EX-99.1 2 dex991.htm ASM INTERNATIONAL REPORTS FINAL 4TH QUARTER 2006/FULL YEAR 2006 OPERATING RESULT ASM International Reports Final 4th Quarter 2006/Full Year 2006 Operating Result

Exhibit 99.1

LOGO

ASM International N.V.

 

    Contact :   Naud van der Ven,   + 31 30 229 85 40  
      Mary Jo Dieckhaus,   + 1 212 986 29 00  

ASM INTERNATIONAL REPORTS FINAL

FOURTH QUARTER 2006 AND FULL YEAR 2006 OPERATING RESULTS

 

  •  

Fourth quarter of 2006 net sales of € 222.9 million, up 4% from the third quarter of 2006 and down 4% from the fourth quarter of 2005;

 

  •  

Net earnings from continued operations of the fourth quarter of 2006 were € 12.0 million, or € 0.22 diluted net earnings from continued operations per share, as compared to net earnings from continued operations of € 14.0 million, or € 0.26 diluted net earnings from continued operations per share for the third quarter of 2006 and net earnings from continued operations of € 13.1 million or € 0.25 diluted net earnings from continued operations per share in the fourth quarter of 2005;

 

  •  

Bookings in the fourth quarter of 2006 were € 205.4 million, up 11% from the third quarter of 2006. Bookings from our Front-end segment were up 33% and bookings from our Back-end segment were down 8%. Year-end backlog was € 234.3 million, down 7% from the end of the previous quarter;

 

  •  

Full year 2006 net sales of € 877.5 million, up 21% from net sales of € 724.7 million for the full year 2005. Sales from our Front-end segment were up 14% and sales from our Back-end segment were up 28%;

 

  •  

Net earnings from continued operations for the full year 2006 were € 54.7 million, or € 1.02 diluted net earnings from continued operations per share, as compared to net earnings from continued operations of € 8.9 million, or € 0.17 diluted net earnings from continued operations per share for the full year 2005;

 

  •  

Net loss from discontinued operations for the full year 2006 was € 20.4 million as compared to € 49.1 million for the full year 2005;

 

  •  

Full year 2006 bookings of € 889.9 million, up 17% from the full year 2005.

BILTHOVEN, THE NETHERLANDS, March 8, 2007 - ASM International N.V. (NASDAQ: ASMI and Euronext Amsterdam: ASM) reports today its final fourth quarter 2006 and full year 2006 operating results. These operating results have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

“Throughout 2006, both Front-end and Back-end segments delivered solid top-line growth as we continued to execute according to our long-term plan,” commented Arthur del Prado, president and chief executive officer of ASMI. “As EBITDA of € 17 million of our Front-end segment demonstrates, we made considerable progress with our program to bring Front-end operations to consistent profitability. We achieved this by streamlining our wafer processing portfolio while strengthening core technologies, at the same time we are putting in place a low-cost vertically-

 

1

integrated manufacturing base. ASMI’s Back-end operation once again reported superior returns, with the percentage of net earnings to sales exceeding 25 percent.”

Unaudited Accounts

ASM International N.V. is currently finalizing the financial statements for the year ended December 31, 2006. We expect to be able to file our Form 20-F with the U.S. Securities and Exchange Commission within two weeks and to publish our Statutory Annual Accounts for the year 2006 in early April 2007. The consolidated balance sheets of ASM International N.V. as of December 31, 2006, the related statements of operations and cash flows for the year ended December 31, 2006 and all quarterly information as presented in this press release are unaudited.

Discontinued Operations ASM NuTool, Inc.

Due to continued negative cash flows and the expected future returns on the invested capital employed, we decided in 2005 to reduce ASM NuTool to a small operation, focusing on process and intellectual property development with the intention of licensing these technologies in the future. In December 2006 we sold substantially all of the ASM NuTool patent portfolio to a third party. Consequently, in the fourth quarter of 2006, we impaired the remaining carrying value of goodwill in the amount of € 11.4 million and reclassified the cumulative translation adjustment related to ASM NuTool, a loss of € 4.8 million, from shareholders’ equity to the statement of operations. This caused ASM NuTool to be accounted for retroactively as discontinued operations in our Consolidated Financial Statements, in accordance with US GAAP. For a further analysis of discontinued operations, reference is made to the notes.

EBITDA - Front-end segment

EBITDA of our Front-end segment is a non-GAAP financial measure. We believe it is a relevant measure as it provides a comparison with earlier statements. EBITDA of our Front-end segment, as defined by us, which excludes one-time charges related to the impairment and discontinuation of ASM NuTool, may not be comparable to similar titled measures reported by others. It should be considered in addition to, and not as a substitute for, other measures of financial performance reported in accordance with US GAAP. The calculation of EBITDA of our Front-end segment for the year 2006 is included in the notes.

 

2

Three months ended December 31, 2006.

The following table shows the operating performance for the fourth quarter of 2006 as compared to the third quarter of 2006 and the fourth quarter of 2005:

 

(euro million)

       
     Q4 2005     Q3 2006     Q4 2006    

% Change
Q3 2006

to

Q4 2006

    

% Change
Q4 2005

to

Q4 2006

  

Net sales

    232.3     213.4     222.9     4 %   (4 )%

Gross profit

    83.2     83.0     83.8     1 %   1 %

Gross profit margin %

    35.8 %   38.9 %   37.6 %   (1.3 )% (1)   1.8 % (1)

Selling, general and administrative expenses

    (25.5 )   (29.2 )   (31.4 )   7 %   23 %

Research and development expenses

    (27.0 )   (21.9 )   (24.2 )   11 %   (10 )%

Amortization of other intangible assets

    (0.2 )   (0.1 )   —       na     na  
                              

Earnings from operations

    30.5     31.7     28.2     (11 )%   (8 )%

Net earnings from continuing operations

    13.1     14.0     12.0     (14 )%   (8 )%

Net loss from discontinued operations

    (40.3 )   (0.9 )   (10.7 )   (1,136 )%   73 %
                              

Net earnings (loss)

    (27.2 )   13.1     1.3     (90 )%   na  

Diluted net earnings (loss) from continuing operations per share

    0.25     0.26     0.22      

Diluted net loss from discontinued operations per share

    (0.77 )   (0.02 )   (0.20 )    
                      

Diluted net earnings (loss) per share

    (0.52 )   0.24     0.02      

New orders

    230.6     184.5     205.4     11 %   (11 )%

Backlog at end of period

    221.9     251.7     234.3     (7 )%   6 %
                              

(1)

Percentage point change

Net Sales in the fourth quarter of 2006 was 4% higher as compared to the third quarter of 2006. When compared to the fourth quarter of 2005, net sales decreased by 4%.

The weakening of the US dollar and US dollar related currencies against the euro in the fourth quarter of 2006 as compared to the third quarter of 2006 and the fourth quarter of 2005 impacted sales negatively by 0.3% and 5.5% respectively.

When compared to the third quarter of 2006, net sales of the Company’s Front-end segment increased 16% from € 96.1 million to € 111.2 million, while net sales of the Company’s Back-end segment decreased 5% from € 117.3 million to € 111.6 million.

The Gross Profit Margin for the fourth quarter of 2006 of 37.6% of net sales was 1.3 percentage points below the 38.9% gross profit margin realized in the third quarter of 2006. The fourth quarter gross profit margin of the Front-end segment decreased to 31.5% from 32.9% in the third quarter of 2006. The gross profit margin of the Back-end segment decreased slightly from 43.8% in the third quarter to 43.7% in the fourth quarter. The gross profit margin of the fourth quarter of 2005 included one-time charges of € 2.6 million related to the consolidation of platforms used in our Capacitor Product group.

Selling, General and Administrative Expenses increased 7% from € 29.2 million in the third quarter of 2006 to € 31.4 million in the fourth quarter of 2006 and increased 23% from € 25.5 million in the fourth quarter of 2005.

 

3

The increase from the third quarter of 2006 is, in part, due to growing expenditures for increased sales activities of our Vertical Furnace product group and additional corporate expenses related to our extraordinary shareholders meeting in November 2006.

As a percentage of net sales, selling, general and administrative expenses in the fourth quarter of 2006 were 14%, as compared to 14% in the third quarter of 2006 and 11% in the fourth quarter of 2005.

Research and Development Expenses increased 11% from € 21.9 million in the third quarter of 2006 to € 24.2 million in the fourth quarter of 2006 and decreased 10% from € 27.0 million in the fourth quarter of 2005.

The increase from the third quarter of 2006 is mainly due to additional development expenses in our Capacitor and Transistor Product group.

The fourth quarter of 2005 included one-time charges of € 4.4 million related to the consolidation of platforms used in our Capacitor Product group.

As a percentage of net sales, research and development costs in the fourth quarter of 2006 were 11%, as compared to 10% in the third quarter of 2006 and 12% in the fourth quarter of 2005.

Earnings from Operations amounted to € 28.2 million in the fourth quarter of 2006 compared to € 31.7 million in the third quarter of 2006 and € 30.5 million in the fourth quarter of 2005. The decrease of 11% as compared to the third quarter of 2006 is primarily caused by increased operating expenses. Earnings from operations in the fourth quarter of 2005 included one-time charges of € 7.0 million related to the consolidation of platforms used in our Capacitor Product group.

Full year 2006

The following table shows the operating performance of 2006 in comparison to 2005 and the percentage change:

 

(euro million)

    2005     2006     % Change  

Net sales

    724.7     877.5     21 %

Gross profit margin

    255.4     338.8     33 %

Gross profit margin %

    35.2 %   38.6 %   3.4  (1)

Selling, general and administrative expenses

    (98.1 )   (120.6 )   23 %

Research and development expenses

    (89.8 )   (88.1 )   (2 )%

Amortization of other intangible assets

    (0.6 )   (0.6 )   (8 )%
                  

Earnings from operations

    66.9     129.5     94 %

Net earnings from continuing operations

    8.9     54.7     515 %

Net loss from discontinued operations

    (49.1 )   (20.4 )   (59 )%
                  

Net earnings (loss)

    (40.2 )   34.3     na  

Diluted net earnings (loss) from continuing operations per share

    0.17     1.02     500 %

Diluted net loss from discontinued operations per share

    (0.93 )   (0.38 )   (59 )%
                  

Diluted net earnings (loss) per share

    (0.76 )   0.64     na  

New orders for the year

    759.8     889.9     17 %

Backlog at the end of the year

    221.9     234.3     6 %
                  

(1)

Percentage points change.

 

4

Net Sales The following table shows net sales of our Front-end and Back-end segments and the percentage change between the years 2005 and 2006:

 

(euro million)

    2005    2006    % Change  

Front-end

    357.9    409.4    14 %

Back-end

    366.8    468.1    28 %
                

Total net sales

    724.7    877.5    21 %
                

In 2006, net sales of wafer processing equipment (Front-end segment) represented 46.7% of total net sales. Net sales of assembly and packaging equipment and materials (Back-end segment) represented 53.3% of total net sales in 2006.

In the second half of 2006, net sales in the Front-end segment increased by 3% compared to the first half of 2006, while net sales in the Back-end segment for the second half of 2006 decreased 4% compared to the first half of 2006. In total, net sales decreased by 1% compared to the first half of 2006.

The weakening of the US dollar and US dollar related currencies against the euro in 2006 as compared to 2005 impacted sales negatively by 0.4%.

Gross Profit Margin. The following table shows our gross profit and gross profit margin for Front-end and Back-end segments and the percentage point increase or decrease in gross profit as a percentage of net sales between the years 2005 and 2006:

 

(euro million)

   

€

2005

   

€

2006

   

%

2005

    

%

2006

    

Increase or
(decrease)

percentage
points

  

Front-end

    89.8    127.8    25.1 %   31.2 %   6.1  

Back-end

    165.6    211.0    45.2 %   45.1 %   (0.1 )
                            

Total gross profit

    255.4    338.8    35.2 %   38.6 %   3.4  
                            

The gross profit margin of our Front-end segment increased steadily in 2006. Increased manufacturing of generic subassemblies and components by ASM Front-End Manufacturing Singapore (“FEMS”) contributed to this development. At the end of 2006, most generic subassemblies for 300mm Vertical Furnaces and 200mm Epitaxy systems were manufactured in this facility, as well as a number of generic subassemblies for the 200mm Vertical Furnaces. FEMS is expected to further lower our manufacturing costs and mitigate the impact of foreign currency transaction results on our margins. Focus on other cost reduction programs as well as the growing maturity and sales volume of our Vertical Furnace product group contributed positively to the increased gross profit margin in our Front-end segment. The gross profit margin of our Front-end segment in 2005 included one-time charges of € 2.6 million related to the consolidation of platforms used in our Capacitor Product group, which impacted the gross profit margin by 0.7 percentage points.

Although the gross profit margin of our Back-end segment decreased 2.6% in the second half of 2006 as compared to the first half of 2006 due in part to higher copper prices, the gross profit margin in 2006 remained at a level similar to 2005.

 

5

Selling, General and Administrative Expenses. The following table shows selling, general and administrative expenses for our Front-end and Back-end segments and the percentage change between the years 2005 and 2006:

 

(euro million)

    2005    2006    % Change  

Front-end

    57.1    67.3    18 %

Back-end

    41.0    53.4    30 %
                

Total selling, general and administrative expenses

    98.1    120.7    23 %
                

The increase from 2005 is, besides general price increases, due to increased sales and marketing activity, demo activity, increased expenditures in preparing to meet the requirements under Section 404 of the Sarbanes-Oxley Act, and corporate expenses related to discussions with shareholders. In addition, the adoption of Statement of Financial Accounting Standards No. 123R “Share-Based Payment,” effective January 1, 2006, required us to recognize costs of employee stock options of € 1.4 million.

As a percentage of net sales, selling, general and administrative expenses were 14%, both in 2006 and 2005.

Research and Development Expenses. The following table shows research and development expenses for our Front-end and Back-end segments and the percentage change between the years 2005 and 2006:

 

(euro million)

    2005    2006    % Change  

Front-end

    63.9    58.6    (8 )%

Back-end

    25.9    29.5    14 %
                

Total research and development expenses

    89.8    88.1    (2 )%
                

The decrease in the Front-end segment was the result of increased focus in the research and development project portfolio. The year 2005 included one-time charges of € 4.4 million related to the consolidation of platforms used in our Capacitor Product group.

The increase in the Back-end segment was the result of increased research and development activities supporting more value-innovative products.

As a percentage of net sales, research and development expenses decreased from 12% for the year 2005 to 10% in 2006.

Earnings from Operations amounted to earnings of € 129.5 million in 2006 compared to earnings of € 66.9 million in 2005. The increase is mainly caused by higher sales levels and gross profit margin, only partially offset by increased operating expenses. Earnings from operations in 2005 included one-time charges of € 7.0 million related to the consolidation of platforms used in our Capacitor Product group.

 

6

A breakdown of our earnings from operations of our Front-end and Back-end segment and of our Front-end segment between our established products Vertical Furnaces, Epitaxy and PECVD, products in development and unallocated overhead is as follows:

 

(euro million)

    2005     2006     % Change  

Established products

    20.6     37.2     18.6 %

Products in development (1)

    (39.3 )   (27.5 )   30.0 %

Unallocated

    (13.1 )   (8.3 )   36.6 %
                  

Earnings (loss) from operations Front-end segment

    (31.8 )   1.4     104.4 %

Earnings from operations Back-end segment

    98.7     128.1     29.8 %
                  

Total earnings from operations

    66.9     129.5     93.6 %
                  

(1)

2005: includes € 7.0 million one-time charges

Net Interest Expense amounted to € 5.8 million in 2006 compared to € 10.4 million in 2005. Net interest expenses decreased due to less debt, the repayment of US$ 94.3 million in convertible subordinated notes in November 2005 and more favourable interest income resulting from increased interest rates.

Bookings and backlog

The following table shows the level of new orders during the year and the backlog at the end of the year for our Front-end and Back-end segments and the percentage change between the years 2005 and 2006:

 

(euro million)

    2005    2006    % Change  

Front-end:

         

New orders for the year

    352.4    429.5    22 %

Backlog at the end of the year

    135.4    155.5    14 %

Back-end:

         

New orders for the year

    407.4    460.4    13 %

Backlog at the end of the year

    86.5    78.8    (9 )%

Total

         

New orders for the year

    759.8    889.9    17 %

Backlog at the end of the year

    221.9    234.3    6 %
                

For the full year 2006, the ratio of new orders divided by net sales (book-to-bill ratio) was 1.01, compared to 1.05 for the full year 2005.

For the fourth quarter of 2006, new orders received increased 11% to € 205.4 million from € 184.5 million in the third quarter of 2006. The increase was caused by a 33% increase of new orders in our Front-end segment, partially offset by an 8% decrease of new orders in our Back-end segment.

The backlog of € 234.3 million as of December 31, 2006 is 6% higher than the backlog of € 221.9 million as of December 31, 2005 and 7% lower than the backlog of € 251.7 million as of September 30, 2006.

Liquidity and capital resources

Net cash provided by operations was € 39.5 million for the fourth quarter of 2006 as compared to net cash provided by operations of € 21.1 million for the fourth quarter of 2005. For the year 2006, net cash provided by operations was € 143.8 million as compared to € 50.7 million for 2005. Theses developments result from improved net earnings and decreased working capital.

 

7

Net cash used in investing activities was € 4.2 million for the fourth quarter of 2006 as compared to € 12.5 million for the fourth quarter of 2005. For the year 2006, net cash used in investing activities was € 30.1 million as compared to € 45.6 million for 2005. These decreases primarily result from the proceeds of € 11.0 million of the sale of substantially all of ASM NuTool’s patent portfolio, and lower capital expenditures.

Net cash provided by financing activities was € 1.7 million for the fourth quarter of 2006 as compared to net cash used in financing activities of € 77.8 million for the fourth quarter of 2005. For the year 2006, net cash used in financing activities was € 41.8 million as compared to net cash used in financing activities of € 109.7 million for 2005. We repaid the remaining balance of US$ 94.3 million of our 5% convertible subordinated notes in November 2005. Dividend to minority shareholders of our subsidiary ASM Pacific Technology Ltd., increased from € 31.7 million in 2005 to € 51.1 million in 2006.

Net working capital, consisting of accounts receivable, inventories, other current assets, accounts payable, accrued expenses, advance payments from customers and deferred revenue, decreased from € 236.0 million at December 31, 2005 to € 227.1 million at December 31, 2006. The decrease is primarily the result of increased focus on working capital management, and partially offset by increased sales and manufacturing levels. The number of outstanding days of working capital, measured based on annual sales, decreased from 119 days at December 31, 2005 to 94 days at December 31, 2006.

At December 31, 2006, the Company’s principal sources of liquidity consisted of € 193.9 million in cash and cash equivalents and € 104.5 million in undrawn bank lines. Approximately € 89.3 million of the cash and cash equivalents and € 28.3 million of the undrawn bank lines are restricted to use in the Company’s Back-end operations and € 25.9 million in undrawn bank lines are restricted to use in the Company’s Front-end operations in Japan.

Outlook

As we enter 2007, we remain confident of our corporate strategy. During the past year, we had the opportunity to reiterate that strategy to our investors, and are pleased that our 2006 results validate our vision and corporate integrity. The target for our Front-end operations is to return to profitability at the net earnings level in 2007.

Based on good bookings in the fourth quarter of 2006, recent bookings in early 2007, and the visibility for the first half of 2007, we expect our Front-end sales for the first quarter in 2007 to be comparable to the fourth quarter of 2006 and expect a further increase in sales in the second quarter of 2007. We expect our Front-end segment to show positive net earnings in the first half of 2007.

Though Back-end is expected to show a lower sales level in the first quarter of 2007 compared with the fourth quarter of 2006, it should be another quarter with solid earnings.

 

8

ASM INTERNATIONAL CONFERENCE CALL

ASM International will host an investor conference call and web cast on

FRIDAY, MARCH 9, 2007 at

09:00 a.m. US Eastern time

15:00 p.m Continental European time.

The teleconference dial-in numbers are as follows:

 

United States:

   +1   800.510.9836

International:

   +1   617.614.3670

Participation pass code is

   603 45 039

A simultaneous audio web cast will be accessible at www.asm.com.

The teleconference will be available for replay, beginning one hour after completion of the live broadcast, through March 23, 2007. The replay dial-in numbers are:

 

United States:

   +1   888.286.8010

International:

   +1   617.801.6888

Participation pass code is

   450 55 739

About ASM International

ASM International N.V., headquartered in Bilthoven, the Netherlands, and its subsidiaries design and manufacture equipment and materials used to produce semiconductor devices. ASM International and its subsidiaries provide production solutions for wafer processing (Front-end segment) as well as assembly and packaging (Back-end segment) through facilities in the United States, Europe, Japan and Asia. ASM International’s common stock trades on NASDAQ (symbol ASMI) and the Euronext Amsterdam Stock Exchange (symbol ASM). For more information, visit ASMI’s website at www.asm.com.

Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995: All matters discussed in this statement, except for any historical data, are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These include, but are not limited to, economic conditions and trends in the semiconductor industry generally and the timing of the industry cycles specifically, currency fluctuations, the timing of significant orders, market acceptance of new products, competitive factors, litigation involving intellectual property, shareholder and other issues, commercial and economic disruption due to natural disasters, terrorist activity, armed conflict or political instability, epidemics and other risks indicated in the Company’s filings from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, the Company’s reports on Form 20-F and Form 6-K. The Company assumes no obligation nor intends to update or revise any forward-looking statements to reflect future developments or circumstances.

 

9

ASM INTERNATIONAL N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(thousands except per share data)

    in Euro  
     Three months ended
December 31,		     Year ended
December 31,		  
     2005     2006     2005     2006  
     (unaudited)     (unaudited)           (unaudited)  

Net sales

    232,293     222,877     724,698     877,491  

Cost of sales

    (149,099 )   (139,055 )   (469,321 )   (538,674 )
                        

Gross profit

    83,194     83,822     255,377     338,817  

Operating expenses:

         

Selling, general and administrative

    (25,524 )   (31,368 )   (98,073 )   (120,654 )

Research and development

    (26,966 )   (24,239 )   (89,829 )   (88,130 )

Amortization of other intangible assets

    (243 )   (40 )   (599 )   (553 )
                        

Total operating expenses

    (52,733 )   (55,647 )   (188,501 )   (209,337 )
                        

Earnings from operations

    30,461     28,175     66,876     129,480  

Net interest expense

    (2,409 )   (1,121 )   (10,417 )   (5,824 )

Foreign currency transaction losses

    (50 )   (59 )   (128 )   (1,250 )
                        

Earnings from continuing operations before income taxes and minority interest

    28,002     26,995     56,331     122,406  

Income tax expense

    (1,559 )   (5,275 )   (6,666 )   (14,095 )
                        

Earnings from continuing operations before minority interest

    26,443     21,720     49,665     108,311  

Minority interest

    (16,116 )   (10,963 )   (43,558 )   (54,882 )

Gain on dilution of investment in subsidiary

    2,781     1,255     2,781     1,255  
                        

Net earnings from continuing operations

    13,108     12,012     8,888     54,684  

Loss from discontinued operations before income taxes

    (39,658 )   (10,703 )   (48,464 )   (20,350 )

Income tax expense

    (641 )   —       (641 )   —    
                        

Net loss from discontinued operations

    (40,299 )   (10,703 )   (49,105 )   (20,350 )
                        

Net earnings (loss)

    (27,191 )   1,309     (40,217 )   34,334  
                        

Net earnings (loss) per share:

         

Basic net earnings from continuing operations

    0.25     0.22     0.17     1.02  

Basic net loss from discontinued operations

    (0.77 )   (0.20 )   (0.93 )   (0.38 )

Basic net earnings (loss)

    (0.52 )   0.02     (0.76 )   0.64  

Diluted net earnings from continuing operations (1)

    0.25     0.22     0.17     1.02  

Diluted net loss from discontinued operations (1)

    (0.77 )   (0.20 )   (0.93 )   (0.38 )

Diluted net earnings (loss) (1)

    (0.52 )   0.02     (0.76 )   0.64  
                        

Weighted average number of shares used in computing per share amounts (in thousands):

         

Basic

    52,655     53,613     52,638     53,403  

Diluted (1)

    52,655     53,852     52,638     53,575  
                        
(1) The calculation of diluted net earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the Company. Only instruments that have a dilutive effect on net earnings (loss) are included in the calculation. The assumed conversion results in adjustment in the weighted average number of common shares and net earnings (loss) due to the related impact on interest expense. The calculation is done for each reporting period individually. Due to the loss reported in the three months and the year ended December 31, 2005, the effect of securities and other contracts to issue common stock were anti-dilutive and no adjustments have been reflected in the diluted weighted average number of shares and net losses for those periods. For the three months and the year ended December 31, 2006 the effect of a potential conversion of convertible debt into 11,886,738 common shares was anti-dilutive and no adjustments have been reflected in the diluted weighted average number of shares and net earnings for those periods.

ASM INTERNATIONAL N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(thousands except per share data)

    in Euro  
     Three months ended  
     March 31,
2006		     June 30,
2006		     September 30,
2006		     December 31,
2006		  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Net sales

    206,488     234,759     213,367     222,877  

Cost of sales

    (127,794 )   (141,443 )   (130,382 )   (139,055 )
                        

Gross profit

    78,694     93,316     82,985     83,822  

Operating expenses:

         

Selling, general and administrative

    (29,674 )   (30,385 )   (29,227 )   (31,368 )

Research and development

    (20,581 )   (21,391 )   (21,919 )   (24,239 )

Amortization of other intangible assets

    (183 )   (228 )   (102 )   (40 )
                        

Total operating expenses

    (50,438 )   (52,004 )   (51,248 )   (55,647 )
                        

Earnings from operations

    28,256     41,312     31,737     28,175  

Net interest expense

    (1,813 )   (1,580 )   (1,310 )   (1,121 )

Foreign currency transaction gains (losses)

    161     (1,040 )   (312 )   (59 )
                        

Earnings from continuing operations before income taxes and minority interest

    26,604     38,692     30,115     26,995  

Income tax expense

    (2,434 )   (3,609 )   (2,777 )   (5,275 )
                        

Earnings from continuing operations before minority interest

    24,170     35,083     27,338     21,720  

Minority interest

    (14,137 )   (16,365 )   (13,417 )   (10,963 )

Gain on dilution of investment in subsidiary

    —       —       —       1,255  
                        

Net earnings from continuing operations

    10,033     18,718     13,921     12,012  

Loss from discontinued operations before income taxes

    (7,464 )   (1,317 )   (866 )   (10,703 )

Income tax expense

    —       —       —       —    
                        

Net loss from discontinued operations

    (7,464 )   (1,317 )   (866 )   (10,703 )
                        

Net earnings (loss)

    2,569     17,401     13,055     1,309  
                        

Net earnings (loss) per share:

         

Basic net earnings from continuing operations

    0.19     0.35     0.26     0.22  

Basic net loss from discontinued operations

    (0.14 )   (0.02 )   (0.02 )   (0.20 )

Basic net earnings (loss)

    0.05     0.33     0.24     0.02  

Diluted net earnings from continuing operations

    0.19     0.32     0.26     0.22  

Diluted net loss from discontinued operations

    (0.14 )   (0.02 )   (0.02 )   (0.20 )

Diluted net earnings (loss)

    0.05     0.30     0.24     0.02  
                        

Weighted average number of shares used in computing per share amounts (in thousands):

         

Basic

    53,073     53,446     53,474     53,613  

Diluted

    53,197     65,424     65,426     53,852  
                        

ASM INTERNATIONAL N.V.

CONSOLIDATED BALANCE SHEETS

 

(thousands except share data)

    In Euro  
    

December 31,

2005

    

December 31,

2006

  
    
           (unaudited)  

Assets

     

Cash and cash equivalents

    135,000     193,872  

Accounts receivable, net

    209,314     198,359  

Inventories, net

    189,404     197,089  

Income taxes receivable

    22     49  

Deferred tax assets

    2,841     3,140  

Other current assets

    24,232     24,009  
            

Total current assets

    560,813     616,518  

Debt issuance costs

    5,430     3,938  

Deferred tax assets

    536     1,052  

Other intangible assets

    9,177     4,948  

Goodwill, net

    73,009     54,576  

Property, plant and equipment, net

    163,343     151,265  
            

Total Assets

    812,308     832,297  
            

Liabilities and Shareholders' Equity

     

Notes payable to banks

    21,061     19,657  

Accounts payable

    93,669     99,841  

Accrued expenses

    75,437     70,773  

Advance payments from customers

    7,943     8,095  

Deferred revenue

    9,862     13,652  

Income taxes payable

    7,965     15,952  

Current portion of long-term debt

    7,150     7,344  
            

Total current liabilities

    223,087     235,314  

Pension liabilities

    1,462     3,490  

Deferred tax liabilities

    311     620  

Long-term debt

    25,741     19,267  

Convertible subordinated debt

    203,448     182,232  
            

Total Liabilities

    454,049     440,923  

Minority interest

    119,665     114,916  

Shareholders' Equity:

     

Common shares

     

Authorized 110,000,000 shares, par value € 0.04, issued and outstanding 52,678,952 and 53,828,745 shares

    2,107     2,153  

Financing preferred shares, issued none

    —       —    

Preferred shares, issued none

    —       —    

Capital in excess of par value

    300,479     316,745  

Retained earnings

    (15,586 )   18,748  

Accumulated other comprehensive loss

    (48,406 )   (61,188 )
            

Total Shareholders' Equity

    238,594     276,458  
            

Total Liabilities and Shareholders' Equity

    812,308     832,297  
            

ASM INTERNATIONAL N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(thousands)

    in Euro  
     Three months ended
December 31,		     Year ended
December 31,		  
     2005     2006     2005     2006  
     (unaudited)     (unaudited)           (unaudited)  

Increase (decrease) in cash and cash equivalents:

         

Cash flows from operating activities:

         

Net earnings (loss)

    (27,191 )   1,309     (40,217 )   34,334  

Adjustments to reconcile net earnings to net cash from operating activities:

         

Depreciation of property, plant and equipment

    10,231     7,725     36,006     35,067  

Amortization of other intangible assets

    541     945     1,748     2,439  

Impairment of property, plant and equipment

    3,308     —       3,308     —    

Impairment and disposal of discontinued operations

    33,128     9,507     33,128     12,841  

Amortization of debt issuance costs

    371     318     1,781     976  

Compensation expense employee stock option plan

    66     403     66     1,421  

Compensation expense employee share incentive scheme ASMPT

    6,242     1,748     6,242     7,290  

Deferred income taxes

    221     (664 )   550     (151 )

Minority interest

    16,116     10,963     43,558     54,882  

Gain on dilution of investment in subsidiary

    (2,781 )   (1,255 )   (2,781 )   (1,255 )

Changes in other assets and liabilities:

         

Accounts receivable

    (28,315 )   5,647     (22,266 )   (7,143 )

Inventories

    11,417     (4,718 )   (14,537 )   (26,095 )

Other current assets

    2,042     1,757     1,918     (1,632 )

Accounts payable and accrued expenses

    2,985     372     14,657     15,585  

Advance payments from customers

    373     58     (497 )   1,403  

Deferred revenue

    (925 )   1,650     (4,328 )   4,241  

Pension liabilities

    (177 )   496     (284 )   629  

Income taxes

    (6,529 )   3,246     (7,335 )   8,960  
                        

Net cash provided by operating activities

    21,123     39,507     50,717     143,792  
                        

Cash flows from investing activities:

         

Capital expenditures

    (11,777 )   (15,193 )   (44,637 )   (39,374 )

Purchase of intangible assets

    (455 )   (856 )   (732 )   (3,298 )

Acquisition of business, net of common shares issued and cash acquired

    (1,101 )   (356 )   (1,101 )   (1,162 )

Proceeds from sale of property, plant and equipment

    865     1,198     913     2,750  

Proceeds from sale of intangible assets

    —       11,032     —       11,032  
                        

Net cash used in investing activities

    (12,468 )   (4,175 )   (45,557 )   (30,052 )
                        

Cash flows from financing activities:

         

Notes payable to banks, net

    2,050     (1,729 )   (2,379 )   1,052  

Proceeds from long-term debt and subordinated debt

    199     646     13,347     2,694  

Repayments of long-term debt and subordinated debt

    (80,489 )   (2,078 )   (89,620 )   (6,282 )

Proceeds from issuance of common shares

    415     4,883     654     11,843  

Dividend to minority shareholders

    —       —       (31,713 )   (51,125 )
                        

Net cash provided by (used in) financing activities

    (77,825 )   1,722     (109,711 )   (41,818 )

Exchange rate effects

    2,170     (4,956 )   20,932     (13,050 )
                        

Net increase (decrease) in cash and cash equivalents

    (67,000 )   32,098     (83,619 )   58,872  

Cash and cash equivalents at beginning of period

    202,000     161,774     218,619     135,000  
                        

Cash and cash equivalents at end of period

    135,000     193,872     135,000     193,872  
                        

Supplemental disclosures of cash flow information

         

Cash paid during the period for:

         

Interest, net

    6,172     3,454     10,295     6,000  

Income taxes, net

    8,509     3,300     14,093     5,893  
                        

Non cash investing and financing activities:

         

Capital leases

    1,414     —       1,414     —    
                        

ASM INTERNATIONAL N.V.

DISCLOSURE ABOUT SEGMENTS AND RELATED INFORMATION

The Company organizes its activities in two operating segments, Front-end and Back-end.

The Front-end segment manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The segment is a product driven organizational unit comprised of manufacturing, service, and sales operations in Europe, the United States, Japan and Southeast Asia.

The Back-end segment manufactures and sells equipment and materials used in assembly and packaging, encompassing the processes in which silicon wafers are separated into individual circuits and subsequently assembled, packaged and tested. The segment is organized in ASM Pacific Technology Ltd., in which the Company holds a majority interest of 53.35% at December 31, 2006, whilst the remaining shares are listed on the Stock Exchange of Hong Kong. The segment's main operations are located in Hong Kong, Singapore, the People's Republic of China and Malaysia.

 

(thousands, except headcount)

    In Euro  
     Front-end     Back-end     Total  

Year ended December 31, 2005

                   

Net sales to unaffiliated customers

    357,913     366,785     724,698  

Gross profit

    89,742     165,635     255,377  

Earnings (loss) from operations

    (31,818 )   98,694     66,876  

Net interest income (expense)

    (11,958 )   1,541     (10,417 )

Foreign currency transaction gains (losses)

    174     (302 )   (128 )

Income tax expense

    (1,095 )   (5,571 )   (6,666 )

Gain on dilution of investment in subsidiary

    2,781     —       2,781  

Minority interest

    —       (43,558 )   (43,558 )

Net earnings (loss) from continuing operations

    (41,916 )   50,804     8,888  

Net loss from discontinued operations

    (49,105 )   —       (49,105 )

Net earnings (loss)

    (91,021 )   50,804     (40,217 )

Capital expenditures and purchase of intangible assets

    25,354     20,015     45,369  

Depreciation and amortization

    21,794     15,960     37,754  

Impairment of property, plant and equipment

    3,308     —       3,308  

Impairment of and disposal of discontinued operations

    33,128     —       33,128  

Cash and cash equivalents

    55,329     79,671     135,000  

Capitalized goodwill

    26,005     47,004     73,009  

Other intangible assets

    9,177     —       9,177  

Other identifiable assets

    341,652     253,470     595,122  

Total assets

    432,163     380,145     812,308  

Total debt

    257,350     50     257,400  

Headcount in full-time equivalents (1)

    1,691     7,760     9,451  

Year ended December 31, 2006

    (unaudited)     (unaudited)     (unaudited)  

Net sales to unaffiliated customers

    409,383     468,108     877,491  

Gross profit

    127,856     210,961     338,817  

Earnings from operations

    1,390     128,090     129,480  

Net interest income (expense)

    (9,131 )   3,307     (5,824 )

Foreign currency transaction losses

    (1,228 )   (22 )   (1,250 )

Income tax expense

    (976 )   (13,119 )   (14,095 )

Gain on dilution of investment in subsidiary

    1,255     —       1,255  

Minority interest

    —       (54,882 )   (54,882 )

Net earnings (loss) from continuing operations

    (8,690 )   63,374     54,684  

Net loss from discontinued operations

    (20,350 )   —       (20,350 )

Net earnings (loss)

    (29,040 )   63,374     34,334  

Capital expenditures and purchase of intangible assets

    21,422     21,250     42,672  

Depreciation and amortization

    20,123     17,383     37,506  

Impairment of and disposal of discontinued operations

    12,841     —       12,841  

Cash and cash equivalents

    104,599     89,273     193,872  

Capitalized goodwill

    14,253     40,323     54,576  

Other intangible assets

    4,646     302     4,948  

Other identifiable assets

    328,257     250,644     578,901  

Total assets

    451,755     380,542     832,297  

Total debt

    227,793     707     228,500  

Headcount in full-time equivalents (1)

    1,860     9,008     10,868  
(1) Headcount includes those employees with a fixed contract, and is exclusive of temporary workers.

 

ASM INTERNATIONAL N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

ASM International N.V, ("ASMI") follows accounting principles in the United States of America ("US GAAP"). Accounting principles applied are unchanged compared to the year 2005, except for the adoption of Statements of Financial Accounting Standard No. 123R "Share-based Payment" ("SFAS 123R"), and No. 158, “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of SFAS No. 87, 88, 106, and 132(R)” (“SFAS 158”).

Principles of Consolidation

The Consolidated Financial Statements include the accounts of ASMI and its subsidiaries, where ASMI holds a controlling interest. The minority interest in subsidiaries is disclosed separately in the Consolidated Financial Statements. All intercompany profits, transactions and balances have been eliminated in consolidation. Intercompany profits included in inventory are recognized in the Consolidated Statements of Operations upon the sale of the respective inventory to a third party.

SFAS 123R

ASMI adopted SFAS 123R effective January 1, 2006 and applies the provisions of SFAS 123R to all share-based payments, including employee stock options, granted, vested, modified or settled subsequent to January 1, 2006. SFAS 123R requires that the cost of all share-based compensation arrangements, be reflected in the financial statements based on the fair value of the awards. The cost is measured at fair value on the grant date and is recognized over the requisite service period.

Prior to January 1, 2006, ASMI applied the intrinsic-value method prescribed in APB No. 25, “Accounting for Stock Issued to Employees.” All stock options granted to employees had an exercise price equal to the market value of the underlying common shares on the date of grant and accordingly for these plans no stock-based compensation expense was reflected in financial statements.

SFAS 158

ASMI adopted SFAS 158 effective January 1, 2006. SFAS 158 requires an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year; (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income; and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. SFAS 158 does not change the amount of net periodic pension cost included in net income.

ASM INTERNATIONAL N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

EBITDA - Front-end segment

EBITDA of our Front-end segment is a non-GAAP financial measure. We believe it is a relevant measure as it provides a comparison with earlier announcements. EBITDA of our Front-end segment, as defined by us, which excludes one-time charges related to the impairment and discontinuation of ASM NuTool, may not be comparable to similar titled measures reported by others. It should be considered in addition to, and not as a substitute for, other measures of financial performance reported in accordance with US GAAP. The calculation of EBITDA of our Front-end segment for the year 2006 is as follows:

 

(thousands)

    in Euro  
     Year ended
December 31,
2006		  
     (unaudited)  

Earnings from operations

    1,390  

Loss from discontinued operations before income taxes

    (20,350 )
      
   (18,960 )

Depreciation and amortization of other intangible assets

    20,123  

Amortization of debt issuance costs

    976  

One-time charges related to the impairment and disposal of ASM NuTool

   

Gain from the sale of patent portfolio

    (6,689 )

Impairment of goodwill

    11,364  

Settlement agreement with former shareholders NuTool

    3,048  

Reclassification of cumulative translation adjustment

    4,832  

Other restructuring charges

    2,371  
      

Total

    14,926  
      

EBITDA - Front-end segment

    17,065  
      

ASM INTERNATIONAL N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Discontinued operations

Due to continued negative cash flows and the expected future returns on the invested capital employed, the Company decided in 2005 to reduce ASM NuTool to a small operation, focusing on process and intellectual property development with the intention of licensing these technologies in the future. In December 2006 the Company sold substantially all off the ASM NuTool patent portfolio to a third party. This caused ASM NuTool to be accounted for retroactively as discontinued operations in the Company's Consolidated Financial Statements, in accordance with US GAAP.

Net losses from discontinued operations are summarized as follows:

 

(thousands)

    in Euro  
     Three months ended
December 31,		     Year ended
December 31,		  
     2005     2006     2005     2006  
     (unaudited)     (unaudited)           (unaudited)  

Net sales

    1,666     (1,478 )   1,720     (1,478 )

Cost of sales

    (3,609 )   1,405     (2,158 )   1,286  
                        

Gross profit

    (1,943 )   (73 )   (438 )   (192 )

Operating expenses

    (6,721 )   (1,123 )   (11,833 )   (5,232 )

Gain from the sale of patent portfolio

    —       6,689     —       6,689  

Impairment of goodwill

    (30,994 )   (11,364 )   (30,994 )   (11,364 )

Settlement agreement with former shareholders NuTool

    —       —       —       (3,048 )

Reclassification of cumulative translation adjustment

    —       (4,832 )   —       (4,832 )

Other restructuring charges

    —       —       (5,199 )   (2,371 )
                        

Total operating expenses

    (37,715 )   (10,630 )   (48,026 )   (20,158 )
                        

Loss from discontinued operations before income taxes

    (39,658 )   (10,703 )   (48,464 )   (20,350 )

Income tax expense

    (641 )   —       (641 )   —    
                        

Net loss from discontinued operations

    (40,299 )   (10,703 )   (49,105 )   (20,350 )
                        

Impairment and disposal of discontinued operations, as reported in the Consolidated Statement of Cash Flows, is summarized as follows:

 

(thousands)

    in Euro  
     Three months ended
December 31,		     Year ended
December 31,		  
     2005    2006     2005    2006  
     (unaudited)    (unaudited)          (unaudited)  

Gain from the sale of patent portfolio

    —      (6,689 )   —      (6,689 )

Impairment of goodwill

    30,994    11,364     30,994    11,364  

Impairment of property, plan and equipment

    2,134    —       2,134    286  

Settlement agreement with former shareholders NuTool

    —      —       —      3,048  

Reclassification of cumulative translation adjustment

    —      4,832     —      4,832  
                      

Net loss from discontinued operations

    33,128    9,507     33,128    12,841  
                      

The proceeds from the sale of the patent portfolio amounts to 11,032. After deducting the carrying value of the patent portfolio of 4,343, the gain amounts to 6,689.

ASM INTERNATIONAL N.V.

RECONCILIATION US GAAP – IFRS

Accounting principles under IFRS

ASMI’s primary consolidated financial statements are and will continue to be prepared in accordance with US GAAP. However, ASMI is required under Dutch law to report its Consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”). As a result of the differences between IFRS and US GAAP that are applicable to ASMI, the Consolidated Statement of Operations and Consolidated Balance Sheet reported in accordance with IFRS differ from those reported in accordance with US GAAP. The major differences relate to accounting for goodwill, accounting for minority interest, accounting for convertible subordinated notes, accounting for development expenses, accounting for option plans and accounting for pension plans.

The reconciliation between IFRS and US GAAP is as follows:

 

     Net earnings (loss)     Net earnings (loss)  
     Three months ended
December 31,		     Year ended
December 31,		  

(euro thousands except per share data)

    2005     2006     2005     2006  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

US GAAP

    (27,191 )   1,309     (40,217 )   34,334  

Adjustments for IFRS:

         

Impairment of goodwill

    2,412     —       2,412     —    

Classification of minority interest

    16,116     10,963     43,558     54,882  

Convertible subordinated notes

    (1,805 )   (2,718 )   (6,504 )   (9,899 )

Development expenses

    2,360     3,808     9,143     11,445  

Option plans

    (419 )   (7 )   (1,386 )   85  
                        

Total adjustments

    18,664     12,046     47,223     56,513  

IFRS

    (8,527 )   13,355     7,006     90,847  
                        

IFRS allocation of net earnings:

         

Shareholders

    (24,643 )   2,392     (36,552 )   35,965  

Minority interest

    16,116     10,963     43,558     54,882  

Net earnings (loss) per share:

         

Basic

    (0.47 )   0.04     (0.69 )   0.67  

Diluted

    (0.47 )   0.04     (0.69 )   0.67  
                        

 

     Equity     Equity  

(euro thousands)

   

December 31,

2005

    

December 31,

2006

  
    
           (unaudited)  

US GAAP

    238,594     276,458  

Adjustments for IFRS:

     

Goodwill

    (11,686 )   (10,575 )

Classification of minority interest

    119,665     114,916  

Convertible subordinated notes

    38,229     28,330  

Development expenses

    9,366     19,065  

Pension plans

    —       860  
            

Total adjustments

    155,574     152,596  

IFRS

    394,168     429,054