses and optical
components. During 2007, we were in some cases constrained by
the number of lenses that Zeiss could produce.
If Zeiss is unable to maintain or increase production levels, we
might not be able to respond to customer demand. As a result,
our relationships with current and prospective customers could
be harmed, which would have a material adverse effect on our
business, financial condition and results of operations.
Our relationship with Zeiss is structured as a strategic
alliance pursuant to several agreements executed in 1997 and
later years. These agreements define an exclusive framework for
cooperation in all areas of our joint business. The partnership
between ASML and Zeiss is focused on continuous improvement of
operational excellence.
Pursuant to these agreements, ASML and Zeiss will continue their
strategic alliance until either party provides at least three
years notice of its intent to terminate. Although we
believe such an outcome is unlikely, if Zeiss were to terminate
its relationship with us, or if Zeiss were unable to produce
lenses and optical components over a prolonged period, we would
effectively cease to be able to conduct our business.
In addition to Zeiss, we also rely on other outside vendors for
the components and subassemblies used in our systems, each of
which is obtained from a single supplier or a limited number of
suppliers. Our reliance on a limited group of suppliers involves
several risks, including a potential inability to obtain an
adequate supply of required components and the risk of untimely
delivery of these components and subassemblies.
See Item 3.D. Risk Factors, The Number of Systems We
Can Produce Is Limited by Our Dependence on a Limited Number of
Suppliers of Key Components.
Research and
Development
The semiconductor manufacturing industry is subject to rapid
technological changes and new product introductions and
enhancements. We believe that continued and timely development
and introduction of new and enhanced systems are essential for
us to maintain our competitive position. As a result, we have
historically devoted a significant portion of our financial
resources to research and development programs and we expect to
continue to allocate significant resources to these efforts. In
addition, we have established and are currently establishing
sophisticated development centers in the Netherlands, the United
States and Taiwan, respectively. We also work jointly with
independent research centers in nano-electronics and
nano-technology. Those research centers focus on the next
generations of chips and systems.
We apply for subsidy payments in connection with specific
development projects under programs sponsored by the Netherlands
government, the European Union, the United States and Taiwanese
government. Amounts received under these programs
ASML ANNUAL REPORT 2007
13
generally are not required to be repaid. See our discussions of
research and development in Item 5 Operating and
Financial Review and Prospects, and Note 1 to our
consolidated financial statements.
We invested EUR 511 million in research and development in
continuing operations in 2007, compared to EUR 414 million
in 2006 and EUR 348 million in 2005. The amount invested in
2007 includes a one-off charge related to the Brion acquisition
of EUR 23 million (amortization of in-process research and
development). We are also involved in joint research and
development programs with both public and private partnerships
and consortiums, involving independent research centers, leading
chip manufacturers and governmental programs. We aim to own or
license our jointly developed technology and designs of critical
components.
In 2007, our research and development efforts drove further
development of the TWINSCAN platform along with several
leading-edge technologies, including 248 nm, 193 nm, immersion
and EUV. The continuous drive by our customers for cost
reductions has led us to significantly increase the commonality
of components of the different models of the TWINSCAN platform.
Our research and development activities in 2007 have also led to
productivity and performance enhancements for our other product
families. We also started developing technology to support
applications of double patterning. Double patterning
is a resolution enhancement technique that involves splitting a
dense circuit pattern into multiple, less-dense patterns. These
simplified patterns are then printed sequentially on a target
wafer. Between the exposures, the wafer is removed from the
exposure system for additional processing. Double patterning
improves the achievable resolution and enables the printing of
smaller features.
Intellectual
Property
We rely on intellectual property rights such as patents,
copyrights and trade secrets to protect our proprietary
technology. We aim to obtain ownership rights on technology
developed by or for us or, alternatively, to have license rights
in place with respect to such technology. However, we face the
risk that such measures will be inadequate. Intellectual
property laws may not sufficiently support our proprietary
rights, our patent applications may not be granted and our
patents may not be construed as we expect. Also, competitors may
be able to develop or protect similar technology earlier and
independently.
Litigation may be necessary to enforce our intellectual property
rights, to determine the validity and scope of the proprietary
rights of others, or to defend against claims of infringement.
Any such litigation may result in substantial costs and
diversion of management resources, and, if decided unfavorably
to us, could have a material adverse effect on our business,
financial condition and results of operations. We also may incur
substantial licensing or settlement costs where doing so would
strengthen or expand our intellectual property rights or limit
our exposure to intellectual property claims of third parties.
Patent
cross-license with Canon
In December 2007, we announced that ASML and Zeiss have signed
an agreement with Canon for the global cross-license of patents
in their respective fields of semiconductor lithography and
optical components, used to manufacture integrated circuits, or
chips. There will be no transfer of technology and no payment
was made among the parties. The cross-license helps the three
companies to compete more freely in the area relevant to their
customers, which is technology expertise and implementation,
rather than on intellectual property (IP) rights. ASML and Zeiss
are strongly committed to investing in research and development
and will continue their
build-up of
know-how and IP.
Patent litigation
with Nikon
From 2001 through late 2004, we were a party to a series of
civil litigations and administrative proceedings in which Nikon
alleged ASMLs infringement of Nikon patents relating to
photolithography. ASML in turn filed claims against Nikon.
Pursuant to agreements executed on December 10, 2004
(effective November 12, 2004), ASML, Zeiss and Nikon agreed
to settle all pending worldwide patent litigation between the
companies. The settlement included an agreement to dismiss all
pending patent litigation between the companies, an exchange of
releases, a cross-license of patents related to lithography
equipment used to manufacture semiconductor devices and payments
to Nikon by ASML and Zeiss. In connection with the settlement,
ASML made an initial payment to Nikon of US$ 60 million in
2004 and further payments of US$ 9 million in 2005, 2006
and 2007. Zeiss also made settlement payments to Nikon from 2004
to 2007. See Item 18 Financial Statements for a
description of the accounting treatment.
Patent litigation
with Ultratech Stepper, Inc
In May 2000, Ultratech Stepper, Inc. (Ultratech)
filed a lawsuit against ASML. Ultratech alleged that ASML
infringed Ultratechs rights under a United States patent
in connection with its manufacture and commercialization in the
United States of advanced photolithography equipment embodying
technology that, in particular, is used in Step & Scan
equipment.
Ultratechs patent infringement claims were tried before a
jury in Oakland, California, in May and June of 2005. On
June 21, 2005 the jury unanimously determined that each of
the patent claims that Ultratech had asserted against ASML was
invalid, and thus
ASML ANNUAL REPORT 2007
14
that ASML was not liable for patent infringement,
notwithstanding the jurys finding that each of these
claims was infringed by ASML and certain of its customers. The
court entered judgment in favor of ASML following receipt of the
jury verdict.
Ultratech filed motions with the court seeking to overturn the
jurys finding that its asserted patent claims are invalid
or, in the alternative, seeking a new trial. The court denied
each of Ultratechs motions. Ultratech then filed an appeal
with the United States Court of Appeals for the Federal Circuit
challenging the finding that its asserted patent claims are
invalid. On May 14, 2007, the Federal Circuit rejected
Ultratechs arguments on appeal, affirming the lower
courts order that Ultratechs asserted patent claims
are invalid. The time for Ultratech to file an appeal with the
United States Supreme Court has lapsed.
Arbitration with
Aviza Technology
On December 1, 2006, Aviza Technology (Aviza)
initiated arbitration proceedings against ASML Holding N.V.,
ASML U.S., Inc. and certain of its affiliates and subsidiaries
(collectively, the ASML parties). Avizas
arbitration demand alleges that the ASML parties engaged in
fraud and made negligent misrepresentations or omissions in
connection with a 2002 License Agreement between ASML and IPS,
Ltd. That agreement was assigned to Aviza in connection with the
2003 divestiture of ASMLs Thermal Division.
We believe that there are meritorious defenses to Avizas
allegations.
Although we believe the ultimate outcome of the dispute with
Aviza will not have a material adverse effect on our business,
financial condition or result of operations (taking into account
the defenses available to ASML), given the inherently uncertain
nature of arbitration, our defenses may not succeed. If Aviza
were to prevail, it could have a material adverse effect on
ASMLs business, financial condition or results of
operations.
Dividend
withholding tax
In May and June 2006 ASML entered into forward purchase
agreements with a broker acting as principal to effect the share
repurchases under its share buyback program.
The aggregate number of shares bought back up to and including
July 13, 2006 was 25,450,296 and represented
100 percent of the announced objective of maximum EUR
400 million to be repurchased during the term of the
program.
The Netherlands tax authorities have challenged the fiscal
interpretation of the share program and are seeking to recast
the repurchase as a dividend payment to unidentifiable
shareholders. As a result the Netherlands tax authorities have
issued a dividend withholding tax assessment of approximately
EUR 24 million, payable by ASML. ASML management is of the
opinion that the case of the Netherlands tax authorities is
without merit and will contest the position of the Netherlands
tax authorities in court. Based on this, ASML management
believes that there is no reason to set up a liability for this
dividend withholding tax assessment.
Competition
The semiconductor equipment industry is highly competitive. The
principal elements of competition in our market segments are the
technical performance characteristics of a photolithography
system and the value of ownership of that system based on its
purchase price, maintenance costs, productivity and customer
service and support. In addition, we believe that an
increasingly important factor affecting our ability to compete
is the strength and breadth of our portfolio of patent and other
intellectual property rights. We believe that the market segment
for photolithography systems and the investments required to be
a significant competitor in this market segment have resulted in
increased competition for market share through the aggressive
prosecution of patents. Our competitiveness will increasingly
depend upon our ability to protect and defend our patents, as
well as our ability to develop new and enhanced semiconductor
equipment that is competitively priced and introduced on a
timely basis. See Item 3.D. Risk Factors, We Face
Intense Competition.
Government
Regulation
Our business is subject to direct and indirect regulation in
each of the countries in which our customers or we do business.
As a result, changes in various types of regulations could
affect our business adversely. The implementation of new
technological or legal requirements could impact our products,
or our manufacturing or distribution processes, and could affect
the timing of product introductions, the cost of our production,
and products as well as their commercial success. Moreover,
environmental and other regulations that adversely affect the
pricing of our products could adversely affect our results of
operation. The impact of these changes in regulation could
adversely affect our business even where the specific
regulations do not directly apply to us or to our products.
C. Organizational
Structure
ASML Holding N.V. is a holding company that operates through its
subsidiaries. Our major operating subsidiaries, each of which is
a wholly-owned subsidiary, are as follows:
ASML ANNUAL REPORT 2007
15
See Exhibit 8.1 for a list of our material subsidiaries.
D. Property,
Plants and Equipment
We principally obtain and operate our facilities under operating
leases. However, we also own a limited number of buildings. We
are currently constructing new facilities as part of the
expansion of our worldwide capacity. The book value of the
buildings used in our continuing operations and owned by us
amounted to EUR 136 million as of December 31, 2007
compared to EUR 59 million as of December 31, 2006.
During 2007, our facilities were generally utilized at and in
some cases above normal capacity.
Subject to market developments we expect that our capital
expenditures in 2008 could be up to approximately EUR
250 million, an increase of EUR 18 million
compared to 2007. We expect that a significant part of 2008
expenditures will be allocated to construction and upgrades of
production facilities in the Netherlands and Taiwan. This
expansion would offer the additional space and facilities
necessary to accommodate our current production levels as well
as support continued growth in the long term. We intend to fund
the related capital expenditures primarily with cash on hand
and/or cash generated through operations.
See also Item 4.A. History and Development of the
Company, Capital Expenditures and Divestitures and
Item 5.B. Liquidity and Capital Resources and
Note 10 to our consolidated financial statements.
Facilities in
Europe
Our headquarters, applications laboratory and research and
development facilities are located in a 120 thousand square
meter
state-of-the-art
facility in the Netherlands, of which 65 thousand square meters
is used as office space and 55 thousand square meters is used
for manufacturing and research and development activities. We
lease the majority of these facilities through long-term
operating leases that contain purchase options. Some of our
office facilities at our headquarters in Veldhoven are financed
through a special purpose vehicle that is a variable interest
entity. See Item 5.E. Off-Balance Sheet
Arrangements and Note 13 to our consolidated
financial statements. We also lease several sales and service
facilities at locations across Europe.
Facilities in the
United States
Our American headquarters and American training facilities are
located in two buildings, comprising a nine thousand square
meter office building space and a ten thousand square meter
training space in Tempe, Arizona. We maintain lithography
research, development and manufacturing operations in a 27
thousand square meter facility in Wilton, Connecticut and a six
thousand square meter facility in Santa Clara, California. We
also lease several sales and service facilities at locations
across the United States.
Facilities in
Asia
Our Asian headquarters is located in a 425 square meter office
space in Hong Kong. We also lease and own several sales and
service / training facilities at locations across Asia.
During 2007 we started the construction of our new ACE facility
located in Linkou, Taiwan. This project comprises both
clean room (approximately two thousand square meters) and
office space (approximately six thousand square meters) in order
to support customers in the Asia-Pacific region by focusing on
technology and applications development, equipment support,
training, logistics and refurbishment. ACE will also enable
local sourcing of equipment models, components and services.
Item 4A
Unresolved Staff Comments
Not applicable.
ASML ANNUAL REPORT 2007
16
Item 5
Operating and Financial Review and Prospects
Executive
Summary
Introduction
ASML is the worlds leading provider of lithography systems
that are critical to the production of ICs or chips.
Headquartered in Veldhoven, the Netherlands, ASML operates
globally, with activities in Europe, the United States and Asia.
In 2007, we generated net sales of EUR 3,809 million and
income from operations of EUR 825 million or
21.7 percent of net sales. Net income in 2007 amounted to
EUR 688 million or 18.1 percent of net sales,
representing EUR 1.49 per share.
As of December 31, 2007 we employed approximately 6,500
employees and operated in 16 countries through over 63 sales and
service locations.
In the executive summary below we provide an update of the
semiconductor equipment industry, followed by our business
strategy and a discussion of our key performance indicators.
Semiconductor
equipment industry update
Historically the semiconductor industry has experienced
significant growth largely due to the continual reduction of
cost per function performed by ICs. Improvement in the design
and manufacture of ICs with higher circuit densities has
resulted in smaller and cheaper ICs capable of performing a
larger number of functions at higher speeds with lower power
consumption. We believe that these long term trends will
continue for the foreseeable future and will be accompanied by a
continuing demand for production equipment that is capable of
accurate production of advanced ICs in high volumes at the
lowest possible cost.
Lithography equipment is used to print complex circuit patterns
onto silicon wafers, which are the primary raw materials for
ICs. The printing process is one of the most critical and
expensive steps in wafer fabrication. Lithography equipment is
therefore a significant focus of the IC industrys demand
for cost efficient enhancements to production technology.
The costs to develop new lithography equipment are high.
Accordingly, the lithography equipment industry is characterized
by the presence of only a few primary suppliers: ASML, Nikon and
Canon. ASML is the worlds leading provider of lithography
equipment with a market share based on revenue of
65 percent in 2007 up from 63 percent in 2006
according to the latest available data up to and including
November 2007 as reported by SEMI, an independent semiconductor
industry organization.
Nikon and Canon are the leading suppliers in Japan, which
accounts for a significant portion of worldwide semiconductor
production. This region historically has been difficult for
non-Japanese companies to penetrate. Since 2004, we have been
increasing our service, sales and marketing operations in Japan
to serve our growing customer base. In 2007, we further
strengthened our long term market development strategy in Japan,
and our net system sales there grew from EUR 139 million in
2006 to EUR 269 million.
Total lithography equipment shipped by the industry as a whole
in the five years ended December 31, 2006 is set forth in
the following table:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
Total units shipped
|
|
413
|
|
456
|
|
694
|
|
536
|
|
633
|
Total value (in millions USD)
|
|
2,817
|
|
3,229
|
|
5,268
|
|
4,988
|
|
6,386
|
|
(Source: Gartner Dataquest)
In 2007, the semiconductor industry experienced another year of
growth due to growth in semiconductor units by 11 percent
and the continuing technology drive of our customers among other
things resulting in continued strong capacity
build-up by
our customers, especially in memory. During this period, our
customers began
ramp-up of
volume manufacturing for 45 nm Flash and 55 nm DRAM with our
advanced immersion systems.
Business
strategy
Our business strategy is based on achieving and reinforcing
technological leadership in semiconductor lithography, resulting
in the delivery of superior value of ownership for our customers
while achieving top financial performance in our segment. We
implement this strategy through customer focus, aggressive
investment in research and development, and operational
excellence.
ASML ANNUAL REPORT 2007
17
Customer
focus
We serve different types of chipmakers by ensuring that our
products provide premium value for the various semiconductor
market segments, including memory, integrated device
manufacturers, and foundries or
made-to-order
chip contractors.
Of the top 20 chipmakers worldwide, in terms of semiconductor
capital expenditure, 18 are our customers. We also have a
significant market share of customers below the top 20. We
strive for continued growth in both segments.
In 2007, we achieved top customer satisfaction ratings among
large suppliers of semiconductor wafer processing equipment,
according to VLSI Research, an independent industry research
firm that surveyed customers representing 95 percent of the
worlds total semiconductor market. Our satisfaction
ratings by customers surpassed every lithography competitor for
the fifth year in a row.
In July 2007, we announced a new KrF lithography system that
significantly reduces operating costs for our customers. The
ASML TWINSCAN XT:1000 scanner extends cost efficient KrF
technology to resolutions that previously required more
expensive ArF technology. Customers can realize savings of
30 percent or more per layer as a result of the lower
operating costs for KrF technology, particularly its use of less
expensive lasers and lower material costs for KrF resists and
other materials.
We are making additional investments in Japan, where
historically the leading positions have been held by our
competitors and where ASML is increasing sales and customers.
From time to time, we seek to expand our business scope as ASML
pursues hardware technologies and new product opportunities in
fields adjacent or complementary to our core semiconductor
lithography competence. In March 2007, ASML completed the
acquisition of Brion Technologies, Inc., a leading provider of
semiconductor design and wafer manufacturing optimization
solutions for advanced lithography.
Aggressive
investment in research and development
Our product range for steppers and advanced Step &
Scan systems spans all the industrys current wavelengths
for both 200- and
300-mm
wafers.
Supported by our financial performance, research and development
expenses in 2007 increased by 25.8 percent compared with 2006
(which excludes a one-off charge of EUR 23 million in 2007
of in-process research and development relating to the Brion
acquisition), as we accelerated new developments and advanced
our development of immersion and EUV technologies. This
operating decision was made possible by leveraging our
outsourcing strategy, which continues to enable us to rapidly
and efficiently adjust our cost structure throughout a cycle
while making use of leading-edge capabilities in our supply
chain.
Since 2000, we have offered a dual-stage wafer imaging
platform the TWINSCAN system which
allows exposure of one wafer while simultaneously measuring the
wafer that will be exposed next. ASMLs strong leadership
in this capability has allowed it to achieve the industrys
highest throughput, enabling reduced
cost-per-exposure
per wafer. ASML is the only lithography manufacturer that has
volume production based on dual stage systems.
In the third quarter of 2007, we shipped our first new TWINSCAN
XT:1900i system, the only immersion lithography machine in the
world capable of imaging chip features down to 40 nm. Our
innovative immersion lithography replaces air over the wafer
with fluid, enhancing focus on enabling circuit line-width to
shrink to even smaller dimensions. ASML experienced strong
demand for this machine, driven initially by memory chip makers
that need more cost effective technology transitions to the 4x
and 5x nm nodes that are enabled by immersion systems. With more
than 70 immersion systems shipped to date, our immersion
technology is now widely accepted as the standard for critical
layer high volume chip manufacturing, solidifying our technology
leadership position worldwide and supporting our significant
growth in Japan.
In parallel, we are developing EUV technology. We received four
orders for preproduction tools during 2007, the first of which
is scheduled for shipment in late 2009. We have two Alpha Demo
Tools at research and development institutions located in
Albany, New York (United States) and Leuven (Belgium), where
potential customers can conduct early stage research and
development, and where the first 30 nm images with a Sn light
source were produced.
Operational
excellence
We strive to sustain our business success based on our
technological leadership by continuing to execute our
fundamental operating strategy well, including reducting in lead
time while improving our cost competitiveness. Lead time is the
time from a customers order to a tools delivery.
Our business strategy includes outsourcing the majority of
components and subassemblies that make up our products. We work
in partnership with suppliers, collaborating on quality,
logistics, technology and total cost. By operating our strategy
of value
ASML ANNUAL REPORT 2007
18
sourcing, we strive to attain flexibility and cost efficiencies
from our suppliers through mutual commitment and shared risk and
reward. Value sourcing also allows the necessary flexibility to
adapt to the cyclicality of the world market for semiconductor
lithography systems.
ASML has a flexible labor model in its manufacturing facilities
located in Veldhoven which reinforces our ability to adapt more
quickly to semiconductor market cycles, including support for
potential
24-hour,
seven
days-a-week
production activities. By maximizing the flexibility of our high
tech work force, we can shorten lead time: a key driver of added
value for customers. Flexibility also reduces our working
capital requirements.
We continuously strive to improve efficiencies in our
operations: addressing our cost structure and strengthening our
capability to generate cash. We have been successful at
progressively enhancing the value of ownership of our products
while increasing margins and boosting cash generation through
gains in manufacturing productivity and reductions in cycle time.
ASML operations
update on key performance indicators
The following table presents the key performance indicators used
by our Board of Management and senior management to measure
performance in our monthly operational review meetings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except market
|
|
2005
|
|
|
|
2006
|
|
|
|
2007
|
|
|
|
share and systems)
|
|
EUR
|
|
|
|
EUR
|
|
|
|
EUR
|
|
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market share (based on
revenue)1
|
|
|
57%
|
|
|
|
|
|
63%
|
|
|
|
|
|
65%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
2,529
|
|
|
|
|
|
3,597
|
|
|
|
|
|
3,809
|
|
|
|
|
Increase in net sales
|
|
|
2.6%
|
|
|
|
|
|
42.2%
|
|
|
|
|
|
5.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems shipped (value)
|
|
|
2,228
|
|
|
|
|
|
3,229
|
|
|
|
|
|
3,392
|
|
|
|
|
Systems shipped (number)
|
|
|
196
|
|
|
|
|
|
266
|
|
|
|
|
|
260
|
|
|
|
|
Average selling price
|
|
|
11.4
|
|
|
|
|
|
12.1
|
|
|
|
|
|
13.0
|
|
|
|
|
Systems backlog (value)
|
|
|
1,434
|
|
|
|
|
|
2,146
|
|
|
|
|
|
1,697
|
|
|
|
|
Systems backlog (number)
|
|
|
95
|
|
|
|
|
|
163
|
|
|
|
|
|
89
|
|
|
|
|
Average selling price
|
|
|
15.1
|
|
|
|
|
|
13.2
|
|
|
|
|
|
19.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical achievement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immersion systems shipped
|
|
|
10
|
|
|
|
|
|
23
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profitability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
974
|
|
|
38.5%
|
|
|
1,462
|
|
|
40.6%
|
|
|
1,560
|
|
|
|
41.0%
|
Income from operations
|
|
|
449
|
|
|
17.8%
|
|
|
871
|
|
|
24.2%
|
|
|
825
|
2
|
|
|
21.7%
|
Net income
|
|
|
311
|
|
|
12.3%
|
|
|
625
|
|
|
17.4%
|
|
|
688
|
2
|
|
|
18.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,905
|
|
|
|
|
|
1,656
|
|
|
|
|
|
1,272
|
|
|
|
|
Operating cash flow
|
|
|
711
|
|
|
|
|
|
478
|
|
|
|
|
|
670
|
|
|
|
|
|
|
|
1
|
According to the latest available
data up to and including November 2007 as reported by SEMI, an
independent semiconductor industry organization.
|
2
|
The 2007 figures for income from
operations and net income include a one-off charge of EUR
23 million relating to the Brion acquisition for
amortization of in-process research and development.
|
Growth
We are seeking to grow to a net sales level of
EUR 5 billion in 2010, based on three growth drivers:
market growth, market share growth and a broadening of our
product and services scope.
In 2007, we achieved growth in net sales of 5.9 percent to
EUR 3,809 million from EUR 3,597 million in 2006.
The increase in net sales mainly resulted from a continued high
demand for lithography equipment with higher ASPs in 2007
ultimately driven by a continuing increase in unit demand for
semiconductors of 11 percent (2006: 9 percent; 2005:
9 percent). In addition we achieved market share growth
from 63 percent in 2006 to 65 percent in 2007
(according to the latest available data up to and including
November 2007 as reported by SEMI, an independent semiconductor
industry organization) as a result of our sustained
technological leadership.
The ASP of our systems increased by 7.4 percent from
EUR 12.1 million in 2006 to EUR 13.0 million
in 2007. This increase was mainly driven by a change in the
product mix reflecting the continued shift in market demand to
our leading-edge technology systems with higher ASPs driven by
the shrink roadmaps of our customers. This increase was partly
offset by a growing number of
i-line
systems, with relatively low ASPs, sold in 2007, reflecting our
market share gains in this segment of the market.
ASML ANNUAL REPORT 2007
19
As of December 31, 2007, our order backlog was valued at
EUR 1,697 million and included 89 systems with an ASP
of EUR 19.1 million. As of December 31, 2006, the
order backlog was valued at EUR 2,146 million and
included 163 systems with an ASP of EUR 13.2 million.
The increase in ASP of 44.8 percent was mainly due to a high
number of leading-edge ArF-immersion systems in the backlog of
2007 pursuant to the continued
ramp-up of
volume manufacturing with our leading-edge immersion systems in
2008. The decrease in the total value of backlog was primarily
the result of increased uncertainty about future global economic
market conditions and the impact on the semiconductor industry.
Profitability
We seek to achieve an average income from operations to net
sales of 17 percent over the industrys business cycle
with
10-15 percent
at the downturn point and
20-25 percent
at the upturn point.
Operating income decreased by 5.2 percent from EUR
871 million or 24.2 percent of sales in 2006 to
825 million or 21.7 percent of sales in 2007. This EUR
46 million decrease was substantially the result of the
increase in operating expenses of EUR 144 million or
24.3 percent which was partially offset by an increase of
gross profit of EUR 98 million or 6.7 percent.
Gross profit on sales increased compared to 2006, showing a
growth of 6.7 percent from EUR 1,462 million or
40.6 percent of net sales in 2006 to 1,560 million or
41.0 percent of net sales in 2007. The higher gross profit
was principally attributable to an increase in net sales (see
above) and a decrease in the cost of sales as a percentage of
net sales.
Operating expenses were EUR 144 million higher in 2007
compared to 2006 due to an increase of both research and
development costs by 123 million, or 31.7 percent and
selling, general and administrative costs by EUR
21 million, or 10.2 percent. The increase in research
and development costs included a one-off charge of EUR
23 million related to the Brion acquisition (in-process
research and development). The remaining increase in research
and development costs by EUR 100 million, or
25.8 percent was mainly related to our decision to further
accelerate investments in our technological leadership in a time
of strong financial performance. For further details regarding
research and development see Item 4.B Business
Overview and Item 5 Operating and Financial
Review and Prospects, Business Strategy.
Net income in 2007 amounted to EUR 688 million,
representing EUR 1.49 per share compared with net income of EUR
625 million or EUR 1.32 per share in 2006.
Liquidity
We seek to maintain our strategic target level of cash and cash
equivalents between EUR 1.0 and 1.5 billion. To the extent
that our cash and cash equivalents exceeds this target and there
are no investment opportunities that we wish to pursue, we
intend to return excess cash to our shareholders. As of
December 31, 2007 our cash and cash equivalents amounted to
EUR 1.3 billion.
Our cash and cash equivalents decreased from EUR
1,656 million as of December 31, 2006 to EUR
1,272 million as of December 31, 2007. We generated
cash from operations of EUR 670 million in 2007, which was
offset by a cash outflow of EUR 699 million from
financing activities, mainly as a result of our 2007 share
buyback programs (EUR 1,372 million) which was offset
by the net proceeds from issuance of a Eurobond in June 2007
(EUR 594 million), and EUR 348 million cash used
in investing activities mainly related to the acquisition of
Brion (EUR 188 million), production facilities in Veldhoven
and, to a lesser extent, equipment and information technology.
In an ongoing commitment to return excess cash to shareholders,
ASML returned EUR 1,372 million in cash to its shareholders
in 2007. The cumulative amount returned to shareholders between
May 2006 and December 2007 was EUR 2,050 million.
A. Operating
Results
Critical
accounting policies using significant estimates
Our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with U.S.
GAAP. The preparation of our financial statements requires us to
make estimates and judgments that affect the reported amounts of
assets, liabilities, net sales and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing
basis, we evaluate our estimates, including those related to
revenue recognition, warranty, long-lived assets, inventories,
accounts receivable, contingencies and litigation, income tax
and share-based compensation expenses. We base our estimates on
historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. While we
regularly evaluate our estimates and assumptions, actual results
may differ from these estimates if these assumptions prove
incorrect. To the extent there are material differences between
actual results and these estimates, our future results of
operations could be materially and adversely affected. We
believe that the accounting policies described below require us
to make significant judgments and estimates in the preparation
of our consolidated financial statements.
ASML ANNUAL REPORT 2007
20
Revenue
recognition
In general, we recognize the revenue from the sale of a system
upon shipment and the revenue from the installation of a system
upon completion of that installation at the customer site. Each
system undergoes, prior to shipment, a Factory Acceptance
Test in our clean room facilities, effectively replicating
the operating conditions that will be present on the
customers site, in order to verify whether the system will
meet its standard specifications and any additional technical
and performance criteria agreed with the customer. A system is
shipped, and revenue is recognized, only after all
specifications are met and customer sign-off is received or
waived. Although each systems performance is re-tested
upon installation at the customers site, we have never
failed to successfully complete installation of a system at a
customers premises.
We anticipate that, in connection with future introductions of
new technology, we will initially defer revenue recognition
until completion of installation and acceptance of the new
technology at customer premises. This deferral would continue
until we are able to conclude that installation of the
technology in question would occur consistently within a
predetermined time period and that the performance of the new
technology would not reasonably be different from that exhibited
in the pre-shipment Factory Acceptance Test. Any such deferral
of revenues, however, could have a material effect on our
results of operations for the fiscal period in which the
deferral occurred and on the succeeding fiscal period. At
December 31, 2007 and 2006, we had no deferred revenue from
shipments of new technology. During the three years ended
December 31, 2007, no revenue from new technology was
recorded that had been previously deferred. As our systems are
based largely on two product platforms that permit incremental,
modular upgrades, the introduction of genuinely new
technology occurs infrequently, and has occurred on only one
occasion since 1999.
A portion of our revenue is derived from contractual
arrangements with our customers that have multiple deliverables,
such as installation and training services, prepaid service
contracts and prepaid extended optic warranty contracts. The
revenue relating to the undelivered elements of the arrangements
is deferred at fair value until delivery of these elements. The
fair value is determined by vendor specific objective evidence
(VSOE). VSOE is determined based upon the prices
that we charge for installation and comparable services (such as
relocating a system to another customer site) on a stand-alone
basis, which are subject to normal price negotiations. Revenue
from installation and training services is recognized when the
services are completed. Revenue from prepaid service contracts
and prepaid extended optic warranty contracts is recognized over
the term of the contract.
The deferred revenue balance from installation and training
services amounted to approximately EUR 9 million and
EUR 28 million, respectively, as of December 31,
2007.
The deferred revenue balance from prepaid service contracts and
prepaid extended optic warranty contracts amounted to
approximately EUR 149 million and EUR 38 million,
respectively, as of December 31, 2007.
We offer customers discounts in the normal course of sales
negotiations. These discounts are directly deducted from the
gross sales price at the moment of revenue recognition. From
time to time, we offer volume discounts to a limited number of
customers. In some instances these volume discounts can be used
to purchase field options (system enhancements). The related
amount is recorded as a reduction in revenue at time of
shipment. Generally, there are no other credits or adjustments
recognized at shipment. From time to time, we offer free
products or services in connection with the sale of a system,
which are earned by the customer at a future date only if the
customer completes a specified cumulative level of revenue
transactions. As the value of these free products or services is
insignificant in relation to the value of the transactions
necessary to earn these free products or services, a liability
is recorded for the cost of these free products or services at
the time of revenue recognition.
Warranty
We provide standard warranty coverage on our systems for
12 months and on certain optic parts for 60 months,
providing labor and parts necessary to repair systems and optic
parts during the warranty period. The estimated warranty costs
are accounted for by accruing these costs for each system upon
recognition of the system sale. The estimated warranty costs are
based on historical product performance and field expenses.
Based upon historical service records, we calculate the charge
of average service hours and parts per system to determine the
estimated warranty charge. We update these estimated charges
periodically. The actual product performance and/or field
expense profiles may differ, and in those cases we adjust our
warranty reserves accordingly. Future warranty expenses may
exceed our estimates, which could lead to an increase in our
cost of sales.
Business
combinations
Acquisitions of subsidiaries are accounted for using the
purchase accounting method. The costs of an acquired
subsidiary are assigned to the assets and the liabilities
assumed on the basis of their fair values at the date of
acquisition. The determination of fair values of assets and
liabilities acquired requires us to make estimates and use
valuation techniques when market value is not readily available.
The excess of the costs of an acquired subsidiary over the net
of the amounts assigned to assets acquired and liabilities
assumed is capitalized as goodwill.
ASML ANNUAL REPORT 2007
21
Evaluation of
long-lived assets for impairment and costs associated with exit
or disposal activities
Long-lived assets include goodwill, other intangible assets and
property, plant and equipment.
Goodwill is tested at least annually for impairment. Goodwill is
considered to be impaired if the fair value based on discounted
future cash flows expected to be generated by the reporting unit
is less than the carrying amount. The impairment to be
recognized is measured as the excess of the carrying amount of
goodwill over its implied fair value.
Other intangible assets and property, plant and equipment are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of those assets
may not be recoverable. Recoverability of these assets is
measured by a comparison of the carrying amount of the asset to
future undiscounted net cash flows expected to be generated by
the asset. If those assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
asset. Assets held for sale are reported at the lower of the
carrying amount or fair value less the costs to sell.
In determining the fair value of a reporting unit or the
recoverable amount of an asset, the Company makes estimates
about future cash flows. These estimates are based on the
financial plan updated with the latest available projection of
the semiconductor market conditions and our sales and cost
expectations which are consistent with the plans and estimates
that we use to manage our business. We also make estimates and
assumptions concerning Weighted Average Cost of Capital (WACC)
and future inflation rates. It is possible that the outcome of
the plans, estimates and assumptions used may differ from our
estimates, which may require impairment of certain long-lived
assets. Future adverse changes in market conditions may also
require impairment of certain long-lived assets.
During 2007, we recorded impairment charges of EUR
8.0 million in property, plant and equipment and EUR
1.0 million in other intangible assets of which we recorded
EUR 8.6 million in cost of sales, EUR 0.2 million in
research and development costs and EUR 0.2 million in
selling, general and administrative costs. The impairment
charges mainly relate to buildings and constructions and
machinery and equipment. The impairment charges with respect to
buildings and constructions mainly relate to a building in
Veldhoven that was abandoned in 2007 and will be demolished in
2008 to create space for the clean room and central utilities
which are currently under construction. The impairment was
determined based on the difference between the buildings
estimated fair value (being EUR 0.0) and its carrying amount.
The impairment charges with respect to machinery and equipment
mainly relate to development, production and field service
tooling, which were no longer used because the tools no longer
met current technology requirements. The impairment charges were
determined based on the difference between the assets
estimated fair value (being EUR 0.0) and their carrying amount.
See Notes 9 and 10 to our consolidated financial statements.
Inventories
Inventories are stated at the lower of cost
(first-in,
first-out method) or market value. Costs include net prices paid
for materials purchased, charges for freight and customs duties,
production labor cost and factory overhead. Inventory provisions
are made for slow moving, obsolete or unsaleable inventory and
are reviewed on a quarterly basis. Our methodology involves
matching our on-hand and on-order inventory with our
manufacturing forecast. In determining inventory provisions, we
evaluate inventory in excess of our forecasted needs on both
technological and economical criteria and make appropriate
provisions to reflect the risk of obsolescence. This methodology
is significantly affected by our forecasted needs for inventory.
If actual demand or usage were to be lower than estimated,
additional inventory provisions for excess or obsolete inventory
may be required, which could have a material adverse effect on
our business, financial condition and results of operations. See
Note 6 to our consolidated financial statements.
Accounts
receivable
A majority of our accounts receivable are derived from sales to
large multinational semiconductor manufacturers throughout the
world. In order to monitor potential credit losses, we perform
ongoing credit evaluations of our customers financial
condition. An allowance for doubtful accounts is maintained for
potential credit losses based upon managements assessment
of the expected collectability of all accounts receivable. The
allowance for doubtful accounts is reviewed periodically to
assess the adequacy of the allowance. In making this assessment,
we take into consideration (i) any circumstances of which
we are aware regarding a customers inability to meet its
financial obligations; and (ii) our judgments as to
potential prevailing economic conditions in the industry and
their potential impact on the Companys customers. Where we
deem it prudent to do so, we may require some form of credit
enhancement, such as a letter of credit or bank guarantee,
before shipping systems to certain customers. We have not
incurred any material accounts receivable credit losses during
the past three years. However, we sell a substantial number of
systems to a limited number of customers. Our three largest
customers accounted for 40.1 percent of accounts receivable
at December 31, 2007, compared to 35.0 percent at
December 31, 2006. An unanticipated business failure of one
of our main customers could result in a substantial credit loss
in respect to amounts owed to the Company by that customer,
which could adversely affect our results of operations and
financial condition. See Note 5 and 20 to our consolidated
financial statements.
ASML ANNUAL REPORT 2007
22
Contingencies and
litigation
We are party to various legal proceedings generally incidental
to our business, as disclosed in Note 15 to the
consolidated statements. In connection with these proceedings
and claims, our management evaluates, based on the relevant
facts and legal principles, the likelihood of an unfavorable
outcome and whether the amount of the loss could be reasonably
estimated. In each case, management has determined that either a
loss was not probable or was not reasonably estimable and, as a
result, no estimated losses were recorded as a charge to our
statement of operations in 2005, 2006 and 2007. Significant
subjective judgments were required in these evaluations,
including judgments regarding the validity of asserted claims
and the likely outcome of legal and administrative proceedings.
The outcome of these proceedings, however, is subject to a
number of factors beyond our control, most notably the
uncertainty associated with predicting decisions by courts and
administrative agencies. In addition, estimates of the potential
costs associated with legal and administrative proceedings
frequently cannot be subjected to any sensitivity analysis, as
damage estimates or settlement offers by claimants may bear
little or no relation to the eventual outcome. Finally, in any
particular proceeding, even where we believe that we would
ultimately prevail, we may agree to settle or to terminate a
claim or proceeding where we believe that doing so, when taken
together with other relevant commercial considerations, is more
cost-effective than engaging in an expensive and protracted
litigation, the outcome of which is otherwise uncertain. Such a
decision occurred when we determined to enter into a
cross-license agreement as an alternative to continuing our
intellectual property dispute with Nikon.
We accrue for legal costs related to litigation in our statement
of operations at the time when the related legal services are
actually provided to us.
Share-based
compensation expenses
Prior to January 1, 2006, we measured compensation expenses
for our stock option plans using the intrinsic value method
under APB 25 Accounting for Stock Issued to
Employees and related interpretations. As the exercise
price of all stock options granted under these plans was at or
above the fair market price of the underlying ordinary shares on
the grant date, no compensation expenses were recognized.
As of January 1, 2006, we implemented the provisions of
SFAS No. 123(R), Share-Based Payment,
using the modified prospective transition method. Under the
modified prospective transition method, no restatement of prior
interim periods and fiscal years has been made.
SFAS No. 123(R) requires companies to recognize the
cost of employee services received in exchange for equity-based
awards based upon the grant-date fair value of those awards. The
grant-date fair value of these awards was estimated using a
Black-Scholes option valuation model. This Black-Scholes
valuation model requires the use of assumptions, including the
risk-free interest rate, the expected stock price volatility and
the estimated life of each award. The risk-free interest rate
used in the model is determined, based on a Euro government bond
with a life equal to the expected life of the equity-settled
share-based payments.
Using the modified prospective transition method, we began
recognizing compensation expenses for equity-based awards
granted, modified, repurchased, or cancelled after the required
effective date of January 1, 2006. Additionally, we began
recognizing compensation expenses for equity-based awards
granted before the effective date of January 1, 2006 that
were outstanding as of January 1, 2006 and for which the
requisite service period has not been rendered. Compensation
expenses are recognized on a straight-line basis over the
requisite service period of the awards, which is generally the
vesting period. The total gross amount of expenses associated
with share based payments recognized in 2007 was EUR
16.5 million.
The grant-date fair value for awards for which the requisite
service has not been rendered and that are outstanding as of
January 1, 2006 was based on the grant-date fair value of
those awards as calculated under SFAS No. 123,
Accounting for Stock-Based Compensation for pro
forma disclosures under the assumption of historical volatility.
We changed our method of estimating expected volatility for all
stock options granted after January 1, 2006 from the
exclusive use of historical volatility to the exclusive use of
implied volatility. The primary reason for this change is that
historical volatility had showed a significant and consistent
downward trend over the five years ended December 31, 2006,
which we believe is the result of the semiconductor industry
becoming more mature and less cyclical. Within this period,
historical share price volatility decreased from 89 percent
in 2002 to 28 percent in 2006. The implied volatility as
applied by ASML in 2006 was approximately 30 percent, which
is significantly lower than historical share price volatility of
55 percent over the five year period then ended, and was
much closer to the actual volatility of ASMLs share price
over fiscal year 2006 of 28 percent. Consequently, we no
longer believe that an average historical volatility over a
period commensurate with the expected term of the employee stock
options (4-5 years) is likely to be indicative of future
stock price behavior. Instead, we believe that the exclusive use
of implied volatility results in a more accurate estimate of the
expected stock price volatility because it more appropriately
reflects market expectations of future stock price volatility.
Our stock options are actively traded on Euronext Amsterdam. For
this purpose, we use implied volatility as calculated by
Bloomberg, which is based on an average of traded stock options:
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with market prices reasonably close to the date of grant;
|
|
that have exercise prices close to the exercise price of the
employee stock options; and
|
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that have a remaining maturity of up to 4 years.
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ASML ANNUAL REPORT 2007
23
We make quarterly assessments of the adequacy of the
(hypothetical) tax pool to determine whether there are tax
deficiencies that require recognition in the consolidated
statements of operations. We have selected the alternative
transition method (under FSP
FAS 123(R)-3)
in order to calculate the tax pool.
We did not modify outstanding stock option plans in anticipation
of the adoption of SFAS No. 123(R). Our current stock
option plans do not provide for cash settlement of options. See
Note 1 and 14 to our consolidated financial statements.
Income
tax
We operate in various tax jurisdictions in Europe, Asia and the
United States and must comply with the tax laws and regulations
of each of these jurisdictions.
We use the asset and liability method in accounting for income
taxes. Under this method, deferred tax assets and liabilities
are recognized for tax consequences attributable to differences
between the balance sheet carrying amounts of existing assets
and liabilities and their respective tax bases. Furthermore tax
assets are recognized for the tax effect of incurred net
operating losses. If it is more likely than not that the
carrying amounts of deferred tax assets will not be realized, a
valuation allowance will be recorded to reduce the carrying
amounts of those assets.
We continuously assess our ability to realize our deferred tax
assets resulting from net operating loss carry-forwards. The
total amount of loss carry-forwards as of December 31, 2007
was EUR 209 million, which resides completely with ASML US,
Inc. We believe that all losses will be offset by future taxable
income before our ability to utilize those losses expires. This
analysis takes into account our projected future taxable income
from operations, possible tax planning alternatives available to
us, and a realignment of group assets that we effected during
the period 2001 through 2003 that included the transfer of
certain tangible and intangible assets of ASML US, Inc. to ASML
Netherlands B.V. The value of the assets transferred has
resulted and will result in income recognized and to be
recognized by ASML US, Inc., which we believe, together with
projected future taxable income from operations will be
sufficient to absorb the net operating losses that ASML US, Inc.
has incurred, prior to the expiry of those losses. In order to
determine with certainty the tax consequences and value of the
asset transfer and the routine remuneration of ASML US, Inc. for
intercompany services rendered, in 2002 we requested a bilateral
advance pricing agreement (APA) from the United
States and Netherlands tax authorities which resulted in
September 2007 in two duly signed APAs between certain ASML
subsidiaries and the tax authorities of the United States and
the Netherlands. The APAs will be valid through 2009 with the
possibility of extension (see also Note 16 to our consolidated
financial statements).
Until December 31, 2006, we accounted for income tax
contingencies in accordance with SFAS No. 5,
Accounting for Contingencies. The tax contingencies
mainly related to transfer pricing positions, operational
activities in countries where we are not tax registered and tax
deductible costs. We provided for these tax contingencies for
the duration of the statute of limitation which differs per tax
jurisdiction and generally ranges up to seven years. As of
December 31, 2006, the tax contingencies amount to EUR
130.7 million and are included in deferred tax and other
liabilities in the consolidated balance sheet.
On January 1, 2007, we adopted the provisions of
FIN 48 Accounting for Uncertainty in Income
Taxes. FIN 48 clarifies the accounting for income
taxes, by prescribing a minimum recognition threshold a tax
position is required to meet, before being recognized in the
financial statements. FIN 48 also provides guidance on
derecognition, measurement, classification, interest and
penalties, accounting in interim periods and disclosure
regarding income taxes. The cumulative effect of adopting
FIN 48 was an increase in the liability for unrecognized
tax benefits and a decrease in retained earnings of EUR
7.6 million at January 1, 2007. Upon adoption, the
liability for unrecognized tax benefits amounted to EUR
138.3 million. The amount of unrecognized tax benefits, if
recognized, would have a favorable effect on the Companys
effective tax rate.
In addition, consistent with the provisions of FIN 48, we
classified EUR 138.3 million as non-current liabilities
because payment of cash was not anticipated within one year of
the balance sheet date. These non-current income tax liabilities
are recorded in deferred tax and other liabilities in the
consolidated balance sheet.
Expected interest and penalties related to income tax
liabilities have been accrued for and are included in the
liability for unrecognized tax benefits and in the provision for
income taxes. The balance of accrued interest and penalties
recorded in the consolidated balance sheet of January 1,
2007 amounted to EUR 10.5 million and as of
December 31, 2007 amounted to EUR 32.0 million; these
amounts were also classified as non-current liabilities
consistent with the provisions of FIN 48.
A reconciliation of the beginning and ending balance of the
liability for unrecognized tax benefits is as follows:
ASML ANNUAL REPORT 2007
24
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2007
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(in millions)
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|
EUR
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Balance, January 1
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|
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|
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138.3
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Gross increases tax positions in prior period
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|
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17.7
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|
Gross decreases tax positions in prior period
|
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|
|
|
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(30.3
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)
|
Gross increase in tax positions in current period
|
|
|
|
|
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26.6
|
|
Gross decrease tax positions in current period
|
|
|
|
|
|
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Settlements
|
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|
|
|
(35.5
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)
|
Lapse of statute of limitations
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|
|
|
|
|
(6.5
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)
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|
|
|
|
|
|
|
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Balance, December 31
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|
|
|
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110.3
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For the 12 month period ending December 31, 2007,
there were material changes related to the liability for
unrecognized tax benefits that impacted the Companys
effective tax rate. This was due to the settlement of a number
of unrecognized tax benefits recorded in prior years in the
various jurisdictions. The settlement of the unrecognized tax
benefits in the Netherlands jurisdiction was the result of
discussions held with the Netherlands tax authorities. As a
result of these discussions clarity was obtained on
substantially all uncertain tax positions relating to the
Netherlands unrecognized tax benefits through fiscal year 2006.
The total tax liability related to resolved uncertain tax
positions in 2007 amounted to EUR 72.3 million of
which EUR 36.8 million was released to the tax
provision and EUR 35.5 million was reclassified from
deferred tax and other liabilities to current tax liabilities.
The Company estimates that the total liability of unrecognized
tax benefits will change with EUR 15.8 million within the
next 12 months. The estimated changes to the liability for
unrecognized tax benefits within the next 12 months are
mainly due to expected settlements and expiration of statute of
limitations which are expected to have a favorable effect on the
Companys effective tax rate.
On December 5, 2007, ASML Holding entered into a
Supervision Agreement, or Handhavingsconvenant with
the Netherlands tax authorities, which provides for cooperation
between ASML and the Netherlands tax authorities. The purpose of
this agreement is that parties base their mutual relationship on
transparency, understanding and trust. This should result in
accelerated settlement of uncertain tax positions for ASML in
the Netherlands, where ASML reports the vast majority of its
taxable income.
Results of
Operations
The following discussion and analysis of results of operations
should be viewed in the context of the risks affecting our
business strategy, described in Item 3.D. Risk
Factors.
Set forth below are our consolidated statements of operations
data for the three years ended December 31, 2007:
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Year ended December 31
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2005
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|
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2006
|
|
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2007
|
|
(in millions)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
Total net sales
|
|
|
2,529
|
|
|
|
3,597
|
|
|
|
3,809
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Cost of sales
|
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|
1,555
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|
|
|
2,135
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|
|
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2,248
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Gross profit on sales
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974
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1,462
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1,561
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Research and development costs
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348
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414
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511
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Amortization of in-process research and development costs
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23
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Research and development credits
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|
(24
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)
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(28
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)
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(24
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)
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Selling, general and administrative costs
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201
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205
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226
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Income from operations
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449
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871
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825
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Interest income (expense), net
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(14
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)
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(1
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)
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34
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Income from operations before income taxes
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435
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|
|
|
870
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|
|
|
859
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Provision for income taxes
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124
|
|
|
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245
|
|
|
|
171
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Net income
|
|
|
311
|
|
|
|
625
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688
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Set forth below are our consolidated statements of operations
from continuing operations data for the three years ended
December 31, 2007, expressed as a percentage of our total
net sales:
ASML ANNUAL REPORT 2007
25
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Year ended December 31
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2005
|
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2006
|
|
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2007
|
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Total net sales
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|
100.0
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%
|
|
|
100.0
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%
|
|
|
100.0
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%
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Cost of sales
|
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|
61.5
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|
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59.4
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59.0
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Gross profit on sales
|
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38.5
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40.6
|
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|
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41.0
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Research and development costs
|
|
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13.8
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11.5
|
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|
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13.4
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Amortization of
in-process
research and development costs
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|
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|
|
|
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0.6
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Research and development credits
|
|
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(1.0
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)
|
|
|
(0.8
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)
|
|
|
(0.6
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)
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Selling, general and administrative costs
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|
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8.0
|
|
|
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5.7
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|
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5.9
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Income from operations
|
|
|
17.8
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|
|
|
24.2
|
|
|
|
21.7
|
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Interest income (expense), net
|
|
|
(0.6
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)
|
|
|
|
|
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0.9
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Income from operations before income taxes
|
|
|
17.2
|
|
|
|
24.2
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|
|
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22.6
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Provision for income taxes
|
|
|
4.9
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|
|
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6.8
|
|
|
|
4.5
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Net income
|
|
|
12.3
|
|
|
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17.4
|
|
|
|
18.1
|
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Results of
operations from continuing operations 2007 compared with
2006
Consolidated
sales and gross profit
The following table shows a summary of sales (revenue and units
sold), gross profit on sales and ASP data on an annual and
semi-annual basis for the years ended December 31, 2007 and
2006.
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2006
|
|
|
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|
2007
|
|
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First
|
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Second
|
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Full
|
|
First
|
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Second
|
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Full
|
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half year
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|
half year
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year
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half year
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|
half year
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year
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Net sales (EUR million)
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|
|
1,571
|
|
|
2,026
|
|
|
3,597
|
|
|
1,895
|
|
|
1,914
|
|
|
3,809
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Net system sales (EUR million)
|
|
|
1,394
|
|
|
1,835
|
|
|
3,229
|
|
|
1,690
|
|
|
1,702
|
|
|
3,392
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Net service and field option sales (EUR million)
|
|
|
177
|
|
|
191
|
|
|
368
|
|
|
206
|
|
|
211
|
|
|
417
|
Total systems recognized
|
|
|
123
|
|
|
143
|
|
|
266
|
|
|
146
|
|
|
114
|
|
|
260
|
Total new systems recognized
|
|
|
97
|
|
|
123
|
|
|
220
|
|
|
131
|
|
|
104
|
|
|
235
|
Total used systems recognized
|
|
|
26
|
|
|
20
|
|
|
46
|
|
|
15
|
|
|
10
|
|
|
25
|
Gross profit on sales (% of sales)
|
|
|
40.3
|
|
|
40.9
|
|
|
40.6
|
|
|
41.0
|
|
|
40.9
|
|
|
41.0
|
ASP for systems (EUR million)
|
|
|
11.3
|
|
|
12.8
|
|
|
12.1
|
|
|
11.6
|
|
|
14.9
|
|
|
13.0
|
ASP for new systems (EUR million)
|
|
|
13.6
|
|
|
14.3
|
|
|
14.0
|
|
|
12.6
|
|
|
15.9
|
|
|
14.0
|
ASP for used systems (EUR million)
|
|
|
2.8
|
|
|
3.7
|
|
|
3.2
|
|
|
2.8
|
|
|
5.5
|
|
|
3.9
|
|
We achieved growth in net sales of EUR 212 million or
5.9 percent from EUR 3,597 million in 2006 to
EUR 3,809 million in 2007. The increase in net sales
mainly relates to an increase in net system sales of
EUR 163 million or 5.0 percent, from
EUR 3,229 million in 2006 to
EUR 3,392 million in 2007 mainly attributable to
increased ASPs partly offset by a lower number of systems
shipped and to an increase in net service and field option sales
of EUR 49 million or 13.3 percent from
EUR 368 million in 2006 to EUR 417 million
in 2007.
The number of systems shipped decreased by 2.3 percent from
266 systems in 2006 to 260 systems in 2007, following a year of
significant growth of systems shipped (35.7 percent) in
2006. The continued high market demand for lithography equipment
was driven by a continuing increased market demand for
semiconductor revenue by 11 percent in 2007 following two
years of semiconductor unit growth by 9 percent in 2005 and
2006. Furthermore the 2007 strong market demand was related to
the continued drive from our customers to follow or accelerate
their technology shrink roadmaps.
The ASP of our systems increased by 7.4 percent from
EUR 12.1 million in 2006 to EUR 13.0 million
in 2007. This increase was mainly driven by a change in product
mix reflecting the continued shift in market demand to our
leading-edge technology systems (as customers commenced their
ramp-up of
volume manufacturing with our leading-edge immersion systems for
45 nm Flash and 55 nm DRAM) with higher ASPs driven by the
shrink roadmaps of our customers. This increase was partly
offset by a growing number of
i-line
systems sold, with relatively low ASPs, in 2007 reflecting our
market share gains in this segment of the market.
From time to time, ASML repurchases systems that it has
manufactured and sold and, following factory-rebuild or
refurbishment, resells those systems to other customers. This
repurchase decision is mainly driven by market demand for
capacity expressed by other customers and not by explicit or
implicit contractual arrangements relating to the initial sale.
The number of used systems sold in 2007 decreased to 25 from 46
in 2006, reflecting decreased demand for older systems to
produce less complex ICs following two years of significant
capacity growth. The ASP for used systems increased from
EUR 3.2 million in 2006 to
ASML ANNUAL REPORT 2007
26
EUR 3.9 million in 2007, reflecting a further shift
from our older PAS 2500 towards our newer PAS 5500 family and
TWINSCAN family.
Net service and field option sales showed a 13.3 percent
increase from EUR 368 million in 2006 to
EUR 417 million in 2007, resulting from increased
service as well as field option sales. The increase in service
sales was mainly driven by the growth of our system installed
base at customers. The growth of field option sales is
positively impacted by the customer demand for system upgrade
packages that further enhance system performance.
Of the top 20 chipmakers worldwide, in terms of semiconductor
capital expenditures, 18 are customers of ASML. In 2007, sales
to the largest customer accounted for EUR 833 million,
or 21.9 percent of our net sales. In 2006, sales to the largest
customer accounted for EUR 730 million, or
20 percent of our net sales.
Gross profit increased 6.7 percent from
EUR 1,462 million or 40.6 percent of net sales in
2006 to 1,560 million or 41.0 percent of net sales in
2007. The gross margin was positively impacted by a changed
product mix (0.2 percent) and, more important, by decreased
cost of sales (2.4 percent) reflecting the results of our
continuous cost of sales reduction programs. Gross margin was
negatively impacted by decreased ASPs of mature technology
(−2.4 percent). In addition gross margin was
positively impacted by currency effects (0.4 percent)
partly offset by various other items including lower service
gross margin as a result of investments in spare parts related
to the introduction of immersion systems for volume
manufacturing as well as investments in our ASML Center of
Excellence (ACE) in Asia.
We started 2006 with an order backlog of 163 systems. In 2007,
we booked orders for 203 systems, received order cancellations
or push-outs beyond 12 months of 17 systems and recognized
sales for 260 systems. This resulted in an order backlog of 89
systems as of December 31, 2007. The total value of our
backlog as of December 31, 2007 amounted to
EUR 1,697 million with an ASP of
EUR 19.1 million, compared with a backlog of
EUR 2,146 million with an ASP of
EUR 13.2 million as of December 31, 2006. See
also Item 5.D. Trend Information.
Research and
development
Research and development costs increased by
EUR 97 million or 23.4 percent from
EUR 414 million in 2006 to EUR 511 million
in 2007. The increase reflected further investment in technology
leadership in 2007 through investments in the development of the
newest versions of our high resolution TWINSCAN systems and
enhancements of the next generation TWINSCAN systems based on
immersion, double patterning and EUV. In the third quarter of
2007 we shipped the first XT:1900i, capable of imaging features
down to 40 nm.
Amortization of in-process research and development costs of
EUR 23 million in 2007 relates to a one-off charge
related to the Brion acquisition.
Research and development credits are EUR 24 million in
2007 compared to EUR 27 million in 2006.
Selling,
general and administrative costs
Selling, general and administrative costs increased by
10.2 percent from EUR 205 million in 2006 to
EUR 226 million in 2007 reflecting the increased
activity level to support sales growth. Over the past two years
selling, general and administrative costs increased by
12.2 percent, while net sales grew by 50.6 percent.
Continuing cost reduction and efficiency programs contributed to
maintaining a relatively low increase in the level of selling,
general and administrative costs compared to the increase in net
sales and related activity over the two year period ended
December 31, 2007.
Net interest
expense
Net interest changed from EUR 1 million net interest
expense in 2006 to EUR 33 million net interest income
in 2007. Our interest income relates to interest earned on our
cash and cash equivalents. In 2007 interest income increased
mainly as a result of higher short-term interest rates and a
higher average cash balance. The average cash balance was higher
as a result of the cash provided by operating activities and the
issuance of a EUR 600 million Eurobond. Interest
expense in 2007 was lower due to the conversion of substantially
all the U.S. dollar 575 million 5.75 percent
Convertible Subordinated Notes in October 2006 (with the
unconverted notes redeemed) and the conversion of substantially
all the EUR 380 million 5.50 percent Convertible
Subordinated Notes, in October 2007 (with the unconverted notes
redeemed). This was partly offset by the issuance of a
EUR 600 million Eurobond in June 2007.
Income
taxes
Income taxes represented 19.9 percent of income before
taxes in 2007, compared to 28.2 percent in 2006. The
decrease in income taxes in 2007 is mainly related to a
favorable settlement of unrecognized tax benefits. In addition a
corporate tax rate reduction in the Netherlands also contributed
to a decrease in income taxes. As of January 1, 2007, we
implemented FIN 48
ASML ANNUAL REPORT 2007
27
Accounting for uncertainty in income taxes. The
cumulative effect of implementing FIN 48 was an increase in
the tax liability for uncertain tax positions against retained
earnings of EUR 7.6 million at January 1, 2007.
Results of
operations from continuing operations 2006 compared with
2005
Consolidated
sales and gross profit
The following table sets forth a summary of sales (by revenue
and units sold), gross profit on sales and ASP data on an annual
and semi-annual basis for the years ended December 31, 2006
and 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
2006
|
|
|
|
|
First
|
|
Second
|
|
Full
|
|
First
|
|
Second
|
|
Full
|
|
|
half year
|
|
half year
|
|
year
|
|
half year
|
|
half year
|
|
year
|
Net sales (EUR million)
|
|
|
1,448
|
|
|
1,081
|
|
|
2,529
|
|
|
1,571
|
|
|
2,026
|
|
|
3,597
|
Net system sales (EUR million)
|
|
|
1,313
|
|
|
915
|
|
|
2,228
|
|
|
1,394
|
|
|
1,835
|
|
|
3,229
|
Net service and field option sales (EUR million)
|
|
|
135
|
|
|
166
|
|
|
301
|
|
|
177
|
|
|
191
|
|
|
368
|
Total systems recognized
|
|
|
110
|
|
|
86
|
|
|
196
|
|
|
123
|
|
|
143
|
|
|
266
|
Total new systems recognized
|
|
|
94
|
|
|
62
|
|
|
156
|
|
|
97
|
|
|
123
|
|
|
220
|
Total used systems recognized
|
|
|
16
|
|
|
24
|
|
|
40
|
|
|
26
|
|
|
20
|
|
|
46
|
Gross profit on sales (% of sales)
|
|
|
39.6
|
|
|
37.1
|
|
|
38.5
|
|
|
40.3
|
|
|
40.9
|
|
|
40.6
|
ASP for systems (EUR million)
|
|
|
11.9
|
|
|
10.6
|
|
|
11.4
|
|
|
11.3
|
|
|
12.8
|
|
|
12.1
|
ASP for new systems (EUR million)
|
|
|
13.5
|
|
|
13.6
|
|
|
13.5
|
|
|
13.6
|
|
|
14.3
|
|
|
14.0
|
ASP for used systems (EUR million)
|
|
|
2.8
|
|
|
2.9
|
|
|
2.9
|
|
|
2.8
|
|
|
3.7
|
|
|
3.2
|
|
We achieved a significant growth in net sales of 42 percent
from EUR 2,529 million in 2005 to
EUR 3,597 million in 2006. The increase in net sales
was driven by a combination of ASP increases and an increased
market demand for lithography equipment in 2006 by
34 percent (2005: −3 percent). The increase in
net sales mainly relates to an increase in net system sales of
44.9 percent, from EUR 2,228 million in 2005 to
EUR 3,229 million in 2006 and to a lesser degree to an
increase in net service and field option sales of
22.3 percent from EUR 301 million in 2005 to
EUR 368 million in 2006.
The number of systems shipped increased by 35.7 percent
from 196 systems in 2005 to 266 systems in 2006. This increase
in the number of systems shipped reflects the increased market
demand for lithography equipment in 2006 as well as the growth
of our market share which is the result of our sustained
technological leadership.
The ASP of our systems increased slightly by 6.1 percent
from EUR 11.4 million in 2005 to
EUR 12.1 million in 2006. This increase is mainly
driven by a change in product mix reflecting the continuous
shift in market demand to our leading-edge technology systems
(65 nm ramp and immersion start up) with higher ASPs driven by
the shrink roadmaps of our customers, partly offset by a growing
number of
i-line and
KrF systems in 2006 reflecting capacity investments by our
customers.
The number of used systems sold in 2006 increased to 46 from 40
in 2005, reflecting increased demand for older systems to
produce less complex ICs. The ASP for used systems increased
from EUR 2.9 million in 2005 to
EUR 3.2 million in 2006, reflecting a further shift
from our older PAS 2500 towards our newer PAS 5500 family and
TWINSCAN family.
Net service and field option sales showed a 22.3 percent
increase from EUR 301 million in 2005 to
EUR 368 million in 2006, resulting from increased
service as well as field option sales. The increase in service
sales was mainly driven by the growth of our system installed
base at customers. The growth of field option sales is
positively impacted by the availability and customer demand for
system upgrade packages that further enhance system performance.
Of the top 20 chipmakers worldwide, in terms of semiconductor
capital expenditures, 16 were customers of ASML. In 2006, sales
to the largest customer accounted for EUR 730 million,
or 20 percent of our net sales. In 2005, sales to the largest
customer accounted for EUR 609 million, or
24 percent of our net sales.
Gross profit increased compared to 2005, increasing by
50.1 percent from EUR 974 million or 38.5 percent
of net sales in 2005 to 1,462 million or 40.6 percent
of net sales in 2006. The increased gross margin was positively
impacted by decreased cost of sales as a percentage of net sales
(5.2 percent positive impact on gross profit) reflecting the
results of our continuous cost of sales reduction program,
partly offset by a change in the product mix (2.1 percent
negative impact on gross profit) and slightly decreased prices
(0.8 percent negative impact on gross profit). The positive
impact on gross profit of the higher production volumes
(0.6 percent) and currency effects (0.4 percent) was
offset by the negative impact on gross profit of the higher cost
for obsolete inventories (0.4 percent) and the higher costs
for lens swaps (0.9 percent).
ASML ANNUAL REPORT 2007
28
We started 2005 with an order backlog of 95 systems. In
2006, we booked orders for 347 systems, received order
cancellations or
push-outs
beyond 12 months of 13 systems and recognized sales
for 266 systems. This resulted in an order backlog of
163 systems as of December 31, 2006. The total value
of our backlog as of December 31, 2006 amounted to
EUR 2.1 billion, compared with a backlog of
approximately EUR 1.4 billion as of December 31,
2005.
Research and
development
Research and development costs increased by 19.0 percent
from EUR 348 million in 2005 to
EUR 414 million in 2006. We further accelerated our
investment in technology leadership in 2006 through the
investments in the newest versions of our high resolution
TWINSCAN systems and enhancements of the next generation
TWINSCAN systems based on immersion, double patterning, EUV and
the development of optical maskless lithography. In the second
quarter of 2006 we shipped the first XT:1700i and the third
quarter we introduced the XT:1900i, both enhanced immersion
systems. Also in the second quarter of 2006, we shipped the
industrys first EUV Alpha Demo Tools to two research and
development institutions.
Research and development credits increased from
EUR 24 million in 2005 to EUR 27 million in
2006 due to an increased volume of research and development
projects that qualified for credits under governmental funding
programs.
Selling,
general and administrative costs
Selling, general and administrative costs increased by only
2 percent from EUR 201 million in 2005 to
EUR 205 million in 2006 while sales grew by
42 percent. Cost reduction and efficiency programs
contributed to maintaining a near constant level of selling,
general and administrative costs.
Net interest
expense
Net interest expense decreased from EUR 14 million in
2005 to EUR 1 million in 2006 due to decreased
interest expenses and increased interest income. Interest
expense mainly relate to our convertible subordinated notes,
which had lower average balances in 2006 mainly due to the
conversion of the USD 575 million 5.75 percent
convertible notes which were due October 15, 2006. Our
interest income relates primarily to interest earned on our cash
and cash equivalents. Our interest income increased in 2006
mainly as a result of higher short term interest rates.
Income
taxes
Income taxes represented 28.2 percent of income before
taxes in 2006, compared to 28.4 percent in 2005. The
decrease in income taxes in 2006 is mainly related to a
corporate tax rate reduction in the Netherlands.
Foreign Exchange
Management
See Item 3.D. Risk Factors, Fluctuations in Foreign
Exchange Rates Could Harm Our Results of Operations,
Item 11 Quantitative and Qualitative Disclosures
About Market Risk and Note 4 to our consolidated
financial statements.
New U.S.
GAAP Accounting Pronouncements
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments.
This Statement amends SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities and
SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities and permits, among other things, fair value
re-measurement for any hybrid financial instrument that contains
an embedded derivative that otherwise would require bifurcation.
SFAS No. 155 had to be adopted for all financial
instruments acquired, issued, or subject to a re-measurement
(new basis) event occurring after the beginning of an
entitys first fiscal year that begins after
September 15, 2006. The adoption of SFAS No. 155
did not have a material impact on our consolidated financial
statements.
In June 2006, the FASB issued Interpretation 48,
Accounting for Uncertainty in Income Taxes.
FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold a tax position is
required to meet before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. On
January 1, 2007 we adopted FIN 48. See Note 16 to
the consolidated financial statements for additional
information, including the effect of adoption on the
Companys consolidated financial statements.
In June 2006, the FASB ratified the consensus reached by the
FASBs Emerging Issues Task Force (EITF) on
Issue
No. 06-03,
How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income
Statement (That is, Gross versus Net Presentation)
(EITF
No. 06-03).
EITF
No. 06-03
permits registrants to elect to present vendor taxes imposed
concurrently on a specific revenue-producing transaction between
a seller and a customer on either a gross or net basis. The
scope of EITF
No. 06-03
includes government assessed taxes that are directly imposed on
revenue-producing transactions between a seller and a customer
and may include, but is not limited to, sales, use, value added
and some excise taxes. Registrants are to be required to
disclose their policies for presenting the taxes and would
disclose any amounts presented on a gross basis. EITF
No. 06-03
is effective for interim and annual financial statements issued
for periods beginning after
ASML ANNUAL REPORT 2007
29
December 15, 2006. The adoption of EITF
No. 06-03
did not have a material impact on our consolidated financial
statements. ASML continues to recognize revenues excluding the
taxes levied on revenues (net basis).
The FASB issued SFAS No. 157, Fair Value
Measurements on September 15, 2006. The Statement
defines fair value, provides guidance on how to measure assets
and liabilities using fair value and expands disclosures about
fair value measurements. The Statement is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 and should be applied prospectively (with
a limited form of retrospective application) as of the beginning
of the fiscal year in which this Statement is initially applied.
We believe that the adoption of SFAS No. 157 will have
no material impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities Including an amendment of FASB Statement
No. 115 (SFAS 159). SFAS 159 is
expected to expand the use of fair value accounting but does not
affect existing standards which require certain assets or
liabilities to be carried at fair value. The objective of
SFAS 159 is to improve financial reporting by providing
companies with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge
accounting provisions. Under SFAS 159, a company may
choose, at specified election dates, to measure eligible items
at fair value and report unrealized gains and losses on items
for which the fair value option has been elected in earnings at
each subsequent reporting date. SFAS 159 is effective for
interim and annual financial statements issued for fiscal years
beginning after November 15, 2007. We are currently
assessing the impact that SFAS 159 may have on our
consolidated financial statements.
In June 2007, the FASB ratified the consensus reached by the
EITF on Issue
No. 06-11,
Accounting for Income Tax Benefits of Dividends on
Share-Based Payment Awards. EITF
No. 06-11
requires that a realized income tax benefit from dividends or
dividend equivalents that are charged to retained earnings and
are paid to employees for equity classified nonvested equity
shares, nonvested equity share units, and outstanding equity
share options should be recognized as an increase to additional
paid-in capital. The amount recognized in additional paid-in
capital for the realized income tax benefit from dividends on
those awards should be included in the pool of excess tax
benefits available to absorb tax deficiencies on share-based
payment awards. EITF
No. 06-11
is effective for interim and annual financial statements issued
for periods beginning after December 15, 2007. We believe
that the adoption of EITF
06-11 will
have no material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS 141(R),
Business Combinations. This statement replaces FASB
Statement No. 141 Business Combinations.
SFAS 141(R) improves the relevance, representational
faithfulness and comparability of the information that a
reporting entity provides in its financial reports about a
business combination and its effects. This FASB statement
applies prospectively to business combination for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2008. We are currently assessing the impact that
SFAS 141(R) may have on our consolidated financial
statements.
In December 2007, the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial
Statements. This statement amends ARB No. 51
Consolidated Financial Statement. This Statement
establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in
the consolidated financial statements. This Statement is
effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008.
Adoption of SFAS 160 will have no impact on our
consolidated financial statements since all subsidiaries are
wholly owned and no subsidiaries are deconsolidated.
In December 2007, the SEC issued Staff Accounting
Bulletin No. 110 (SAB 110) regarding
the use of a simplified method in developing an
estimate of expected term of plain vanilla share
options. In particular, the staff indicated in SAB 107 that
it will accept a companys election to use the simplified
method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At
the time SAB 107 was issued, the SEC staff believed that
more detailed external information about employee exercise
behavior (e.g. employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily
available to companies. Therefore, the SEC staff stated in
SAB 107 that it would not expect a company to use the
simplified method for share option grants after
December 31, 2007. The SEC staff stated that it understands
that such detailed information about employee exercise behavior
may not be widely available by December 31, 2007.
Accordingly, the SEC staff stated that it will continue to
accept, under certain circumstances, the use of the simplified
method beyond December 31, 2007. We believe that the
adoption of SAB 110 will have no material adverse effect on
our consolidated financial statements.
B. Liquidity and
Capital Resources
The following discussion and analysis of financial condition
should be viewed in the context of the risks affecting our
business, described in Item 3.D. Risk Factors.
ASML ANNUAL REPORT 2007
30
Our balance of cash and cash equivalents amounted to
EUR 1,656 million and EUR 1,272 million as
of December 31, 2006 and 2007, respectively.
We generated cash from operating activities of
EUR 478 million and EUR 670 million in 2006
and 2007, respectively. The primary components of cash provided
by operating activities in 2007 were net income (EUR
688 million) plus non-cash expenses (EUR 215 million)
mainly related to depreciation, impairment charges and inventory
obsolescence partially offset by a cash outflow of
EUR 233 million due to investments in working capital.
The investments in working capital mainly relate to higher
inventories of EUR 439 million and higher other assets
of EUR 86 million, partly offset by higher accrued
liabilities of EUR 263 million. The higher inventories
relate to the increased complexity of our systems resulting in
higher costs of components for our systems and higher ASPs.
We used EUR 66 million for investing activities in
2006 and EUR 348 million in 2007. The majority of the
2007 expenditures was spent on the ongoing construction of a new
production facility, the acquisition of Brion and, to a lesser
extent, machinery and equipment and information technology
investments.
Net cash used by financing activities was
EUR 648 million in 2006 compared to
EUR 699 million in 2007. In 2007, cash provided by
financing activities mainly included EUR 594 million
net proceeds from the issuance in June 2007 of a Eurobond,
EUR 80 million from the issuance of shares in
connection with the exercise of employee stock options. In 2007,
cash used by financing activities mainly included
EUR 1,372 million for share buyback programs
(including the synthetic share buyback) and
EUR 10 million for the redemption of debt. See also
Item 16.E. Purchases of Equity Securities by the
Issuer and Affiliated Purchasers.
Our principal sources of liquidity consist of
EUR 1,272 million of cash and cash equivalents as of
December 31, 2007, EUR 500 million of available
credit facilities as of December 31, 2007 and cash flows
from operations. For further details of our credit facilities,
see Note 12 to our consolidated financial statements. In
addition to cash and available credit facilities, from time to
time we raise additional capital in debt and equity markets. Our
liquidity needs are affected by many factors, some of which are
based on the normal ongoing operations of the business, and
others that relate to the uncertainties of global economies and
the semiconductor industries. Although our cash requirements
fluctuate based on the timing and extent of these factors, we
believe that cash generated from operations, together with the
liquidity provided by existing cash balances, are sufficient to
satisfy our present requirements.
We expect substantial cash outflow from investing activities in
2008 due to our planned capital expenditures. Subject to market
developments we expect that our capital expenditures in 2008
could be up to approximately EUR 250 million, an
increase of EUR 18 million compared to 2007. We expect
that a significant part of the 2008 expenditures will be
allocated to construction and upgrades of production facilities
in the Netherlands and Taiwan. See also Item 4.D.
Property, Plants and Equipment. We expect to finance
2008 capital expenditures out of our cashflow from operations
and available cash and cash equivalents.
We reiterate our commitment to return excess cash to our
shareholders and will consider all available opportunities to
return this cash to shareholders, including share buybacks,
dividend and capital repayment. Accordingly, we intend to seek
authorization for additional share buyback programs at the
Annual General Meeting of Shareholders on April 3, 2008.
We have repayment obligations in 2017, amounting to
EUR 600 million, on our 5.75 percent senior notes
due 2017. We currently intend to fund any future repayment
obligations primarily with cash on hand and cash generated
through operations. A description of our senior bond, lines of
credit and other borrowing arrangements is provided in
Note 12 to our consolidated financial statements.
Our contractual obligations and commercial commitments are
disclosed in further detail in Item 5.F. Tabular
Disclosure of Contractual Obligations and Note 13 to
our consolidated financial statements.
See Notes 4 and 12 to our consolidated financial statements
for discussion of our funding, treasury policies and currencies
in which cash and cash equivalents are held and convertible
notes, senior bonds and other borrowing arrangements.
C. Research and
Development, Patents and Licenses, etc
Research and
Development
See Item 4.B. Business Overview, Research and
Development and Item 5.A. Operating
Results.
Intellectual
Property Matters
See Item 3.D. Risk Factors, Defending Against
Intellectual Property Claims by Others Could Harm Our
Business and Item 4.B. Business Overview,
Intellectual Property.
ASML ANNUAL REPORT 2007
31
D. Trend
Information
Within the current sentiment of global economic weakness and an
overall 2008 semiconductor capital investment slowdown forecast
by some analysts and customers, ASML believes that it is
nonetheless well positioned for robust revenues in the first
half of 2008. With 60 percent of our
EUR 1,697 million backlog covered by immersion
technology tools, and 26 percent of the backlog ordered by
manufacturers of logic ICs, we have a relatively low exposure to
the currently more volatile capital spend at second tier memory
manufacturers. Our immersion products are designed to enable
rapid technology transfers down to 4x nm nodes, which are being
executed by our customers to reach appropriate integration and
cost targets that are needed in the current environment. We
expect to almost double our net sales from immersion systems in
2008 from 2007. Although independent market researchers still
expect a double digit increase in demand for integrated circuit
units in 2008, which we expect will translate into lithography
market expansion in 2008, we are awaiting confirmation of this
potential growth through the level of first and second quarter
bookings. We remain optimistic, in view of our customers
large immersion technology needs, their high level of capacity
utilization, and the current IC inventory levels in the market.
The trends discussed in this Item 5.D. are subject to risks and
uncertainties. See Part I Special Note Regarding
Forward Looking Statements.
The following table sets forth our backlog of systems as of
December 31, 2006 and 2007.
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2006
|
|
2007
|
Backlog sales of new systems (units)
|
|
|
153
|
|
|
79
|
Backlog sales of used systems (units)
|
|
|
10
|
|
|
10
|
Backlog sales of total systems (units)
|
|
|
163
|
|
|
89
|
Value of backlog new systems (EUR million)
|
|
|
2,120
|
|
|
1,650
|
Value of backlog used systems (EUR million)
|
|
|
26
|
|
|
47
|
Value of backlog of total systems (EUR million)
|
|
|
2,146
|
|
|
1,697
|
ASP for new systems (EUR million)
|
|
|
13.9
|
|
|
20.9
|
ASP for used systems (EUR million)
|
|
|
2.6
|
|
|
4.7
|
ASP for total systems (EUR million)
|
|
|
13.2
|
|
|
19.1
|
|
Our backlog includes only system orders for which written
authorizations have been accepted and shipment dates within
12 months have been assigned. Historically, orders have
been subject to cancellation or delay by the customer. Due to
possible customer changes in delivery schedules and to
cancellation of orders, our backlog at any particular date is
not necessarily indicative of actual sales for any succeeding
period.
ASML expects to ship 50 systems in the first quarter of 2008
with an average selling price of EUR 18.9 million for
new systems and an average selling price for all systems of
EUR 16.3 million. We expect a gross profit margin in
the first quarter of 2008 of between 40 to 41 percent,
research and development costs of EUR 127 million net
of credits and selling, general and administrative costs of
EUR 58 million.
E. Off-Balance
Sheet Arrangements
We have various contractual obligations, some of which are
required to be recorded as liabilities in our consolidated
financial statements, including long- and short-term debt. Other
contractual arrangements, namely operating lease commitments and
purchase obligations, are not generally required to be
recognized as liabilities on our balance sheet but are required
to be disclosed.
Variable Interest
Entities
In December 2003, the FASB issued FIN 46(R)
Consolidation of Variable Interest Entities. Under
FIN 46(R), an enterprise must consolidate a variable
interest entity if that enterprise has a variable interest (or
combination of variable interests) that will absorb a majority
of the entitys expected losses if they occur, receive a
majority of the entitys expected residual returns if they
occur, or both.
In 2003, ASML moved to its current Veldhoven headquarters. We
lease these headquarters for a period of 15 years from an
entity (the lessor) that was incorporated by a
syndicate of three banks (shareholders) solely for
the purpose of leasing this building. The shareholders equity in
the lessor amounts to EUR 1.9 million. The
shareholders each granted a loan of EUR 11.6 million
and a fourth bank granted a loan of EUR 12.3 million
to the lessor. ASML provided the lessor with a subordinated loan
of EUR 5.4 million and has a purchase option that is
exercisable either at the end of the lease in 2018, at a
pre-determined price of EUR 24.5 million, or during
the lease at the book value of the assets. The total assets of
the lessor entity amounted to approximately
EUR 54 million at inception of the lease.
ASML ANNUAL REPORT 2007
32
ASML believes that it holds a variable interest in this entity
and that the entity is a variable interest entity
(VIE) because it is subject to consolidation in
accordance with the provisions of paragraph 5 of
FIN 46(R). The total equity investment at risk is
approximately 3.6 percent of the lessors total assets
and is not considered and cannot be demonstrated, qualitatively
or quantitatively, to be sufficient to permit the lessor to
finance its activities without additional subordinated financial
support provided by any parties, including the shareholders.
ASML has determined that it is not appropriate to consolidate
the VIE as it is not the primary beneficiary. To make this
determination, the expected losses and expected residual returns
of the lessor were allocated to each variable interest holder
based on their contractual right to absorb expected losses and
residual returns. The analysis of expected losses and expected
residual returns involved determining the expected negative and
positive variability in the fair value of the lessors net
assets exclusive of variable interests through various cash flow
scenarios based upon the expected market value of the
lessors net assets. Based on this analysis, ASML
determined that other variable interest holders will absorb the
majority of the lessors expected losses, and as a result,
ASML is not the primary beneficiary.
ASMLs maximum exposure to the lessors expected
losses is estimated to be approximately
EUR 5.4 million.
Purchase
Obligations
We enter into purchase commitments with vendors in the ordinary
course of business to ensure a smooth and continuous supply
chain for key components. Purchase obligations include medium to
long-term purchase agreements. These contracts differ and may
include certain restrictive clauses. Any identified losses that
result from purchase commitments that are forfeited are provided
for in our financial statements. As of December 31, 2007,
we had purchase commitments for a total amount of approximately
EUR 1,405 million, compared to
EUR 995 million as of December 31, 2006. This
increase is mainly due to costs of components for our systems as
ASPs have increased. In our negotiations with suppliers we
continuously seek to align our purchase commitments with our
business objectives. See also Item 5.F. Tabular
Disclosure of Contractual Obligations.
Other Off-Balance
Sheet Arrangements
We have certain additional commitments and contingencies that
are not recorded on our balance sheet but may result in future
cash requirements.
We provide guarantees to third parties in connection with
transactions entered into in the ordinary course of business
from time to time.
F. Tabular
Disclosure of Contractual Obligations
Our contractual obligations as of December 31, 2007 can be
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
After
|
Payments due by period
|
|
Total
|
|
1 year
|
|
1-3 years
|
|
3-5 years
|
|
5 years
|
(In thousands)
|
|
EUR
|
|
EUR
|
|
EUR
|
|
EUR
|
|
EUR
|
Long Term Debt Obligations, including interest
expenses1
|
|
|
948,222
|
|
|
35,706
|
|
|
71,412
|
|
|
69,000
|
|
|
772,104
|
Operating Lease Obligations
|
|
|
189,293
|
|
|
36,040
|
|
|
55,581
|
|
|
40,586
|
|
|
57,086
|
Purchase Obligations
|
|
|
1,405,283
|
|
|
1,375,334
|
|
|
29,945
|
|
|
4
|
|
|
|
Unrecognized tax benefits (FIN 48)
|
|
|
110,346
|
|
|
15,750
|
|
|
28,941
|
|
|
13,402
|
|
|
52,253
|
Other
Liabilities2
|
|
|
53,259
|
|
|
40,459
|
|
|
12,800
|
|
|
|
|
|
|
|
Total Contractual Obligations
|
|
|
2,706,403
|
|
|
1,503,289
|
|
|
198,679
|
|
|
122,992
|
|
|
881,443
|
|
|
|
1
|
We refer to Note 12 to the
consolidated financial statements for the amounts excluding
interest expenses.
|
2
|
Other liabilities relate to system
repurchase commitments.
|
ASML ANNUAL REPORT 2007
33
Several operating leases for our buildings contain purchase
options, exercisable at the option of the Company at the end of
the lease, and in some cases, during the term of the lease. The
amounts to be paid if ASML should exercise these purchase
options at the end of the lease can be summarized as of
December 31, 2007 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase options
|
|
|
|
Less than
|
|
|
|
|
|
After
|
due by period
|
|
Total
|
|
1 year
|
|
1-3 years
|
|
3-5 years
|
|
5 years
|
(in thousands)
|
|
EUR
|
|
EUR
|
|
EUR
|
|
EUR
|
|
EUR
|
Purchase options
|
|
|
61,362
|
|
|
3,358
|
|
|
2,269
|
|
|
8,250
|
|
|
47,485
|
|
G. Safe
Harbor
See Special Note regarding Forward-Looking
Statements.
Item 6 Directors,
Senior Management and Employees
A. Directors and
Senior Management
The members of our Supervisory Board and our Board of Management
are as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Year of Birth
|
|
Term Expires
|
Arthur P.M. van der
Poel1, 3,
4
|
|
Chairman of the Supervisory Board
|
|
|
1948
|
|
|
2008
|
Jan A.
Dekker1,
4
|
|
Member of the Supervisory Board
|
|
|
1939
|
|
|
2009
|
Jos W.B.
Westerburgen2,
3
|
|
Member of the Supervisory Board
|
|
|
1942
|
|
|
2009
|
Fritz W.
Fröhlich1
|
|
Member of the Supervisory Board
|
|
|
1942
|
|
|
2008
|
Ieke C.J. van den
Burg2
|
|
Member of the Supervisory Board
|
|
|
1952
|
|
|
2009
|
OB
Bilous3,
4
|
|
Member of the Supervisory Board
|
|
|
1938
|
|
|
2009
|
William T.
Siegle4
|
|
Member of the Supervisory Board
|
|
|
1939
|
|
|
2011
|
Rolf
Deusinger2
|
|
Member of the Supervisory Board
|
|
|
1957
|
|
|
2011
|
Eric Meurice
|
|
President, Chief Executive Officer and Chairman of the Board of
Management
|
|
|
1956
|
|
|
2008
|
Peter T.F.M. Wennink
|
|
Executive Vice President, Chief Financial Officer and Member of
the
Board of Management
|
|
|
1957
|
|
|
N/A5
|
Martin A. van den Brink
|
|
Executive Vice President Marketing & Technology and Member
of the
Board of Management
|
|
|
1957
|
|
|
N/A5
|
Klaus P. Fuchs
|
|
Executive Vice President Operations and Member of the Board of
Management
|
|
|
1958
|
|
|
2010
|
|
|
|
1
|
Member of the Audit Committee.
|
2
|
Member of the Remuneration
Committee.
|
3
|
Member of the Selection and
Nomination Committee.
|
4
|
Member of the Technology and
Strategy Committee.
|
5
|
There are no specified terms for
members of the Board of Management appointed prior to March 2004.
|
Effective March 28, 2007, Mr. Bodt retired by rotation
from the Supervisory Board. On that same date, Mr. Siegle
was appointed as member of the Supervisory Board and, on
July 17, 2007, Mr. Deusinger was appointed as member
of the Supervisory Board. Mr. Van der Poel and
Mr. Fröhlich will retire by rotation from the
Supervisory Board on April 3, 2008.
There are no family relationships among the members of our
Supervisory Board and Board of Management.
Since 2005, the Works Council of ASML Netherlands B.V. has an
enhanced right to make recommendations (which recommendation may
be rejected by the Supervisory Board in limited circumstances)
for nomination of at least one-third of the members of the
Supervisory Board. See Item 6.C. Board Practices,
Supervisory Board. At the 2005 General Meeting of
Shareholders, Ms. Van den Burg was appointed pursuant to
this recommendation right and, at the Extraordinary General
Meeting of Shareholders held on July 17, 2007,
Mr. Deusinger was appointed pursuant to this recommendation
right. In accordance with our Articles of Association, the
appointments of Ms. Van den Burg and Mr. Deusinger
satisfy the Works Councils current recommendation right.
ASML ANNUAL REPORT 2007
34
Director and
Officer Biographies
Arthur P.M.
van der Poel
Mr. Van der Poel was appointed to our Supervisory Board in
March 2004 and was appointed as Chairman in 2007. Until 2001 he
was the Chief Executive Officer of Philips Semiconductors.
Mr. Van der Poel is a former member of the Board of
Management (through May 2003) and a former member of the
Group Management Committee (through April 2004) of Royal
Philips Electronics. Mr. Van der Poel is the chairman of
the Board of the Dutch Innovation Program Point-One, a member of
the Board of Directors of Gemalto Holding N.V., a director of
the Public Utility Fund (PUF-NRE) and serves as a member of the
Supervisory Boards of PSV N.V. and DHV Holding B.V.
Jan A.
Dekker
Mr. Dekker has served on our Supervisory Board since 1997.
Mr. Dekker is a former Chief Executive Officer of TNO from
which he retired in November 2003. He currently serves on the
Supervisory Boards of Koninklijke BAM Group N.V. and Syntens and
he is also President of the Royal Institute of Engineers (KIVI
NIRIA).
Jos W.B.
Westerburgen
Mr. Westerburgen was appointed to our Supervisory Board in
March 2002. Mr. Westerburgen has extensive experience in
the field of corporate law and tax. Mr. Westerburgen is
former Company Secretary and Head of Tax of Unilever.
Mr. Westerburgen currently serves as a member of the
Supervisory Board of Unibail-Rodamco S.A. and is also
Vice-Chairman of the Board of the Association Aegon.
Fritz W.
Fröhlich
Mr. Fröhlich was appointed to our Supervisory Board in
March 2004. He is the former Deputy Chairman and Chief Financial
Officer of Akzo Nobel N.V. Mr. Fröhlich is the
Chairman of the Supervisory Boards of Randstad Holding N.V.,
Draka Holding N.V. and Altana A.G. and serves as a member of the
Supervisory Boards of Allianz Nederland N.V. and Rexel S.A.
Ieke C.J. van
den Burg
Ms. Van den Burg was appointed to our Supervisory Board in
March 2005. She is a former member of the Dutch Social and
Economic Council and of the EU Economic and Social Committee.
Ms. Van den Burg also held various positions in Dutch and
international trade union and labor organizations. Ms. Van
den Burg has been a member of the European Parliament
(EP) since 1999 and has served on the EPs
Committee on Economic and Monetary Affairs since 1999 and on the
Committee on the Internal Market and Customer Protection since
2004.
OB
Bilous
Mr. Bilous was appointed to our Supervisory Board in March
2005. From 1960 until 2000 Mr. Bilous held various
management positions at IBM, including General Manager and VP
Worldwide Manufacturing of IBMs Microelectronics Division.
He also served on the Boards of SMST, ALTIS Semiconductor and
Dominion Semiconductor. Mr. Bilous currently serves as
Chairman of the Board of Directors of Sematech and as Board
member of Nantero, Inc.
William T.
Siegle
Mr. Siegle was appointed to our Supervisory Board in March
2007. From 1964 until 1990 Mr. Siegle held various
technical, management and executive positions at IBM, including
Director of the Advanced Technology Center. From 1990 until 2005
Mr. Siegle served as SVP and Chief Scientist at AMD,
responsible for the development of technology platforms and
manufacturing operations worldwide. He was also chairman of the
Board of Directors of SRC, member of the Board of Directors of
Sematech and Director of Etec, Inc. and DuPont Photomask, Inc.
Currently, Mr. Siegle is a member of the Advisory Boards of
Toppan Photomasks, Inc. and Acorn Technologies, Inc.
Rolf
Deusinger
Mr. Deusinger was appointed to our Supervisory Board in
July 2007. Mr. Deusinger is the Executive Vice President
Human Resources of ICI plc in London, which position he has held
since 2002. Before Mr. Deusinger joined ICI plc, he held
several senior human resources management functions with various
international companies in the US and Europe, including Pepsi
Cola Corporation and Messer Griesham GmbH.
Eric
Meurice
Mr. Meurice joined ASML on October 1, 2004 as
President, Chief Executive Officer and Chairman of the Board of
Management. Prior to joining ASML, and since March 2001, he was
Executive Vice President Thomson Television
Worldwide. Between 1995 and 2001, Mr. Meurice served as
Vice President for Dell Computer, where he ran the Western,
Eastern Europe and Dells Emerging Markets business within
EMEA. Before 1995, he gained extensive technology experience in
the semiconductor industry at ITT Semiconductors Group and Intel
Corporation, in the micro-controller group. Mr. Meurice is
currently a member of the Board of Directors of Verigy Inc.
ASML ANNUAL REPORT 2007
35
Peter T.F.M.
Wennink
Mr. Wennink joined ASML on January 1, 1999 and was
appointed as Executive Vice President, Chief Financial Officer
of ASML and member of our Board of Management on July 1,
1999. Mr. Wennink has an extensive background in finance
and accounting. Prior to his employment with ASML,
Mr. Wennink worked as a partner at Deloitte Accountants,
specializing in the high technology industry with an emphasis on
the semiconductor equipment industry. Mr. Wennink is a
member of the Netherlands Institute of Registered Accountants.
Mr. Wennink is currently a member of the Supervisory Board
of Bank Insinger de Beaufort N.V.
Martin A. van
den Brink
Mr. Van den Brink was appointed as Executive Vice President
Marketing & Technology in 1999. Before that, he served
as Vice President Technology since 1995. Mr. Van den Brink
was appointed as a member of our Board of Management in 1999.
Klaus P.
Fuchs
Mr. Fuchs was appointed as Executive Vice President
Operations and member of the Board of Management in 2006.
Between 2003 and 2005, Mr. Fuchs served as Vice President
of Linde AG in Wiesbaden, Germany where he was responsible for
strategic direction and operations of its industrial sector.
Before that he was technical director and member of the
executive board at TRW Aerospace and he also gained experience
at Daimler Benz Aerospace as Vice President of electronic
systems.
For details on Board of Management and Supervisory Board
remuneration as well as benefits upon termination of executive
employment, see Note 18 to our consolidated financial
statements.
ASML has not in the past established and does not intend to
establish in the future stock option or purchase plans or other
equity compensation arrangements for members of our Supervisory
Board.
Bonus and
Profit-sharing plans
For details on our bonus and profit sharing plans for our
employees, see Note 14 to our consolidated financial
statements.
Pension
plans
For details on our pension plans for our employees, see
Note 14 to our consolidated financial statements.
Board
Practices
General
We endorse the importance of good corporate governance, in which
independent oversight, accountability and transparency are the
most significant elements. Within the framework of corporate
governance, it is important that a relationship of trust exists
between the Board of Management, the Supervisory Board, our
employees and our shareholders.
In addition to the exchange of ideas at the General Meeting of
Shareholders, other important forms of communication include the
publication of our annual and quarterly financial results as
well as press releases and publications posted on our website.
In addition, we pursue a policy of active communication with our
shareholders. Our corporate governance structure is intended to:
|
|
|
provide shareholders with regular, reliable and relevant
transparent information regarding our activities, structure,
financial condition, performance and other information,
including information on our social, ethical and environmental
records and policies;
|
|
apply high quality standards for disclosure, accounting and
auditing; and
|
|
apply stringent rules with regard to insider securities trading.
|
Two-tier
structure
ASML is incorporated under Netherlands law and has a two-tier
board structure. Responsibility for the management of ASML lies
with the Board of Management. Independent, non-executive members
serve on the Supervisory Board, which supervises and advises the
members of the Board of Management in performing their
management tasks. The Board of Management has the duty to keep
the Supervisory Board informed, consult with the Supervisory
Board on important matters and submit certain important
decisions to the Supervisory Board for its approval. The
supervision of the Board of Management by the Supervisory Board
includes (i) achievement of ASMLs objectives,
(ii) corporate strategy and management of risks inherent to
ASMLs business activities, (iii) the structure and
operation of internal risk management and control systems,
(iv) the financial reporting process and
(v) compliance with applicable legislation and regulations.
Supervisory Board members are prohibited from serving as
officers or employees of ASML, and members of the Board of
Management cannot serve on the Supervisory Board.
ASML ANNUAL REPORT 2007
36
Board of
Management
The Board of Management consists of at least two members or such
larger number of members as determined by the Supervisory Board.
Members of the Board of Management are appointed by the
Supervisory Board. The Supervisory Board must notify the General
Meeting of Shareholders of the intended appointment of a member
of the Board of Management. As a result of our compliance with
the Netherlands Corporate Governance Code, members of the Board
of Management that are appointed in 2004 or later shall be
appointed for a maximum period of four years, but may be
re-appointed. Members of the Board of Management serve until the
end of the term of their appointment, voluntary retirement, or
suspension or dismissal by the Supervisory Board. In the case of
dismissal, the Supervisory Board must first inform the General
Meeting of Shareholders of the intended removal.
The Supervisory Board determines the remuneration of the
individual members of the Board of Management, in line with the
remuneration policy adopted by the General Meeting of
Shareholders, upon a proposal of the Supervisory Board.
ASMLs remuneration policy is posted on its website.
Supervisory
Board
The Supervisory Board consists of at least three members or such
larger number as determined by the Supervisory Board. The
Supervisory Board prepares a profile in relation to its size and
composition; ASMLs Supervisory Board profile is posted on
ASMLs website.
Members of the Supervisory Board are appointed by the General
Meeting of Shareholders from nominations of the Supervisory
Board. Nominations must be reasoned and must be made available
to the General Meeting of Shareholders and the Works Council
simultaneously. Before the Supervisory Board presents its
nominations, both the General Meeting of Shareholders and the
Works Council may make recommendations (which the Supervisory
Board may reject). In addition, the Works Council has an
enhanced right to make recommendations for nomination of at
least one-third of the members of the Supervisory Board, which
recommendation may only be rejected by the Supervisory Board:
(i) if the relevant person is unsuitable or (ii) if
the Supervisory Board would not be duly composed if the
recommended person were appointed as a Supervisory Board member.
If no agreement can be reached between the Supervisory Board and
the Works Council on these recommendations, the Supervisory
Board may request the Enterprise Chamber of the Amsterdam Court
to declare its objection legitimate. Any decision of the
Enterprise Chamber on this matter is non-appealable.
Nominations of the Supervisory Board may be overruled by the
General Meeting of Shareholders by an absolute majority of the
votes representing at least one third of the total outstanding
capital. If the votes cast in favor of such resolution do not
represent at least one third of the total outstanding capital, a
new meeting can be convened at which the nomination can be
overruled by an absolute majority. If a nomination is overruled,
the Supervisory Board must make a new nomination. If a
nomination is not overruled and the General Meeting of
Shareholders does not appoint the nominated person, the
Supervisory Board will appoint the nominated person.
Members of the Supervisory Board serve for a maximum term of
four years from the date of their appointment, or a shorter
period as set forth in the rotation schedule as adopted by the
Supervisory Board, and may be re-appointed, provided that their
entire term of office does not exceed twelve years. The General
Meeting of Shareholders may, by an absolute majority of the
votes representing at least one-third of the total outstanding
capital, dismiss the Supervisory Board in its entirety for lack
of confidence. In such event, the Enterprise Chamber of the
Amsterdam Court shall appoint one or more members of the
Supervisory Board at the request of the Board of Management.
Upon the proposal of the Supervisory Board, the General Meeting
of Shareholders determines the remuneration of the members of
the Supervisory Board. A member of the Supervisory Board shall
not be granted any shares or option rights by way of
remuneration.
Approval of
Board of Management Decisions
The Board of Management requires prior approval of the General
Meeting of Shareholders for resolutions concerning an important
change in the identity or character of ASML or its business,
including in any case:
|
|
|
a transfer of all or substantially all of the business of ASML
to a third party;
|
|
entering into or the termination of a long-term joint venture
between ASML and a third party, if this joint venture is
material to ASML; and
|
|
an acquisition or divestment by ASML of an interest in the
capital of a company with a value of at least one third of
ASMLs assets (determined by reference to ASMLs most
recently adopted annual accounts).
|
Rules of
Procedure
The Board of Management and the Supervisory Board have adopted
Rules of Procedure for each of the Board of Management,
Supervisory Board and the four Committees of the Supervisory
Board. These Rules of Procedure are posted on ASMLs
website.
ASML ANNUAL REPORT 2007
37
Directors and
Officers Insurance and Indemnification
Members of the Board of Management and Supervisory Board, as
well as certain senior management members, are insured under the
ASMLs Directors and Officers Insurance Policy. Although
the insurance policy provides for a wide coverage, our directors
and officers may incur uninsured liabilities. ASML has agreed to
indemnify its Board of Management and Supervisory Board against
any claims arising in connection with their position as director
and officer of the Company, provided that such claim is not
attributable to willful misconduct or intentional recklessness
of such officer or director.
Corporate
Governance Developments
ASML continuously monitors and assesses applicable corporate
governance rules, including recommendations and initiatives
regarding principles of corporate governance. These include
rules that have been promulgated in the United States both by
the NASDAQ Stock Market LLC (NASDAQ) and by the SEC
pursuant to the Sarbanes-Oxley Act of 2002.
The Netherlands Corporate Governance Code (the Code)
came into effect on January 1, 2004. A full report on
ASMLs compliance with the Code is required to be included
in the Companys statutory annual report. Netherlands
listed companies are required to either comply with the
principles and the best practice provisions of the Code, or to
explain on which points they deviate from these best practice
provisions and why.
Pursuant to the Codes recommendations, ASML has included a
separate chapter on corporate governance in its statutory annual
report. The Code contains recommendations with regard to
corporate governance, including on the following topics:
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strengthening the role of the Supervisory Board and its
committees and increasing its independence, quality and
expertise;
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strengthening the role of the shareholders with respect to
control on the functioning of the Board of Management and the
Supervisory Board, as well as with respect to nomination and
remuneration of members of the Board of Management and with
respect to the nomination of members of the Supervisory Board;
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facilitating and encouraging shareholders to use their voting
power and to actively participate in the General Meeting of
Shareholders; and
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defining the role of the external auditor vis-à-vis the
Supervisory Board as its principal contact.
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Committees of
ASMLs Supervisory Board
The Supervisory Board has an Audit Committee, a Remuneration
Committee, a Selection and Nomination Committee and a Technology
and Strategy Committee. Members of these committees are
appointed from among the Supervisory Board members.
Audit
Committee
ASMLs Audit Committee is composed of three members of the
Supervisory Board. The current members of our Audit Committee
are Fritz Fröhlich (chairman), Arthur van der Poel and Jan
Dekker, each of whom is an independent, non-executive member of
the Supervisory Board. The Supervisory Board has determined that
Fritz Fröhlich qualifies as the Audit Committee financial
expert pursuant to Section 407 of the Sarbanes-Oxley Act of
2002 and the rules promulgated thereunder. Our external auditor,
our Chief Executive Officer, our Chief Financial Officer, our
Corporate Controller as well as other ASML employees invited by
the chairman of the Audit Committee may also attend the meetings
of the Audit Committee.
The Audit Committee assists the Supervisory Board in:
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overseeing the integrity of our financial statements and related
non-financial disclosure;
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overseeing the qualifications, independence and performance of
the external auditor; and
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overseeing the integrity of our systems of disclosure controls
and procedures and the system of internal controls regarding
finance and accounting.
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The Audit Committee held seven meetings in 2007. At these
meetings the Audit Committee, reviewed our quarterly earnings
announcements and our audited annual consolidated financial
statements, discussed the system of internal controls over
financial reporting and related audit findings, approved the
internal and external audit plan and related audit fees and
pre-approved any audit and non-audit services to be rendered by
our external auditor.
Remuneration
Committee
ASMLs Remuneration Committee is composed of three members
of the Supervisory Board. The current members of our
Remuneration Committee are Jos Westerburgen (chairman), Ieke van
den Burg and Rolf Deusinger. The Remuneration Committee is
responsible for the preparation of the remuneration policy for
the Board of Management.
The Remuneration Committee prepares and the Supervisory Board
establishes ASMLs general compensation philosophy for
members of the Board of Management, and oversees the development
and implementation of compensation programs for members of the
Board of Management. The Remuneration Committee reviews and
proposes to the Supervisory Board corporate goals and objectives
relevant to the compensation of members of the Board of
Management. The Committee further evaluates
ASML ANNUAL REPORT 2007
38
the performance of members of the Board of Management in view of
those goals and objectives, and makes recommendations to the
Supervisory Board on the compensation levels of the members of
the Board of Management based on this evaluation.
In proposing to the Supervisory Board the actual remuneration
elements and levels applicable to the members of the Board of
Management, the Remuneration Committee considers, among other
factors, the remuneration policy, the desired levels of and
emphasis on particular aspects of ASMLs short and
long-term performance, as well as current compensation and
benefits structures and levels benchmarked against relevant
peers. External compensation survey data and, where necessary,
external consultants are used to benchmark ASMLs
remuneration levels and structures.
In 2007, the Remuneration Committee held four scheduled meetings.
Selection and
Nomination Committee
ASMLs Selection and Nomination Committee is composed of
three members of the Supervisory Board. The current members of
our Selection and Nomination Committee are Jos Westerburgen
(chairman), Arthur van der Poel and OB Bilous.
The Selection and Nomination Committee assists the Supervisory
Board in:
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preparing the selection criteria and appointment procedures for
members of the Companys Supervisory Board and Board of
Management;
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periodically evaluating the scope and composition of the Board
of Management and the Supervisory Board and proposing the
profile of the Supervisory Board in relation thereto;
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periodically evaluating the functioning of the Board of
Management and the Supervisory Board and the individual members
of those boards and reporting the results thereof to the
Supervisory Board; and
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proposing (re-)appointments of members of the Board of
Management and the Supervisory Board and supervising the policy
of the Board of Management in relation to the selection and
appointment criteria for senior management.
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The Selection and Nomination Committee held two scheduled
meetings and several ad hoc meetings in 2007.
Technology and
Strategy Committee
ASMLs Technology and Strategy Committee is composed of
four members of the Supervisory Board. The current members of
our Technology and Strategy Committee are Jan Dekker (chairman),
Arthur van der Poel, OB Bilous and William Siegle. In addition,
the Technology and Strategy Committee may appoint one or more
advisors from within the Company
and/or from
outside the Company. The advisors to the Technology and Strategy
Committee may be invited as guests to (parts of) the meetings of
the Committee, but are not entitled to vote in the meetings.
The Technology and Strategy Committee advises the Supervisory
Board in relation to the following responsibilities and may
prepare resolutions of the Supervisory Board related thereto:
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familiarization with and risk assessment and study of potential
strategies, required technical resources, technology roadmaps
and product roadmaps; and
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providing advice to the Supervisory Board with respect to
matters related thereto.
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The Technology and Strategy Committee held three meetings in
2007.
Disclosure
Committee
ASML has a Disclosure Committee to ensure compliance with
applicable disclosure requirements arising under US and
Netherlands law and applicable stock exchange rules. The
Disclosure Committee comprises various members of senior
management, including our Chief Financial Officer, and reports
to and assists our Chief Executive Officer and Chief Financial
Officer in the maintenance and evaluation of disclosure controls
and procedures. The Audit Committee is kept informed about the
outcome of the Disclosure Committee meetings. The Disclosure
Committee gathers all relevant financial and non-financial
information and assesses materiality, timeliness and necessity
for disclosure of such information. Furthermore, members of the
Disclosure Committee are in close contact with our external
legal counsel and our external auditor.
During 2007, the Disclosure Committee reviewed our quarterly
earnings announcements and our audited annual consolidated
financial statements and other public announcements containing
financial information. During various meetings, the Disclosure
Committee assessed ASMLs disclosure controls and
procedures and internal control over financial reporting. In
order to assist the Disclosure Committee in preparing its advice
to our Chief Executive Officer and Chief Financial Officer in
their assessment of ASMLs disclosure controls and
procedures and internal control over financial reporting, we
also have an Internal Control Committee, comprising among others
three members of the Disclosure Committee.
ASML ANNUAL REPORT 2007
39
Variations from
Certain NASDAQ Corporate Governance Rules
NASDAQ rules provide that foreign private issuers may follow
home country practice in lieu of the NASDAQ corporate governance
standards subject to certain exceptions and except to the extent
that such exemptions would be contrary to US federal securities
laws. The practices followed by ASML in lieu of NASDAQ rules are
described below:
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ASML does not follow NASDAQs quorum requirements
applicable to meetings of ordinary shareholders. In accordance
with Netherlands law and Netherlands generally accepted business
practice, ASMLs Articles of Association provide that there
are no quorum requirements generally applicable to General
Meetings of Shareholders.
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ASML does not follow NASDAQs requirements regarding the
provision of proxy statements for General Meetings of
Shareholders. Netherlands law does not have a regulatory regime
for the solicitation of proxies and the solicitation of proxies
is not a generally accepted business practice in the
Netherlands. ASML does provide shareholders with an agenda and
other relevant documents for the General Meeting of Shareholders.
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ASML does not follow NASDAQs requirement regarding
distribution to shareholders of copies of an annual report
containing audited financial statements prior to the
Companys Annual General Meeting of Shareholders. The
distribution of annual reports to shareholders is not required
under Netherlands corporate law or Netherlands securities laws,
or by Euronext Amsterdam. Furthermore, it is generally accepted
business practice for Netherlands companies not to distribute
annual reports. In part, this is because the Netherlands system
of bearer shares has made it impractical to keep a current list
of holders of the bearer shares in order to distribute the
annual reports. Instead, we make our annual report available at
our corporate head office in the Netherlands (and at the offices
of our Netherlands listing agent as stated in the convening
notice for the meeting) as from the day of convocation of the
Annual General Meeting of Shareholders. In addition, we post a
copy of our annual report on our website prior to the Annual
General Meeting of Shareholders.
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NASDAQ rules require shareholder approval of stock option plans
available to officers, directors or employees. However, NASDAQ
has granted ASML an exemption from this requirement (foreign
private issuers are no longer required to obtain an exemption,
but may follow home country practice in lieu of NASDAQ corporate
governance rules, subject to exceptions).
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D.
Employees
As of December 31, 2007, we had 6,582 employees in our
operations employed primarily in manufacturing, product
development and customer support activities. As of
December 31, 2005 and 2006, the total number of employees
in continued operations was 5,055 and 5,594 respectively. In
addition, during 2007 we had an average of 3,218 temporary
employees. For a more detailed description of employee
information, including a breakdown of our employees by sector,
see Notes 14 and 19 to our consolidated financial
statements, which are incorporated herein by reference. We rely
on our ability to vary the number of temporary employees to
respond to fluctuating market demand for our products.
Our future success will depend on our ability to attract, train,
retain and motivate highly qualified, skilled and educated
employees, who are in great demand. We are particularly reliant
for our continued success on the services of several key
employees, including a number of systems development specialists
with advanced university qualifications in engineering, optics
and computing.
ASML Netherlands B.V., our operating subsidiary in the
Netherlands, has a Works Council, as required by Netherlands
law. A Works Council is a representative body of the employees
of a Netherlands company elected by the employees. The Board of
Management of any Netherlands company that runs an enterprise
with a Works Council must seek the non-binding advice of the
Works Council before taking certain decisions with respect to
the company, such as those related to a major restructuring, a
change of control, or the appointment or dismissal of a member
of the Board of Management. Other decisions directly involving
employment matters that apply either to all employees, or
certain groups of employees, may only be taken with the Works
Councils approval. Such a decision may be taken without
the prior approval of the Works Council only with the approval
of the District Court.
E. Share
Ownership
Information with respect to share ownership of members of our
Supervisory Board and Board of Management is included in
Item 7 Major Shareholders and Related Party
Transactions and Note 18 to our consolidated
financial statements, which are incorporated herein by
reference. Information with respect to the grant of shares and
stock options to employees is included in Note 14 to our
consolidated financial statements which are incorporated herein
by reference.
Item 7
Major Shareholders and Related Party Transactions
A. Major
Shareholders
The following table sets forth the total number of ordinary
shares owned by each shareholder whose beneficial ownership of
ordinary shares exceeds 5 percent of the ordinary shares
issued and outstanding, as well as the ordinary shares
(including options) owned by the members of the Supervisory
Board and members of the Board of Management (which includes
those persons specified in Item 6 Directors, Senior
Management and Employees), as a group, as of
December 31, 2007. The
ASML ANNUAL REPORT 2007
40
information set forth below is solely based on public filings
with the SEC and AFM (Autoriteit Financiële Markten) at
December 31, 2007.
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Shares
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Percent of
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Identity of Person or Group
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Owned
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Class
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Capital Group International,
Inc.1
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37,251,670
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7.7%
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FMR
LLC2
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28,506,903
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5.9%
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PRIMECAP Management
Company3
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26,144,100
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5.4%
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Barclays Global
Investors4
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23,037,699
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5.2%
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Capital Research and Management
Company5
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22,884,943
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5.2%
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Members of ASMLs Supervisory Board and Board of
Management, as a group (4
persons)6
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1,405,343
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*
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1
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Based solely on the
Schedule 13-G/A
filed by Capital Group International, Inc. with the Commission
on February 12, 2007.
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2
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Based solely on the
Schedule 13-G/A
filed by FMR LLC with the Commission on October 10, 2007
(includes shares owned by affiliates).
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3
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Based solely on the
Schedule 13-G/A
filed by PRIMECAP Management Company with the Commission on
March 8, 2007.
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4
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Based solely on the report of
substantial ownership filed by Barclays Global Investors with
the AFM on December 11, 2007.
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5
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Based solely on the report of
substantial ownership filed by Capital Research and Management
Company with the AFM on December 5, 2007.
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6
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Four members of our Board of
Management own a total of 456,998 unconditional options to
purchase ASML shares. These members of our Board of Management
together are also entitled to 463,034 conditional performance
stock options and 87,507, 210,001 and 187,803 conditional
performance stock for 2005, 2006 and 2007 respectively. The
number of performance stock that are ultimately awarded will be
determined in the financial year 2008, 2009 and 2010
respectively, and is conditional upon the achievement of
performance targets. See Note 18 to our consolidated
financial statements for information on options held by and
conditional performance stock conditionally awarded to members
of our Board of Management on an individual basis. None of the
members of the Supervisory Board holds any of our outstanding
shares or options on shares.
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According to SEC filings, (i) Capital Group International,
Inc. increased its shareholding (including as a holder of
convertible notes) from 51,528,140 shares as of February
2005 to 55,842,520 shares as of February 2006 and decreased
to 37,251,670 as of February 2007, (ii) FMR LLC increased
its shareholding (including as a holder of convertible notes)
from 54,662,612 shares as of February 2005 to
70,721,194 shares as of February 2006 and decreased to
57,681,794 as of February 2007 and to 28,506,903 as of October
2007 and (iii) PRIMECAP Management Company decreased its
shareholding from 24,218,000 shares as of September 2006 to
23,825,400 as of October 2006 and increased its shareholding to
26,144,100 as of March 2007. According to SEC and AFM filings,
Capital Research and Management Company decreased its
shareholding (including as a holder of convertible notes) from
50,572,880 shares as of February 2005 to
49,577,150 shares as of February 2006 and to 22,884,943 as
of December 2007.
Our major shareholders do not have voting rights different from
other shareholders. We do not issue share certificates, except
for registered New York Shares. For more information see
Item 10.B. Memorandum and Articles of
Association.
As of December 31, 2007, 146.5 million ordinary shares
were held by 516 registered holders with a registered address in
the United States. Since certain of our ordinary shares were
held by brokers and nominees, the number of record holders in
the United States may not be representative of the number of
beneficial holders or of where the beneficial holders are
resident.
Obligations of
Shareholders to Disclose Holdings under Netherlands
Law
Holders of our shares may be subject to reporting obligations
under the Act on the supervision of financial markets (Wet op
het financieel toezicht, the Act).
The disclosure obligations under the Act apply to any person or
entity that acquires or disposes of an interest in the voting
rights and/or the capital of a public limited company
incorporated under the laws of the Netherlands whose shares are
admitted to trading on a regulated market within the European
Union. Disclosure is required when, as a result of an
acquisition or disposal, the percentage of voting rights or
capital interest acquired or disposed of by a person or an
entity reaches, exceeds or falls below 5, 10, 15, 20, 25, 30,
40, 50, 60, 75 or 95 percent. With respect to ASML, the Act
would require any person or entity whose interest in the voting
rights and/or capital of ASML reached, exceeded or fell below
those percentage interests to notify the Netherlands Authority
for the Financial Markets (AFM) immediately.
ASML is required to notify the AFM immediately if the
Companys voting rights and/or capital have changed by one
percent or more since its previous notification on outstanding
voting rights and capital. In addition, ASML must notify the AFM
of changes of less than one percent in ASMLs outstanding
voting rights and capital at least once per calendar quarter,
within eight days after the end of the quarter. Any person whose
direct or indirect voting rights and/or capital interest meets
or passes the thresholds referred to in the previous paragraph
as a result of a change in the outstanding voting rights or
capital must notify the AFM no later than the fourth trading day
after the AFM has published such a change.
Once every calendar year, within four weeks after the end of the
calendar year, holders of an interest of five percent or more in
ASMLs voting rights or capital must notify the AFM of a
change in the composition of their interest resulting from
certain acts
ASML ANNUAL REPORT 2007
41
(including, but not limited to, the exchange of shares for
depositary receipts and vice versa, and the exercise of rights
to acquire shares).
Subsidiaries, as defined in the Act, do not have independent
reporting obligations under the Act, as interests held by them
are attributed to their (ultimate) parents. Any person may
qualify as a parent for purposes of the Act, including an
individual. A person who disposes of an interest of five percent
or more in ASMLs voting rights or capital and who ceases
to be a subsidiary must immediately notify the AFM. As of that
moment, all notification obligations under the Act will become
applicable to the former subsidiary.
For the purpose of calculating the percentage of capital
interest or voting rights, the following interests must, among
other arrangements, be taken into account: shares and votes
(i) directly held by any person, (ii) held by such
persons subsidiaries, (iii) held by a third party for
such persons account, (iv) held by a third party with
whom such person has concluded an oral or written voting
agreement (including on the basis of an unrestricted power of
attorney) and (v) held by a third party with whom such
person has agreed to temporarily transfer voting rights against
payment. Interests held jointly by multiple persons are
attributed to those persons in accordance with their
entitlement. A holder of a pledge or right of usufruct in
respect of shares can also be subject to these reporting
obligations if such person has, or can acquire, the right to
vote on the shares or, in case of depositary receipts, the
underlying shares. The managers of certain investment funds are
deemed to hold the capital interests and voting rights in the
funds managed by them.
For the same purpose, the following instruments qualify as
shares: (i) shares, (ii) depositary
receipts for shares (or negotiable instruments similar to such
receipts), (iii) negotiable instruments for acquiring the
instruments under (i) or (ii) (such as convertible bonds),
and (iv) options for acquiring the instruments under
(i) or (ii).
The AFM keeps a public registry of and publishes all
notifications made pursuant to the Act.
Non-compliance with the reporting obligations under the Act
could lead to criminal fines, administrative fines, imprisonment
or other sanctions. In addition, non-compliance with the
reporting obligations under the Act may lead to civil sanctions,
including (i) suspension of the voting rights relating to
the shares held by the offender, for a period of not more than
three years, (ii) nullification of any resolution of the
General Meeting of Shareholders of the Company to the extent
that such resolution would not have been approved if the votes
at the disposal of the person or entity in violation of a duty
under the Act had not been exercised and (iii) a
prohibition on the acquisition by the offender of our shares or
the voting on our ordinary shares for a period of not more than
five years.
B. Related Party
Transactions
There have been no transactions during our most recent fiscal
year, nor are there presently any proposed transactions, which
are material to ASML or any transactions that are unusual in
their nature or conditions, involving goods, services, or
tangible or intangible assets between ASML or any of our
subsidiaries and any significant shareholder and any director or
officer or any relative or spouse thereof. During our most
recent fiscal year, there has been no, and at present there is
no, outstanding indebtedness to ASML owed or owing by any
director or officer of ASML or any associate thereof, other than
the virtual financing arrangement with respect to stock options
described under Note 14 to our consolidated financial
statements.
C. Interests of
Experts & Counsel
Not applicable.
Item 8
Financial Information
A. Consolidated
Statements and Other Financial Information
Consolidated
Statements
See Item 18 Financial Statements.
Export
Sales
See Note 17 to our consolidated statements included in
Item 18 Financial Statements, which is
incorporated herein by reference.
Legal
Proceedings
See Item 4.B. Business Overview, Intellectual
Property and Note 15 to our consolidated financial
statements, which are incorporated herein by reference.
ASML ANNUAL REPORT 2007
42
Dividend
Policy
We have historically not paid dividends on our ordinary shares.
We strive to maintain our strategic target level of cash and
cash equivalents between EUR 1.0 billion and EUR
1.5 billion. Should cash and cash equivalents exceed this
target and there are no investment opportunities that we wish to
pursue, we intend to return excess cash to our shareholders,
which may be in the form of share buybacks, capital
distributions or dividends. As of December 31, 2007 our
cash and cash equivalents amounts to EUR 1,272 million. For
more information see Item 10.B. Memorandum and
Articles of Association and Item 10.D. Exchange
Controls.
B. Significant
Changes
No significant changes have occurred since the date of our
consolidated financial statements. See Item 5.D.
Trend Information.
Item 9 The
Offer and Listing
A. Listing
Details
Our ordinary shares are listed for trading in the form of New
York Shares on NASDAQ and in the form of registered shares on
Euronext Amsterdam (Amsterdam Shares). The principal
trading market of our ordinary shares is Euronext Amsterdam. For
more information see Item 10.B. Memorandum and
Articles of Association.
The following table sets forth, for the periods indicated, the
high and low closing prices of our ordinary shares on NASDAQ, as
well as on Euronext Amsterdam.
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NASDAQ
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Euronext Amsterdam
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USD
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EUR
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High
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Low
|
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High
|
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Low
|
Annual Information
|
|
|
|
|
|
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|
|
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|
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2003
|
|
|
20.39
|
|
|
6.11
|
|
|
17.04
|
|
|
5.39
|
2004
|
|
|
22.32
|
|
|
12.41
|
|
|
17.50
|
|
|
10.26
|
2005
|
|
|
20.13
|
|
|
14.44
|
|
|
17.12
|
|
|
11.11
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2006
|
|
|
25.83
|
|
|
18.46
|
|
|
19.90
|
|
|
14.49
|
2007
|
|
|
35.79
|
|
|
22.89
|
|
|
24.99
|
|
|
17.15
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
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Quarterly Information
|
|
|
|
|
|
|
|
|
|
|
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1st quarter 2006
|
|
|
23.57
|
|
|
19.42
|
|
|
19.29
|
|
|
16.23
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2nd quarter 2006
|
|
|
22.41
|
|
|
18.70
|
|
|
17.63
|
|
|
14.49
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3rd quarter 2006
|
|
|
23.39
|
|
|
18.46
|
|
|
18.44
|
|
|
14.64
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4th quarter 2006
|
|
|
25.83
|
|
|
22.30
|
|
|
19.90
|
|
|
17.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st quarter 2007
|
|
|
26.29
|
|
|
22.89
|
|
|
20.39
|
|
|
17.15
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2nd quarter 2007
|
|
|
27.91
|
|
|
24.69
|
|
|
20.83
|
|
|
18.34
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3rd quarter 2007
|
|
|
33.03
|
|
|
26.64
|
|
|
23.40
|
|
|
19.73
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4th quarter 2007
|
|
|
35.79
|
|
|
30.70
|
|
|
24.99
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|
|
21.62
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Monthly Information
|
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July 2007
|
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30.60
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|
|
27.67
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|
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22.26
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20.24
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August 2007
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|
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29.72
|
|
|
26.64
|
|
|
21.73
|
|
|
19.73
|
September 2007
|
|
|
33.03
|
|
|
29.56
|
|
|
23.40
|
|
|
21.30
|
October 2007
|
|
|
35.79
|
|
|
30.70
|
|
|
24.99
|
|
|
21.97
|
November 2007
|
|
|
34.75
|
|
|
32.21
|
|
|
24.00
|
|
|
22.06
|
December 2007
|
|
|
35.17
|
|
|
31.29
|
|
|
24.00
|
|
|
21.62
|
January (through Jan. 23), 2008
|
|
|
30.47
|
|
|
25.51
|
|
|
20.97
|
|
|
17.15
|
|
(Source: Bloomberg Finance LP)
B. Offer and Plan
of Distribution
Not applicable.
C.
Markets
See Item 9.A. Listing Details.
ASML ANNUAL REPORT 2007
43
D. Selling
Shareholders
Not applicable.
E.
Dilution
Not applicable.
F. Expenses of
the Issue
Not applicable.
Item 10
Additional Information
A. Share
Capital
Not applicable.
B. Memorandum and
Articles of Association
The information required by Item 10.B. is incorporated by
reference to ASMLs Report on
Form 6-K,
filed with the Commission on November 2, 2007.
Current
Authorizations to Issue and Repurchase Ordinary Shares
Our Board of Management has the power to issue ordinary shares
and cumulative preference shares insofar as the Board of
Management has been authorized to do so by the General Meeting
of Shareholders (either by means of a resolution or by an
amendment to our Articles of Association). The Board of
Management requires approval, however, of the Supervisory Board
must for such an issue.
At our annual General Meeting of Shareholders, held on
March 28, 2007, the Board of Management was authorized for
a period of 18 months, to issue shares and/or rights
thereto representing up to a maximum of 5 percent of our
issued share capital as of the date of authorization, plus an
additional 5 percent of our issued share capital as of the
date of authorization that may be issued in connection with
mergers and acquisitions. At our annual General Meeting of
Shareholders to be held on April 3, 2008, our shareholders
will be asked to authorize the Board of Management (subject to
the approval of the Supervisory Board) to issue shares and/or
rights thereto through October 3, 2009.
Holders of our ordinary shares have a preemptive right of
subscription in proportion to the aggregate nominal amount of
the ordinary shares held by them to any issuance of ordinary
shares for cash, which right may be restricted or excluded.
Ordinary shareholders have no pro rata preemptive right of
subscription to any ordinary shares issued for consideration
other than cash or ordinary shares issued to employees. If
authorized for this purpose by the General Meeting of
Shareholders (either by means of a resolution or by an amendment
to our Articles of Association), the Board of Management has the
power, with the approval of the Supervisory Board, to restrict
or exclude the preemptive rights of holders of ordinary shares.
A designation may be renewed. At our annual General Meeting of
Shareholders held on March 28, 2007, the Board of
Management was authorized, subject to the aforementioned
approval, to restrict or exclude preemptive rights of holders of
ordinary shares. At our annual General Meeting of Shareholders
to be held on April 3, 2008, our shareholders will be asked
to grant this authority through October 3, 2009. At this
annual General Meeting of Shareholders, the shareholders will be
asked to grant authority to the Board of Management to issue
shares or options separately. These authorizations will each be
requested to be granted for a period of 18 months.
We may repurchase our issued ordinary shares at any time,
subject to compliance with the requirements of Netherlands law
and provided the aggregate nominal value of the ordinary shares
held by ASML or a subsidiary at any time amounts to no more than
one-tenth of our issued share capital. Any such purchases are
subject to the approval of the Supervisory Board and the
authorization (whether by means of a resolution or by an
amendment to our Articles of Association) of shareholders at our
General Meeting of Shareholders, which authorization may not be
for more than 18 months. The Board of Management is
currently authorized, subject to Supervisory Board approval, to
repurchase through September 28, 2008 up to a maximum of
30 percent of our issued share capital as of the date of
authorization (March 28, 2007) at a price between the
nominal value of the ordinary shares purchased and
110 percent of the market price of these securities on
Euronext Amsterdam or NASDAQ. At our annual General Meeting of
Shareholders to be held on April 3, 2008, our shareholders
will be asked to extend this authority through October 3,
2009.
C. Material
Contracts
Not applicable.
ASML ANNUAL REPORT 2007
44
D. Exchange
Controls
There are currently no limitations, either under the laws of the
Netherlands or in the Articles of Association of ASML, to the
rights of non-residents to hold or vote ordinary shares. Cash
distributions, if any, payable in euro on Amsterdam Shares may
be officially transferred from the Netherlands and converted
into any other currency without being subject to any Netherlands
legal restrictions. However, for statistical purposes, such
payments and transactions must be reported by ASML to the
Netherlands Central Bank. Furthermore, no payments, including
dividend payments, may be made to jurisdictions subject to
certain sanctions, adopted by the government of the Netherlands,
implementing resolutions of the Security Council of the United
Nations. Cash distributions, if any, on New York Shares shall be
paid in U.S. dollars, converted at the rate of exchange on
Euronext Amsterdam at the close of business on the date fixed
for that purpose by the Board of Management in accordance with
the Articles of Association. See also Item 8.A.
Consolidated Statements and Other Financial Information,
Dividend Policy.
E.
Taxation
Netherlands
Taxation
The statements below represent a summary of current Netherlands
tax laws, regulations and judicial interpretations thereof. The
description is limited to the material tax implications for a
holder of ordinary shares who is not, or is not deemed to be, a
resident of the Netherlands for Netherlands tax purposes (a
Non-resident Holder). This description does not
address special rules that may apply to special classes of
holders of ordinary shares and should not be read as extending
by implication to matters not specifically referred to herein.
As to individual tax consequences, each investor in ordinary
shares should consult his or her tax counsel.
General
The acquisition of ordinary shares by a non-resident of the
Netherlands should not be treated as a taxable event for
Netherlands tax purposes. The income consequences in connection
with owning and disposing of our ordinary shares are discussed
below.
Substantial
Interest
A person that, directly or indirectly, owns five percent or more
of our share capital, or holds options to purchase five percent
or more of our share capital, is deemed to have a substantial
interest in our shares, respectively, our options, as
applicable. A deemed substantial interest also exists if (part
of) a substantial interest has been disposed of, or is deemed to
be disposed of, in a transaction where no taxable gain has been
recognized. Special attribution rules exist in determining the
presence of a substantial interest.
Income Tax
Consequences for Individual Non-resident Holders on Owning and
Disposing of the Ordinary Shares
An individual who is a Non-resident Holder will not be subject
to Netherlands income tax on received income in respect of our
ordinary shares or capital gains derived from the sale, exchange
or other disposition of our ordinary shares, provided that such
holder:
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does not carry on and has not carried on a business in the
Netherlands through a permanent establishment or a permanent
representative to which the ordinary shares are attributable;
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does not hold and has not held a (deemed) substantial interest
in our share capital or, in the event the Non-resident Holder
holds or has held a (deemed) substantial interest in our share
capital, such interest is, respectively was, a business asset in
the hands of the holder;
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does not share and has not shared directly (through the
beneficial ownership of ordinary shares or similar securities)
in the profits of an enterprise managed and controlled in the
Netherlands which (is deemed to) own(s), respectively (is deemed
to have) has owned, our ordinary shares;
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does not carry out and has not carried out any activities which
generate taxable profit or taxable wages to which the holding of
our ordinary shares was connected;
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does not carry out and has not carried out employment activities
in the Netherlands, does not serve and has not served as a
director or board member of any entity resident in the
Netherlands, and does not serve and has not served as a civil
servant of a Netherlands public entity with which the holding of
our ordinary shares is or was connected; and
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is not an individual that has elected to be taxed as a resident
of the Netherlands.
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Corporate
Income Tax Consequences for Corporate Non-resident
Holders
Income derived from ordinary shares or capital gains derived
from the sale, exchange or disposition of ordinary shares by a
corporate Non-resident Holder is taxable if:
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the holder carries on a business in the Netherlands through a
permanent establishment or a permanent agent in the Netherlands
(Netherlands enterprise) and the ordinary shares are
attributable to this permanent establishment or permanent agent,
unless the participation exemption (discussed below) applies; or
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the holder has a substantial interest in our share capital,
which is not allocable to his enterprise; or
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ASML ANNUAL REPORT 2007
45
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certain assets of the holder are deemed to be treated as a
Netherlands enterprise under Netherlands tax law and the
ordinary shares are attributable to this Netherlands enterprise.
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To qualify for the Netherlands participation exemption, the
holder must generally hold at least five percent of our nominal
paid-in capital and meet certain other requirements.
Dividend
Withholding Tax
In general, a dividend distributed by us in respect of our
ordinary shares will be subject to a withholding tax imposed by
the Netherlands at the statutory rate of 15 percent.
Dividends include:
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dividends in cash and in kind;
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deemed and constructive dividends;
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consideration for the repurchase or redemption of ordinary
shares (including a purchase by a direct or indirect ASML
subsidiary) in excess of qualifying average paid-in capital
unless such repurchase is made for temporary investment purposes
or is exempt by law;
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stock dividends up to their nominal value (unless distributed
out of qualifying paid-in capital);
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any (partial) repayment of paid-in capital not qualifying as
capital for Netherlands dividend withholding tax purposes; and
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liquidation proceeds in excess of qualifying average paid-in
capital for Netherlands dividend withholding tax purposes.
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A reduction of Netherlands dividend withholding tax can be
obtained if:
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the participation exemption applies and the ordinary shares are
attributable to a business carried out in the Netherlands;
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the dividends are distributed to a qualifying EU corporate
holder satisfying the conditions of the EU Parent-Subsidiary
Directive; or
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the rate is reduced by a Tax Treaty.
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A Non-resident Holder of ordinary shares can be eligible for a
partial or complete exemption or refund of all or a portion of
the above withholding tax under a Tax Treaty that is in effect
between the Netherlands and the Non-resident Holders
country of residence. The Netherlands has concluded such
treaties with the United States, Canada, Switzerland, Japan,
most European Union member states, as well as many other
countries. Under the Treaty between the United States and the
Netherlands for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income
(the Tax Treaty), dividends paid by us to a
Non-resident Holder that is a resident of the United States as
defined in the Tax Treaty (other than an exempt organization or
exempt pension trust, as discussed below) are generally liable
to 15 percent Netherlands withholding tax or, in the case
of certain United States corporate shareholders owning at least
ten percent of our voting power, a reduction to 5 percent,
provided that it does not have an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a
permanent establishment or permanent representative in the
Netherlands to which the dividends are attributable. The Tax
Treaty provides for a complete exemption from tax on dividends
received by exempt pension trusts and exempt organizations, as
defined therein. Except in the case of exempt organizations, the
reduced dividend withholding tax rate (or exemption from
withholding) can be applied at the source upon payment of the
dividends, provided that the proper forms have been filed in
advance of the payment. Exempt organizations remain subject to
the statutory withholding rate of 15 percent and are
required to file for a refund of such withholding.
A Non-resident Holder may not claim the benefits of the Tax
Treaty unless (i) it is a resident of the United States as
defined therein, or (ii) it is deemed to be a resident on
the basis of the provisions of article 24(4) of the Tax
Treaty, and (iii) its entitlement to those benefits is not
limited by the provisions of article 26 (limitation on
benefits) of the Tax Treaty.
In this respect it is noted that the United States and the
Netherlands have agreed on a protocol to the Tax Treaty. It
provides for (among others) a 0 percent dividend
withholding tax rate on dividends, provided certain requirements
are met. In addition, above mentioned article 26
(limitation on benefits) has been adjusted. Some requirements to
the various tests mentioned in article 26 will become more
severe and others will be moderated.
Dividend
Stripping Rules
Under Netherlands tax legislation regarding anti-dividend
stripping, no exemption from, or refund of, Netherlands dividend
withholding tax is granted if the recipient of dividends paid by
us is not considered the beneficial owner of such dividends.
Gift or
Inheritance Taxes
Netherlands gift or inheritance taxes will not be levied on the
transfer of ordinary shares by way of gift, or upon the death of
a Non-resident Holder, unless:
ASML ANNUAL REPORT 2007
46
(1) the transfer is construed as an inheritance or as a
gift made by or on behalf of a person who, at the time of the
gift or death, is deemed to be, resident of the Netherlands; or
(2) the ordinary shares are attributable to an enterprise
or part thereof that is carried on through a permanent
establishment or a permanent representative in the Netherlands.
For purposes of Netherlands gift and inheritance tax, an
individual of Netherlands nationality is deemed to be a resident
of the Netherlands if he has been a resident thereof at any time
during the ten years preceding the time of the gift or death.
For purposes of Netherlands gift tax, a person not possessing
Netherlands nationality is deemed to be a resident of the
Netherlands if he has resided therein at any time in the twelve
months preceding the gift.
Value Added
Tax
No Netherlands value added tax is imposed on dividends in
respect of our ordinary shares or on the transfer of our shares.
Residence
A Non-resident Holder will not become resident, or be deemed to
be resident, in the Netherlands solely as a result of holding
our ordinary shares or of the execution, performance, delivery
and/or enforcement of rights in respect of our ordinary shares.
United States
Taxation
The following is a discussion of the material United States
federal income tax consequences relating to the acquisition,
ownership and disposition of ordinary shares by a United States
Holder (as defined below). This discussion deals only with
ordinary shares held as capital assets and does not deal with
the tax consequences applicable to all categories of investors,
some of which (such as tax-exempt entities, passive foreign
investment companies, banks, broker-dealers, investors owning
directly, indirectly or constructively 10 percent or more
of our outstanding voting shares, investors who hold ordinary
shares as part of hedging or conversion transactions and
investors whose functional currency is not the U.S. dollar) may
be subject to special rules. In addition, the discussion does
not address any alternative minimum tax or any state, local or
non-United
States tax consequences. The following discussion is based on
United States tax laws, and judicial and administrative
interpretations thereof as in effect on the date of filing of
this Annual Report on
Form 20-F,
all of which are subject to change, potentially retroactively.
This discussion is based on the Internal Revenue Code of 1986,
as amended to the date hereof, final, temporary and proposed
Treasury Department regulations promulgated, and administrative
and judicial interpretations thereof, changes to any of which
subsequent to the date hereof, possibly with retroactive effect,
may affect the tax consequences described herein. In addition,
there can be no assurance that the Internal Revenue Service will
not challenge one or more of the tax consequences described
herein, and we have not obtained, nor do we intend to obtain, a
ruling from the Internal Revenue Service or an opinion of
counsel with respect to the United States federal income tax
consequences of acquiring or holding shares. Prospective
purchasers of ordinary shares are advised to consult their tax
advisers with respect to their particular circumstances and with
respect to the effects of United States federal, state, local or
non-United
States tax laws to which they may be subject.
As used herein, the term United States Holder means
a beneficial owner of ordinary shares that for United States
federal income tax purposes is:
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an individual citizen or resident of the United States;
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a corporation or other entity treated as a corporation for
United States federal income tax purposes created or organized
in or under the laws of the United States or of any political
subdivision thereof;
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an estate of which the income is subject to United States
federal income taxation regardless of its source;
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a trust whose administration is subject to the primary
supervision of a court within the United States and which has
one or more United States persons who have the authority to
control all of its substantial decisions.
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If an entity treated as a partnership for United States federal
income tax purposes owns ordinary shares, the United States
federal income tax treatment of a partner in such partnership
will generally depend upon the status of the partner and the
activities of the partnership. A partnership that owns ordinary
shares and the partners in such partnership should consult their
tax advisors about the United States federal income tax
consequences of holding and disposing of the ordinary shares.
Taxation of
Dividends
United States Holders will include in gross income as
foreign-source dividend income the gross amount of any
distribution (before reduction for Netherlands withholding
taxes) ASML makes out of its current or accumulated earnings and
profits (as determined for United States federal income tax
purposes) when the distribution is actually or constructively
received by the United States Holder. Distributions will not be
eligible for the dividends-received deduction generally allowed
to United States corporations in respect of dividends received
from other United States corporations. The amount of the
dividend distribution includible in income of a United States
Holder should be the U.S. dollar value of the foreign currency
(e.g. euro) paid, determined by the spot rate of exchange on the
date of the distribution, regardless of whether the payment is
in fact converted into U.S. dollars. Distributions in
ASML ANNUAL REPORT 2007
47
excess of current and accumulated earnings and profits, as
determined for United States federal income tax purposes, will
be treated as a non-taxable return of capital to the extent of
the United States Holders basis in the ordinary shares and
thereafter as taxable capital gain. ASML does not maintain
calculations of its earnings and profits under United States
federal income tax principles.
Subject to limitations provided in the United States Internal
Revenue Code, a United States Holder may generally deduct from
its United States federal taxable income, or credit against its
United States federal income tax liability, the amount of
qualified Netherlands withholding taxes. However, Netherlands
withholding tax may be credited only if the United States Holder
does not claim a deduction for any Netherlands or other
non-United
States taxes paid or accrued in that year. In addition,
Netherlands dividend withholding taxes will likely not be
creditable against the United States Holders United States
tax liability to the extent ASML is not required to pay over the
amount withheld to the Netherlands Tax Administration.
Currently, a Netherlands corporation that receives dividends
from qualifying
non-Netherlands
subsidiaries may credit source country tax withheld from those
dividends against Netherlands withholding tax imposed on a
dividend paid by a Netherlands corporation, up to a maximum of
3 percent of the dividend paid by the Netherlands
corporation. The credit reduces the amount of dividend
withholding that ASML is required to pay to the Netherlands Tax
Administration but does not reduce the amount of tax ASML is
required to withhold from dividends.
Recently enacted United States tax legislation (the 2003
Tax Act) reduces to 15 percent the maximum tax rate
for certain dividends received by individuals through taxable
years beginning on or before December 31, 2008, so long as
the stock has been held for more than 60 days during the
120 day period beginning 60 days before the
ex-dividend date. Dividends received from qualified
foreign corporations generally qualify for the reduced
rate. A
non-United
States corporation (other than a foreign personal holding
company, foreign investment company, or passive foreign
investment company) generally will be considered to be a
qualified foreign corporation if (i) the shares of the
non-United
States corporation are readily tradable on an established
securities market in the United States or (ii) the
non-United
States corporation is eligible with respect to substantially all
of its income for the benefits of a comprehensive income tax
treaty with the United States which contains an exchange of
information program. The Tax Treaty has been identified as a
qualifying treaty. Individual United States Holders should
consult their tax advisors regarding the impact of the
provisions of the 2003 Tax Act on their particular situations.
Taxation on Sale
or Other Disposition of Ordinary Shares
Upon a sale or other disposition of ordinary shares, a United
States Holder will generally recognize capital gain or loss for
United States federal income tax purposes in an amount equal to
the difference between the amount realized, if paid in U.S.
dollars, or the U.S. dollar value of the amount realized
(determined at the spot rate on the settlement date of the sale)
if proceeds are paid in currency other than the U.S. dollar, as
the case may be, and the United States Holders tax basis
(determined in U.S. dollars) in such ordinary shares. Generally,
the capital gain or loss will be long-term capital gain or loss
if the holding period of the United States Holder in the
ordinary shares exceeds one year at the time of the sale or
other disposition. The deductibility of capital losses is
subject to limitations for United States federal income tax
purposes. Gain or loss from the sale or other disposition of
ordinary shares generally will be treated as United States
source income or loss for United States foreign tax credit
purposes. Generally, any gain or loss resulting from currency
fluctuations during the period between the date of the sale of
the ordinary shares and the date the sale proceeds are converted
into U.S. dollars will be treated as ordinary income or loss
from sources within the United States. Each United States Holder
should consult its tax advisor with regard to the translation
rules of its adjusted basis and the amount realized upon a sale
or other disposition of its ordinary shares if purchased in, or
sold or disposed of for, a currency other than U.S. dollar.
Information
Reporting and Backup Withholding
Information returns may be filed with the Internal Revenue
Service (IRS) in connection with payments on the
ordinary shares or proceeds from a sale, redemption or other
disposition of the ordinary shares. A backup
withholding tax may apply to these payments if the
beneficial owner fails to provide a correct taxpayer
identification number to the paying agent and to comply with
certain certification procedures or otherwise establish an
exemption from backup withholding. Any amounts withheld under
the backup withholding rules might be refunded (or credited
against the beneficial owners United States federal income
tax liability, if any) depending on the facts and provided that
the required information is furnished to the IRS.
The discussion set forth above is included for general
information only and may not be applicable depending upon a
holders particular situation. Holders should consult their
tax advisors with respect to the tax consequences to them of the
purchase, ownership and disposition of shares including the tax
consequences under state, local and other tax laws and the
possible effects of changes in United States federal and other
tax laws.
F. Dividends and
Paying Agents
Not applicable.
G. Statement by
Experts
Not applicable.
ASML ANNUAL REPORT 2007
48
H. Documents on
Display
We are subject to certain of the reporting requirements of the
US Securities Exchange Act of 1934 (the Exchange
Act). As a foreign private issuer, we are
exempt from the rules under the Exchange Act prescribing certain
disclosure and procedural requirements for proxy solicitations,
and our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of the Exchange
Act, with respect to their purchases and sales of shares. In
addition, we are not required to file reports and financial
statements with the Commission as frequently or as promptly as
companies that are not foreign private issuers whose securities
are registered under the Exchange Act. However, we are required
to file with the Commission, within six months after the end of
each fiscal year, an annual report on
Form 20-F
containing financial statements audited by an independent
accounting firm. We publish unaudited interim financial
information after the end of each quarter. We furnish this
quarterly financial information to the Commission under cover of
a
Form 6-K.
You may read and copy any document we file with the Commission
at its public reference facilities at 450 Fifth Street, N.W.,
Washington, DC 20549, Woolworth Building, 233 Broadway, New
York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois
60661-2511.
You may also obtain copies of the documents at prescribed rates
by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington DC 20549. The Commission also
maintains a website that contains reports and other information
regarding registrants that are required to file electronically
with the Commission. The address of this website is
http://www.sec.gov. Please call the Commission at
1-800-SEC-0330
for further information on the operation of the public reference
facilities.
I. Subsidiary
Information
See Item 4.C. Organizational Structure.
Item 11
Quantitative and Qualitative Disclosures About Market
Risk
We are subject to market risks including changes in foreign
exchange rates and interest rates. In order to hedge the risks
of changes in foreign exchange rates and interest rates, we use
derivative instruments in accordance with established policies.
None of these transactions are entered into for trading purposes.
Foreign currency
management
The Company uses the euro as its invoicing currency in order to
limit the exposure to foreign currency movements. Exceptions may
occur on a customer by customer basis. To the extent that
invoicing is done in a currency other than the euro, the Company
is exposed to foreign currency risk.
It is the Companys policy to hedge material transaction
exposures, such as sales transactions, forecasted purchase
transactions and accounts receivable/accounts payable. The
Company hedges these exposures through the use of foreign
exchange options and forward contracts. The use of a mix of
foreign exchange options and forwards is aimed at reflecting the
likelihood of the transactions occurring. The effectiveness of
all outstanding hedge contracts is monitored closely throughout
the life of the hedges.
During the twelve months ended December 31, 2007, EUR
0.2 million gain (2006: EUR 0.0) was recognized in cost of
sales relating to ineffective hedges. As of December 31,
2007 EUR 3.8 million gain (2006: EUR 4.1 million gain)
of other comprehensive income represents the total anticipated
gain to be released to sales, and EUR 3.1 million loss
(2006: EUR 2.1 million loss) is the total anticipated loss
to be charged to cost of sales over the next twelve months as
the forecasted revenue and purchase transactions occur.
It is the Companys policy to hedge material remeasurement
exposures. These net exposures from certain monetary assets and
liabilities in non-functional currencies are hedged with forward
contracts.
It is the Companys policy to manage material translation
exposures resulting predominantly from ASMLs U.S. dollar
net investments. Throughout 2005 a proportion of our USD
575 million 5.75 percent Convertible Subordinated Notes due
2006 was assigned to hedge a certain part of our U.S. dollar net
investments. As from December 2005, forward contracts have been
assigned to hedge this exposure.
The related foreign currency translation amounts (gross of
taxes) included in cumulative translation adjustment for the
years ended December 31, 2006 and 2007 were EUR
16.0 million gain and EUR 15.0 million gain,
respectively.
Interest rate
management
The Company has both assets and liabilities that bear interest,
which expose the Company to fluctuations in the prevailing
market rate of interest. The Company uses interest rate swaps to
align the interest typical terms of interest bearing assets with
the interest typical terms of interest bearing liabilities. The
Company still retains residual financial statement exposure risk
to the
ASML ANNUAL REPORT 2007
49
extent that the asset and liability positions do not fully
offset. It is the Companys policy to enter into interest
rate swaps to hedge this residual exposure. For this purpose,
the Company uses interest rate swaps, both to hedge changes in
market value of fixed loan coupons payable due to changes in
interest rates as well as to hedge the variability of future
interest receipts as a result of changes in market interest
rates.
See Notes 1 and 12 to our consolidated financial
statements, which are incorporated herein by reference.
Credit
risk
Financial instruments that potentially subject us to significant
concentrations of credit risk consist principally of cash and
cash equivalents, accounts receivable and derivative financial
instruments used in hedging activities.
Financial instruments contain an element of risk of the
counterparties being unable to meet their obligations. This
financial credit risk is monitored and minimized per type of
financial instrument by limiting our counterparties to a
sufficient number of major financial institutions and issuers of
commercial paper. We do not expect the counterparties to default
given their high credit quality.
Our customers consist of integrated circuit manufacturers
located throughout the world. We perform ongoing credit
evaluations of the customers financial condition and
generally require no collateral to secure accounts receivable.
We maintain an allowance for potentially uncollectable accounts
receivable. We regularly review the allowance by considering
factors such as historical payment experience, credit quality,
age of the accounts receivable balances, and current economic
conditions that may affect a customers ability to pay. In
addition, we utilize letters of credit to mitigate credit risk
when considered appropriate.
Sensitivity
analysis derivative financial instruments
We use foreign exchange derivatives to manage our foreign
exchange rate risk and interest rate swaps to manage our
interest rate risk.
The following table summarizes our derivative financial
instruments, their fair values and their sensitivity to an
instantaneous 10 percent decrease of the euro against other
currencies and an instantaneous 1 percent non-favorable
increase in interest rates from their levels of
December 31, 2006 and 2007 respectively, with all other
variables held constant.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value change
|
|
|
|
|
|
|
|
|
|
|
10%
|
|
|
|
|
|
|
|
1% non-
|
|
|
weakening of
|
|
|
|
|
|
|
|
favorable
|
|
|
euro against
|
|
|
|
|
|
|
|
increase in
|
|
|
other
|
|
|
|
Notional Amount
|
|
Fair Value
|
|
interest rate
|
|
|
currency
|
|
(in thousands)
|
|
EUR
|
|
EUR
|
|
EUR
|
|
|
EUR
|
|
As of December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
contracts1,2
|
|
|
482,131
|
|
|
2,150
|
|
|
N/A
|
|
|
|
(53,388
|
)
|
Currency
options2
|
|
|
73,049
|
|
|
3,827
|
|
|
N/A
|
|
|
|
(3,227
|
)
|
Interest rate swaps
|
|
|
429,900
|
|
|
2,584
|
|
|
(10,481
|
)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
contracts1,2
|
|
|
283,881
|
|
|
528
|
|
|
N/A
|
|
|
|
(31,402
|
)
|
Currency
options2
|
|
|
90,000
|
|
|
4,887
|
|
|
N/A
|
|
|
|
(3,706
|
)
|
Interest rate
swaps3
|
|
|
1,029,900
|
|
|
16,553
|
|
|
(51,727
|
)
|
|
|
N/A
|
|
|
(Source: Bloomberg Finance LP)
|
|
1
|
Mainly includes forward contracts
on U.S. dollar and Japanese yen.
|
2
|
Net amount of forward and option
contracts assigned as a hedge to sales and purchase
transactions, to monetary assets and liabilities and to net
investments in foreign operations.
|
3
|
The 2007 notional amount of the
interest rate swaps mainly consists of EUR 380 million relating
to cash and cash equivalents and of EUR 600 million relating to
a Eurobond of EUR 600 million. The fair value of interest rate
swaps includes accrued interest and mainly consists of the fair
value of the interest rate swaps relating to a Eurobond of EUR
600 million.
|
The fair value of forward contracts (used for hedging purposes)
is the estimated amount that a bank would receive or pay to
terminate the forward contracts at the reporting date, taking
into account the current interest rates, current exchange rates
and current creditworthiness of the counterparties.
ASML ANNUAL REPORT 2007
50
The fair value of currency options (used for hedging purposes)
is the estimated amount that a bank would receive or pay to
terminate the option agreements at the reporting date, taking
into account the current interest rates, current exchange rates,
volatility and current creditworthiness of the counterparties.
The fair value of interest rate swaps (used for hedging
purposes) is the estimated amount that a bank would receive or
pay to terminate the swap agreements at the reporting date,
taking into account the current interest rates and current
creditworthiness of the counterparties.
Item 12
Description of Securities Other Than Equity Securities
Not applicable.
ASML ANNUAL REPORT 2007
51
Part II
Item 13
Defaults, Dividend Arrearages and Delinquencies
None.
Item 14
Material Modifications to the Rights of Security Holders and Use
of Proceeds
None.
Item 15
Controls and Procedures
Disclosure
Controls and Procedures
As of the end of the period covered by this report, management
of ASML conducted an evaluation, under the supervision and with
the participation of ASMLs Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and
operation of ASMLs disclosure controls and procedures (as
defined in
Rule 13a-15(e)
under the Exchange Act). Based on such evaluation, ASMLs
Chief Executive Officer and Chief Financial Officer have
concluded that, as of December 31, 2007, ASMLs
disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis,
information required to be disclosed by ASML in the reports that
it files or submits under the Exchange Act and are effective in
ensuring that information required to be disclosed by ASML in
the reports that it files or submits under the Exchange Act is
accumulated and communicated to ASMLs management,
including ASMLs Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
Managements
Report on Internal Control over Financial Reporting
ASMLs management is responsible for establishing and
maintaining adequate internal control over financial reporting,
as such term is defined in
Rule 13a-15(f)
under the Exchange Act, for ASML. Under the supervision and with
the participation of ASMLs Chief Executive Officer and
Chief Financial Officer, ASMLs management conducted an
evaluation of the effectiveness of ASMLs internal control
over financial reporting based upon the framework in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission as of the end of the period covered by this report.
Based on that evaluation, management has concluded that
ASMLs internal control over financial reporting was
effective as of December 31, 2007 at providing reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the
United States of America.
ASMLs managements evaluation of the effectiveness of
ASMLs internal control over financial reporting as of
December 31, 2007 excluded the internal control over
financial reporting of Brion Technologies, Inc., which was
acquired by ASML on March 7, 2007 and whose financial statements
constitute 8.9 percent and 4.4 percent of net and
total assets, respectively, 0.2 percent of net sales and
−6.5 percent of net income of the consolidated
financial statement amounts as of and for the year ended
December 31, 2007. If adequately disclosed, companies are
allowed to exclude acquisitions for their assessment of internal
control over financial reporting during the first year of an
acquisition while integrating the acquired company under
guidelines established by the SEC.
Deloitte Accountants B.V., an independent registered public
accounting firm, has audited the consolidated financial
statements included in this annual report on
Form 20-F
and, as part of the audit, has issued a report, included herein,
on the effectiveness of ASMLs internal control over
financial reporting.
Changes in
Internal Control over Financial Reporting
During the year ended December 31, 2007 there have been no
changes in our internal control over financial reporting that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Inherent
Limitations of Disclosure Controls and Procedures in Internal
Control over Financial
Reporting
It should be noted that any system of controls, however
well-designed and operated, can provide only reasonable, and not
absolute, assurance that the objectives of the system will be
met. In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future
events.
ASML ANNUAL REPORT 2007
52
Item 16
A. Audit
Committee Financial Expert
Our Supervisory Board has determined that effective
March 18, 2004, Mr. Fritz Fröhlich, an
independent member of the Supervisory Board, qualifies as the
Audit Committee Financial Expert.
B. Code of
Ethics
ASML has adopted its Principles of Ethical Business
Conduct, which contain ASMLs ethical principles in
relation to various subjects. These Principles have been
developed into
day-to-day
guidelines (the Internal Guidelines on Ethical Business
Conduct). The Internal Guidelines on Ethical Business
Conduct apply to ASML employees worldwide, including ASMLs
Supervisory Board and Board of Management. Our Principles of
Ethical Business Conduct and Internal Guidelines on Ethical
Business Conduct are posted on our website (www.asml.com).
The Internal Guidelines on Ethical Business Conduct contain,
among others, written standards that are reasonably designed to
deter wrongdoing and to promote:
|
|
|
honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and
professional relationships;
|
|
full, fair, accurate, timely, and understandable disclosure in
reports and documents that ASML files with, or submits to, the
SEC and in other public communications made by ASML;
|
|
compliance with applicable governmental laws, rules and
regulations;
|
|
prompt internal reporting of violations of the Internal
Guidelines on Ethical Business Conduct to an appropriate person
or persons identified in these guidelines; and
|
|
accountability for adherence to the guidelines.
|
C. Principal
Accountant Fees and Services
Deloitte Accountants B.V. has served as our independent
registered public accounting firm for each of the three years in
the period ended December 31, 2007. The following table
sets forth the aggregate fees for professional audit services
and other services rendered by Deloitte Accountants B.V. in 2006
and 2007:
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2006
|
|
2007
|
(in thousands)
|
|
EUR
|
|
EUR
|
Audit fees
|
|
|
1,438
|
|
|
1,297
|
Audit-related fees
|
|
|
266
|
|
|
188
|
Tax fees
|
|
|
216
|
|
|
237
|
|
|
|
|
|
|
|
Total
|
|
|
1,920
|
|
|
1,722
|
|
Audit
fees
Audit fees primarily relate to the audit of our annual financial
statements set forth in our Annual Report on
Form 20-F,
agreed upon procedures work on our quarterly financial results,
services related to statutory and regulatory filings of ASML
Holding N.V. and its subsidiaries and services in connection
with accounting consultations on U.S. GAAP.
Audit-related
fees
Audit-related fees mainly comprise services in connection with
intended acquisitions and services in connection with
consultations on implementing the requirements of
Section 404 of the Sarbanes-Oxley Act.
Tax
fees
Tax fees can be detailed as follows:
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2006
|
|
2007
|
(in thousands)
|
|
EUR
|
|
EUR
|
Corporate Income Tax compliance services
|
|
|
59
|
|
|
146
|
Tax assistance for expatriate employees
|
|
|
70
|
|
|
62
|
Other tax advisory and compliance
|
|
|
87
|
|
|
29
|
|
|
|
|
|
|
|
Total
|
|
|
216
|
|
|
237
|
|
ASML ANNUAL REPORT 2007
53
The Audit Committee has approved the internal and external audit
plan and related audit fees for the year 2007. The Audit
Committee has adopted a policy regarding audit and non-audit
services, in consultation with Deloitte Accountants B.V. This
policy ensures the independence of our auditors by expressly
setting forth all services that the auditors may not perform and
reinforcing the principle of independence regardless of the type
of work performed. Certain non-audit services, such as certain
tax-related services and acquisition advisory services, are
permitted. The Audit Committee pre-approves all audit and
non-audit services not specifically prohibited under this policy
and reviews the annual external audit plan and any subsequent
engagements.
D. Exemptions
from the Listing Standards for Audit Committees
Not applicable.
E. Purchases of
Equity Securities by the Issuer and Affiliated
Purchasers
2006-2007
Share program
On March 23, 2006, the General Meeting of Shareholders
authorized the repurchase of up to a maximum of 10 percent
of our issued shares through September 23, 2007.
The aggregate number of shares bought back in this Repurchase
Program was 25,450,296, representing 100 percent of the
announced objective of maximum EUR 400 million and
5.25 percent of outstanding shares. This 2006 Repurchase
Program was completed in the third quarter of 2006. Shares
repurchased were recorded at cost and classified within
shareholders equity. ASML cancelled these repurchased
shares in 2007.
In order to mitigate the dilution due to the issuance of shares
upon conversion of its convertible bond due October 2006, ASML
repurchased 14,934,843 shares pursuant to a call option
transaction announced on October 9, 2006. These shares were
subsequently used to satisfy the conversion rights of holders of
ASMLs 5.75 percent Convertible Subordinated Notes.
The Company paid an aggregate of EUR 277 million in cash
for these shares. This repurchase program was completed in the
fourth quarter of 2006. These shares were purchased from a third
party who issued the call option.
In February 2007, ASML bought back 8,000,000 shares,
representing 100 percent of the announced objective of the
remaining 1.7 percent of outstanding shares. The share
program was announced on February 14, 2007 and was
completed in the first quarter of 2007. Shares repurchased have
been used to cover exercised stock options and to partly satisfy
the conversion rights of ASMLs 5.50 percent
Convertible Subordinated Notes.
The following table provides a summary of shares repurchased by
the Company in 2007 under the
2006-2007
program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
|
Total Value of Shares
|
|
|
|
|
|
|
Shares Purchased as
|
|
Maximum Number of
|
|
Purchased as Part of
|
|
|
|
|
|
|
Part of Publicly
|
|
Shares that May
|
|
Publicly Announced
|
|
|
Total Number of
|
|
Average Price Paid
|
|
Announced Plans or
|
|
Yet be Purchased
|
|
Plans or Programs
|
Period
|
|
Shares purchased
|
|
per Share (EUR)
|
|
Programs
|
|
Under the Program
|
|
(In EUR million)
|
February
14-23, 2007
|
|
|
8,000,000
|
|
|
19.53
|
|
|
8,000,000
|
|
|
|
|
|
156
|
|
2007-2008
Share program
On March 28, 2007, the General Meeting of Shareholders
authorized the repurchase of up to a maximum of three times
10 percent of our issued shares through September 28,
2008.
In 2007, the aggregate number of shares bought back under the
2007-2008
share program was 9,000,000, representing 64.3 percent of
the announced objective of 14,000,000 shares to be
repurchased during a period ending on September 28, 2008.
The share program was announced on October 17, 2007. Shares
repurchased will be used to cover outstanding stock options.
ASML ANNUAL REPORT 2007
54
The following table provides a summary of shares repurchased by
the Company in 2007 under the 2007-2008 program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
|
Total Value of Shares
|
|
|
|
|
|
|
Shares Purchased as
|
|
Maximum Number of
|
|
Purchased as Part of
|
|
|
|
|
|
|
Part of Publicly
|
|
Shares that May
|
|
Publicly Announced
|
|
|
Total Number of
|
|
Average Price Paid
|
|
Announced Plans or
|
|
Yet be Purchased
|
|
Plans or Programs
|
Period
|
|
Shares purchased
|
|
per Share (EUR)
|
|
Programs
|
|
Under the Programs
|
|
(In EUR million)
|
November
14-26, 2007
|
|
|
9,000,000
|
|
|
22.62
|
|
|
14,000,000
|
|
|
5,000,0001
|
|
|
204
|
|
|
|
1
|
In January 2008, ASML bought back
5,000,000 shares. The aggregate number of shares bought
back up to and including January 2008 represents
100 percent of the announced objective of 14 million
ordinary shares.
|
Capital repayment
program 2007
On July 17, 2007 the Extraordinary General Meeting of
Shareholders approved three proposals to amend the
Companys Articles of Association. The first amendment
involved an increase of share capital by an increase in the
nominal value per ordinary share from EUR 0.02 to EUR 2.12 and a
corresponding reduction in share premium. The second amendment
was a reduction of the nominal value per ordinary share from EUR
2.12 to EUR 0.08 resulting in the payment to shareholders of EUR
2.04 per ordinary share. The third amendment involved a
reduction in stock, whereby 9 ordinary shares with a nominal
value of EUR 0.08 each were consolidated into 8 ordinary shares
with a nominal value of EUR 0.09 each. As a result of these
amendments, which in substance constitute a synthetic share
buyback, EUR 1,012 million was repaid to our shareholders
and the outstanding number of ordinary shares was reduced by
55,093,409 shares or 11 percent. The capital repayment
program was completed in October 2007.
ASML ANNUAL REPORT 2007
55
Part III
Item 17
Financial Statements
Not applicable.
Item 18
Financial Statements
In response to this item, the Company incorporates herein by
reference the consolidated financial statements of the Company
set forth on pages F-2 through F-44 hereto.
Item 19
Exhibits
|
|
|
|
Exhibit No.
|
|
Description
|
1
|
|
Articles of Association of ASML Holding N.V. (English
translation) (Incorporated by reference to Amendment No. 11
to the Registrants Registration Statement on
Form 8-A/A,
filed with the Commission on November 2, 2007)
|
2.1
|
|
Fiscal Agency Agreement between ASML Holding N.V., Deutsche Bank
AG, London Branch and Deutsche Bank Luxembourg S.A. relating to
the Registrants 5.75 percent Notes due 2017*
|
4.1
|
|
Agreement between ASML Lithography B.V. and Carl Zeiss, dated
March 17, 2000 (Incorporated by reference to the
Registrants Annual Report on
Form 20-F
for the fiscal year ended December 31, 2000) #
|
4.2
|
|
Agreement between ASML Holding N.V. and Carl Zeiss, dated
October 24, 2003 (Incorporated by reference to the
Registrants Annual Report on
Form 20-F
for the year ended December 31, 2003) #
|
4.3
|
|
Form of Indemnity Agreement between ASML Holding N.V. and
members of its Board of Management (Incorporated by reference to
the Registrants Annual Report on
Form 20-F
for the year ended December 31, 2003)
|
4.4
|
|
Form of Indemnity Agreement between ASML Holding N.V. and
members of its Supervisory Board (Incorporated by reference to
the Registrants Annual Report on
Form 20-F
for the year ended December 31, 2003)
|
4.5
|
|
Employment Agreement between ASML Holding N.V. and Klaus Fuchs
(Incorporated by reference to the Registrants Annual
Report on
Form 20-F
for the fiscal year ended December 31, 2005)
|
4.6
|
|
Employment Agreement between ASML Holding N.V. and Eric Meurice
(Incorporated by reference to the Registrants Annual
Report on
Form 20-F
for the fiscal year ended December 31, 2004)
|
4.7
|
|
Form of Employment Agreement for members of the Board of
Management (Incorporated by reference to the Registrants
Annual Report on
Form 20-F
for the fiscal year ended December 31, 2003)
|
4.8
|
|
Nikon-ASML Patent Cross License Agreement, dated
December 10, 2004, between ASML Holding N.V. and Nikon
Corporation (Incorporated by reference to the Registrants
Annual Report on
Form 20-F
for the fiscal year ended December 31, 2004) #
|
4.9
|
|
ASML/Zeiss Sublicense Agreement, 2004, dated December 10,
2004, between Carl Zeiss SMT AG and ASML Holding N.V.
(Incorporated by reference to the Registrants Annual
Report on
Form 20-F
for the fiscal year ended December 31, 2004) #
|
4.10
|
|
ASML New Hires and Incentive Stock Option Plan For Management
(Version 2003) (Incorporated by reference to the
Registrants Statement on
Form S-8,
filed with the Commission on September 2, 2003 (File
No. 333-109154))
|
4.11
|
|
ASML Incentive and New Hire Option Plan for Board of Management
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8,
filed with the Commission on June 9, 2004 (File
No. 333-116337))
|
4.12
|
|
ASML Option Plan for Management of ASML Holding Group Companies
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on June 30, 2005 (file
No. 333-126340))
|
4.13
|
|
ASML Stock Option Plan for New Hire Options granted to Members
of the Board of Management (Version April 2006) (Incorporated by
reference to the Registrants Registration Statement on
Form S-8
filed with the Commission on August 7, 2006 (file
No. 333-136362))
|
4.14
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version April 2006)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on August 7, 2006
(file No. 333-136362))
|
4.15
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version July 2006)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on August 7, 2006
(file No. 333-136362))
|
4.16
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version October 2006)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on August 7, 2006
(file No. 333-136362))
|
4.17
|
|
ASML Restricted Stock Plan (Incorporated by reference to the
Registrants Registration Statement on
Form S-8
filed with the Commission on March 7, 2007 (file
No. 333-141125))
|
4.18
|
|
Brion Technologies, Inc., 2002 Stock Option Plan (as amended on
March 25, 2005; March 24, 2006; and November 17,
2006) (Incorporated by reference to the Registrants
Registration Statement on
Form S-8
filed with the Commission on April 20, 2007
(file No. 333-142254))
|
4.19
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version January 2007)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on July 5, 2007
(file No. 333-144356))
|
ASML ANNUAL REPORT 2007
56
|
|
|
|
Exhibit No.
|
|
Description
|
4.20
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version April 2007)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on July 5, 2007
(file No. 333-144356))
|
4.21
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version July 2007)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on July 5, 2007
(file No. 333-144356))
|
4.22
|
|
ASML Stock Option Plan for Incentive or New Hire Options granted
to Senior and Executive Management (Version October 2007)
(Incorporated by reference to the Registrants Registration
Statement on
Form S-8
filed with the Commission on July 5, 2007
(file No. 333-144356))
|
4.23
|
|
ASML Performance Stock Plan for Members of the Board of
Management (Version 1) (Incorporated by reference to the
Registrants Registration Statement on
Form S-8
filed with the Commission on July 5, 2007 (file
No. 333-144356))
|
4.24
|
|
ASML Performance Stock Option Plan for Members of the Board of
Management (Version 2) (Incorporated by reference to the
Registrants Registration Statement on
Form S-8
filed with the Commission on July 5, 2007 (file
No. 333-144356))
|
4.25
|
|
ASML Stock Option Plan from Base Salary for Senior &
Executive Management (Version October 2007) (Incorporated by
reference to the Registrants Registration Statement on
Form S-8
filed with the Commission on November 2, 2007 (file
No. 333-147128))
|
8.1
|
|
List of Material Subsidiaries*
|
12.1
|
|
Certification of CEO and CFO Pursuant to
Rule 13a-14(a)
of the Securities Exchange Act of 1934*
|
13.1
|
|
Certification of CEO and CFO Pursuant to
Rule 13a-14(b)
of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
|
15.1
|
|
Consent of Deloitte Accountants B.V.*
|
|
|
|
*
|
Filed at the Commission herewith
|
#
|
Certain information omitted
pursuant to a request for confidential treatment filed
separately with the Securities and Exchange Commission
|
ASML ANNUAL REPORT 2007
57
Signatures
ASML Holding N.V. hereby certifies that it meets all of the
requirements for filing on
Form 20-F
and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.
(Registrant)
President, Chief Executive Officer and Chairman of the Board of
Management
Dated: January 25, 2008
Executive Vice President, Chief Financial Officer and Member of
the Board of Management
Dated: January 25, 2008
ASML ANNUAL REPORT 2007
58
Index to Financial
Statements
|
|
|
F-2
|
|
Consolidated Statements of Operations for the years ended
December 31, 2005, 2006 and 2007
|
F-3
|
|
Consolidated Statements of Comprehensive Income for the years
ended December 31, 2005, 2006 and 2007
|
F-3
|
|
Consolidated Balance Sheets as of December 31, 2006 and 2007
|
F-4
|
|
Consolidated Statements of Shareholders Equity for the
years ended December 31, 2005, 2006 and 2007
|
F-5
|
|
Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2006 and 2007
|
F-6
|
|
Notes to the Consolidated Financial Statements
|
F-43
|
|
Report of Independent Registered Public Accounting Firm
|
ASML ANNUAL REPORT 2007
F-1
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Notes
|
|
(in thousands, except per share data)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
17
|
|
Net system sales
|
|
|
2,227,678
|
|
|
|
3,229,065
|
|
|
|
3,391,775
|
|
|
|
Net service and field option sales
|
|
|
301,289
|
|
|
|
368,039
|
|
|
|
416,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
|
2,528,967
|
|
|
|
3,597,104
|
|
|
|
3,808,679
|
|
|
|
Cost of system sales
|
|
|
1,366,026
|
|
|
|
1,911,362
|
|
|
|
1,973,588
|
|
|
|
Cost of service and field option sales
|
|
|
188,746
|
|
|
|
223,724
|
|
|
|
274,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
1,554,772
|
|
|
|
2,135,086
|
|
|
|
2,248,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit on sales
|
|
|
974,195
|
|
|
|
1,462,018
|
|
|
|
1,560,344
|
|
|
|
Research and development costs
|
|
|
347,901
|
|
|
|
413,708
|
|
|
|
510,503
|
|
2
|
|
Amortization of in-process research and development costs
|
|
|
|
|
|
|
|
|
|
|
23,148
|
|
|
|
Research and development credits
|
|
|
(24,027
|
)
|
|
|
(27,141
|
)
|
|
|
(24,362
|
)
|
|
|
Selling, general and administrative costs
|
|
|
201,204
|
|
|
|
204,799
|
|
|
|
225,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
449,117
|
|
|
|
870,652
|
|
|
|
825,387
|
|
|
|
Interest income
|
|
|
38,429
|
|
|
|
49,634
|
|
|
|
78,165
|
|
|
|
Interest expense
|
|
|
(52,523
|
)
|
|
|
(50,488
|
)
|
|
|
(44,714
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
|
|
|
435,023
|
|
|
|
869,798
|
|
|
|
858,838
|
|
16
|
|
Provision for income taxes
|
|
|
(123,559
|
)
|
|
|
(245,109
|
)
|
|
|
(170,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
311,464
|
|
|
|
624,689
|
|
|
|
687,843
|
|
|
|
Basic net income per ordinary share
|
|
|
0.64
|
|
|
|
1.32
|
|
|
|
1.49
|
|
|
|
Diluted net income per ordinary share
|
|
|
0.64
|
|
|
|
1.27
|
|
|
|
1.44
|
|
|
|
Number of ordinary shares used in computing per share amounts
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
484,103
|
|
|
|
474,860
|
|
|
|
462,406
|
|
|
|
Diluted
|
|
|
542,979
|
|
|
|
503,983
|
|
|
|
485,643
|
|
|
ASML ANNUAL REPORT 2007
F-2
Consolidated
Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
Net income
|
|
|
311,464
|
|
|
|
624,689
|
|
|
|
687,843
|
|
Foreign currency translation, net of taxes
|
|
|
25,389
|
|
|
|
(20,104
|
)
|
|
|
(31,975
|
)
|
Gain (loss) on derivative instruments
|
|
|
(38,365
|
)
|
|
|
11,240
|
|
|
|
(3,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
298,488
|
|
|
|
615,825
|
|
|
|
652,418
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2006
|
|
|
2007
|
|
Notes
|
|
(in thousands, except share and per share data)
|
|
EUR
|
|
|
EUR
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,655,857
|
|
|
|
1,271,636
|
|
5
|
|
Accounts receivable, net
|
|
|
672,762
|
|
|
|
637,975
|
|
6
|
|
Inventories, net
|
|
|
808,481
|
|
|
|
1,102,210
|
|
16
|
|
Deferred tax assets short term
|
|
|
141,255
|
|
|
|
73,019
|
|
7
|
|
Other current assets
|
|
|
147,683
|
|
|
|
234,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,426,038
|
|
|
|
3,319,369
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Deferred tax assets
|
|
|
200,378
|
|
|
|
141,032
|
|
7
|
|
Other assets
|
|
|
35,653
|
|
|
|
59,991
|
|
8
|
|
Goodwill
|
|
|
|
|
|
|
128,271
|
|
9
|
|
Other intangible assets, net
|
|
|
18,076
|
|
|
|
38,195
|
|
10
|
|
Property, plant and equipment, net
|
|
|
270,890
|
|
|
|
380,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
3,951,035
|
|
|
|
4,067,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
326,995
|
|
|
|
282,953
|
|
11
|
|
Accrued liabilities and other
|
|
|
665,842
|
|
|
|
917,133
|
|
16
|
|
Deferred tax liabilities short term
|
|
|
825
|
|
|
|
50
|
|
16
|
|
Current tax liabilities
|
|
|
187,751
|
|
|
|
104,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,181,413
|
|
|
|
1,304,768
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Deferred tax and other liabilities
|
|
|
223,463
|
|
|
|
245,415
|
|
14
|
|
Other deferred liabilities
|
|
|
8,271
|
|
|
|
7,936
|
|
12
|
|
Convertible subordinated debt
|
|
|
380,000
|
|
|
|
|
|
12
|
|
Other long term debt
|
|
|
1,433
|
|
|
|
602,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,794,580
|
|
|
|
2,160,135
|
|
|
|
|
|
|
|
|
|
|
|
|
13, 15
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preference Shares, EUR 0.02 nominal value;
900,000,000 shares authorized; none outstanding at
December 31, 2006 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares, EUR 0.02 nominal value at December 31,
2006 and EUR 0.09 nominal value at December 31, 2007
900,000,000 shares authorized; 477,099,245 outstanding at
December 31, 2006 and 435,625,934 at December 31, 2007
|
|
|
10,051
|
|
|
|
39,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share premium
|
|
|
1,195,034
|
|
|
|
463,847
|
|
|
|
Treasury shares at cost
|
|
|
(401,000
|
)
|
|
|
(198,893
|
)
|
|
|
Retained earnings
|
|
|
1,239,689
|
|
|
|
1,526,201
|
|
|
|
Accumulated other comprehensive income
|
|
|
112,681
|
|
|
|
77,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
Total shareholders equity
|
|
|
2,156,455
|
|
|
|
1,907,617
|
|
|
|
Total liabilities and shareholders equity
|
|
|
3,951,035
|
|
|
|
4,067,752
|
|
|
ASML ANNUAL REPORT 2007
F-3
Consolidated
Statements of Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Issued and outstanding
|
|
|
|
|
|
|
|
|
Treasury
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
APIC/Share
|
|
|
Retained
|
|
|
Shares at
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Premium
|
|
|
Earnings
|
|
|
cost
|
|
|
Income
|
|
|
Total
|
|
(in thousands)
|
|
Number1
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
Balance at January 1, 2005
|
|
|
483,676
|
|
|
|
9,675
|
|
|
|
895,836
|
|
|
|
351,570
|
|
|
|
|
|
|
|
134,521
|
|
|
|
1,391,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311,464
|
|
|
|
|
|
|
|
|
|
|
|
311,464
|
|
Foreign Currency Translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,389
|
|
|
|
25,389
|
|
Gain (loss) on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,365
|
)
|
|
|
(38,365
|
)
|
Tax benefit from stock options
|
|
|
|
|
|
|
|
|
|
|
5,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,919
|
|
Issuance of shares
|
|
|
994
|
|
|
|
19
|
|
|
|
15,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
484,670
|
|
|
|
9,694
|
|
|
|
917,564
|
|
|
|
663,034
|
|
|
|
|
|
|
|
121,545
|
|
|
|
1,711,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
624,689
|
|
|
|
|
|
|
|
|
|
|
|
624,689
|
|
Foreign Currency Translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,104
|
)
|
|
|
(20,104
|
)
|
Gain (loss) on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,240
|
|
|
|
11,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury shares
|
|
|
(25,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(401,000
|
)
|
|
|
|
|
|
|
(401,000
|
)
|
Purchase of shares in conjunction with conversion rights of
bond holders
|
|
|
(14,935
|
)
|
|
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
|
(277,235
|
)
|
|
|
|
|
|
|
(277,534
|
)
|
Issuance of shares in conjunction with convertible bonds
|
|
|
30,811
|
|
|
|
616
|
|
|
|
238,862
|
|
|
|
(48,034
|
)
|
|
|
277,235
|
|
|
|
|
|
|
|
468,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit from stock options
|
|
|
|
|
|
|
|
|
|
|
2,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares and stock options
|
|
|
2,003
|
|
|
|
40
|
|
|
|
35,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
477,099
|
|
|
|
10,051
|
|
|
|
1,195,034
|
|
|
|
1,239,689
|
|
|
|
(401,000
|
)
|
|
|
112,681
|
|
|
|
2,156,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
687,843
|
|
|
|
|
|
|
|
|
|
|
|
687,843
|
|
Foreign Currency Translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,975
|
)
|
|
|
(31,975
|
)
|
Gain (loss) on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,450
|
)
|
|
|
(3,450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of applying the provisions of
FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,648
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,648
|
)
|
Purchase of shares in conjunction with conversion rights of
bond holders and stock options
|
|
|
(17,000
|
)2
|
|
|
(970
|
)
|
|
|
|
|
|
|
|
|
|
|
(358,886
|
)
|
|
|
|
|
|
|
(359,856
|
)
|
Issuance of shares in conjunction with convertible bonds
|
|
|
26,232
|
|
|
|
718
|
|
|
|
288,360
|
|
|
|
(35,366
|
)
|
|
|
130,317
|
|
|
|
|
|
|
|
384,029
|
|
Capital
repayment3
|
|
|
(55,093
|
)
|
|
|
29,748
|
|
|
|
(1,041,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,011,857
|
)
|
Cancellation of treasury shares
|
|
|
|
|
|
|
(509
|
)
|
|
|
(48,563
|
)
|
|
|
(351,928
|
)
|
|
|
401,000
|
|
|
|
|
|
|
|
|
|
Tax benefit from stock options
|
|
|
|
|
|
|
|
|
|
|
9,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,006
|
|
Issuance of shares and stock options
|
|
|
4,388
|
|
|
|
168
|
|
|
|
61,614
|
|
|
|
(6,388
|
)
|
|
|
29,676
|
|
|
|
|
|
|
|
85,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
435,626
|
|
|
|
39,206
|
|
|
|
463,846
|
|
|
|
1,526,202
|
|
|
|
(198,893
|
)
|
|
|
77,256
|
|
|
|
1,907,617
|
|
|
|
|
1
|
As of December 31, 2007, the
number of issued shares is 444,452,864. This included the number
of issued and outstanding shares of 435,625,934 and treasury
shares of 8,826,930. As of December 31, 2006, the number of
issued shares was 502,549,541. This included the number of
issued and outstanding shares of 477,099,245 and treasury shares
of
25,450,296.
|
2
|
In 2007, 17,000,000 shares
were bought back which were partly reissued in order to cover
exercised stock options and to satisfy the conversion rights of
holders of our 5.50 percent Convertible Subordinated Notes.
We paid EUR 360 million in cash for these shares in total.
See Note 22 for further information.
|
3
|
In 2007, as part of a capital
repayment program, EUR 1,012 million of equity was repaid
to our shareholders and the number of outstanding ordinary
shares was reduced by 11 percent. See Note 22 for
further information.
|
ASML ANNUAL REPORT 2007
F-4