ASM International

ASM International ASM International N.V. dedicates its resources to the research, development, manufacturing, marketing and servicing of equipment and materials used to produce semiconductor devices. The Company provides solutions for the main areas of semiconductor production: wafer processing, assembly and packaging. The Company’s principal facilities in Europe, the United States, South East Asia and Japan enable it to meet local specifications and to sell and service its products in the world’s major semiconductor markets: Europe, the United States and the Far East. To meet the semiconductor industry’s demand for capital intensive production solutions, the Company’s design concepts emphasize superior quality, ease of operation and maintenance, reliability, safety and system integration. 1 1998 Annual Report Financial Highlights and Selected Comparative Financial Data In Netherlands guilders, Euros and US dollars (1) Year ended December 31, (millions, except per share data and full-time equivalents) 1998) 1998) 1998) 1997) 1996) 1995) 1994) US$) Eur) Nlg) Nlg) Nlg) Nlg) Nlg) Operations Net sales: 336.4) 288.1) 634.9) 708.7) 658.2) 670.9) 475.1) Front-End 155.1) 132.9) 292.8) 336.2) 361.2) 342.5) 181.9) Back-End 181.3) 155.2) 342.1) 372.5) 297.0) 328.4) 293.2) Earnings (loss) from operations, before one-time charges: 15.4) 13.1) 29.0) 63.3) 101.7) 122.6) 35.3) Front-End (1.5) (1.3) (2.9) 4.5) 57.6) 55.0) (17.6) Back-End 16.9) 14.4) 31.9) 58.8) 44.1) 67.6) 52.9) One-time charges(2) -) -) -) (179.2) -) -) -) Earnings (loss) from operations 15.4) 13.1) 29.0) (115.9) 101.7) 122.6) 35.3) Net earnings (loss) 0.7) 0.6) 1.2) (155.3) 68.4) 73.6) (9.2) Balance sheet Net working capital(3) 116.6) 99.9) 220.1) 217.6) 175.8) 107.0) 74.4) Total assets 330.4) 282.9) 623.5) 724.1) 612.0) 515.5) 421.7) Long term debt(4) 100.3) 85.9) 189.3) 102.7) 88.0) 85.8) 124.8) Backlog: 61.7) 52.8) 116.4) 243.6) 174.4) 303.7) 264.2) Front-End 31.5) 27.0) 59.5) 120.3) 115.8) 166.6) 154.7) Back-End 30.2) 25.8) 56.9) 123.3) 58.6) 137.1) 109.5) Staff Full-time equivalents:(5) 4,436) 4,436) 4,436) 4,514) 4,140) 4,037) 3,452) Front-End 756) 756) 756) 860) 898) 786) 618) Back-End 3,680) 3,680) 3,680) 3,654) 3,242) 3,251) 2,834) Staff costs: 110.3) 94.4) 208.1) 205.6) 174.2) 142.2) 124.6) Front-End 50.0) 42.8) 94.3) 108.8) 93.7) 73.2) 64.7) Back-End 60.3) 51.6) 113.8) 96.8) 80.5) 69.0) 59.9) Data per share Earnings (loss) per share from operations, before one-time charge s : Basic 0.45) 0.39) 0.86) 1.90) 3.22) 3.90) 1.12) Diluted 0.44) 0.38) 0.83) 1.90) 3.02) 3.61) 1.12) Net earnings (loss) per share: Basic 0.02) 0.02) 0.04) (4.67) 2.17) 2.34) (0.29) Diluted 0.02) 0.02) 0.04) (4.67) 2.03) 2.17) (0.29) Weighted average number outstanding(6 ) : Basic 33,794) 33,794) 33,794) 33,232) 31,566) 31,428) 31,533) Diluted 34,743) 34,743) 34,743) 33,232) 33,717) 33,966) 31,533) Definitions (1) For the convenience of investors, Financial Highlights and Selected Comparative Financial Data for 1998 have been converted into US dollars using the rate as at December 31, 1998 of US$1 = Nlg 1.8873 (which differs from the conversion rates used in accordance with the accounting policies used, see Note A) and into Euros (Eur) using the permanently fixed rate of 1 H = Nlg 2.20371. (2) For 1997: restructuring costs Nlg 3.6 million and Settlement Litigation Nlg 175.6 million. (3) Accounts receivable, inventories, other current assets, accounts payable, accrued expenses and advance payments from customers. (4) Long term debt includes subordinated long term debt. (5) Number of staff, calculated on a full time basis. (6) 1994 and 1995 number of shares are restated to give effect to the March 1996 3-for-1 stock split. The increase in the weighted average number of shares used for computing diluted net earnings per share in 1996 and 1995 results from the assumed exercise of options. Due to the loss reported in 1997 and 1994, no dilutive common stock equivalents have been reflected in the dilutive weighted average number of shares for such year. 19981997 Annual Report 22 Report from the Supervisory Board We submit herewith the 1998 Annual Report and during the year 1998 and to discharge the Supervisory Accounts as prepared by the Management Board. As Directors for their supervision during the year 1998. Supervisory Directors, we have held several meetings with the Management Board during the year and in our assessment Mr. A.C. Helfrich will retire as Supervisory Director in we have gained sufficient insight in the Company’s strategy, the Annual Meeting of June 1999, having reached the the business risks, the ongoing operations, market statutory age-limit. Mr. Helfrich joined the Board in 1987. developments, its organization, management and financials. Having held many senior positions in the Royal Dutch/Shell The Board monitored the compliance with the standards group of companies, Mr. Helfrich brought valuable given by the Dutch Corporate Governance Committee. The international management experience to the Company and Board was also actively involved in the refinancing activities we thank him for his contributions. during the year. It continues to supervise the ongoing effo r t s to change the maturity profile of the financing of the We thank the staff of ASM International for their Company into one with more emphasis on permanent capital. commitment and support shown during the past year. The Supervisory’s Board Audit Committee met regularly with the Management Board and Deloitte & Touche, the Supervisory Board, Company’s independent auditors. Matters of discussion were the Company’s system of internal control, the introduction of the Euro by the Company and the handling of the P.C. van den Hoek Millennium issue, as well as the Company’s accounting A.C. Helfrich principles, the audit performed and its findings and the 1998 F.C. Rauwenhoff Report and Accounts as prepared by the Management Board. F.W. Saris Deloitte & Touche have issued an unqualified opinion on the 1998 Accounts and we submit these Accounts to the General Meeting of Shareholders for approval. We also recommend Bilthoven, to discharge the Managing Directors for their management February 26, 1999 3 1998 Annual Report Letter to Shareholders Industry market conditions deteriorated in 1998. difficult memory market, the sales of the A600 UHVproduct According to consensus industry reports, the semiconductor line were substantially lower in 1998. Significantly, however, equipment market contracted between 20% and 30%. In this our A600 UHVcustomer base expanded with approximately environment, ASM International’s revenues also decreased, 70% of sales shipped to new accounts. but to a lesser degree than the industry’s contraction. Because we also refinanced significant short-term liabilities in the Back-End year, 1998 was a difficult year for the Company. ASM Pacific Technology (ASMPT), the company that handles our Back-End activities, saw total net sales decrease Markets by approximately 8% to NLG 342 million. Despite the contraction of the overall assembly and packaging market by ASM International operates in two segments of the over 30%, ASMPTachieved a gain in market share. The semiconductor equipment market. Approximately half of our success of our Back-End equipment divisions is the result of sales are realized in the wafer processing or Front-End ongoing development of technologically enhanced equipment segment of the market. The other half of our sales are such as the AB339 gold wire bonder, introduced in mid-1997, generated by our 50.3% owned subsidiary, ASM Pacific and awarded the Semiconductor International magazine’s Technology Ltd., and come from the assembly and packaging Ed i t o r ’s Choice Best Products Award last year. In the leadframe markets, the Back-End segment of the industry. division, the Company encountered heavy price-based competition during 1998, as sales decreased by 22%. During 1998, the markets deteriorated for most of the Fo r t u n a t e l y , the price of copper, the main leadframe ingredient, year, continuing a development that began in the second half was at an all-time low, providing some relief to margins. of 1996. The low point, in terms of revenues and order activity, was the third quarter. As structural overcapacity Technology developments continued to impact the semiconductor industry, production facilities were partially or completely closed, causing lay-offs During 1998, the wafer processing or Front-End segment and reduced earnings. This resulted in the so-called “buyers’ saw an acceleration in the demand for smaller and smaller market” in 1998, with depressed prices, and deteriorated other semiconductor devices. The miniaturization of devices that business conditions, such as credit terms and after sales are used in an ever-widening range of business and consumer support packages. The resulting double-digit contraction of products, such as hand-held telephones, organizers, and palm ASM’s core markets caused sharp competition among top computers, demands new technologies and superior equipment suppliers, in an effort to secure market share amid quality manufacturing processes.

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