exv99w5
Exhibit
99.5
Statutory Annual Report 2010
Contents
This report comprises regulated information within the meaning
of articles 1:1 and 5:25c of the Dutch Financial Markets
Supervision Act (Wet op het Financieel Toezicht)
In this report the name “ASML” is sometimes used for
convenience in contexts where reference is made to ASML Holding
N.V. and/or
any of its subsidiaries in general. The name is also used where
no useful purpose is served by identifying the particular
company or companies.
©
2011, ASML Holding N.V. All Rights Reserved
ASML STATUTORY ANNUAL REPORT 2010
Board of Management
Eric Meurice
(1956)
President, Chief Executive Officer and
Chairman of the Board of Management
Appointed in 2004, re-appointed in 2008
French nationality
Peter T.F.M.
Wennink (1957)
Executive Vice President, Chief Financial Officer and
Member of the Board of Management
Appointed in 1999
Dutch nationality
Martin A. van den
Brink (1957)
Executive Vice President, Chief Product and
Technology Officer and
Member of the Board of Management
Appointed in 1999
Dutch nationality
Frits J. van Hout
(1960)
Executive Vice President, Chief Marketing Officer and
Member of the Board of Management
Appointed in 2009
Dutch nationality
Frederic
Schneider-Maunoury (1961)
Executive Vice President, Chief Operating Officer and
Member of the Board of Management
Appointed in 2010
French nationality
Supervisory Board
Arthur P.M. van
der Poel (1948)
(Chairman)
Former Chief Executive Officer of Philips Semiconductors
First appointed 2004
Current term until 2012
Dutch nationality
Jos W.B.
Westerburgen (1942)
Former Company Secretary and
Head of Tax of Unilever N.V. and Plc.
First appointed 2002
Current term until 2011
Dutch nationality
Fritz W.
Fröhlich (1942)
(Vice Chairman)
Former Deputy Chairman and
Chief Financial Officer of Akzo Nobel N.V.
First appointed 2004
Current term until 2012
German nationality
Hendrika (Ieke)
C.J. van den Burg (1952)
Member of the Dutch Monitoring Committee Corporate Governance
Code
First appointed 2005
Current term until 2013
Dutch nationality
OB Bilous
(1938)
Former General Manager and
VP Worldwide Manufacturing of IBM’s Microelectronics
Division
First appointed 2005
Current term until 2012
United States nationality
William T. Siegle
(1939)
Former Senior Vice President and
Scientist of AMD, Inc.
First appointed 2007
Current term until 2011
United States nationality
Pauline F.M. van
der Meer Mohr (1960)
President of the Executive Board of the Erasmus University
Rotterdam
First appointed 2009
Current term until 2013
Dutch nationality
Wolfgang H.
Ziebart (1950)
Former President and CEO of Infineon Technologies A.G.
First appointed 2009
Current term until 2013
German nationality
ASML STATUTORY ANNUAL REPORT 2010
Supervisory Board
Report
In this section of the 2010 Statutory Annual Report of ASML
Holding N.V. (“ASML” or the “Company”), the
Supervisory Board reports on its activities in 2010, and on the
information required to be provided in this report based on the
Dutch Corporate Governance Code (the “Code”).
General
The Supervisory Board is charged with the supervision of the
Board of Management and the general course of action of ASML, as
well as providing the Board of Management with advice.
In performing its responsibilities, the Supervisory Board takes
into account all relevant interests of the Company’s
stakeholders. Members of the Supervisory Board perform their
duties without a mandate, and are independent of any interests
in the business of the Company, as per the criteria of the Code.
Major management decisions, such as ASML’s strategy, major
investments and budget, require the approval of the Supervisory
Board. The Supervisory Board also supervises the structure and
management of systems, including the internal control and risk
management systems, and the financial reporting process. The
Supervisory Board selects and appoints new Board of Management
members, prepares the remuneration policy for the Board of
Management, and decides on the remuneration for the individual
members of the Board of Management. With respect to the
Supervisory Board remuneration: the Supervisory Board submits
remuneration proposals for approval to the General Meeting of
Shareholders (“AGM” or “Annual General Meeting of
Shareholders”). The Supervisory Board is also the body
responsible for nominating new Supervisory Board candidates for
appointment to the AGM.
The Supervisory Board closely follows the developments in the
area of corporate governance, as well as the application of the
relevant corporate governance rules within the Company and for
the Supervisory Board itself. An example of such an application
for the Supervisory Board based on the Code revised in 2009, was
the inclusion of a broader diversity paragraph in the
Supervisory Board’s profile, including the aspiration to
have at least 30.0 percent of each gender in the
Supervisory Board. The new profile was discussed with the works
council and discussed in the AGM in 2010.
For a more detailed description on corporate governance,
reference is made to the Corporate Governance Chapter of this
report.
Composition of
the Supervisory Board
Currently, the Supervisory Board consists of eight members.
Based on the articles of association, the Supervisory Board
should have a minimum of three members. Four of the Supervisory
Board members have the Dutch nationality, two members are German
nationals and two members have the US nationality. Two of the
eight Supervisory Board members are female. The average age is
63 years, whereby the ages vary from 50 to 72 years.
Meetings and
activities of the Supervisory Board
The Supervisory Board held five –
scheduled – physical meetings in 2010, and three
scheduled conference calls were held to specifically discuss the
quarterly results, the press release related thereto, and other
relevant topics. In general, the committee and Supervisory Board
meetings are held during several days, thus creating more time
for longer Supervisory Board meetings. The longer Supervisory
Board meetings provide for extra time that can be spent on
specific themes, such as management development, operational
performance and strategy.
Twice per year, the Supervisory Board reviews the budget. The
reason that this is done semi-annually, is the very cyclical
character of the semiconductor industry, which can cause this
market to change drastically within a period of just a few
months. In general, such changes also have significant impact on
ASML’s financial situation, and therefore the Supervisory
Board has made it practice to have an in – depth
semi-annual budget review.
With respect to the cyclicality of the semiconductor industry:
starting in the second half of 2009 and continuing throughout
2010, the Supervisory Board spent a considerable amount of time
reviewing the measures taken by ASML to be able to deliver to
the significantly increased demand.
ASML STATUTORY ANNUAL REPORT 2010
2
On the other hand, in the second half of 2008 and in the first
half of 2009, the Supervisory Board spent a similar amount of
time discussing the measures necessary to address the crisis
that began in the second half of 2008 and continued in 2009
(“financial and economic crisis”).
Other topics frequently discussed during this year were
ASML’s R&D programs; ASML’s market position; its
customer strategy; ASML’s financing policy; Investor
Relations; ASML’s business and operational objectives and
targets; and committee reports. The Supervisory Board also
discussed the topic of sustainability, its objectives and
related actions.
One Supervisory Board meeting took place in Japan, for the
Supervisory Board members to familiarize themselves with
ASML’s business activities, customer base and market in
Asia, as this continues to be a growing market.
During all physical meetings of the Supervisory Board, most
Board of Management members were present. In general after each
Supervisory Board meeting, the Supervisory Board members met
(and meet) inter se to discuss for example the functioning of
the Supervisory Board and of the Board of Management; as well as
the functioning of the individual members of both bodies; and
any other topics deemed important at that time.
No Supervisory Board member of those who were in office during
the full year of 2010, was absent more than once at the meetings
held in 2010.
In addition to the scheduled meetings and conference calls,
members of the Supervisory Board interacted intensively with the
Board of Management, as well as with its individual members,
through consultations, telephone calls and regular reports.
Also, several informal meetings and telephone calls took place
among Supervisory Board members to consult with each other on
various topics.
Throughout the year, the Supervisory Board and its committees
also meet without the members of the Board of Management.
Each year, the Supervisory Board and each of its committees
perform an evaluation related to the functioning of the
Supervisory Board, its committees and its individual members.
The evaluation process consists of the completion of a
questionnaire for the full Supervisory Board and for each
committee. The questionnaires also contain follow – up
themes resulting from the evaluations performed the previous
year. In addition, also for evaluation purposes, the Chairman
conducts
one-on-one
meetings with each Supervisory Board member.
This year, the Supervisory Board also requested feedback from
the Board of Management with respect to the evaluation of the
Supervisory Board.
The Chairman of the Selection and Nomination Committee
coordinates the evaluation process, assisted by the company
secretary.
Each committee discusses the outcome of the evaluation among its
own members. The main conclusions of the evaluation of the
committees and of the Supervisory Board, are discussed in a
Supervisory Board-only meeting. The Supervisory Board does not
consider the annual evaluation as an obligation resulting from
the Code, but the Supervisory Board has embedded the evaluation
process in its processes and activities, because the Supervisory
Board is of the opinion that the evaluations ensure continuous
focus on the quality of the activities, composition and
functioning of the Supervisory Board and its committees.
Improvement areas resulting from the evaluations are shared with
the Board of Management.
Furthermore, in 2010 a delegation of the Supervisory Board met
twice with the Works Council of ASML Netherlands B.V. The topics
of these meetings mostly evolve around important current
internal and external developments relevant for the Company and
its employees, the Company’s financial situation and its
strategy. The Supervisory Board considers these meetings a
valuable contribution to its activities for ASML.
Composition of
the Supervisory Board
In 2010, no members of the Supervisory Board were due to resign
per the applicable rotation schedule. J. (Jos) Westerburgen and
W. (William) Siegle will retire by rotation on April 20,
2011.
For further details on the activities and responsibilities of
the Supervisory Board, reference is made to the Corporate
Governance Chapter of this Statutory Annual Report.
ASML STATUTORY ANNUAL REPORT 2010
3
Supervisory Board
Committees
The Supervisory Board has installed four committees: an Audit
Committee, Remuneration Committee, Selection and Nomination
Committee, and Technology and Strategy Committee. Each committee
operates pursuant to its charter, which charter is based on the
rules and regulations of the Code, but also reflects practices
developed over the years. The responsibilities and authorities
of the committees are based on a mandate of the Supervisory
Board, whereas the Supervisory Board retains full responsibility
for the activities of the four committees.
In the plenary Supervisory Board meetings, the Chairman of each
committee provides a report, verbally
and/or in
writing, on the topics discussed during the committee meetings.
In addition, the minutes of the meetings are available for all
Supervisory Board members, in order to provide them with
sufficient information to understand ASML’s current state
of affairs, thus ensuring that the full Supervisory Board is
able to make the appropriate decisions.
For a further description of the activities and responsibilities
of the Supervisory Board committees, reference is made to the
Corporate Governance Chapter of this report.
Audit
Committee
In 2010, the Audit Committee met four times and held five
conference calls. Three calls were specifically held to discuss
the quarterly results and the related press release; the other
two calls were held for the purpose of discussing the results of
the year-end audits (US GAAP and International Financial
Reporting Standards, “IFRS”, respectively). The
current members of ASML’s Audit Committee are
Mr. Fröhlich (Chairman), Mr. Van der Poel and
Mr. Ziebart. The members of the Audit Committee are all
independent, non-executive members of the Supervisory Board.
In general, the Audit Committee focuses strongly on the review
of ASML’s quarterly (and annual) results and announcements.
It also continuously monitors the activities of the internal
audit department with respect to ASML’s internal controls,
including the internal controls over financial reporting in
light of Section 404 of the Sarbanes-Oxley Act of 2002. The
Audit Committee discusses in-depth ASML’s risk management
systems. Risk management includes a thorough and extensive risk
analysis process, as well as a list of some of the more relevant
risks the Company faces, described in more detail in the
Management Board Report of this Statutory Annual Report.
Other recurring activities of the Audit Committee are:
discussion and approval of the internal and external audit plan
and related external audit fees; review of i) the audit and
non-audit fees paid to the Company’s external auditor;
ii) the audit activities of the Company’s internal and
external auditor; iii) the internal and external
auditor’s management letter. Annually, the Audit Committee
monitors and reviews ASML’s tax strategy, tax systems and
tax planning; investor relations; ASML’s management of the
IT landscape; and the activities of the Company’s
Disclosure Committee. In 2010, significant attention was also
given to ASML’s financing policy, especially in view of
ASML’s strong cash position. The Audit Committee involved
external experts to provide their views on ASML’s financing
policy.
Another responsibility of the Audit Committee is to provide
advice to the Remuneration Committee with respect to the
financial targets for the Board of Management. The Audit
Committee also provides the Remuneration Committee with its
opinion on the level of achievement of the financial targets.
In 2010, the Audit Committee followed a training session on
fiscal related matters and on capital markets.
Remuneration
Committee
In 2010, the Remuneration Committee met six times in scheduled
meetings and several times on an ad-hoc basis, as well as via
teleconferences. The current members of ASML’s Remuneration
Committee are Mr. Westerburgen (Chairman), Ms. Van den
Burg and Ms. Van der Meer Mohr.
The topics discussed in 2010 included the regular topics: the
targets and remuneration package for the Board of Management,
the stock option and share plans and the 2009 and 2010
Remuneration Reports. Also discussed was the proposed revision
of the 2008 Remuneration Policy that led to the 2010
Remuneration Policy as proposed to and adopted by the AGM in
March 2010. Further topics discussed were the remuneration
related requirements based on the amended Code and law
proposals, such as the claw back and ultimum remedium
provisions. Also in 2010, scenario analyses and an internal pay
relativity analysis have been conducted.
Formal arrangements were developed with respect to the
implementation of the claw back and ultimum remedium provisions.
In cooperation with the Audit Committee and the Technology and
Strategy Committee, the Remuneration Committee reviewed and
proposed to the Supervisory Board the 2010 targets for the Board
of Management. And also in cooperation with the Audit
ASML STATUTORY ANNUAL REPORT 2010
4
Committee and the Technology and Strategy Committee, the
Remuneration Committee evaluated the performance of the members
of the Board of Management in view of those targets and provided
its recommendation to the Supervisory Board with respect to the
achievement of the 2010 targets and related appropriate
compensation levels for the Board of Management members over the
financial year 2010.
Legal experts as well as experts in the field of remuneration
for members of Boards of Management assisted the Remuneration
Committee in its activities. These experts do not provide
remuneration advice to the Board of Management.
Selection and
Nomination Committee
The Selection and Nomination Committee held three scheduled
meetings and several additional meetings on an ad-hoc basis in
2010. The current members of ASML’s Selection and
Nomination Committee are Mr. Westerburgen (Chairman),
Mr. Bilous and Mr. Van der Poel.
The main topics discussed in the Selection and Nomination
Committee meetings in 2010 were management development and
talent management; the composition of the Supervisory Board and
of the Board of Management; and the functioning of the
individual members of the Supervisory Board and of the
individual members of the Board of Management. As mentioned
earlier in the report, the Chairman of the Selection and
Nomination Committee is responsible for coordinating the
evaluation process of the Supervisory Board, and the results of
the evaluation were also discussed in the Selection and
Nomination Committee.
As part of the added responsibility to monitor corporate
governance developments, the Selection and Nomination Committee
also discussed the outcome of the 2010 Report of the Monitoring
Committee (Committee Streppel), as well as the implications
thereof for ASML.
Technology and
Strategy Committee
The Technology and Strategy Committee had three physical
meetings in 2010 and held two conference calls. In general, the
physical meetings last a full day. The conference calls were
held for the purpose of discussing the technology targets for
the Board of Management and the achievements related thereto.
The current members of ASML’s Technology and Strategy
Committee are Mr. Siegle (Chairman), Mr. Bilous,
Mr. Van der Poel and Mr. Ziebart. In addition, the
Technology and Strategy Committee may appoint one or more
advisors from within
and/or from
outside the Company. In 2010 three external advisors
participated in committee meetings. 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 reviews the specific ASML
technology matters important at that time. The outcome of the
discussions is reported in the meetings of the full Supervisory
Board. Because the important technical matters are being
discussed extensively in this Committee and because the
reporting is done in a comprehensible way, the Supervisory
Board’s understanding of ASML technology matters increases,
which enables the Supervisory Board to better supervise the
strategic choices ASML is facing.
In addition, the Committee also reviews the proposals for the
technology targets for the Board of Management, and advises the
Remuneration Committee on this topic. The Committee also
provides its opinion to the Remuneration Committee with respect
to the level of achievement of the technology targets.
The main subjects of the meetings of the Technology and Strategy
Committee in 2010 were the Company’s technology roadmap,
including Extreme Ultraviolet lithography, immersion technology,
double patterning and holistic lithography (for example Brion
products and metrology).
The Technology and Strategy Committee also paid a visit to IMEC
(Leuven, Belgium) in 2010. IMEC is an important research
institute in – among others –
nano-technology and works closely together with ASML in this
area.
Remuneration of
the Supervisory Board
The remuneration of the Supervisory Board members is described
in Note 29 to the Statutory Financial Statements 2010. The
General Meeting of Shareholders determines the remuneration of
the members of the Supervisory Board. In addition to their fee
as member of the Supervisory Board, Supervisory Board members
also receive a fee for each committee membership, as well as a
net cost allowance. The Supervisory Board remuneration is not
dependent on the financial results of the Company. No member of
the Supervisory Board personally maintains a business
relationship with the Company other than as a member of the
Supervisory Board.
None of the members of the Supervisory Board owns shares or
options on shares of the Company.
ASML STATUTORY ANNUAL REPORT 2010
5
The Company has not granted any loans to, nor has it granted any
guarantees in favor of, any of the members of the Supervisory
Board.
The 2004 Annual General Meeting of Shareholders has, as part of
the amendment to the Company’s Articles of Association,
agreed to indemnify the members of the Supervisory Board against
any claim arising in connection with their position as member of
the Supervisory Board, provided that such claim is not
attributable to willful misconduct or intentional recklessness
of such Supervisory Board member. The Board of Management has
further implemented the indemnification of the Supervisory Board
members by means of separate indemnification agreements for each
member of the Supervisory Board.
Composition of
the Board of Management
The Board of Management currently consists of five members. Upon
notification to the AGM held on March 24, 2010, the
Supervisory Board appointed Mr. Schneider-Maunoury as the
fifth member of the Board of Management.
For further details and a biography of the members of the Board
of Management, see page 1 of this Statutory Annual Report.
Remuneration of
the Board of Management
The actual remuneration received by the members of the Board of
Management is described in Note 29 to the Statutory
Financial Statements 2010. For the full 2010 Remuneration Report
and 2010 Remuneration Policy – reference is made to
ASML’s website.
General
In 2010, the General Meeting of Shareholders adopted an update
of the Remuneration Policy for the Board of Management. This
policy was designed while taking into account the amendments of
the Code and a number of developments with regard to executive
remuneration (e.g. public debate on executive compensation).
The Supervisory Board is of the opinion that the design of the
remuneration policy in general and the variable part in
particular, strengthens the commitment of the members of the
Board of Management to ASML as well as to its objectives. The
remuneration policy is linked to previously determined,
measurable targets, which are aligned with and contribute to the
achievement of the corporate strategy of the Company.
The Remuneration Committee oversees the development and
implementation of compensation and benefit programs for the
Board of Management, as well as the compensation levels for the
individual members of the Board of Management.
Furthermore, the Remuneration Committee reviews and proposes the
corporate objectives and targets relevant to the compensation of
all members of the Board of Management to the Supervisory Board,
in cooperation with the Audit Committee and the Technology and
Strategy Committee. The Remuneration Committee evaluates the
achievements of the Board of Management with respect to those
objectives and targets (in cooperation with the Audit Committee
and the Technology and Strategy Committee), and makes
recommendations to the Supervisory Board on the resulting
compensation levels of the members of the Board of Management,
based on this evaluation.
The external auditor performs
agreed-upon
procedures on the targets achieved, to provide additional
assurance whether the performance targets set have been achieved.
The Supervisory Board has the discretionary power to adjust
variable remuneration components both upwards and downwards if
these would, in the opinion of the Supervisory Board, produce an
unfair result due to extraordinary circumstances during the
period in which the predetermined performance criteria have been
or should have been achieved (Ultimum Remedium –
provision II.2.10). Besides this, the Supervisory Board may
recover from the Board of Management any variable remuneration
awarded on the basis of incorrect financial or other data (claw
back clause – provision II.2.11).
Outline 2010
remuneration report
In the 2010 Remuneration Policy, several adjustments were made
to further improve the effectiveness of ASML’s executive
pay policies:
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Shifting the focus from the short term to the long
term – the short term incentive in options was no
longer granted. Relatively more emphasis has been placed on the
long term incentive element instead.
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Furthermore enhanced alignment of the performance criteria to
the business needs – application of a more balanced
set of performance criteria, both financial and non-financial in
nature, that are derived from the business strategy, and the
introduction of a qualitative criterion in the long term
incentive plan, which should help keep ASML performing at high
standards;
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ASML STATUTORY ANNUAL REPORT 2010
6
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Alignment of the pension arrangement with the adjusted excedent
pension arrangement for ASML employees in The Netherlands and
with common market practice for executive pensions in The
Netherlands.
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With respect to the financial year 2010, the outline of the
remuneration levels for the Board of Management is as follows:
1. Total Direct Compensation for members of the Board of
Management is derived from the median level of the appropriate
top executive pay market (a reference market consisting of a
balanced group of European companies in the ICT and Technology
sector) and consists of (i) base salary; (ii) a short
term performance related cash incentive; (iii) long term
performance shares. The payout of the cash incentive and vesting
of performance shares is dependent on the achievement of
predetermined financial and non-financial performance criteria;
2. By applying the following ratio, the structure of Total
Direct Compensation is aimed at balancing short and long term
performance and to align remuneration with long term value
creation:
100-75-80
for the CEO, where base salary is 100; the target short term
performance related cash incentive is 75; long term performance
shares are 80. For the other members of the Board of Management
this ratio is
100-60-80.
The maximum payout – in case of overachievement of
pre-defined targets – for the performance shares is
146.25 percent for all members of the Board of Management;
3. The Supervisory Board decided to adjust the pension
arrangement for the Board of Management to be in line with
common market practice. The Supervisory Board decided on this
adjustment as ASML adjusted the (Defined Contribution) excedent
pension arrangement for their employees in The Netherlands as of
January 1, 2010.
Indemnification
The 2004 AGM has, as part of the amendment of the Company’s
Articles of Association, agreed to indemnify the members of the
Board of Management against any claim arising in connection with
their position as member of the Board of Management, provided
that such claim is not attributable to willful misconduct or
intentional recklessness of such Board of Management member. The
Supervisory Board has further implemented the indemnification of
the Board of Management members by means of separate
indemnification agreements for each member of the Board of
Management.
Gratitude to ASML
employees
The Supervisory Board would like to thank and recognize all ASML
employees who have been able to achieve so much this past, very
challenging year. ‘Challenging’ having a different
meaning in 2010 compared to the second half of 2008 and the
first half of 2009, when we experienced a very deep down cycle,
with other, but equally challenging, consequences. This year
however, was dictated by the steep upturn, which required ASML
to significantly ramp up to be able to supply to demand. Other
significant challenges in 2010 related to the Company’s
three core R&D programs: immersion, double patterning and
EUV. ASML’s Supervisory Board acknowledges the extreme
swings in demand on ASML employees, and appreciates all the
efforts and achievements of ASML employees throughout the years.
ASML STATUTORY ANNUAL REPORT 2010
7
Information on
Supervisory Board members
Presented below is the personal data of all Supervisory Board
members that is required to be disclosed in this report in order
to comply with the Code.
OB
Bilous
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gender
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: male
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age
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: 72
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profession
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: former General Manager and VP Worldwide Manufacturing of
IBM’s Microelectronics Division
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principal position
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: retired
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nationality
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: US
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other relevant positions
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: Board member Nantero, Inc.
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first appointed
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: 2005
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current term until
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: 2012
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H.C.J. van den
Burg
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gender
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: female
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age
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: 58
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profession
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: former member of the European Parliament
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principal position
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: member of the Dutch Monitoring Committee Corporate Governance
Code
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nationality
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: Dutch
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other relevant positions
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: member of the Supervisory Board of APG Groep N.V., member of
the Advisory Boards of the Dutch Data-Protection Authority and
the Dutch National Register Supervisory Directors
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first appointed
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: 2005
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current term until
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: 2013
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F.W.
Fröhlich
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gender
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: male
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age
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: 68
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profession
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: former Deputy Chairman and CFO of Akzo Nobel N.V.
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principal position
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: retired
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nationality
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: German
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other relevant positions
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: Chairman of the Supervisory Boards of Randstad Holding N.V.,
Draka Holding N.V. (until April, 2011 at the latest) and Altana
AG (company de-listed in 2010), member of the Supervisory Boards
of Allianz Nederland N.V. and Rexel SA.
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first appointed
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: 2004
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current term until
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: 2012
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P.F.M. van der
Meer Mohr
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gender
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: female
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age
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: 50
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profession
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: President of the Executive Board of the Erasmus University
Rotterdam
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nationality
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: Dutch
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other relevant positions
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: Member of the Supervisory Boards of Duisenberg School of
Finance and Netherlands School for Public Governance
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first appointed
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: 2009
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current term until
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: 2013
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A.P.M. van der
Poel
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gender
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: male
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age
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: 62
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profession
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: former member of the Board of Management of Royal Philips
Electronics
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principal position
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: retired
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nationality
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: Dutch
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other relevant positions
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: member of the Board of Directors of Gemalto Holding N.V.,
member of the Supervisory Boards of PSV N.V. and DHV Holding B.V.
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first appointed
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: 2004
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current term until
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: 2012
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ASML STATUTORY ANNUAL REPORT 2010
8
W.T.
Siegle
| |
|
|
|
gender
|
|
: male
|
|
age
|
|
: 71
|
|
profession
|
|
: former Senior Vice President and Scientist of AMD, Inc.
|
|
principal position
|
|
: retired
|
|
nationality
|
|
: US
|
|
other relevant positions
|
|
: member of the Advisory Board of Acorn Technologies, Inc.
|
|
first appointed
|
|
: 2007
|
|
current term until
|
|
: 2011
|
J.W.B.
Westerburgen
| |
|
|
|
gender
|
|
: male
|
|
age
|
|
: 68
|
|
profession
|
|
: former Company Secretary and Head of Tax of Unilever N.V. and
Plc.
|
|
principal position
|
|
: retired
|
|
nationality
|
|
: Dutch
|
|
other relevant positions
|
|
: Vice-Chairman of the Board of the Association Aegon
|
|
first appointed
|
|
: 2002
|
|
current term until
|
|
: 2011
|
W.H.
Ziebart
| |
|
|
|
gender
|
|
: male
|
|
age
|
|
: 60
|
|
profession
|
|
: former President and CEO of Infineon Technologies A.G.
|
|
principal position
|
|
: retired
|
|
nationality
|
|
: German
|
|
other relevant positions
|
|
: member of the Board of Autoliv, Inc. and member of the
Supervisory Board of Nordex A.G.
|
|
first appointed
|
|
: 2009
|
|
current term until
|
|
: 2013
|
|
Company Secretary
|
|
: Mr. R.F. Roelofs
|
|
Appointed
|
|
: 2002
|
|
Deputy Company Secretary
|
|
: Ms. G.C.M. Keizer
|
|
Appointed
|
|
: 2002
|
The Supervisory Board,
Veldhoven, February 14, 2011
ASML STATUTORY ANNUAL REPORT 2010
9
Corporate Governance
Paragraph1
I.
General
ASML Holding N.V. (“ASML” or the “Company”)
was established in 1994 as a private limited liability company.
ASML is the parent company of ASML Netherlands B.V., which was
established in 1984, as well as of other, mainly foreign,
subsidiaries. ASML is a public limited liability company, with
registered seat in Veldhoven, the Netherlands and is governed by
Dutch law. ASML’s shares are listed on Euronext Amsterdam
by NYSE Euronext (“Euronext Amsterdam”) and on the
NASDAQ Stock Market LLC (“NASDAQ”), since 1995.
ASML continuously monitors and assesses applicable Dutch, U.S.,
and other relevant corporate governance codes, rules, and
regulations. ASML is subject to the Dutch Corporate Governance
Code (the “Code”). Because ASML is also listed on
NASDAQ, it is required to comply with the
U.S. Sarbanes-Oxley Act of 2002, as well as NASDAQ listing
rules, and the rules and regulations promulgated by the
U.S. Securities and Exchange Commission (“SEC”).
For the full text of the Code, please refer to the website
www.commissiecorporategovernance.nl. For the full text of the
U.S. Sarbanes-Oxley Act of 2002, as well as NASDAQ listing
rules, and the rules and regulations promulgated by the SEC, see
www.sec.gov/about/laws/soa2002.pdf,
http://nasdaq.cchwallstreet.com/,
and www.sec.gov/about.shtml respectively.
ASML’s Supervisory Board and Board of Management, who are
responsible for ASML’s corporate governance structure, will
continue their efforts to ensure that ASML’s practices and
procedures comply with both U.S. and Dutch corporate
governance requirements. In this Chapter, ASML addresses its
corporate governance structure, thereby referring to the
principles and best practices set forth in the Code. ASML’s
Supervisory Board and Board of Management are of the opinion
that ASML complies with the vast majority of the recommendations
in the Code. In those cases where ASML cannot or chooses not to
comply with the Code, an explanation is provided.
Material changes in the corporate governance structure of ASML
and/or in
its compliance with the Code will be discussed at ASML’s
Annual General Meeting of Shareholders (“AGM”) as a
separate agenda item.
II. Board of
Management
Role and
Procedure
ASML’s Board of Management is responsible for managing
ASML, under the chairmanship of its President and Chief
Executive Officer (“CEO”). The current Board of
Management comprises five members. The fifth member of the Board
of Management, Mr. Frederic Schneider-Maunoury, was
appointed by the Supervisory Board upon notification to the AGM
held on March 24, 2010.
Although the various management tasks are divided among the
members of the Board of Management, the Board of Management
remains collectively responsible for the management of ASML, the
deployment of its strategy, its risk profile and policies, the
achievement of its objectives, its results and the corporate
social responsibility aspects relevant to the Company.
In fulfilling its management tasks and responsibilities, the
Board of Management considers the interests of ASML and the
business connected with it, as well as the interests of
ASML’s stakeholders. The Board of Management is accountable
to the Supervisory Board and the General Meeting of Shareholders
for the performance of its management tasks.
ASML has a two-tier board structure: the Supervisory Board
supervises and advises the Board of Management in the execution
of its tasks and responsibilities. The Board of Management
provides the Supervisory Board with all information, in writing
or otherwise, necessary for the Supervisory Board to fulfill its
duties. Besides the information provided in the regular
meetings, the Board of Management keeps the Supervisory Board
frequently informed on developments relating to ASML’s
business, financials, operations, and also with respect to
industry developments in general.
Important decisions of the Board of Management that require the
approval of the Supervisory Board are, among others:
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|
| •
|
the operational and financial objectives of ASML;
|
| •
|
the strategy designed to achieve the objectives;
|
| •
|
the parameters to be applied in relation to the strategy to
achieve the objectives; and
|
| •
|
corporate social responsibility issues that are relevant to ASML.
|
1 This
Corporate Governance Paragraph also includes the information
that is required to be disclosed pursuant to article 2a of
the Decree of 23 December 2004 regarding further provisions
on the substance of annual reports.
ASML STATUTORY ANNUAL REPORT 2010
10
The main elements of the operational and financial objectives of
ASML, the strategy to achieve the objectives, and the parameters
to be applied are included in the Report of the Board of
Management. In the “risk factors” section of the 2010
Statutory Annual Report, ASML describes the sensitivity of its
results to both external as well as internal factors and
variables.
The Rules of Procedure for the Board of Management
contain – among other topics – the general
responsibilities of the Board of Management, the relationship
with the Supervisory Board and various stakeholders, the
decision making process within the Board of Management, and also
the logistics surrounding the meetings. The Rules of Procedure
are posted in the Corporate Governance section on ASML’s
website.
Appointment,
Other Functions
Members of the Board of Management are appointed by the
Supervisory Board upon recommendation by ASML’s Selection
and Nomination Committee and upon notification to the General
Meeting of Shareholders. Members of the Board of Management
appointed after the amendment of the Articles of Association in
2004, are appointed for a period of four years, where after
reappointment is possible for consecutive four-year terms.
Because Messrs. P. Wennink and M. van den Brink’s
initial appointment as member of the Board of Management
occurred before 2004, their appointment to the Board of
Management is for an indefinite period of time. The existing
employment contracts, including all rights and obligations under
these contracts, will be honored.
The Supervisory Board may suspend and dismiss members of the
Board of Management, but only after consulting the General
Meeting of Shareholders.
Board of Management members may only accept a Supervisory Board
membership of another listed company after having obtained prior
approval from the Supervisory Board. Members of the Board of
Management are also required to notify the Supervisory Board of
other important functions held or to be held by them.
Currently, no Board of Management member has more than two
Supervisory Board memberships in other listed companies. No
current member of the Board of Management is chairman of a
supervisory board of a listed company.
Internal Risk
Management and Control Systems, External Factors
The Board of Management is responsible for ensuring that ASML
complies with applicable legislation and regulations. It is also
responsible for the financing of ASML and for managing the
internal and external risks related to its business activities.
The establishment of ASML’s internal risk management and
control system is based on the identification of external and
internal risk factors that could influence the operational and
financial objectives of ASML and contains a system of
monitoring, reporting, and operational reviews.
To help identifying risks, ASML uses a formal risk management
approach, consisting of a set of risks definitions (Risk
Universe) which are discussed amongst ASML senior management
during an annually recurring risk workshop. Based on this risk
assessment, actions are initiated to further enhance ASML’s
risk mitigation.
The establishment of ASML’s internal control and risk
management systems is based on the identification of external
and internal risk factors that could influence the operational
and financial objectives of the Company and contains a system of
monitoring, reporting and operational reviews. All material risk
management activities have been discussed with the Audit
Committee and the Supervisory Board. For a summary of
ASML’s Risk Factors, we refer to our Management Board
Report in the Statutory Annual Report.
ASML does not rank the risks identified, as ASML is of the
opinion that selecting the risks does not make sense because it
defies the purpose of a comprehensive risk assessment and it
would be arbitrary of nature since all risks mentioned have
significant relevance for ASML and its business.
ASML publishes two annual reports in respect of the financial
year 2010 (“2010 Annual Reports”): this Statutory
Annual Report in accordance with the Dutch legal requirements
and International Financial Reporting Standards
(“IFRS”) as adopted by the European Union and an
Annual Report on
Form 20-F
in accordance with U.S. securities laws, based on the
United States of America Generally Accepted Accounting
Principles (“U.S. GAAP”). Both 2010 Annual
Reports include risk factors that are specific to the
semiconductor industry, ASML and its shares. ASML also provides
sensitivity analyses by providing:
|
|
| •
|
a narrative explanation of its financial statements;
|
| •
|
the context within which financial information should be
analyzed; and
|
| •
|
information about the quality, and potential variability, of
ASML’s earnings and cash flow. In its “In Control
Statement” (as part of the Director’s Responsibility
Statement), as included in the Statutory Annual Report 2010, the
Board of Management addresses ASML’s internal risk
management and control systems.
|
ASML STATUTORY ANNUAL REPORT 2010
11
With respect to the process of drafting annual reports, ASML has
extensive guidelines for the lay-out and the content of its
reports. These guidelines are primarily based on applicable
laws. For the Statutory Annual Report, ASML follows the
requirements of Dutch law and regulations, including preparation
of the consolidated financial statements in accordance with
IFRS. For the Annual Report on
Form 20-F,
ASML applies the requirements of the U.S. Securities and
Exchange Act of 1934, and prepares the financial statements
included therein in accordance with U.S. GAAP. With respect
to the preparation process of these and the other financial
reports, ASML applies internal procedures to safeguard
completeness and correctness of such information as part of its
disclosure controls and procedures.
ASML’s Disclosure Committee, consisting of various members
of senior management from different functional areas within
ASML, reports to and assists ASML’s CEO and CFO in the
maintenance, review and evaluation of disclosure controls and
procedures. The Disclosure Committee’s main responsibility
is to ensure compliance with applicable disclosure requirements
arising under United States and Dutch law and applicable stock
exchange rules. The Chairman of the Disclosure Committee reports
to the Audit Committee and to the CEO and CFO on the topics
discussed in the Disclosure Committee meetings.
ASML’s Internal Control Committee, comprising among others
three members of the Disclosure Committee, advises ASML’s
CEO and CFO about their assessment of ASML’s disclosure
controls and procedures and internal control over financial
reporting. The Chairman of the Internal Control Committee
reports [to the Audit Committee and] to the Board of Management
on the progress of the assessments.
Code of
Conduct
Part of ASML’s risk management and control system is
ASML’s Code of Ethical Business Conduct (the “Code of
Conduct”). The Code of Conduct contains rules and
guidelines on integrity subjects and issues.
The Code of Conduct, the Complaints Procedure and the
Whistleblowers Policy, are currently being revised for
simplification and transparency purposes.
The Code of Conduct, as well as submitted complaints, if any,
are regularly discussed in the Audit Committee meeting.
The Code of Conduct, Whistleblowers Policy and the Complaints
Procedure are posted in the Corporate Governance section on
ASML’s website.
Remuneration of
the Board of Management
With respect to the remuneration of the Board of Management, the
Supervisory Board is of the opinion that the 2010 Remuneration
Policy was drafted in accordance with the Code, and that the
execution of the Policy is also in line with the Code, with
(potential) exceptions as mentioned more specifically at the end
of this Chapter.
Performance
criteria
Even though this is not a deviation from the Code, as the Code
stipulates that not disclosing the performance criteria (best
practice provisions II.2.13 f and g) because of competition
sensitiveness is justified, ASML hereby wants to provide its
reasons for not providing all information as included in the
best practice provisions mentioned above.
ASML provides the quantitative performance criteria, a summary
and account of the methods to determine the achievement of the
performance criteria, and also the ultimate achievement level of
the quantitative and qualitative performance criteria. However,
ASML cannot provide the exact performance criteria data, nor the
levels of achievement per each performance criterion, as this
concerns highly competitive information, such as targets related
to ASML’s technology, market position etc. The Supervisory
Board deems it its responsibility to set the actual targets and
to determine the level of achievement of these targets for the
variable part of the remuneration of the Board of Management.
The AGM endorsed this position in its meeting on March 23,
2006. And each year, the external auditor performs agreed upon
procedures on the targets achieved, to provide additional
assurance whether the performance targets set have been achieved.
For more details about the Board of Management’s
remuneration, its composition, and other relevant elements,
reference is made to the 2010 Remuneration Policy and the
Remuneration Report for the 2010 financial year (both published
on ASML’s website), the Report of the Supervisory Board and
Note 29 of the 2010 Annual Statutory Report.
Insider
Trading
With respect to trading in ASML financial instruments, ASML
employees, ASML Board of Management members and ASML Supervisory
Board members are bound by ASML’s Insider Trading Rules,
which are published on the Company’s website. The ASML
Insider Trading Rules stipulate, among other items, that members
of the Board of Management may not trade during the
ASML STATUTORY ANNUAL REPORT 2010
12
two months preceding the publication of the annual results, and
during the three weeks before publication of quarterly results.
In addition, employees of ASML, including the members of the
Board of Management, may not perform transactions in ASML
financial instruments during the open periods when they have
inside information.
Indemnification
ASML’s Articles of Association provide for the
indemnification of the members of the Board of Management
against claims that are a direct result of their tasks as
members of the Board of Management, provided that such claim is
not attributable to willful misconduct or intentional
recklessness of such member of the Board of Management. The
Supervisory Board has further implemented the indemnification of
the Board of Management members by means of separate
indemnification agreements for each Board of Management member.
Conflicts of
Interest
Conflicts of interest procedures are incorporated in the Board
of Management’s Rules of Procedure and address the
principle and the best practice provisions of the Code with
respect to conflicts of interest. A member of the Board of
Management shall, among other things, have a conflict of
interest if he has a material amount of securities in industry
related companies, or in companies with which ASML has entered
or intends to enter into a business relationship. The member
concerned shall immediately report any potential conflict of
interest to the Chairman of the Supervisory Board and to the
other members of the Board of Management. During the year 2010,
no transactions occurred that could have given the appearance of
conflicts of interest or that effectively involved conflicts of
interest. In addition, during 2010 no transactions of material
significance were entered into between ASML and a shareholder
holding at least 10.0 percent of the shares in the Company
in ASML’s capital. Besides potential transactions that
could cause conflict of interest situations, the Board of
Management, together with the Chairman of the Supervisory Board,
also carefully considers potential conflicts of interest
situations in view of other positions or functions of Board of
Management members.
III. Supervisory
Board
Role and
Procedure
As mentioned before, ASML’s Supervisory Board supervises
the policies of the Board of Management and the general course
of affairs of ASML and its subsidiaries. ASML’s Supervisory
Board also supports the Board of Management with its advice. The
Supervisory Board is a separate and independent body from the
Board of Management and from the Company. Under Dutch law and
per the Code, Supervisory Board members cannot be members of the
Board of Management and cannot be (former) officers or employees
of ASML.
In fulfilling its role and responsibilities, the Supervisory
Board takes into consideration the interests of ASML and its
subsidiaries, as well as the relevant interests of ASML’s
stakeholders. The Supervisory Board supervises and advises the
Board of Management in performing its tasks, with a particular
focus on:
|
|
| •
|
the achievement of ASML’s objectives;
|
| •
|
ASML’s corporate strategy and the management of risks
inherent to ASML’s business activities;
|
| •
|
the structure and operation of internal risk management and
control systems;
|
| •
|
the financial reporting process;
|
| •
|
compliance with applicable legislation and regulations;
|
| •
|
relationship with shareholders; and
|
| •
|
the corporate social responsibility issues important for ASML.
|
Major management decisions, such as ASML’s strategy, major
investments and budget, require the approval of the Supervisory
Board. The Supervisory Board also supervises the structure and
management of systems, including the internal control and risk
management systems, and the financial reporting process. The
Supervisory Board selects and appoints new Board of Management
members, prepares the remuneration policy for the Board of
Management, and decides on the remuneration for the individual
members of the Board of Management. In addition, the Supervisory
Board is the body that nominates new Supervisory Board
candidates for appointment to the AGM and submits proposals for
the remuneration of the Supervisory Board members.
The Supervisory Board, through its Selection &
Nomination Committee, closely follows the developments in the
area of corporate governance and the application of the relevant
corporate governance rules within the Company. For a more
detailed description on the Supervisory Board’s activities
in the area of corporate governance reference is made to the
Supervisory Board Report as included in this Statutory Annual
Report.
ASML STATUTORY ANNUAL REPORT 2010
13
Meetings and
activities of the Supervisory Board
The Supervisory Board held five scheduled physical meetings in
2010. In addition three conference calls were held specifically
to discuss the quarterly results. No Supervisory Board member of
those who were in office during the full year of 2010, was
absent more than once at the meetings held in 2010.
During the various meetings, the Supervisory Board discussed
ASML’s corporate and technology strategy, the financial
position, financing policy, business risks, investor relations,
sustainability, budget and corporate targets, among other
matters.
Also in 2010, the Supervisory Board paid a visit to Japan to
familiarize themselves with ASML’s business and activities
in Japan specifically and in Asia in general.
For more detailed information on the matters discussed in the
Supervisory Board meetings in 2010 reference is made to the
Supervisory Board Report.
In addition to the scheduled meetings and conference calls,
members of the Supervisory Board interacted intensively with the
Board of Management, as well as with its individual members,
through consultations, telephone calls and regular reports.
Also, several informal meetings and telephone calls took place
among Supervisory Board members to consult each other with
respect to various topics.
During all physical meetings of the Supervisory Board most Board
of Management members were present. In general at the end of
each meeting, the Supervisory Board met (and meets) inter se to
discuss topics related to, amongst others, the functioning of
the Board of Management and the Supervisory Board, its
individual members, the composition of both bodies and their
relationship. Throughout the year, the Supervisory Board and its
committees also meet without the members of the Board of
Management.
As is common practice each year, the Supervisory Board conducted
an evaluation in 2010 with respect to the functioning of the
full Supervisory Board. Also each Committee performed a
self-evaluation with respect to its functioning. For the
evaluation of the Supervisory Board feedback was also requested
from the Board of Management. For more detailed information on
this topic reference is made to the Supervisory Board Report.
The 2010 evaluation survey resulted in various improvement areas
and where applicable, appropriate feedback has been given to the
Board of Management concerning the evaluation results.
As has become standard practice over the years, members of the
Supervisory Board met twice during scheduled meetings with the
Works Council in the Netherlands, to discuss, among other
topics, the Company’s strategy, financial situation and
other topics deemed relevant to be addressed.
The Rules of
Procedure
The Rules of Procedure of the Supervisory Board contain
requirements based on the Code as well as requirements based on
the Sarbanes-Oxley Act, but also corporate governance practices
as developed by the Supervisory Board over the past years. Items
include responsibilities of the Supervisory Board and its
committees, composition of the Supervisory Board and its
committees, logistics surrounding the meetings, meeting
attendance of Supervisory Board members, rotation schedule for
the Supervisory Board members. The Rules of Procedure also
address the Supervisory Board’s relationship with the
various bodies within and stakeholders of ASML.
The Rules of Procedure include the charters for the four
committees of the Supervisory Board to which the Supervisory
Board has assigned certain tasks: the Audit Committee, the
Remuneration Committee, the Selection and Nomination Committee,
and the Technology and Strategy Committee. In accordance with
Dutch law, the plenary Supervisory Board remains responsible for
the fulfillment of its role and responsibilities even if the
Supervisory Board has delegated some of its responsibilities to
one or more of its committees. The Rules of Procedure stipulate
that the Supervisory Board – and its
committees – may also obtain information from officers
and external advisors of ASML, if necessary for the execution of
the tasks assigned to the Supervisory Board (and its
committees). Especially the committees frequently call upon
external advisors to support them in their advisory and
supervising tasks with respect to the various topics each
committee prepares for discussion and approval by the full
Supervisory Board.
The Rules of Procedure, as well as the charters of the four
committees, may be amended from time to time when required by
changes in law or regulations, or changed practices. Changes in
the Supervisory Board’s Rules of Procedure need to be
approved by the full Supervisory Board. In 2009 the Rules of
Procedure were revised to reflect the amendments of the Code.
The amendments related amongst others to the profile of the
Supervisory Board, which includes some specific diversity
aspects now. Changes in the charters of the committees are
approved by the committee concerned. The Audit Committee charter
is reviewed
ASML STATUTORY ANNUAL REPORT 2010
14
annually, to check whether the charter still complies with the
applicable rules and regulations, especially those relating to
the Sarbanes-Oxley Act.
Independence
The Supervisory Board is of the opinion that its current members
are all independent as defined by the Code. Neither the Chairman
nor any other member of the Supervisory Board is a former member
of ASML’s Board of Management, or has another relationship
with ASML which can be judged “not independent” for
ASML.
The Rules of Procedure of ASML’s Supervisory Board include
the independence definition prescribed by the Code. However, it
could be that in the future, the Supervisory Board may need to
deviate from the Code’s independence definition when
looking for the most suitable candidate for a vacancy. For
example in case a candidate would have particular knowledge of
or experience in the semiconductor – and
related – industries, as such background is very
important to ASML’s Supervisory Board. Because this
industry has relatively few players, the Supervisory Board may
want – or need – to nominate candidates for
appointment to the AGM who do not fully comply with the criteria
as listed under best practice provision III.2.2.c. of the Code.
In those circumstances, ASML and the candidate will ensure that
any such business relationship does not compromise the
candidate’s independence.
Expertise,
Composition, Appointment
The Supervisory Board currently consists of eight members, the
minimum being three members. The Supervisory Board determines
the number of Supervisory Board members required for the
performance of its functions.
No Supervisory Board members retired by rotation in 2010.
At the AGM to be held on April 20, 2011 Messrs. W.T.
(Bill) Siegle and J.W.B. (Jos) Westerburgen will retire by
rotation. Provided that Mr. Westerburgen will be
re-appointed, he will then commence his last term on ASML’s
Supervisory Board, as Mr. Westerburgen serves on
ASML’s Supervisory Board since 2002.
The current composition of ASML’s Supervisory Board shows
diversity with respect to background, nationality, age, gender
and expertise. This is in accordance with the Supervisory
Board’s current profile.
The Supervisory Board has amended its profile in 2009 to
incorporate the Code’s new recommendations with respect
thereto. The main change in the Supervisory Board’s revised
profile concerns diversity, especially regarding gender and age.
The profile now includes the intention to have at least thirty
percent of each gender in the Supervisory Board, and also
includes a revised (re)appointment term – two
years – of Supervisory Board members who are seventy
years or older. In general, the profile aims for an
international and adequate composition reflecting the global
business activities of ASML, as well as for an adequate level of
experience in financial, economic, technological, social, and
legal aspects of international business. In case the Supervisory
Board wishes to nominate members for reappointment, the
Selection and Nomination Committee checks whether the
reappointments fit in the Supervisory Board’s profile. The
amended profile was discussed at the 2010 AGM and has been
discussed with ASML’s Works Council.
Pursuant to the law applicable to large corporations
(“structuurregime”), members of the Supervisory Board
are appointed by the General Meeting of Shareholders based on
nominations proposed by the Supervisory Board. The Supervisory
Board informs the AGM and the Works Council about upcoming
resignations by rotation at the AGM in the year preceding the
actual resignation(s) by rotation to ensure that the General
Meeting of Shareholders and the Works Council have sufficient
opportunity to recommend candidates for the upcoming vacancies.
The Supervisory Board has the right to reject the proposed
recommendations. Furthermore, the Works Council has an enhanced
right to make recommendations for one-third of the members of
the Supervisory Board. The enhanced recommendation right implies
that the Supervisory Board may only reject the Works
Council’s recommendations for the following reasons:
(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 Supervisory Board member.
If no agreement on the recommended person(s) can be reached
between the Supervisory Board and the Works Council, the
Supervisory Board may request the Enterprise Chamber of the
Amsterdam Court of Appeal to declare that the Supervisory
Board’s objection is legitimate. Any decision of the
Enterprise Chamber on this matter is non-appealable.
The first Supervisory Board member nominated – and
appointed – based on the Works Council’s enhanced
recommendation right was Ms. Ieke van den Burg, in 2005. In
2009, Ms. Van den Burg’s reappointment was also based
on this enhanced recommendation right. The second Supervisory
Board member nominated – and appointed – in
accordance with the enhanced recommendation right was
Mr. Rolf Deusinger, in 2007. After
Mr. Deusinger’s resignation in June 2008, his
successor, Ms. Van der Meer Mohr, was nominated –
and appointed – per the Works Council’s enhanced
recommendation right in 2009.
Nominations by the Supervisory Board may be overruled by a
resolution at the General Meeting of Shareholders with an
absolute majority of the votes, representing at least one-third
of ASML’s outstanding share capital. If the votes cast in
favor of such a
ASML STATUTORY ANNUAL REPORT 2010
15
resolution do not represent at least one-third of the total
outstanding capital, a new shareholders’ meeting can be
convened at which the nomination can be overruled by an absolute
majority. If the General Meeting of Shareholders does not
appoint the person nominated and does not reject the nomination,
the Supervisory Board will appoint the nominated person.
For newly appointed Supervisory Board members, the Company
prepares an introduction program which contains, among other
topics, an overview of ASML’s history, organization,
operations, strategy, industry and technology, ASML’s
financial and legal affairs, and ASML’s human resources.
New, and also current if desired, Supervisory Board members
receive a separate technical tutorial to maintain and increase
their knowledge of ASML’s ever progressing technology. In
addition, specific training is also provided for new committee
members based on individual needs. Annually, the Supervisory
Board and/ or committees members determine their need for
further training on specific topics.
Supervisory Board members serve for a maximum term of four years
from the date of their appointment, or a shorter period as may
be set forth in the rotation schedule adopted by the Supervisory
Board. Members may be reappointed, provided that their entire
term of office does not exceed 12 years. The rotation
schedule is available in the Corporate Governance section on
ASML’s website.
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 case, the Enterprise
Chamber of the Amsterdam Court of Appeal shall appoint one or
more Supervisory Board members at the request of the Board of
Management.
Currently, none of the Supervisory Board members exceeds the
maximum number of five memberships of supervisory boards of
Dutch listed companies (with a chairmanship counting double).
For detailed information on ASML’s Supervisory Board
members, reference is made to the Supervisory Board report.
Role of the
Chairman of the Supervisory Board and the Company
Secretary
Mr. Van der Poel is the Chairman of ASML’s Supervisory
Board; Mr. Fröhlich was appointed Vice-Chairman. The
role and responsibilities of the Chairman of the Supervisory
Board are described in its Rules of Procedure. The Chairman
determines the agenda of the Supervisory Board meetings, he acts
as the main contact between the Supervisory Board and the Board
of Management and ensures orderly and efficient proceedings at
the General Meeting of Shareholders. The Chairman will among
others also ensure that:
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the members of the Supervisory Board follow an introduction and
training program for Supervisory Board members;
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the members of the Supervisory Board receive all information
necessary for the proper performance of their duties on a timely
basis;
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there is sufficient time for consultation and decision making by
the Supervisory Board;
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the committees function properly;
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the performance of the Board of Management members and the
Supervisory Board members is assessed at least once a
year; and
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the Supervisory Board has proper contact with the Board of
Management and the Works Council.
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The company secretary assists the Supervisory Board in the
performance of its duties. The company secretary ensures that
the correct procedures are followed and that the Supervisory
Board acts in accordance with its legal and statutory
obligations. The company secretary assists the Chairman of the
Supervisory Board in the organization of the affairs of the
Supervisory Board and its committees. The company secretary is
appointed by and may also be dismissed by the Board of
Management after prior approval from the Supervisory Board. The
company secretary is assisted by a deputy company secretary.
Composition and
Role of the four Committees of the Supervisory Board
Although the Supervisory Board retains ultimate responsibility,
the Supervisory Board has delegated certain of its tasks to the
four committees of the Supervisory Board. Their roles and
functions are described in separate chapters in the Supervisory
Board’s Rules of Procedure.
In the plenary Supervisory Board meetings, the chairmen of the
committees report verbally and when deemed necessary in writing,
on the issues and items discussed in the committee meetings. In
addition, the minutes of the committee meetings are available
for all Supervisory Board members, in order to provide each
Supervisory Board member with sufficient information to
understand ASML’s current state of affairs and issues, thus
ensuring that the full Supervisory Board is able to make the
appropriate decisions.
ASML STATUTORY ANNUAL REPORT 2010
16
Audit
Committee
The current members of ASML’s Audit Committee are
Mr. Fröhlich (Chairman), Mr. Van der Poel and
Mr. Ziebart. The members of the Audit Committee are all
independent, non-executive members of the Supervisory Board.
The Audit Committee meets at least four times per year and
always before the publication of the quarterly and annual
financial results. In 2010, the Audit Committee met four times
and held five conference calls to discuss, among other topics,
the quarterly results and the press releases. In the first
quarter, the Audit Committee focused on the annual results, the
audits over the financial year 2009 and the internal and
external audit plan for 2010. Frequent topic of discussion was
also ASML’s financing policy. The Audit Committee invited
experts in this area, to provide the Audit Committee with
external views on ASML’s proposed financing policy. Other
frequently discussed topics were ASML’s internal controls
and risk management systems, the testing of internal controls
over financial reporting in light of Section 404 of the
Sarbanes-Oxley Act, and the supervision of the enforcement of
the relevant legislation and regulations.
ASML provides the Audit Committee with all relevant information
to be able to adequately and efficiently supervise the
preparation and disclosure of financial information by ASML.
This includes, among other things, information on the
application of accounting standards in the Netherlands, IFRS,
the choice of accounting policies and the work of internal and
external auditors. Annually, the Audit Committee discusses and
reviews ASML’s tax planning policy, the investor relations
activities and strategy, fraud policy, and the information and
communication technology policy.
The Audit Committee, on behalf of the Supervisory Board, reviews
and approves the fees of the external auditor. The Audit
Committee is the first contact for the external auditor if the
external auditor discovers irregularities in the content of the
financial reports. The external auditor provides the Audit
Committee regularly with an update on the actual costs, for both
audit services and non-audit services, and the Audit Committee
thereby monitors the independence of the external auditor. The
external auditor only provides the audit and non-audit services
in accordance with ASML’s pre-approval policy, as approved
by the Audit Committee. As a general rule, the external auditor
is present at meetings of the Audit Committee. In general, after
each Audit Committee meeting, the Audit Committee (without
management present) meets with the external auditor to discuss
the relationship between the Audit Committee and the external
auditor, the relationship between Board of Management and the
external auditor, and any other issues deemed necessary to be
discussed.
The Audit Committee generally invites ASML’s CEO, CFO,
Corporate Controller and Chief Accountant to its meetings. The
Internal Auditor also attends these meetings. From time to time,
other ASML employees may be invited to Audit Committee meetings
to address subjects that are of importance to the Audit
Committee.
Mr. Fröhlich, Chairman of the Audit Committee, is the
Supervisory Board’s financial expert, taking into
consideration his extensive financial background and experience,
especially as former CFO of Akzo Nobel N.V.
Remuneration
Committee
The current members of ASML’s Remuneration Committee are
Mr. Westerburgen (Chairman), Ms. Van den Burg and
Ms. Van der Meer Mohr.
The Remuneration Committee prepares ASML’s Remuneration
Policy for members of the Board of Management, and oversees the
development and implementation of the Remuneration Policy. The
Remuneration Policy is revised on a regular basis (in general
every two years) to keep up with market developments. In
cooperation with the Audit Committee and the Technology and
Strategy Committee, 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. Also in cooperation with the Audit Committee and the
Technology and Strategy Committee, the Remuneration Committee
further evaluates the performance of members of the Board of
Management in view of those goals and objectives, and recommends
to the Supervisory Board appropriate compensation levels for the
Board of Management based on this evaluation.
In 2010, the Remuneration Committee met six times formally and
several times on an ad-hoc basis as well as via teleconferences
to discuss, besides the regular topics such as the targets and
remuneration package for the Board of Management, the ASML stock
option and share plans, the 2009 and 2010 Remuneration Reports
and the proposed revision of the 2008 Remuneration Policy, which
led to the 2010 Remuneration Policy as proposed to and adopted
by the 2010 AGM. Also discussed in 2010 were the remuneration
related requirements based on the Code and based on law
proposals, such as the claw back and ultimum remedium
provisions. Furthermore, scenario analyses and an internal pay
relativity analysis have been conducted. Independent experts
assist the Remuneration Committee in its activities. Those
experts do not provide advice to the Board of Management with
respect to matters in this area.
Based on the 2010 Remuneration Policy, the Remuneration
Committee proposed the remuneration packages for the individual
Board of Management members for the year 2010.
ASML STATUTORY ANNUAL REPORT 2010
17
The Remuneration Committee prepared the 2010 Remuneration
Report. This report contains a section describing among others
the manner in which the 2010 Remuneration Policy was implemented
and executed in 2010.
Mr. Westerburgen, the Chairman of the Remuneration
Committee is neither a former member of ASML’s Board of
Management, nor a member of the board of management of another
company. No member of the Remuneration Committee is a current
member of the Board of Management of another Dutch listed
company.
Selection and
Nomination Committee
The Selection and Nomination Committee meets at least twice a
year and more frequently when deemed necessary. In 2010, the
Committee members met three times formally and several
additional times on an ad-hoc basis.
The current members of ASML’s Selection and Nomination
Committee are Mr. Westerburgen (Chairman), Mr. Bilous
and Mr. Van der Poel.
The main topics discussed by the Selection and Nomination
Committee in 2010 were the composition of the Supervisory Board,
the composition of the Board of Management, and the selection
criteria and appointment procedures for Supervisory Board
members and Board of Management members. The Selection and
Nomination Committee also assessed and discussed the size,
composition, and current profile of the Supervisory Board and
the functioning of the individual Supervisory Board and Board of
Management members.
The Selection and Nomination Committee furthermore discussed
imminent corporate governance developments, for example those
based on law proposals, but also the outcome of the Report of
the Monitoring Committee with respect to compliance with the
Code. The Chairman of this committee is also responsible for
coordinating the annual evaluation process of the Supervisory
Board and its committees.
Technology and
Strategy Committee
The Technology and Strategy Committee meets at least twice a
year and more frequently when deemed necessary. As in previous
years, the Technology & Strategy Committee met three
times in 2010 and held two conference calls. The current members
of ASML’s Technology and Strategy Committee are
Mr. Siegle (Chairman), Mr. Bilous, Mr. Van der
Poel and Mr. Ziebart.
The Technology and Strategy Committee provides advice to the
Supervisory Board with respect to ASML’s technological
strategies and ASML’s technology and product roadmaps.
External experts as well as experts from within ASML may act as
advisors to the Technology and Strategy Committee with respect
to the subjects to be reviewed and discussed in this Committee.
The advisors do not have voting rights. The Technology and
Strategy Committee frequently uses the possibility to invite
external
and/or
internal experts to attend Committee meetings. External experts
may include representatives of suppliers and R&D partners
to increase the Committee’s understanding of the technology
and research necessary for the development of ASML’s
leading-edge systems. One meeting in 2010 included a visit to
Imec, a research organization in the field of nanotechnology,
where the Technology & Strategy acquainted itself with
various research projects involving ASML technology.
The in-depth technology discussions in the Technology and
Strategy Committee and the subsequent reporting on headlines in
the full Supervisory Board increases the Supervisory
Board’s understanding of ASML technology matters and
enables the Supervisory Board to adequately supervise the
strategic choices facing ASML, including the Company’s
investment in research and development.
The main subjects of the meetings of the Technology and Strategy
Committee in 2010 were the Company’s technology roadmap,
including Extreme Ultra Violet (“EUV”) lithography,
immersion technology, double patterning, and holistic
lithography (for example Brion, metrology).
The Committee also reviews the proposed technology targets, as
well as the achievements related thereto and provides the
Remuneration Committee with its advice on this topic.
Conflict of
Interest
Conflict of interest procedures are incorporated in the
Supervisory Board’s Rules of Procedure and address the
principle and the best practice provisions of the Code with
respect to conflicts of interest to the fullest extent. A
Supervisory Board member shall, among other things, have a
conflict of interest if he has a material amount of securities
in industry related companies, or in companies with which ASML
has entered or intends to enter into a business relationship.
The member concerned shall immediately report any potential
conflicts of interest to the Chairman of the Supervisory Board
and to the other members of the Supervisory Board. During the
financial year 2010, no transactions occurred that could have
given the appearance of conflicts of interest or that
effectively involved conflicts of interest. Besides potential
transactions that could cause conflict of interest
ASML STATUTORY ANNUAL REPORT 2010
18
situations, the Supervisory Board also carefully considers
potential conflicts of interest situations in view of other
positions or functions of Supervisory Board members.
Remuneration of
the Supervisory Board
The General Meeting of Shareholders determines the remuneration
of the Supervisory Board members; the remuneration is not
dependent on the results of the Company. In addition to their
fee as member of the Supervisory Board, Supervisory Board
members also receive a fee for each committee membership, as
well as a net cost allowance. Also, one Supervisory Board member
receives an additional fee to compensate for certain obligations
which ASML has towards the US government and which obligations
this member is required to fulfill. The Supervisory Board
remuneration is not dependent on the financial results of the
Company. No member of the Supervisory Board personally maintains
a business relationship with the Company other than as a member
of the Supervisory Board.
The Supervisory Board members do not receive ASML shares, or
rights to acquire ASML shares, as part of their remuneration. In
case members acquire or have acquired ASML shares or rights to
acquire ASML shares, these must be for the purpose of long-term
investment only. No member of ASML’s Supervisory Board
currently owns ASML shares or rights to acquire ASML shares. In
concluding transactions in ASML shares, Supervisory Board
members must comply with ASML’s Insider Trading Rules.
Detailed information on the Supervisory Board’s
remuneration can be found in note 29 of the 2010 Statutory
Annual Report.
With respect to ASML financial instruments, the ASML Insider
Trading Rules stipulate – among other
requirements – that members of the Supervisory Board
may not trade during the two months preceding the publication of
the annual results, and during the three weeks before
publication of the quarterly results. In addition, members of
the Supervisory Board may not perform transactions in ASML
financial instruments during the open periods when they have
inside information. This requirement is not applicable for
Supervisory Board members who have a management agreement with
an independent third party for the management of her or his
financial instruments.
ASML has not granted any personal loans, guarantees, or the like
to members of the Supervisory Board. ASML’s Articles of
Association provide for the indemnification of the members of
the Supervisory Board against claims that are a direct result of
their tasks as members of the Supervisory Board, provided that
such claim is not attributable to willful misconduct or
intentional recklessness of such Supervisory Board member. ASML
has further implemented the indemnification of the members of
the Supervisory Board by means of separate indemnification
agreements for each member of the Supervisory Board.
IV. Shareholders
and General Meeting of Shareholders
Powers
A General Meeting of Shareholders is held at least once a year
and generally takes place in Veldhoven. In this meeting, at
least the following items are discussed
and/or
approved:
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the written report of the Board of Management containing the
course of affairs in ASML and the conduct of the management
during the past financial year;
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the adoption of the annual accounts;
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ASML’s reserves and dividend policy and justification
thereof by the Board of Management;
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the discharge of the members of the Board of Management in
respect of their management during the previous financial year;
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the discharge of the members of the Supervisory Board in respect
of their supervision during the previous financial year;
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each material change in the corporate governance structure of
ASML; and
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any other item the Board of Management or the Supervisory Board
determine to place on the agenda.
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The General Meeting of Shareholders has furthermore (with due
observance of the statutory provisions) the power:
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to resolve to amend the articles of association;
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to resolve to dissolve the Company;
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to resolve to issue shares if and insofar as the Board of
Management has not been designated by the General Meeting of
Shareholders for this purpose;
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to resolve to reduce the issued share capital;
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to appoint members of the Supervisory Board;
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to withdraw its confidence in the Supervisory Board;
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to adopt the Remuneration Policy for members of the Board of
Management; and
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to determine the remuneration of the members of the Supervisory
Board.
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The Board of Management requires the approval of the General
Meeting of Shareholders and the Supervisory Board for
resolutions regarding a significant change in the identity or
character of ASML or its business, including in any event:
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a transfer of the business or virtually all of the business to a
third party;
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ASML STATUTORY ANNUAL REPORT 2010
19
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entry into or termination of long-term cooperation by ASML or a
subsidiary with another legal entity or partnership or as a
general partner with full liability in a limited or general
partnership if such cooperation or the termination thereof is of
far-reaching significance for ASML; and
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an acquisition or disposal by ASML or a subsidiary of a
participation in the capital of another company, the value of
which equals at least one third of the amount of the assets
according to the consolidated balance sheet (in the consolidated
financial statements referred to as “statement of financial
position”) with explanatory notes attached to the Annual
Accounts as most recently adopted.
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Proposals placed on the agenda by the Supervisory Board, the
Board of Management, or by shareholders, provided that they have
submitted the proposals in accordance with the applicable legal
provisions, are discussed and resolved upon. Shareholders
representing at least 1% of ASML’s outstanding share
capital or a value of at least Euro 50,000,000 are entitled
to place agenda items on the AGM agenda at the latest sixty days
before the AGM. About two weeks before the closing of this sixty
days term, ASML notifies its shareholders about the closing of
the term on its website.
A recurring agenda item is the limited authorization for the
Board of Management to issue (rights to) shares in the
Company’s capital, and to exclude pre-emptive shareholders
rights for such issuances. This agenda item includes two
elements: 1) the authorization to the Board of Management
to issue a maximum of 10.0 percent (rights to) shares of
ASML’s issued share capital as of the date of
authorization; and 2) the authorization to exclude
pre-emptive rights in relation to the above share issue, with a
maximum of 10.0 percent of ASML’s issued share capital
as of the date of authorization.
A simple majority is required for the authorization to issue
shares; for the authorization to exclude the pre-emptive rights
a simple majority is required in case at least fifty percent of
ASML’s issued share capital is present or represented at
the AGM; otherwise a majority of two thirds of the votes cast is
required. The Board of Management must obtain the approval of
the Supervisory Board for the issuance of ASML shares as well as
for excluding the pre-emptive rights.
It is important for ASML to be able to issue (rights to) shares
and to exclude the pre-emptive shareholders’ rights in
situations where it is imperative to be able to act quickly, for
example when financial opportunities arise or when stock
(option) plans need to be executed to attract and retain top
talent. This authorization has been used in the past especially
to optimize the financial position of ASML. Given the dynamics
of the global capital markets, such financing transactions
generally need to be executed in the shortest window of
opportunity. The opportunity to issue shares or rights to
shares, such as convertible bonds, would be limited if ASML
needed a resolution of the General Meeting of Shareholders to
issue shares and/ or to exclude the shareholders’
pre-emptive rights and may thus hinder the financial flexibility
of ASML.
Another standard and recurring agenda item is the authorization
to repurchase ASML shares up to a maximum of 10.0 percent
of the issued capital for valuable consideration, valid for a
period of 18 months following the approval. A simple
majority is required for the authorization and the Board of
Management must obtain the approval of the Supervisory Board for
the repurchase of ASML shares.
As in the previous three years, ASML shall at the upcoming AGM
also request approval for the proposal to repurchase and cancel
three times ten percent of the then issued share capital, up to
a maximum of about twenty seven percent of the then outstanding
shares. The reason that ASML still uses this method is that ASML
has not yet amended its articles of association to reflect the
law, changed in 2008, with respect to this topic. This changed
law provides for an increase in the maximum number of shares
that may be held by Dutch listed companies in their own share
capital, from ten percent to fifty percent. Such amendment to
ASML’s articles of association will be proposed to the
upcoming AGM.
In principle, ASML shall use its authority to repurchase shares
to mitigate dilution and to hedge stock options or shares
granted, but not yet exercised or issued under the ASML equity
based plans.
Also in 2011, a resolution of the General Meeting of
Shareholders will be asked for the distribution of dividend.
The Board of Management or Supervisory Board may convene
Extraordinary General Meetings (“EGM’s”) as often
as they deem necessary. Such meetings must be held if one or
more shareholders and others entitled to attend the meetings
jointly representing at least one-tenth of the issued share
capital make a written request to that effect to the Board of
Management and the Supervisory Board, specifying in detail the
items to be discussed.
Logistics of the
General Meeting of Shareholders
To facilitate the attendance of shareholders at ASML’s
General Meetings of Shareholders, ASML sets a record date. Those
who are registered as shareholders at such date are entitled to
attend the meeting and to exercise other shareholder rights
during the meeting, notwithstanding sale of their shares after
the record date, should that be the case.
ASML STATUTORY ANNUAL REPORT 2010
20
Since amendment of the applicable law, the convocation date is
legally set at forty two days, and the record date at twenty
eight days before the AGM.
The Board of Management and Supervisory Board shall provide the
shareholders with the facts and circumstances relevant to the
proposed resolutions, through an explanation to the agenda, as
well as through other documents necessary
and/or
helpful for this purpose. All documents relevant to the General
Meeting of Shareholders, including the agenda with explanations,
shall be posted in the Investor Relations and Corporate
Governance sections on ASML’s website. The agenda clearly
indicates which agenda items are voting items, and which items
are for discussion only.
ASML shareholders may appoint a proxy who can vote on their
behalf in the General Meeting of Shareholders. ASML also uses an
internet proxy voting system, thus facilitating shareholder
participation without having to attend in person. Shareholders
who voted through internet proxy voting are required, however,
to appoint a proxy to officially represent them at the General
Meeting of Shareholders in person. ASML also provides the
possibility for shareholders to issue voting proxies or voting
instructions to an independent third party (public notary) prior
to the AGM.
Resolutions passed at the General Meeting of Shareholders shall
be recorded by a civil law notary and co-signed by the Chairman
of the meeting and will thereafter be made available on
ASML’s website within two weeks after the AGM.
The draft minutes of the General Meeting of Shareholders are
available via ASML’s website, and also upon request via
mail or
e-mail, no
later than three months after the meeting. Shareholders are
given the opportunity to provide their comments in the
subsequent three months, and thereafter the minutes are adopted
by the Chairman and the Secretary of the meeting. The adopted
minutes are also available on ASML’s website and, upon
request, via regular mail or
e-mail.
There are no depositary receipts for shares in the
Company’s capital issued with the cooperation of ASML.
Information to
the Shareholders
To ensure fair disclosure, ASML distributes Company information
that may influence the share price to shareholders and other
parties in the financial markets simultaneously and through
means that are public to all interested parties. In case of
bilateral contacts with shareholders, ASML follows the procedure
related thereto as published on ASML’s website.
When ASML’s annual and quarterly results are published by
means of a press release, interested parties, including
shareholders, can participate through conference calls, listen
to a webcast and view the presentation of the results on
ASML’s website. The schedule for communicating the annual
financial results is in general published through a press
release and is posted on ASML’s website. In addition, ASML
provides information to its shareholders at ASML’s AGM.
Also ASML publishes a Sustainability Report on its website every
year, reporting on Environmental, Health, Social and Safety
performance.
It is ASML’s policy to post the presentations given to
analysts and investors at investor conferences on its website.
Information regarding presentations to investors and analysts
and conference calls are announced in advance on ASML’s
website; for details see ASML’s financial calendar as
published in the Investor Relations section on ASML’s
website. Meetings and discussions with investors and analysts
shall, in principle, not take place shortly before publication
of regular financial information. ASML does not assess, comment
upon, or correct analysts’ reports and valuations in
advance, other than to comment on factual errors. ASML does not
pay any fees to parties carrying out research for analysts’
reports, or for the production or publication of analysts’
reports, and takes no responsibility for the content of such
reports.
At the General Meeting of Shareholders, the Board of Management
and the Supervisory Board provide shareholders with all
requested information, unless this is contrary to an overriding
interest of the Company. If this should be the case, the Board
of Management and Supervisory Board will provide their reasons
for not providing the requested information.
Furthermore, the Corporate Governance section on ASML’s
website provides links to websites that contain information
about ASML published or filed by ASML in accordance with
applicable rules and regulations.
ASML’s only anti-takeover device is the Preference
Shares Foundation. The mechanisms of this Foundation are
described in more detail in the next chapter on Required
information Article 10 Takeover Directive and the 2010
Annual Reports.
Relationship with
Institutional Investors
ASML finds it important that its institutional investors
participate in ASML’s General Meetings of Shareholders. To
increase the participation rate, several measures have been
taken in the past few years, including applying a record date,
and providing internet proxy voting. In addition, ASML actively
approaches its institutional investors to discuss their
participation at the General Meetings of Shareholders.
ASML STATUTORY ANNUAL REPORT 2010
21
V. The
Audit of Financial Reporting and the Position of the Internal
and External Auditor Function
Financial
Reporting
ASML has comprehensive internal procedures in place for the
preparation and publication of Annual Reports, annual accounts,
quarterly figures, and all other financial information. These
internal procedures are frequently discussed in the Audit
Committee and the Supervisory Board. The Disclosure Committee
assists the Board of Management in overseeing ASML’s
disclosure activities and ensures compliance with applicable
disclosure requirements arising under U.S. and Dutch law
and regulatory requirements.
The Audit Committee reviews and approves the external
auditor’s Audit Plan for the audits planned during the
financial year. The Audit Plan also includes the activities of
the external auditor with respect to their reviews of the
quarterly results other than the annual accounts. These reviews
are based on agreed upon procedures and are approved by the
Audit Committee. The external auditor regularly updates the
Audit Committee on the progress of the audits and other
activities.
The Supervisory Board has reviewed the Statutory Annual Report
of ASML for the financial year 2010 as prepared by the Board of
Management. Deloitte has duly examined the Company’s
financial statements, and the Auditor’s Report is included
in the Statutory Financial Statements.
Appointment,
Role, Assessment of the Functioning of the External Auditor, and
the Auditor’s Fee
In accordance with Dutch law, ASML’s external auditor is
appointed by the General Meeting of Shareholders and is
nominated for appointment by the Supervisory Board upon advice
from the Audit Committee and the Board of Management.
ASML’s current external auditor, Deloitte Accountants B.V.
(“Deloitte”), was appointed by the General Meeting of
Shareholders in 1995 for an indefinite period of time.
Every four years, an extensive evaluation of the external
auditor’s performance is conducted by the Audit Committee
and the Board of Management. The last time this evaluation was
done, was in 2008, the results of which were presented in the
2008 AGM. The next formal evaluation is planned for the first
quarter in 2012, after the 2011 results.
In the years that no formal evaluation is conducted, the
external auditor’s performance is continuously assessed by
the Board of Management and the Audit Committee in the Audit
Committee meetings, as well as in
one-on-one
sessions with ASML’s Board of Management and Audit
Committee respectively. So far, the external auditor has
functioned to the satisfaction of both the Audit Committee and
the Board of Management.
Annually, the Board of Management and the Audit Committee
provide the Supervisory Board with a report on the relationship
with the external auditor, including the required auditor
independence. To determine the External Auditor’s
independence, the relationship between the audit services and
the non-audit services provided by the external auditor is
important, as well as the rotation of the responsible lead audit
partner every five years. Non-audit services (including tax fees
and non audit-related fees) performed by the external auditor
comprised 28 percent of the external auditor’s
services in 2010. Based on the proportion audit fees versus
non-audit related fees, it was concluded – and
confirmed by the external auditor – that the external
auditor acts independently.
The external auditor is present at ASML’s AGM to respond to
questions, if any, from the shareholders about the
auditor’s report on the financial statements.
The Audit Committee, on behalf of the Supervisory Board,
approves the remuneration of the external auditor as well as the
non-audit services to be performed, after consultation with the
Board of Management. It has been agreed among the members of the
Supervisory Board and the Board of Management that the Audit
Committee has the most relevant insight and experience to be
able to approve both items, and therefore the Supervisory Board
has delegated these responsibilities to the Audit Committee. In
principle the external auditor attends all meetings of the Audit
Committee, unless this is deemed not necessary by the Audit
Committee. The findings of the external auditor are discussed at
these meetings.
The Audit Committee reports on all issues discussed with the
external auditor to the Supervisory Board, including the
external auditor’s report with regard to the audit of the
annual accounts as well as the content of the annual accounts.
In the audit report, the external auditor refers to the
financial reporting risks and issues that were identified during
the audit, internal control matters, and any other matters
requiring communication under the auditing standards generally
accepted in the Netherlands and in the United States.
Internal Audit
Function
The internal audit function of ASML forms one of the key
elements to address the topics of risk management and internal
control over financial reporting as required under the Code and
the Sarbanes-Oxley Act, respectively. To ensure the independence
of this
ASML STATUTORY ANNUAL REPORT 2010
22
function, the Director Internal Audit reports to the Board of
Management and the Audit Committee. The external auditor and the
Audit Committee are involved in drawing up the work schedule and
audit scope of the internal auditor. The internal auditor
regularly provides updates on its findings to the Audit
Committee.
VI. Required
information Article 10 Takeover Directive
General
The EU Takeover Directive requires that listed companies publish
additional information providing insight into defensive
structures and mechanisms which they apply. The relevant
provision has been implemented into Dutch law by means of a
decree of April 5, 2006. Pursuant to this decree, Dutch
companies whose securities have been admitted to trading on a
regulated market have to include information in their annual
report which could be of importance for persons who are
considering taking an interest in the company.
This information comprises amongst other things:
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the capital structure of the company;
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restrictions on the transfer of securities and on voting rights;
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special powers conferred upon the holders of certain shares;
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the rules governing the appointment and dismissal of board
members and the amendment of the articles of association;
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| •
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the rules on the issuing and the repurchasing of shares by the
company; significant agreements to which the company is a party
and which contain change of control rights (except where their
nature is such that their disclosure would be seriously
prejudicial to the company); and
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| •
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agreements between the company and its board members or
employees providing for a “golden parachute”.
|
In this section the Board of Management and the Supervisory
Board provide for an explanation to the information –
if applicable to ASML – as required under the
Resolution Article 10 of the Takeover Directive.
Share
capital
ASML’s authorized share capital amounts to
EUR 126,000,200 and is divided into:
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3,150,005,000 cumulative preference shares with a nominal value
of EUR 0.02 each;
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| •
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700,000,000 ordinary shares with a nominal value of
EUR 0.09 each; and
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10,000 ordinary shares with a nominal value of EUR 0.01
each.
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Currently, only 436,592,972 ordinary shares with a nominal value
of EUR 0.09 each are outstanding and fully paid in. The
number of issued shares was 444,480,095, which includes the
number of repurchased (“treasury”) shares of 7,887,123.
Our Board of Management has the power to issue shares if and to
the extent 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).
However, the Supervisory Board must approve any issuance of
shares.
Ordinary
shares
At ASML’s Annual General Meeting of Shareholders, held on
March 24, 2010, the Board of Management was granted the
authorization to issue shares
and/or
rights thereto representing up to a maximum of 5.0 percent
of the Company’s issued share capital as of the date of
authorization, plus an additional 5.0 percent of the
Company’s issued share capital as of the date of
authorization that may be issued in connection with mergers and
acquisitions. At ASML’s Annual General Meeting of
Shareholders to be held on April 20, 2011, its 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 20, 2012.
Holders of ASML’s ordinary shares have a preemptive right
of subscription to any issuance of ordinary shares for cash,
which right may be limited 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 ASML’s Articles of
Association), the Board of Management has the power, with the
approval of the Supervisory Board, to limit or exclude the
preemptive rights of holders of ordinary shares. A designation
may be renewed. At ASML’s Annual General Meeting of
Shareholders, held on March 24, 2010, the Board of
Management was authorized, subject to the aforementioned
approval, to restrict or exclude preemptive rights of holders of
ordinary shares. At ASML’s Annual General Meeting of
Shareholders to be held on April 20, 2011, its shareholders
will be asked to grant this authority through October 20,
2012. At this Annual General Meeting of Shareholders, the
shareholders will be asked to grant authority to the Board of
Management to issue shares and options separately for a period
of 18 months.
ASML STATUTORY ANNUAL REPORT 2010
23
The Company may repurchase its issued ordinary shares at any
time, subject to compliance with the requirements of Dutch law
and the Company’s Articles of Association. Although since
June 11, 2008, Dutch law provides that after such
repurchases the aggregate nominal value of the ordinary shares
held by ASML or a subsidiary must not exceed 50.0 percent
of the issued share capital, the Company’s current Articles
of Association provide that after such repurchases the aggregate
nominal value of the ordinary shares held by ASML or a
subsidiary must not exceed 10.0 percent of the issued share
capital. It will be proposed to the Annual General Meeting of
Shareholders to be held on April 20, 2011, to amend the
Articles of Association to refer to applicable Dutch law. Any
such repurchases are subject to the approval of the Supervisory
Board and the authorization of shareholders at ASML’s
Annual 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 24, 2011, up to a maximum of
three times 10.0 percent of the Company’s issued share
capital as of the date of authorization (March 24,
2010) at a price between the nominal value of the ordinary
shares purchased and 110.0 percent of the market price of
these securities on Euronext Amsterdam or NASDAQ. At the
Company’s Annual General Meeting of Shareholders to be held
on April 20, 2011, the Company’s shareholders will be
asked to extend this authority through October 20, 2012.
Cumulative
preference shares
In 1998, the Company granted to the preference share foundation,
“Stichting Preferente Aandelen ASML” (the
“Foundation”) an option to acquire cumulative
preference shares in the capital of the Company (the
“Preference Share Option”). This option was amended
and extended in 2003 and 2007. A third amendment to the option
agreement between the Foundation and ASML became effective on
January 1, 2009, to clarify the procedure for the
repurchase and cancellation of the preference shares when issued.
The Foundation may exercise the Preference Share Option in
situations where, in the opinion of the Board of Directors of
the Foundation, the interests of the Company, its business or
the interests of its stakeholders are at stake. This may be the
case if a public bid for the ordinary shares of the Company has
been announced or has been made, or the justified expectation
exists that such a bid will be made without any agreement having
been reached in relation to such a bid with the Company. The
same may apply if one shareholder, or more shareholders acting
in concert, hold a substantial percentage of the issued ordinary
shares of the Company without making an offer or if, in the
opinion of the Board of Directors of the Foundation, the
(attempted) exercise of the voting rights by one shareholder or
more shareholders, acting in concert, is materially in conflict
with the interests of the Company, its business or its
stakeholders.
The objects of the Foundation are to look after the interests of
ASML and of the enterprises maintained by ASML and of the
companies which are affiliated in a group with ASML, in such way
that the interests of ASML, of those enterprises and of all
parties concerned are safeguarded in the best possible way, and
influences in conflict with these interests which might affect
the independence or the identity of ASML and those companies are
deterred to the best of the Foundation’s ability, and
everything related to the above or possibly conducive thereto.
The Foundation seeks to realize its objects by the acquiring and
holding of cumulative preference shares in the capital of ASML
and by exercising the rights attached to these shares,
particularly the voting rights attached to these shares.
The Preference Share Option gives the Foundation the right to
acquire a number of cumulative preference shares, provided that
the aggregate nominal value of such number of cumulative
preference shares shall not exceed the aggregate nominal value
of the ordinary shares that have been issued at the time of
exercise of the Preference Share Option for a subscription price
equal to their EUR 0.02 nominal value. Exercise of the
Preference Share Option could effectively dilute the voting
power of the outstanding ordinary shares by one-half. Only
one-fourth of the subscription price is payable at the time of
initial issuance of the cumulative preference shares.
Cancellation and repayment of the issued cumulative preference
shares by the Company requires the authorization by the General
Meeting of Shareholders of a proposal to do so by the Board of
Management approved by the Supervisory Board. If the Preference
Share Option is exercised and as a result cumulative preference
shares are issued, the Company, at the request of the
Foundation, will initiate the repurchase or cancellation of all
cumulative preference shares held by the Foundation as a result
of such issuance with repayment of the amount paid and exemption
from the obligation to pay up on the cumulative preference
shares. In that case the Company is obliged to effect the
repurchase and cancellation respectively as soon as possible.
If the Foundation will not request the Company to repurchase or
cancel all cumulative preference shares held by the Foundation
within 20 months after issuance of these shares, the
Company will be obliged to convene a General Meeting of
Shareholders in order to decide on a repurchase or cancellation
of these shares.
The Foundation is independent of the Company. The Board of
Directors of the Foundation comprises four independent voting
members from the Dutch business and academic communities:
Mr. R.E. Selman, Mr. M.W. den Boogert, Mr. J.M.
de Jong and Mr. A. Baan.
ASML STATUTORY ANNUAL REPORT 2010
24
Limitations to
transfers of shares in the share capital of ASML
There are currently no limitations, either under Dutch law or in
the Articles of Association of ASML, as to the transfer of
shares in the share capital of ASML.
Reporting
obligations under the Act on the supervision of financial
markets (Wet op het financieel toezicht, the
“Wft”)
Holders of our shares may be subject to reporting obligations
under the Wft.
The disclosure obligations under the Wft apply to any person or
entity that acquires, holds or disposes of an interest in the
voting rights
and/or the
capital of a public limited company incorporated under Dutch law
whose shares are admitted to trading on a regulated market
within the European Union (the “EU”). Disclosure is
required when the percentage of voting rights or capital
interest of a person or an entity reaches, exceeds or falls
below 5, 10, 15, 20, 25, 30, 40, 50, 60, 75 or 95 percent
(as a result of an acquisition or disposal by such person, or as
a result of a change in our total number of voting rights or
capital issued). With respect to ASML, the Wft 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 Authority for the Financial Markets in
the Netherlands (Autoriteit Financiële Markten, the
“AFM”) immediately.
A legislative proposal is currently under discussion in Dutch
Parliament, pursuant to which the 5 percent threshold will
be replaced by a 3 percent threshold. Under the same
proposal each holder of a 3 percent interest would need to
declare, in a filing to be publicly made with the AFM, whether
it has any objections to our strategy as publicly submitted to
the AFM. The proposal would also introduce a mechanism pursuant
to which ASML would be able to identify, and communicate with,
beneficial holders of its shares through the respective
custodians.
According to AFM’s public registry (www.afm.nl/registers)
on December 31, 2010, the following notifications of voting
rights or capital interest above 5 percent have been made
pursuant to the Wft:
Capital Research and Management Company 5.16% voting rights, no
capital interest
Stichting Preferente Aandelen ASML 100% option rights
Special voting
rights on the issued shares
There are no special voting rights on the issued shares in the
share capital of ASML.
Limitation voting
rights on shares
There are currently no limitations, either under Dutch law or in
the Articles of Association of ASML, to hold or vote ordinary
shares.
Appointment of
Board of Management and Supervisory Board
Board of
Management
The rules governing the appointment and dismissal of members of
the Board of Management are described in section II. above.
Supervisory
Board
The rules governing the appointment and dismissal of members of
the Supervisory Board are described in section III. above.
Amendment of the
Articles of Association
The General Meeting of Shareholders can resolve to amend the
Articles of Association of the Company. The (proposed) amendment
requires the approval of the Supervisory Board.
A resolution to amend the Articles of Association is adopted at
a General Meeting of Shareholders at which more than one half of
the issued share capital is represented and with at least
three-fourths of the votes cast; if the required share capital
is not represented at a meeting convened for that purpose, a
subsequent meeting shall be convened, to be held within four
weeks of the first meeting, at which, irrespective of the share
capital represented, the resolution can be adopted with at least
three-fourths of the votes cast. If a resolution to amend the
Articles of Association is proposed by the Board of Management,
the resolution will be adopted with an absolute majority of
votes cast irrespective of the represented share capital at the
General Meeting of Shareholders.
The complete proposals should be made available for inspection
by the shareholders and the others entitled to attend meetings
at the office of the Company and at a banking institution
designated in the convocation to the general meeting of
shareholders, as from the date of said convocation until the
close of that meeting. Furthermore, the Company must consult
Euronext Amsterdam and the AFM, before the amendment is proposed
to its shareholders.
ASML STATUTORY ANNUAL REPORT 2010
25
Severance
payments under agreements with members of Board of
Management
Because their appointment to the Board of Management took place
before March 31, 2004, the employment agreements with
Messrs. Wennink and Van den Brink do not contain specific
provisions regarding benefits upon termination of those
agreements. Potential severance payments will be according to
applicable law.
Employment agreements for members of the Board of Management
appointed after March 31, 2004 contain specific provisions
regarding severance payments. If ASML gives notice of
termination of the employment agreement for reasons which are
not exclusively or mainly found in acts or omissions of the
board member concerned, a severance payment equal to one year
base salary will be paid upon the effective date of termination.
This severance payment will also be paid in case a Board of
Management member gives notice of termination of the employment
agreement in connection with a substantial difference of opinion
between the respective executive and the Supervisory Board
regarding her / his employment agreement,
her / his function or the Company’s strategy.
Board of Management members appointed after March 31, 2004
shall also be entitled to the aforementioned severance payments
in the event ASML or its legal successor gives notice of
termination in connection with a Change of Control (as defined
in the employment agreement) or if such Board of Management
member gives notice of termination directly related to such
Change of Control, and such notice is given within twelve months
from the date on which the Change of Control occurs.
VII. Deviations
from the Code
For clarity purposes, ASML lists below its deviations from the
Code and reasons for doing so. The deviations follow the order
of the recommendations in the Code.
II.2.5
Although ASML does not consider ASML’s execution of this
best practice a deviation from the Code, it could be interpreted
as such.
The members of the Board of Management are eligible to receive
performance shares which will be awarded annually under the
condition of fulfillment of predetermined performance targets,
which are measured over a period of three calendar years. Once
the shares are unconditionally awarded after fulfillment of the
performance conditions, the shares will be retained (for a
lock-up
period) by the Board of Management member for at least two years
after the date of unconditional award or until the termination
of employment, whichever period is shorter. The date of release
lies three years after the original date of target setting, and
the members of the Board of Management have to retain the
performance shares for at least two subsequent years.
Accordingly, the total period before one obtains full rights to
the performance shares will be five years. The Remuneration
Committee believes that the total resulting period is in
compliance with the Code. The AGM approved the performance share
arrangement for the Board of Management on March 24, 2010.
II.2.8
The employment contracts of the members of the Board of
Management appointed before March 31, 2004, being
Messrs. Wennink and Van den Brink, are being honored,
including all rights and obligations under these contracts. This
implies that the appointment of Messrs. Wennink and Van den
Brink as members of the Board of Management will be for an
indefinite period of time, and that their potential severance
payments will be according to applicable law. Although ASML does
not consider this to be contrary to the recommendations in the
Code, it may be considered a deviation from the Code.
II.2.9
ASML has not granted any personal loans, guarantees, or the like
to members of the Board of Management. However, stock option
plans that were issued before 2001 were constructed with a
virtual financing arrangement in compliance with the applicable
laws and after obtaining the necessary corporate approvals,
whereby ASML loaned the tax value of the options granted to
employees and members of the Board of Management (being
Messrs. Van den Brink and Wennink) subject to the Dutch
tax-regime. The loans issued under this arrangement are
repayable to ASML on the exercise date of the respective option,
provided that the option was actually exercised. If the options
expire unexercised, the loans are forgiven. ASML’s
Supervisory Board approved the Stock Option Plans at the time,
including the loans, as these were part of the Stock Option Plan.
The Board of Management and the Supervisory Board,
Veldhoven, February 14, 2011
ASML STATUTORY ANNUAL REPORT 2010
26
Management Board
Report
About
ASML
ASML is one of the world’s leading providers of lithography
equipment that is 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.
As of December 31, 2010 we employed more than 7,100 payroll
employees (2009: 6,500) and more than 2,000 temporary employees
(2009: 1,100), measured in full-time employees
(“FTEs”). ASML operates in 16 countries through over
55 sales and service locations.
In 2010, we generated net sales of EUR 4,507.9 million
and operating income of EUR 1,161.3 million or
25.8 percent of net sales. Net income in 2010 amounted to
EUR 985.5 million or 21.9 percent of net sales,
representing net income per ordinary share of EUR 2.26.
In the executive summary below we provide an overview of the
risk factors, followed by an update of the semiconductor
equipment industry, our business strategy and a discussion of
our key performance indicators.
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. These risks are not the only
ones that ASML faces. Some risks may not yet be known to ASML
and certain risks that ASML does not currently believe to be
material could become material in the future.
Summary
Strategic
Risks
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We Derive Most of Our Revenues from the Sale of a Relatively
Small Number of Products.
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Risks Related to
the Semiconductor Industry
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The Semiconductor Industry is Highly Cyclical and We May Be
Adversely Affected by Any Downturn;
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Our Business Will Suffer If We Do Not Respond Rapidly to
Commercial and Technological Changes in the Semiconductor
Industry;
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We Face Intense Competition.
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Governmental,
Legal and Compliance Risks
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Failure to Adequately Protect the Intellectual Property Rights
Upon Which We Depend Could Harm Our Business;
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Defending Against Intellectual Property Claims Brought by Others
Could Harm Our Business;
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We Are Subject to Risks in Our International Operations;
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Because of Labor Laws and Practices, Any Workforce Reductions
That We May Seek to Implement in Order to Reduce Costs
Company-Wide May Be Delayed or Suspended.
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Operational
Risks
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The Number of Systems We Can Produce Is Limited by Our
Dependence on a Limited Number of Suppliers of Key Components;
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The Pace of Introduction of Our New Products Is Accelerating and
Is Accompanied by Potential Design and Production Delays and by
Significant Costs;
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We Are Dependent on the Continued Operation of a Limited Number
of Manufacturing Facilities;
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We May Be Unable to Make Desirable Acquisitions or to Integrate
Successfully Any Businesses We Acquire;
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Our Business and Future Success Depend on Our Ability to Attract
and Retain a Sufficient Number of Adequately Educated and
Skilled Employees.
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Financial
Risks
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A High Percentage of Net Sales Is Derived from a Few Customers;
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Fluctuations in Foreign Exchange Rates Could Harm Our Results of
Operations.
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ASML STATUTORY ANNUAL REPORT 2010
27
Risks Related to
Our Ordinary Shares
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We may not declare cash dividends at all or in any particular
amounts in any given year;
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The Price of Our Ordinary Shares is Volatile;
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Restrictions on Shareholder Rights May Dilute Voting Power.
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Strategic
Risks
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 (197 units in
2010 and 70 units in 2009), with an average selling price
(“ASP”) in 2010 of EUR 19.8 million (EUR
24.1 million for new systems and EUR 4.4 million
for used systems) and an ASP in 2009 of
EUR 16.8 million (EUR 21.1 million for new
systems and EUR 7.9 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 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:
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a downturn in the highly cyclical semiconductor industry;
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unanticipated shipment rescheduling;
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cancellation or order push-back by customers;
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unexpected manufacturing difficulties; and
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delays in deliveries by suppliers,
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may cause net sales in a particular reporting period to fall
significantly below net sales in previous periods or below our
expected net sales, and may have a material adverse effect on
our operating results for that period.
In particular our published quarterly earnings may vary
significantly from quarter to quarter and may vary in the future
for the reasons discussed above.
Risks Related to
the Semiconductor Industry
The
Semiconductor Industry is Highly Cyclical and We May Be
Adversely Affected by Any Downturn
As a supplier to the global semiconductor industry, we are
subject to the industry’s business cycles, the timing,
duration and volatility of which are difficult to predict. The
semiconductor industry has historically been cyclical. Sales of
our lithography 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:
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the current and anticipated market demand for semiconductors and
for products utilizing semiconductors;
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semiconductor prices;
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semiconductor production costs;
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changes in semiconductor inventory levels;
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general economic conditions; and
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access to capital.
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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 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 level of sales that we
must reach in a year to achieve net income. If sales decrease
significantly as a result of an industry downturn and we are
unable to adjust our costs over the same period, 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 may 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 and impairment of machinery and
equipment, which in the past has had, and in the future could
have, a material adverse effect on our business, financial
condition and results of operations.
The financial crisis affecting the banking system and global
financial markets was in many respects unprecedented in the
history of our Company. Remaining concerns over the instability
of the financial markets and the global economy could result in
a number of follow-on effects on our business, including:
declining business and consumer confidence resulting in reduced,
delayed or shorter-term capital expenditures for our products;
insolvency of key suppliers resulting in product delays; the
inability of customers to obtain credit to finance purchases of
our products, delayed payments from our customers
and/or
customer insolvencies; and other adverse effects that we cannot
currently anticipate. If global economic and market conditions
deteriorate, we are likely to experience material adverse
impacts on our business, financial condition and results of
operations.
ASML STATUTORY ANNUAL REPORT 2010
28
Conversely, 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 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, damage to customer relationships and we may lose
market share.
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:
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rapid change towards more complex technologies;
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frequent new product introductions and enhancements;
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evolving industry standards;
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changes in customer requirements; and
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continued shortening of product life cycles.
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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
(“R&D”) 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 production
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 are investing 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 fully 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 would
result in the recording of impairment charges on these
investments and could have a material adverse effect on our
business, financial condition and results of operations.
The success of EUV will be particularly dependent on light
source (laser) availability and continuing technical advances as
well as infrastructure developments in masks and resists,
without which the tools cannot achieve the productivity and
yield that are required to justify their capability economically.
We Face
Intense Competition
The semiconductor equipment industry is highly competitive. The
principal elements of competition in our market segments are:
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the technical performance characteristics of a lithography
system;
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the value of ownership of that system based on its purchase
price, maintenance costs, productivity, and customer service and
support costs;
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a strengthening of the euro particularly against the Japanese
yen which results in lower prices and margins;
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the strength and breadth of our portfolio of patents and other
intellectual property rights; and
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our customers’ desire to obtain lithography equipment from
more than one supplier.
|
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.
ASML’s primary competitors are Nikon Corporation
(“Nikon”) and Canon Kabushiki Kaisha
(“Canon”). 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, which
may cause a decline in our sales or a loss of market acceptance
for our lithography 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. In
addition, to competitors in lithography, ASML may face
competition with respect to alternative technologies for the
non-critical layers and from alternative technologies for all
layers. In the event the delivery of new technology is delayed,
ASML’s customers may turn to alternative technology
equipment
and/or their
own installed base as a substitute for purchasing ASML’s
products.
ASML STATUTORY ANNUAL REPORT 2010
29
Governmental,
Legal and Compliance Risks
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:
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|
| •
|
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;
|
| •
|
patents will expire which may result in key technology becoming
widely available that may hurt our competitive position;
|
| •
|
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:
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Potentially adverse tax consequences;
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| •
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Unfavorable political or economic environments;
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| •
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Unexpected legal or regulatory changes; and
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| •
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An inability to effectively protect intellectual property.
|
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, 30.6 percent of our 2010 revenues and
27.6 percent of our 2009 revenues were derived from
customers in Taiwan. Taiwan has a unique international political
status. The People’s Republic of China asserts sovereignty
over Taiwan and does not recognize the legitimacy of the
Taiwanese government. Changes in relations between Taiwan and
the People’s Republic of China, Taiwanese government
policies and other factors affecting Taiwan’s political,
economic or social environment 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
Seek 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 formal procedures that can delay,
or may result in the modification of our planned workforce
reductions. For example, in the Netherlands, if our Works
Council renders contrary 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.
ASML STATUTORY ANNUAL REPORT 2010
30
Operational
Risks
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 lithography systems we are able to produce is
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.
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, and the extreme ultraviolet light
source, referred to as “EUV”, used in our
second-generation EUV systems, are available from only a very
limited number of suppliers.
Although the timeliness, yield and quality of deliveries to date
from our other subcontractors generally have been satisfactory,
manufacturing some 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.
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. Moreover, we
anticipate that this learning-curve effect will continue to
present increasingly difficult challenges with every new
generation as a result of increasing technological complexity.
There is a risk that we may not be able to introduce or bring to
full-scale production new products as quickly as we anticipate
in our product introduction plans, which could have a material
adverse effect on our business, financial condition and results
of operations.
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 cancelling orders
for our technology enhancements, which could negatively impact
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 clean room
facilities in Veldhoven, the Netherlands, in Wilton,
Connecticut, the United States and in Linkou, Taiwan. 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.
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
ASML STATUTORY ANNUAL REPORT 2010
31
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.
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 depend 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.
Financial
Risks
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. We expect customer
concentration to increase because of continuing consolidation in
the semiconductor manufacturing industry. Consequently, 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 2010, sales to our
largest customer accounted for EUR 1,270.8 million, or
28.2 percent of net sales, compared with
EUR 348.8 million, or 21.9 percent of net sales,
in 2009. 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 our limited number of customers,
credit risk on our receivables is concentrated. Our three
largest customers (based on net sales) accounted for
42.4 percent of accounts receivable at December 31,
2010, compared with 44.0 percent at December 31, 2009.
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.
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 for
our systems predominantly in euros 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 euros. Accordingly, our results of operations and
assets and liabilities are exposed to fluctuations in exchange
rates between the euro and various currencies. In general, our
customers run their businesses in U.S. dollars, and
therefore a further weakening of the U.S. dollar against
the euro might impact the ability of our customers to purchase
our products.
Furthermore, a strengthening of the euro particularly against
the Japanese yen 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.
Risks Related to
Our Ordinary Shares
We May Not
Declare Cash Dividends at All or in Any Particular Amounts in
Any Given Year
Our policy is to pay a sustainable annual dividend in an amount
that is stable or grows over time. However, the decision by our
Board of Management in any given year to propose to our
Supervisory Board that a dividend be proposed to our Annual
General Meeting of Shareholders in any given year will be
subject to the availability of distributable profits or retained
earnings and may be affected by, among other factors: the Board
of Management’s views on our potential future funding
requirements, including for investments in production capacity
and the funding of our research and development programs, as
well for acquisition opportunities that may arise from time to
time; and by future changes in applicable income tax and
corporate laws. Correspondingly, our dividend payments could
decline or be eliminated with respect to any particular year in
the future. Such a reduction or elimination in our dividend
payments could have a negative effect on our share price.
ASML STATUTORY ANNUAL REPORT 2010
32
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 Dutch 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 Dutch 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.
Financial risk
management
ASML is exposed to a variety of financial risks: market risks
(including foreign currency exchange risk and interest rate
risk), credit risk and liquidity risk. The overall risk
management program focuses on the unpredictability of financial
markets and seeks to minimize potential adverse effects on the
Company’s financial performance. See Note 5 to our
consolidated financial statements for more information.
Semiconductor
Equipment Industry
The chip-making business is focused on “shrink” or
reducing the size of chip designs. Historically the
semiconductor industry has experienced significant growth
largely due to the continual reduction of cost per function
performed by Intergated Circuits (“ICs”). Improvement
in the design and manufacture of ICs with higher circuit
densities 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 industry’s 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. In 2010, ASML was one of the world’s leading
providers of lithography equipment (measured in revenues).
Total lithography equipment shipped by the industry as a whole
in the six years ended December 31, 2010, is set out in the
following table:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Year ended December 31
|
|
2005
|
|
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2006
|
|
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2007
|
|
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2008
|
|
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2009
|
|
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20101
|
|
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Total units shipped
|
|
|
536
|
|
|
|
633
|
|
|
|
604
|
|
|
|
344
|
|
|
|
128
|
|
|
|
286
|
|
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Total value (in millions USD)
|
|
|
4,988
|
|
|
|
6,386
|
|
|
|
7,144
|
|
|
|
5,388
|
|
|
|
2,485
|
|
|
|
6,299
|
|
|
|
(Source: Gartner Dataquest)
1 Full year 2010 estimates are
according to the latest available data up to and including
December 2010.
For the year 2010, the latest indications of independent market
analysts show an increase in total lithography equipment shipped
to the market by the industry of 123.4 percent in unit
volume and 153.5 percent in value. The year 2010 was
characterized by the recovery of the semiconductor equipment
industry and resulting higher overall end-demand for a broad mix
of systems for all chip layers. In order to meet the increased
demand for our advanced technology products as well as for our
capacity tools, we almost tripled the output of our factory in
2010 compared with 2009. In the course of 2010, ASML expanded
its fixed and flexible workforce and structurally improved cycle
times in the second half of 2010.
ASML STATUTORY ANNUAL REPORT 2010
33
Business
strategy
The long-term growth of the semiconductor industry is the result
of the principle that the power, cost and time required for
every computation on a digital electronic device can be reduced
by shrinking the size of transistors on chips. Today, chip
makers can image electronic circuits and features that are over
6,000 times smaller than they were in the early 1970s. This
trend was first observed by Intel co-founder Gordon Moore in
1965, and is referred to as ’Moore’s Law’.
Moore’s Law has resulted in our information society with
fast wired and wireless communications – built on
affordable chips. Moore’s Law also has an impact on the
energy usage of chips. Smaller geometries allow for much lower
electrical currents to operate the chip. This has helped to
contain the world’s energy consumption despite the
proliferation of affordable computing. Using advanced
semiconductors in industrial and consumer products often
provides economic benefits, user-friendliness and increased
safety. The technology revolution powered by semiconductors has
brought many advantages: not only can information be more widely
disseminated than ever before, affordable chip intelligence has
also enabled industry and service sectors to create and
distribute products and ideas at lightning speed.
Smarter, smaller and more energy-efficient chips are made with
increasingly sophisticated lithography systems produced by ASML.
Lithography systems are crucial to the roadmaps of chipmakers to
make smaller transistors on chips. ASML’s business strategy
is based on maintaining and further developing its position as a
technology leader in semiconductor lithography. When executed,
this strategy results in the delivery of lithography systems
which enable customers to produce highest performance and lowest
cost chips. The superior value of ownership offered to customers
as a result of ASML’s strategy also maximizes ASML’s
own financial performance, aligning the interests of ASML and
our customers.
Customer
focus
Ensuring customers are served with the right products at the
right time, supported by excellent service, is key to
ASML’s commitment to a long-term relationship. With
high-valued products, customers expect high-quality support
customized to their specific requirements. This support includes
service engineers, equipped with the latest technical
information, to ensure the highest levels of system performance,
as well as applications specialists who support optimal system
processing and new product implementation.
ASML aims to deliver lithography systems with the lowest cost of
ownership and highest earnings.
Customer satisfaction is a critical objective of ASML. We have
Account Teams that are specifically dedicated to customer
satisfaction throughout the lifecycle of our products.
Through 2010, all of the top 10 chip makers worldwide, in terms
of semiconductor capital expenditure, were our customers. We
also have a significant share of customers outside the top 10
and we strive for continued business growth with all our
customers. We expect customer concentration to increase because
of continuing consolidation in the semiconductor manufacturing
industry.
In 2010, our satisfaction ratings by customers surpassed every
lithography competitor for the eighth successive year, according
to VLSI Research, an independent industry research firm that
surveyed customers representing 95.0 percent of the
world’s total semiconductor market.
Strategic
investment in research and development
Our customer-base relies on ASML to deliver the right technology
at the right time to meet long-term roadmaps which often extend
many years into the future. To meet these demands, ASML is
committed to significant long-term investments in R&D that
are not significantly impacted by short-term cyclical swings.
ASML has one of the highest private R&D budgets invested in
the Netherlands. In 2010, our R&D investments (which
include R&D costs, net of credits and additions to other
intangible assets regarding development expenditures) amounted
to EUR 523.4 million, an increase from previous years
to accommodate the rapid introduction of newly developed
platforms which are in demand by customers (2009:
EUR 466.8 million). A significant part of this budget
was used for R&D jointly with our suppliers and technology
partners. Through direct government grants designed to stimulate
high-risk research for the medium and long term future, ASML
received R&D credits of EUR 29.5 million in 2010.
The Company expects that these R&D credits to ASML will
decline significantly over coming years.
The foundation of our lithography scanners is our dual-stage
wafer imaging platform – the TWINSCAN
system – which we introduced in 2000 and which allows
exposure of one wafer while simultaneously measuring the wafer
which will be exposed next. Our strong leadership in this
capability has allowed us to achieve the industry’s highest
throughput, enabling reduced
cost-per-exposure
per wafer. ASML is the only lithography manufacturer that
enables volume production based on dual-stage systems.
We have focused our R&D investments on three core programs:
immersion, double patterning and EUV.
ASML STATUTORY ANNUAL REPORT 2010
34
Our innovative immersion lithography systems place a fluid
between the wafer and a system’s projection lens to enhance
focus and enable circuit line-width to shrink to smaller
dimensions than what is possible with “dry”
lithography systems. ASML pioneered this “wet”
technology and has experienced strong demand for immersion-based
systems, which have been adopted by most of our customers in all
semiconductor market segments, including NAND-Flash memory chip,
DRAM memory chip, as well as the Logic processor chip segment.
We have developed different immersion systems for different
customer needs. We have optimized our TWINSCAN XT immersion
systems for cost-effective imaging down to 38 nm patterning, and
have developed a new dual wafer stage system called TWINSCAN NXT
with improved positioning (“overlay”) and imaging. The
TWINSCAN NXT platform enables next generations of semiconductors
through the so-called double patterning technique which requires
two exposures per layer on a chip, enabling precise imaging
patterns and lines by using our TWINSCAN NXT planar wafer stage
and breakthrough grid metrology. ASML sold 34 TWINSCAN NXT
systems in 2010.
Also in 2010, we achieved a major milestone with Extreme
Ultraviolet (“EUV”) lithography when we shipped our
first second-generation EUV system to a customer’s
manufacturing site. This system will be used by the customer to
develop its EUV manufacturing process before high-volume EUV
systems will become available, which we expect to occur in 2012.
We anticipate that five additional second-generation systems
will be shipped to other customers in 2011. As of
December 31, 2010, we had received nine orders for its
successor, the third-generation, high-volume EUV systems which
are scheduled to ship from 2012 onwards. The NXE (EUV) system,
built on an evolved TWINSCAN platform, enables our customers to
extend their roadmap towards smaller chip features. EUV permits
chip makers to expose a critical layer in just one single
step – as opposed to double patterning which requires
multiple steps. EUV also has a roadmap from the initial 27 nm
resolution down to 16 nm and beyond. We have published a roadmap
to develop a range of EUV models, offering the greatest
extendibility at the lowest cost of ownership for the future of
lithography.
We complement our scanner products with a rapidly expanding
holistic lithography portfolio of software and metrology
products to help our customers optimize semiconductor scanner
performance, provide a faster start to chip production and
achieve better imaging at higher resolutions. Our customers
optimize their scanner performance by taking into account the
entire chip creation process, from design to volume
manufacturing – we call this approach “holistic
lithography”. During 2010 we announced broad customer
adoption of holistic lithography products as all of ASML’s
leading-edge scanners were sold with one or more holistic
lithography components. Semiconductor manufacturers face
increasingly smaller margins of error as they shrink chip
features. Holistic lithography provides a way to shrink within
these margins, offering significant revenue-generating and
cost-saving opportunities to our customers.
Operational
excellence
We strive to sustain our business success based on our
technological leadership by continuing to execute our
fundamental operating strategy well, including reducing
lead-times while improving our cost competitiveness. Lead-time
is the time from a customer’s order to a tool’s
delivery.
Our business strategy includes outsourcing the manufacturing of
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 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 flexibility to adapt to the cyclicality of the world
market for semiconductor lithography systems.
ASML has a flexible labor model with a mix of fixed and flexible
contracted labor in its manufacturing and R&D facilities in
Veldhoven, the Netherlands, and payroll employees compensated
under a partly variable salary structure through ASML’s
profit sharing plan. This 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 workforce, we can shorten lead-times: a key driver of
added value for customers. Flexibility also reduces our working
capital requirements.
In view of the economic volatility of the semiconductor
industry, we continue to strive to improve efficiencies in our
operations: addressing our cost structure and strengthening our
capability to generate cash.
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 and advanced applications outside the traditional
lithography business, each 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;
|
ASML STATUTORY ANNUAL REPORT 2010
35
|
|
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|
maintaining appropriate levels of R&D to offer the most
advanced technology suitable for high-throughput and low-cost
volume production at the earliest possible date;
|
| •
|
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 customer’s 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,
including outsourcing companies;
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improving the reliability and uptime of our installed system
base; and
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|
providing refurbishing services that effectively increase
residual value by extending the life of equipment.
|
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
subassembly and testing of certain modules and the final
assembly and fine tuning / testing of a finished
system from components and modules that are manufactured to our
specifications by third parties and by us. All of our
manufacturing activities (subassembly, final assembly and system
fine tuning / testing) are performed in clean room
facilities in Veldhoven, the Netherlands, in Wilton,
Connecticut, the United States and in Linkou, Taiwan. 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:
|
|
| •
|
maintaining long-term relationships with our suppliers;
|
| •
|
sharing risks and rewards with our suppliers;
|
| •
|
dual sourcing of knowledge, globally, together with our
suppliers; and
|
| •
|
single, dual or multiple sourcing of products, where possible or
required.
|
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 2010,
29.7 percent of our aggregate cost of sales was purchased
from Zeiss (2009: 24.0 percent).
Zeiss is highly dependent on its manufacturing and testing
facilities in Oberkochen and Wetzlar, Germany, and its
suppliers. Moreover, Zeiss has a finite 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
2010, our sales were not limited by the deliveries from Zeiss.
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
subsequent years. These agreements define a framework in all
areas of our business relationship. The partnership between ASML
and Zeiss is focused on continuous improvement of operational
excellence.
Pursuant to these agreements, ASML and Zeiss have agreed to
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.
ASML has a flexible labor model with a mix of fixed and flexible
contracted labor in its manufacturing and R&D facilities in
Veldhoven, the Netherlands, and payroll employees compensated
under a partly variable salary structure through ASML’s
profit sharing plan. This reinforces our ability to adapt more
quickly to semiconductor market cycles, including support for
potential
ASML STATUTORY ANNUAL REPORT 2010
36
24-hour,
seven
days-a-week
production activities. By maximizing the flexibility of our
high-tech workforce, we can shorten lead-times: a key driver of
added value for customers. Flexibility also reduces our working
capital requirements.
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 (direct or indirect) subsidiary, are as follows:
The chart above excludes intermediate subsidiaries; See
Note 26 to our consolidated financial statements for a list
of our subsidiaries.
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. The
figures in the table below are based on U.S. GAAP.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
|
|
|
2010
|
|
|
|
|
|
(in millions)
|
|
EUR
|
|
|
|
|
|
EUR
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
1,596.1
|
|
|
|
|
|
|
|
4,507.9
|
|
|
|
|
|
|
Increase (decrease) in net sales (%)
|
|
|
(46.0)
|
|
|
|
|
|
|
|
182.4
|
|
|
|
|
|
|
Net system sales
|
|
|
1,174.9
|
|
|
|
|
|
|
|
3,894.7
|
|
|
|
|
|
|
Sales of systems (in units)
|
|
|
70
|
|
|
|
|
|
|
|
197
|
|
|
|
|
|
|
Average selling price of system sales
|
|
|
16.8
|
|
|
|
|
|
|
|
19.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of systems
backlog1
|
|
|
2,113.7
|
|
|
|
|
|
|
|
3,855.7
|
|
|
|
|
|
|
Systems backlog (in
units)1
|
|
|
69
|
|
|
|
|
|
|
|
157
|
|
|
|
|
|
|
Average selling price of systems
backlog1
|
|
|
30.6
|
|
|
|
|
|
|
|
24.6
|
|
|
|
|
|
|
Average selling price of systems backlog
(New)1
|
|
|
33.0
|
|
|
|
|
|
|
|
27.7
|
|
|
|
|
|
|
Average selling price of systems backlog
(Used)1
|
|
|
10.0
|
|
|
|
|
|
|
|
5.1
|
|
|
|
|
|
|
NXT systems sold (in units)
|
|
|
3
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profitability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
458.4
|
|
|
|
28.7%
|
|
|
|
1,955.2
|
|
|
|
43.4%
|
|
|
Income (loss) from
operations2
|
|
|
(163.1)
|
|
|
|
(10.2)%
|
|
|
|
1,250.7
|
|
|
|
27.7%
|
|
|
Net income (loss)
|
|
|
(150.9)
|
|
|
|
(9.5)%
|
|
|
|
1,021.8
|
|
|
|
22.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,037.1
|
|
|
|
|
|
|
|
1,949.8
|
|
|
|
|
|
|
Operating cash
flow2
|
|
|
99.2
|
|
|
|
|
|
|
|
940.0
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
In the past, ASML valued net
bookings and systems backlog at net system sales value, which
does not reflect the full order value because it excludes the
value of options and services related to the systems. As of
2010, in order to more adequately reflect the business
circumstances, ASML values net bookings and systems backlog at
full order value (i.e. including options and services). The
comparative figures for 2009 have been adjusted in order to
reflect this change.
|
| |
|
2
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3 to our consolidated financial statements.
|
Sales
For the longer term, and based on industry analysts IC growth
forecasts, we expect our sales level to grow. Our sales levels
depend on three growth drivers: market growth, market share
growth and a broadening of our product and services scope.
In 2010, net sales increased by 182.4 percent to
EUR 4,507.9 million from EUR 1,596.1 million
in 2009. The increase in net sales was caused by an increase in
the number of systems sold and an increase in ASP, reflecting
the recovery of the semiconductor equipment industry, started in
the second half of 2009 and continued in 2010, as customers
invested in KrF systems for basic
ASML STATUTORY ANNUAL REPORT 2010
37
capacity growth and new leading-edge immersion technology in
order to enable new technology
ramp-ups. In
contrast, the first half of 2009, was characterized by the
collapse of the semiconductor equipment demand as a result of
the crisis that began in the second half of 2008 and continued
in 2009 (“financial and economic crisis”).
The ASP of our systems increased by 17.9 percent to
EUR 19.8 million in 2010 from
EUR 16.8 million in 2009 resulting from a shift to
more leading-edge systems. The ASP of our new systems increased
by 14.2 percent to EUR 24.1 million in 2010 from
EUR 21.1 million in 2009 which was mainly driven by
increased sales of our leading-edge technology products (such as
XT:1950i and NXT:1950i systems) compared with 2009. The ASP of
our used systems decreased by 44.3 percent to
EUR 4.4 million in 2010 from EUR 7.9 million
in 2009 which was the result of a shift in the mix of used
systems sold toward more low-end system types.
As of December 31, 2010, our systems backlog was valued at
EUR 3,855.7 million and included 157 systems with an
ASP of EUR 24.6 million. As of December 31, 2009,
the systems backlog was valued at EUR 2,113.7 million
and included 69 systems with an ASP of
EUR 30.6 million. The significant increase in our
systems backlog reflects our customers’ NAND Flash memory
investments for the high volume
ramp-up of
new technologies and Foundry/Logic commitments for new strategic
fab projects, offset by weakening DRAM lithography demand
(albeit at a rate less then originally anticipated). The
increase will support both technology shrink as well as an
increase in manufacturing capacity. ASP decreased in 2010
compared to 2009 because the systems backlog as of
December 31, 2010, includes a broad mix of systems for all
chip layers, whereas the systems backlog as of December 31,
2009, mainly included new leading-edge immersion technology.
In 2010, our most advanced volume production immersion system
TWINSCAN NXT:1950i, with improved overlay and imaging compared
with the TWINSCAN XT immersion systems, continued to
ramp-up. The
NXT platform enables new generations of semiconductors through
the so-called double patterning technique which requires two
exposures per layer on a chip. During 2010, 34 TWINSCAN NXT
systems were sold.
Profitability
Our general strategy is to seek to achieve income from
operations to net sales of 10.0 to 15.0 percent at the
downturn point and 25.0 to 30.0 percent at the upturn point
over the industry’s business cycle. However in exceptional
circumstances, as evidenced by the financial and economic
crisis, we could see periods with results from operations that
are substantially below our minimum target level.
Operating income increased from EUR 76.1 million loss
or 4.8 percent of net sales in 2009 to an operating profit
of 1,161.3 million or 25.8 percent of net sales in
2010. This EUR 1,237.4 million increase was the result
of an increase sales and resulting increase in gross profit on
sales of EUR 1,426.6 million or 370.3 percent
which was partially offset by an increase in operating expenses
(consisting of SG&A and R&D expenses) of
EUR 189.2 million or 41.0 percent.
Gross profit on sales increased from EUR 385.2 million
or 24.1 percent of net sales in 2009 to
1,811.8 million or 40.2 percent of net sales in 2010.
The higher gross profit was mainly attributable to a significant
increase in net sales as a result of the recovery of the
semiconductor equipment industry, which started in the second
half of 2009 and continued in 2010 as customers invested in KrF
systems for basic capacity growth and in new leading-edge
immersion technology, in order to enable new technology
ramp-ups.
The increase in gross profit was partly offset by increased
manufacturing costs as a result of longer lead-times in the
first half of 2010. Furthermore, our manufacturing facilities
were fully utilized in 2010. In contrast, the first half of 2009
was characterized by the collapse of semiconductor equipment
demand as a result of the financial and economic crisis.
Although the recovery of the semiconductor equipment industry
started in the second half of 2009, the full year
2009 gross margin was negatively impacted by very low net
sales and underutilization of capacity in the first half of 2009.
Operating expenses showed an increase of
EUR 189.2 million in 2010 compared to 2009 due to an
increase of selling, general and administrative
(“SG&A”) costs by EUR 25.9 million, or
16.6 percent and research and an increase of development
(“R&D”) costs by EUR 163.2 million, or
53.6 percent. SG&A costs increased as a result of both
higher sales levels and increased costs to implement and support
IT solutions and costs for improvement programs (mainly employee
development costs).
ASML has a flexible labor model with a mix of fixed and flexible
contracted labor in its manufacturing and R&D facilities in
Veldhoven, the Netherlands, and payroll employees compensated
under a partly variable salary structure through ASML’s
profit sharing plan. This reinforces our ability to adapt more
quickly to semiconductor market cycles.
R&D investments (which include R&D costs, net of
credits and additions to other intangible assets regarding
development expenditures) increased by
EUR 56.7 million or 12.1 percent from
EUR 466.8 million in 2009 (EUR 304.8 million
R&D costs and EUR 162.0 million addition to other
intangible assets regarding development expenditures) to
EUR 523.4 million (EUR 468.0 million R&D
costs and EUR 55.4 million addition to other
intangible assets regarding development expenditures) in 2010.
The increase in R&D investments is caused by the spending
on our strategic programs, in particular immersion, double
patterning
ASML STATUTORY ANNUAL REPORT 2010
38
and EUV. The additions in intangible assets regarding
capitalized development expenditures decreased due to an
increase in subsequent development costs, relating to our
strategic programs, which cannot be capitalized.
Net profit in 2010 amounted to EUR 985.5 million or
21.9 percent of net sales, representing
EUR 2.26 net profit per ordinary share compared with
net loss in 2009 of EUR 81.4 million or
5.1 percent of net sales, representing
EUR 0.19 net loss per ordinary share.
Liquidity
As part of our financing policy we seek to maintain a strategic
level of cash and cash equivalents of between EUR 1.0 and
1.5 billion. In addition to dividend payments, to the
extent the level of cash and cash equivalents exceeds this
target level and there are no investment opportunities that we
wish to pursue, we intend to return cash to our shareholders
through share buybacks or repayment of capital.
Our cash and cash equivalents increased to
EUR 1,949.8 million as of December 31, 2010 from
EUR 1,037.1 million as of December 31, 2009. We
generated cash from operating activities of
EUR 1,002.5 million in 2010. Furthermore, we generated
cash from financing activities of EUR 85.7 million,
mainly reflecting deposits from customers of
EUR 150.0 million and net proceeds from issuance of
shares and stock options of EUR 31.0 million, partly
offset by a cash outflow from our 2010 dividend payment (EUR
87.0 million). An amount of EUR 180.3 million of
cash was used in investing activities mainly related to
machinery and equipment and the start of the second part of the
EUV and NXT production facilities in Veldhoven, the Netherlands.
The Company’s available credit facilities amount to
EUR 700.0 million and consist of two facilities: a
EUR 500.0 million credit facility and a
EUR 200.0 million loan facility. No amounts were
outstanding under these facilities during 2010.
ASML did not repurchase any shares in 2010. The cumulative
amount returned to shareholders in the form of share buybacks
and capital repayment between May 2006 and December 2010 was
EUR 2,137.7 million. As announced on January 19,
2011, ASML intends to repurchase up to EUR 1.0 billion
of its own shares within the next two years and to increase
dividend pay-out in respect of 2010 to EUR 0.40 per
ordinary share of EUR 0.09 (subject to approval of the 2011
Annual General Meeting of Shareholders).
In April 2010, the Company paid a dividend of EUR 0.20 per
outstanding ordinary share of EUR 0.09 or
EUR 87.0 million in total. A proposal will be
submitted to the Annual General Meeting of Shareholders on
April 20, 2011, to declare a dividend for 2010 of
EUR 0.40 per outstanding ordinary share of EUR 0.09.
Results of
Operations
Set forth below are our consolidated income statement data for
the two years ended December 31, 2009 and 2010:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in millions)
|
|
EUR
|
|
|
EUR
|
|
|
Total net sales
|
|
|
1,596.1
|
|
|
|
4,507.9
|
|
|
Cost of sales
|
|
|
1,210.9
|
|
|
|
2,696.1
|
|
|
Gross profit on sales
|
|
|
385.2
|
|
|
|
1,811.8
|
|
|
Research and development costs
|
|
|
304.8
|
|
|
|
468.0
|
|
|
Selling, general and administrative
costs1
|
|
|
156.5
|
|
|
|
182.5
|
|
|
Operating income
(loss)1
|
|
|
(76.1
|
)
|
|
|
1,161.3
|
|
|
Interest charges,
net1
|
|
|
(7.8
|
)
|
|
|
(7.7
|
)
|
|
Income (loss) before income taxes
|
|
|
(83.9
|
)
|
|
|
1,153.6
|
|
|
Benefit from (provision for) income taxes
|
|
|
2.5
|
|
|
|
(168.1
|
)
|
|
Net income (loss)
|
|
|
(81.4
|
)
|
|
|
985.5
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3 to our consolidated financial statements.
|
ASML STATUTORY ANNUAL REPORT 2010
39
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, 2009 and
2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Full
|
|
|
First
|
|
|
Second
|
|
|
Full
|
|
|
|
|
half year
|
|
|
half year
|
|
|
year
|
|
|
half year
|
|
|
half year
|
|
|
year
|
|
|
Net sales (EUR million)
|
|
|
460.2
|
|
|
|
1,135.9
|
|
|
|
1,596.1
|
|
|
|
1,810.5
|
|
|
|
2,697.4
|
|
|
|
4,507.9
|
|
|
Net system sales (EUR million)
|
|
|
284.4
|
|
|
|
890.5
|
|
|
|
1,174.9
|
|
|
|
1,554.6
|
|
|
|
2,340.1
|
|
|
|
3,894.7
|
|
|
Net service and field option sales (EUR million)
|
|
|
175.8
|
|
|
|
245.4
|
|
|
|
421.2
|
|
|
|
255.9
|
|
|
|
357.3
|
|
|
|
613.2
|
|
|
Total sales of systems (in units)
|
|
|
21
|
|
|
|
49
|
|
|
|
70
|
|
|
|
77
|
|
|
|
120
|
|
|
|
197
|
|
|
Total sales of new systems (in units)
|
|
|
11
|
|
|
|
36
|
|
|
|
47
|
|
|
|
58
|
|
|
|
96
|
|
|
|
154
|
|
|
Total sales of used systems (in units)
|
|
|
10
|
|
|
|
13
|
|
|
|
23
|
|
|
|
19
|
|
|
|
24
|
|
|
|
43
|
|
|
Gross profit as a percentage of net sales
|
|
|
3.3
|
|
|
|
32.6
|
|
|
|
24.1
|
|
|
|
37.9
|
|
|
|
41.7
|
|
|
|
40.2
|
|
|
ASP of system sales (EUR million)
|
|
|
13.5
|
|
|
|
18.2
|
|
|
|
16.8
|
|
|
|
20.2
|
|
|
|
19.5
|
|
|
|
19.8
|
|
|
ASP of new system sales (EUR million)
|
|
|
20.1
|
|
|
|
21.5
|
|
|
|
21.1
|
|
|
|
25.7
|
|
|
|
23.1
|
|
|
|
24.1
|
|
|
ASP of used system sales (EUR million)
|
|
|
6.3
|
|
|
|
9.1
|
|
|
|
7.9
|
|
|
|
3.4
|
|
|
|
5.2
|
|
|
|
4.4
|
|
|
|
Consolidated
sales and gross profit
Net sales increased by EUR 2,911.8 million, or
182.4 percent to EUR 4,507.9 million in 2010 from
EUR 1,596.1 million in 2009. The increase in net sales
mainly resulted from an increase in net system sales of
EUR 2,719.8 million, or 231.5 percent to
EUR 3,894.7 million in 2010 from
EUR 1,174.9 million in 2009. Net service and field
option sales increased to EUR 613.2 million in 2010
from EUR 421.2 million in 2009. The number of systems
sold increased by 181.4 percent to 197 systems in 2010 from
70 systems in 2009. This increase was caused by the recovery of
the semiconductor equipment industry, which started in the
second half of 2009 and continued in 2010, as customers invested
in KrF systems for basic capacity growth and new leading-edge
immersion technology in order to enable new technology
ramp-ups. In
contrast, the first half of 2009, was characterized by the
collapse of the semiconductor equipment demand as a result of
the financial and economic crisis.
The ASP of our systems increased by 17.9 percent to
EUR 19.8 million in 2010 from
EUR 16.8 million in 2009 resulting from a shift to
more leading-edge systems. The ASP of our new systems increased
by 14.2 percent to EUR 24.1 million in 2010 from
EUR 21.1 million in 2009 which was mainly driven by
increased sales of our leading-edge technology products (such as
XT:1950i and NXT:1950i systems) compared with 2009.
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 2010 increased to 43 from 23
in 2009. The ASP of our used systems decreased by
44.3 percent to EUR 4.4 million in 2010 from
EUR 7.9 million in 2009 which was the result of a
shift in the mix of used systems sold toward more low-end system
types.
Through 2010, all of the top 10 chipmakers worldwide, in terms
of semiconductor capital expenditure, were our customers. In
2010, sales to our largest customer accounted for
EUR 1,270.8 million, or 28.2 percent of our net
sales. In 2009, sales to our largest customer accounted for
EUR 348.8 million, or 21.9 percent of our net
sales.
Gross profit on sales increased from EUR 385.2 million
or 24.1 percent of net sales in 2009 to
1,811.8 million or 40.2 percent of net sales in 2010.
The higher gross profit was mainly attributable to the
significant increase in net sales resulting from the recovery of
the semiconductor equipment industry, which started in the
second half of 2009 and continued in 2010 as customers invested
in KrF systems for basic capacity growth and in new leading-edge
immersion technology, in order to enable new technology
ramp-ups.
The increase in gross profit was partly offset by increased
manufacturing costs as a result of longer lead-times in the
first half of 2010. Our manufacturing facilities were fully
utilized. In contrast, the first half of 2009, was characterized
by the collapse of the semiconductor equipment demand as a
result of the financial and economic crisis. Although the
recovery of the semiconductor equipment industry started in the
second half of 2009, the full year 2009 gross margin was
negatively impacted by very low net sales and underutilization
of capacity in the first half of 2009.
We started 2010 with a systems backlog of 69 systems. In 2010,
we booked orders for 285 systems, received order cancellations
or push-outs beyond 12 months for 0 systems and recognized
sales for 197 systems. This resulted in a systems backlog of 157
as of December 31, 2010. The total value of our systems
backlog as of December 31, 2010 amounted to
EUR 3,855.7 million with an ASP of
EUR 24.6 million, compared with a systems backlog of
EUR 2,113.7 million with an ASP of
EUR 30.6 million as of December 31, 2009.
ASML STATUTORY ANNUAL REPORT 2010
40
The significant increase in our systems backlog reflects our
customers’ NAND Flash memory investments for the high
volume
ramp-up of
new technologies and Foundry/Logic commitments for new strategic
fab projects, offset by weakening DRAM lithography demand
(albeit at a rate less then originally anticipated). The
increase will support both technology shrink as well as an
increase in manufacturing capacity. The systems backlog as of
December 31, 2010, includes a broad mix of systems for all
chip layers.
Research and
development
R&D investments (which include R&D costs, net of
credits and additions to other intangible assets regarding
development expenditures) increased by
EUR 56.7 million or 12.1 percent from
EUR 466.8 million in 2009 (EUR 304.8 million
R&D costs and EUR 162.0 million addition to other
intangible assets regarding development expenditures) to
EUR 523.4 million (EUR 468.0 million R&D
costs and EUR 55.4 million addition to other
intangible assets regarding development expenditures) in 2010.
This increase reflects the acceleration of strategic investment
in technology leadership in 2010 through investments in the
development and enhancement of the next-generation TWINSCAN
systems based on immersion, double patterning and EUV. The
additions in intangible assets regarding capitalized development
expenditures decreased due to an increase in subsequent
development costs, relating to our strategic programs, which
cannot be capitalized.
Selling, general
and administrative costs
Selling, general and administrative costs increased by
16.6 percent from EUR 156.5 million in 2009 to
EUR 182.4 million in 2010 as a result of both a higher
sales level and costs to implement and support IT solutions and
costs for improvement programs (mainly employee development
costs).
Net interest
income/charges
The 2010 net interest charge was largely unchanged compared
with 2009 (2010: EUR 7.7 million; 2009:
EUR 7.9 million). Interest income relates to interest
earned on our cash and cash equivalents and was more than offset
by net interest charge on our outstanding debt in both 2010 and
2009.
Income
taxes
Income taxes represented 14.6 percent of income before
income taxes in 2010, compared to 3.0 percent of loss
before income taxes in 2009. In 2009, ASML recognized tax
expense of approximately EUR 40.0 million or
approximately 47.5 percent of loss before income taxes
attributable to the reversal of the 2007 Royalty Box benefit
which had an unfavorable impact on the effective tax rate for
2009. In 2009, based on a tax law change effective
January 1, 2010, ASML decided to reverse the Royalty Box
benefits of 2007, as management at that time expected that a
clean start of the Innovation Box (which under Dutch law
replaced the Royalty Box as of January 1, 2010) in
2010 would result in a higher cumulative benefit for ASML.
In December 2010, ASML reached agreement with the Dutch fiscal
authorities regarding the application of the “Innovation
Box”, a facility under Dutch corporate tax law pursuant to
which income associated with R&D is partially exempted from
taxation. This tax ruling has retroactive effect to
January 1, 2007 and is valid through December 31,
2016. Thereafter the validity of this ruling may be extended or
this ruling may be adapted depending on a possible change of
circumstances. While the Company’s domestic nominal rate
was 25.5 percent in 2010, for the ASML entities in the
Dutch fiscal group, the tax rate is effectively reduced as a
result of the Innovation Box effect for current and prior years.
As a result certain Dutch deferred tax assets, Dutch deferred
tax liabilities and other taxes will be realized in future years
against the reduced effective tax rate resulting from the
Innovation Box, the effect amounts to EUR 27.8 million
(gain) or 2.4 percent of income before income taxes.
In 2010, ASML recognized tax benefit of
EUR 22.2 million or 1.9 percent of income before
income taxes mainly attributable to the application of the
Innovation Box for prior years, which had a favorable effect on
the effective tax rate for 2010 (EUR 34.0 million or
2.9 percent). The Innovation Box effect for the current
year amounts to EUR 83.5 million (gain) or
7.2 percent of income before income taxes.
At the end of 2010, the Dutch government enacted a tax rate
reduction from 25.5 percent in 2010 to 25.0 percent in
2011. As a result, the value of certain Dutch deferred tax
assets, Dutch deferred tax liabilities and other taxes was
reduced by EUR 0.1 million (loss).
Liquidity
ASML’s principal sources of liquidity consist of
EUR 1,949.8 million of cash and cash equivalents as of
December 31, 2010, EUR 700.0 million of available
credit facilities as of December 31, 2010 and expected
future cash flows from operations.
The Company’s available credit facilities amount to
EUR 700.0 million as of December 31, 2010 and
December 31, 2009 and consist of two facilities: a
EUR 500.0 million credit facility and a
EUR 200.0 million loan facility. In May 2010, the
Company, in line with its financing policy, cancelled its
EUR 500.0 million credit facility that was due to
expire in May 2012 and replaced it with a new
EUR 500.0 million credit facility from the same group
of banks. The new credit facility has a term of five years and
contains
ASML STATUTORY ANNUAL REPORT 2010
41
the same restrictive covenant as the credit facility it
replaced. This covenant requires the Company to maintain a
minimum committed capital to net total assets ratio of
40.0 percent calculated in accordance with contractually
agreed definitions. As of December 31, 2010, and
December 31, 2009, this ratio was 78.0 percent and
85.7 percent, respectively. Therefore, the Company was in
compliance with the covenant at the end of 2010 and 2009.
Outstanding amounts under this credit facility will bear
interest at EURIBOR or LIBOR plus a margin that depends on the
Company’s liquidity position. No amounts were outstanding
under this credit facility at the end of 2010 and 2009.
The EUR 200.0 million loan facility is related to the
Company’s EUV investment efforts and was entered into
during the first half of 2009. In June 2010, the Company and the
European Investment Bank agreed to extend the availability
period of the EUR 200.0 million loan facility by six
months, allowing the Company to draw the facility up to
March 31, 2011. When drawn, the loan is repayable in annual
installments starting four years after drawdown, with a final
repayment seven years after drawdown. This facility contains a
covenant that restricts indebtedness, as contractually defined,
to a maximum amount of EUR 2,300.0 million. As of
December 31, 2010, and December 31, 2009, this
indebtedness amounted to EUR 1,319.2 million and
EUR 1,319.0 million, respectively. Therefore, the
Company was in compliance with this covenant at the end of 2010
and 2009. Outstanding amounts under this loan facility will bear
interest at EURIBOR or LIBOR plus a margin. No amounts were
outstanding under this loan facility during 2010 and 2009.
The Company currently does not expect any difficulty in
continuing to meet its covenant requirements.
In addition to cash and available credit facilities, from time
to time we may 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 the
global economy and the semiconductor industry. 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 requirements in the foreseeable
future.
We expect that our capital expenditures (purchases of property,
plant and equipment) in 2011 will be approximately
EUR 350.0 million, exceeding 2010 capital expenditures
of EUR 128.7 million. Capital expenditures in 2011
will mainly consist of investments in capacity expansion of EUV
and NXT production facilities as a result of customer
commitments. We expect to finance 2011 capital expenditures out
of our cash flow from operations and available cash and cash
equivalents.
As part of our financing policy we seek to maintain a strategic
level of cash and cash equivalents of between EUR 1.0 and
1.5 billion. In addition to dividend payments, to the
extent the level of cash and cash equivalents exceeds this
target level and there are no investment opportunities that we
wish to pursue, we intend to return cash to our shareholders
through share buybacks or repayment of capital. As announced on
January 19, 2011, ASML intends to repurchase up to
EUR 1.0 billion of its own shares within the next two
years and to increase dividend pay-out in respect of 2010 to
EUR 0.40 per ordinary share of EUR 0.09 (subject to
approval of the 2011 Annual General Meeting of Shareholders).
We have repayment obligations in 2017, amounting to
EUR 600.0 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 notes and lines
of credit is provided in Note 19 to our consolidated
financial statements.
Cash Flows from
Operating Activities
ASML generated cash from operating activities of
EUR 1,002.5 million and EUR 270.1 million in
2010 and 2009, respectively. Cash provided by operating
activities in 2010 mainly relates to increased sales levels as a
result of the recovery of the semiconductor equipment industry.
The primary components of cash provided by operating activities
in 2010 were cash inflows reflecting the net income of
EUR 985.5 million and non-cash items such as
depreciation and amortization (EUR 267.1 million) and
inventory obsolescence (EUR 28.5 million) and cash outflows
as a result of changes in assets and liabilities (EUR
111.3 million). The changes in assets and liabilities
mainly relate to higher accounts receivables (EUR
748.9 million) and higher inventories (EUR
657.3 million), partly offset by higher accrued and other
liabilities (EUR 872.8 million) and higher accounts payable
(EUR 350.2 million).
Cash Flows from
Investing Activities
ASML used EUR 180.3 million for investing activities
in 2010 and EUR 260.0 million in 2009. The 2010
investing activities are mainly related to machinery the start
of the second part of the EUV and NXT production facilities in
Veldhoven, the Netherlands and the capitalization of development
expenditures. The majority of the 2009 expenditures were
attributable to the finalization of the first part of the
construction of the new production facilities in Veldhoven, the
Netherlands and the capitalization of development expenditures.
ASML STATUTORY ANNUAL REPORT 2010
42
Cash Flows from
Financing Activities
Net cash provided by financing activities was
EUR 85.7 million in 2010 compared with net cash used
in financing activities of EUR 83.8 million in 2009.
In 2010 net cash provided by financing activities included
EUR 150.0 million cash inflow from deposits from
customers and 31.0 million cash inflow from the issuance of
shares in connection with the exercise and purchase of employee
stock options, partly offset by EUR 87.0 million cash
outflow for our dividend payment. In 2009 net cash used in
financing activities included EUR 86.5 million as a
result of the dividend payment and EUR 11.1 million
cash inflow from the issuance of shares in connection with the
exercise and purchase of employee stock options.
2011
Perspectives
The year 2010 was characterized by the recovery of the
semiconductor equipment industry and resulting higher overall
end-demand for a broad mix of systems for all chip layers. In
order to meet the increased demand for our advanced technology
products as well as for our capacity tools, we almost tripled
the output of our factory in 2010 compared with 2009. In the
course of 2010, ASML expanded its fixed and flexible workforce
and structurally improved cycle times in the second half of 2010.
The following table sets forth our systems backlog as of
December 31, 2009 and 2010.
| |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
20091
|
|
|
20101
|
|
|
New systems backlog (in units)
|
|
|
62
|
|
|
|
135
|
|
|
Used systems backlog (in units)
|
|
|
7
|
|
|
|
22
|
|
|
Total systems backlog (in units)
|
|
|
69
|
|
|
|
157
|
|
|
Value of new systems backlog (EUR million)
|
|
|
2,043.6
|
|
|
|
3,744.3
|
|
|
Value of used systems backlog (EUR million)
|
|
|
70.1
|
|
|
|
111.4
|
|
|
Total value of systems backlog (EUR million)
|
|
|
2,113.7
|
|
|
|
3,855.7
|
|
|
ASP of new systems backlog (EUR million)
|
|
|
33.0
|
|
|
|
27.7
|
|
|
ASP of used systems backlog (EUR million)
|
|
|
10.0
|
|
|
|
5.1
|
|
|
ASP of total systems backlog (EUR million)
|
|
|
30.6
|
|
|
|
24.6
|
|
|
|
|
|
| 1
|
In the past, ASML valued net
bookings and systems backlog at net system sales value, which
does not reflect the full order value because it excludes the
value of options and services related to the systems. As of
2010, in order to more adequately reflect the business
circumstances, ASML values net bookings and systems backlog at
full order value (i.e. including options and services). The
comparative figures for 2009 have been adjusted in order to
reflect this change.
|
Our systems backlog includes only orders for which written
authorizations have been accepted and system shipment and
revenue recognition 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 systems
backlog at any particular date is not necessarily indicative of
actual sales for any succeeding period.
The significant increase in our systems backlog reflects our
customers’ NAND Flash memory investments for the high
volume
ramp-up of
new technologies and Foundry/Logic commitments for new strategic
fab projects, offset by weakening DRAM lithography demand
(albeit at a rate less then originally anticipated). The
increase will support both technology shrink as well as an
increase in manufacturing capacity. Of our backlog,
67 units are for new immersion systems, including 52
advanced NXT:1950i scanners.
The demand for the TWINSCAN NXT immersion tools remains
extremely strong and we are challenged to produce enough systems
in time to satisfy our customers’ needs. We continue our
focus on cycle time reductions and introduction of more parallel
work flows in order to meet the growing demand as indicated by
our current backlog. Overall, macro-economic drivers have mixed
since the end of the summer, but the semiconductor market, in
which our customers operate, is sustained by a very rich leading
edge technology mix, which justifies the large backlog for our
products: NAND Flash memory, DRAM memory, micro-processors and
overall Logic manufacturers are all ramping up their new nodes
at the same time, in parallel to some strategic or
catch-up
investments in lithography.
ASML expects first quarter 2011 net sales of approximately
EUR 1.4 billion. As a result of our continued
investments in R&D, we now see a growing demand for
second-generation EUV system deliveries and third generation EUV
system development, for which we had received nine orders as of
December 31, 2010.
ASML STATUTORY ANNUAL REPORT 2010
43
Remuneration of
the Supervisory Board
The remuneration of the members of the Supervisory Board is not
dependent on the financial results of the Company. No member of
the Supervisory Board personally maintains a business
relationship with the Company other than as a member of the
Supervisory Board. The General Meeting of Shareholders
determines the remuneration of the members of the Supervisory
Board. For more details regarding the remuneration of the
Supervisory Board we refer to Note 29 to the consolidated
financial statements.
Remuneration of
the Board of Management
The remuneration of the individual members of the Board of
Management is determined by the Supervisory Board based on the
advice of the Remuneration Committee of the Supervisory Board.
For more details regarding the remuneration of the Board of
Management we refer to the Corporate Governance chapter and
Note 29 to our consolidated financial statements.
Corporate
Governance
ASML continuously monitors and assesses applicable Dutch, U.S.,
and other relevant corporate governance codes, rules, and
regulations. ASML is subject to the Dutch Corporate Governance
Code (the “Code”), as ASML is registered in the
Netherlands and is listed on Euronext Amsterdam. For more
details we refer to the Corporate Governance Paragraph included
in this report on pages 10 to 26.
Directors’
Responsibility Statement
The Directors’ Responsibility Statement is included in this
report on pages 47 to 49.
Sustainability
Report 2010
Sustainability
Governance
At the end of 2009, ASML decided to strengthen significantly its
policy in the domain of Sustainability and a number of stringent
objectives to be reached by 2015. In 2010, the ASML Board of
Management expanded the Sustainability Board and assigned a new
department Corporate Sustainability to coordinate and execute
the sustainability policies. The mandate given by the Board of
Management to the Sustainability Board is to review and
recommend sustainability policies and management systems,
authorize plans or recommend Board of Management, provide
guidance to management on objectives and targets; provide
oversight and guidance on sustainability performance &
targets, monitor and oversee sustainability risk management
review and monitor stakeholder relations, and review and make
recommendations on Sustainability impacts of major business
decisions. The Sustainability Board also determines the scope,
provides input, and recommends board adoption of the
Sustainability Report.
Sustainability
Strategy
ASML’s business strategy is based on maintaining and
further developing its position as a technology leader in
semiconductor lithography. ASML executes its strategy through
customer focus, strategic investment in R&D and operational
excellence with a responsibility for sustainability towards our
stakeholders. To effectively manage the execution of this
responsibility, the sustainability strategy rests on four
strategic domains:
|
|
| •
|
Sustainable Operations: Our objective is to ensure that our
employees’ working conditions are safe and healthy. In
addition, we continuously improve the environmental performance
of our operations by developing new initiatives to prevent or
reduce harmful emissions to air, soil and water.
|
| •
|
Sustainable Products: Our objective is to create new
“shrink” technology to continue the exponential
improvement in energy efficiency of computing systems through a
sustained level of investments in R&D, and to improve the
energy efficiency of our products. In addition, we aim to
guarantee the safety performance of our products and auxiliary
equipment through appropriate design.
|
| •
|
Sustainable Value Chain: Our objective is to continuously
improve the performance and sustainability of our supply chain,
as well as to cooperate with our customers to positively
influence their impact on environment and society.
|
| •
|
Sustainable Culture: Our objective is to continuously improve on
providing employment that inspires our highly skilled work force
and respects their cultural and individual differences. In
addition, we care for the local and global communities in which
we operate.
|
ASML STATUTORY ANNUAL REPORT 2010
44
U.S. GAAP and
Dutch Statutory Annual Reports
General
The Company prepares two sets of financial statements, one based
on accounting principles generally accepted in the
United States of America (“U.S. GAAP”) and
one based on Dutch law and International Financial Reporting
Standards (“IFRS”) as adopted by the European Union
(“EU”). By means of regulation 1606/2002, the
European Commission has stipulated that all listed companies
within the European Union member states are required to prepare
their consolidated financial statements under IFRS as adopted by
the EU as from January 1, 2005.
The consolidated financial statements included in this Statutory
Annual Report are based on IFRS as adopted by the EU. For
internal and external reporting purposes, ASML follows
U.S. GAAP. U.S. GAAP is ASML’s primary accounting
standard for the Company’s setting of financial and
operational performance targets.
ASML’s annual report on
Form 20-F,
which is based on U.S. GAAP, may contain additional
information next to its Statutory Annual Report. ASML also
publishes quarterly IFRS financial figures and a statutory
interim report. The U.S. GAAP Annual Report and the
U.S. GAAP and IFRS quarterly press releases, statutory
interim report and statutory annual report are available on
ASML’s website at www.asml.com. For the periods presented
in this statutory annual report, the main differences between
IFRS and U.S. GAAP for ASML relate to the following:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Net income (loss) under U.S. GAAP
|
|
|
(150,925
|
)
|
|
|
1,021,820
|
|
|
Capitalization of development expenditures
|
|
|
50,522
|
|
|
|
(9,859
|
)
|
|
Impairment of capitalized development expenditures
|
|
|
(767
|
)
|
|
|
(9,657
|
)
|
|
Share-based payments
|
|
|
2,401
|
|
|
|
283
|
|
|
Reversal of write-downs
|
|
|
17,104
|
|
|
|
(14,559
|
)
|
|
Income taxes
|
|
|
222
|
|
|
|
(2,575
|
)
|
|
|
|
|
|
Net income (loss) under IFRS
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Equity under U.S. GAAP
|
|
|
1,774,768
|
|
|
|
2,773,908
|
|
|
Capitalization of development expenditures
|
|
|
251,556
|
|
|
|
234,331
|
|
|
Share-based payments
|
|
|
2,397
|
|
|
|
6,542
|
|
|
Reversal of write-downs
|
|
|
17,104
|
|
|
|
2,546
|
|
|
Income taxes
|
|
|
4,982
|
|
|
|
5,135
|
|
|
|
|
|
|
Equity under IFRS
|
|
|
2,050,807
|
|
|
|
3,022,462
|
|
|
|
Capitalization of
development expenditures
Under IFRS, ASML applies IAS 38, “Intangible Assets”.
In accordance with IAS 38, development expenditures are
capitalized and amortized over the expected useful life of the
related product generally ranging between one and three years.
Amortization starts when the developed product is ready for
volume production.
Under U.S. GAAP, ASML applies ASC 730, “Research
and Development”. In accordance with ASC 730, ASML
charges costs relating to research and development to operating
expense as incurred.
Share-based
payments
Under IFRS, ASML applies IFRS 2, “Share-based
Payments” beginning from January 1, 2004. In
accordance with IFRS 2, ASML records as an expense the fair
value of its share-based payments with respect to stock options
and stock granted to its employees after November 7, 2002.
Under IFRS, a deferred tax asset is computed on the basis of the
tax deduction for the share-based payments every period under
the applicable tax law and is recognized to the extent it is
probable that future taxable profit will be available against
which these deductible temporary differences will be utilized.
Therefore, changes in the Company’s share price do affect
the deferred tax asset at period-end and result in adjustments
to the deferred tax asset.
Under U.S. GAAP, ASML applies ASC 718
“Compensation- Stock Compensation” as of
January 1, 2006 which requires companies to recognize the
cost of employee services received in exchange for awards of
equity instruments based upon the grant date fair value of those
instruments. ASC 718’s general principle is that a
deferred tax asset is established as the Company
ASML STATUTORY ANNUAL REPORT 2010
45
recognizes compensation costs for commercial purposes for awards
that are expected to result in a tax deduction under existing
tax law. Under U.S. GAAP, the deferred tax recorded on
share-based compensation is computed on the basis of the expense
recognized in the financial statements. Therefore, changes in
the Company’s share price do not affect the deferred tax
asset recorded in the Company’s financial statements.
Reversal of
write-downs
Under IFRS, ASML applies IAS 2 (revised),
“Inventories”. In accordance with IAS 2, reversal of a
prior period write-down as a result of a subsequent increase in
value of inventory should be recognized in the period in which
the value increase occurs.
Under U.S. GAAP, ASML applies ASC 330
“Inventory”. In accordance with ASC 330 reversal
of a write-down is prohibited as a write-down creates a new cost
basis.
Income
taxes
Under IFRS, ASML applies IAS 12, “Income Taxes”
beginning from January 1, 2005. In accordance with IAS 12
unrealized net income resulting from intercompany transactions
that are eliminated from the carrying amount of assets on
consolidation, give rise to a temporary difference for which
deferred taxes must be recognized on consolidation. The deferred
taxes are calculated based on the tax rate applicable in the
purchaser’s tax jurisdiction.
Under U.S. GAAP, the elimination of unrealized net income
from intercompany transactions that are eliminated from the
carrying amount of assets on consolidation, give rise to a
temporary difference for which prepaid taxes must be recognized
on consolidation. Contrary to IFRS, the prepaid taxes under
U.S. GAAP are calculated based on the tax rate applicable
in the seller’s tax jurisdiction.
Statutory Interim
Report 2010
On July 14, 2010 we published our Statutory Interim Report
for the six-month period ended June 27, 2010. This report
includes Consolidated Condensed Interim Financial Statements
prepared in accordance with IAS 34, an Interim Management Board
Report, and a Managing Directors’ Statement. The Statutory
Interim Report is available on our website www.asml.com. The
Statutory Interim Report comprises regulated information within
the meaning of the Dutch Financial Markets Supervision Act (Wet
op het financieel toezicht).
Great People at
ASML
As of December 31, 2010, we employed 7,184 payroll
employees in FTEs primarily in goodsflow, research and
development and customer support activities. As of
December 31, 2009, the total number of payroll employees in
FTEs was 6,548. In addition, as of December 31, 2010, the
total number of temporary employees in FTEs was 2,061. As of
December 31, 2009, the total number of temporary employees
in FTEs was 1,137. For a more detailed description of payroll
employee information, including a breakdown of our employees in
FTEs by sector, see Note 22 and Note 28 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.
Our successes were achieved thanks to ASML’s people in
every part of our organization. Our world renowned experts in
nano-scale lithography have cumulative experience that is second
to none. Our culture thrives on very strong commitment to
leadership, achievements and customer satisfaction. Our people
have not only driven ASML’s reputation to the highest
levels: they have also positioned ASML well to meet the ever
increasing technical requirements of our customers.
The Board of Management,
Veldhoven, February 14, 2011
ASML STATUTORY ANNUAL REPORT 2010
46
Directors’
Responsibility Statement
Managing
Directors’ Statement (EU Transparency Directive)
The Board of Management hereby declares that, to the best of its
knowledge, the statutory financial statements prepared in
accordance with IFRS and Title 9 of Part 2 of the
Netherlands Civil Code provide a true and fair view of the
assets, liabilities, financial position and profit or loss of
ASML Holding N.V. and the undertakings included in the
consolidation taken as a whole and that the management report
includes a fair review concerning the position as per the
balance sheet date, the development and performance of ASML
Holding N.V. and the undertakings included in the consolidation
taken as a whole, together with the principal risk and
uncertainties that they face.
ASML STATUTORY ANNUAL REPORT 2010
47
In Control
Statement (Dutch Corporate Governance Code)
As the Board of Management of ASML Holding N.V.
(“ASML” or the “Company”), we hereby state
that we are responsible for the design, implementation and
operation of the Company’s internal risk management and
control systems. The purpose of these systems is to adequately
and effectively manage the significant risks to which the
Company is exposed. Such systems can never provide absolute
assurance regarding achievement of corporate objectives, nor can
they provide an absolute assurance that material errors, losses,
fraud and the violation of laws or regulations will not occur.
Financial
reporting risks
To comply with our duties in the area of internal risk
management and control systems with respect to financial
reporting risks, we use various measures including but not
limited to:
|
|
| •
|
monthly operational review meetings of the Board of Management
with ASML’s senior management on financial performance and
realization of operational objectives and responses to emerging
issues;
|
| •
|
bi-annual financial planning meetings of the Board of Management
with ASML’s senior management;
|
| •
|
monthly meetings with ASML’s Chief Executive Officer, Chief
Financial Officer and senior finance management focusing on
monthly financial figures;
|
| •
|
monthly and quarterly financial reporting, mainly to ASML’s
senior management;
|
| •
|
letters of representation that are signed by ASML’s key
senior management members on a semi-annual basis in which they
confirm that for their responsible area based upon their
knowledge (i) an effective system of internal controls and
procedures is maintained and (ii) the financial reports
fairly present the financial position, results of operations and
cash flows;
|
| •
|
assessments by ASML’s Disclosure Committee with respect to
the timely review, disclosure, and evaluation of periodic
(financial) reports;
|
| •
|
assessments by ASML’s Disclosure Committee with respect to
internal controls in light of among other things the
requirements under the Sarbanes-Oxley Act of 2002 and the Dutch
Corporate Governance Code;
|
| •
|
discussions on management letters and audit reports provided by
the Company’s internal and external auditors within our
Board of Management and Supervisory Board;
|
| •
|
ASML’s Business Control Principles;
|
| •
|
ASML’s Internal Guidelines on Ethical Business Conduct,
including the Complaints Procedure and Whistleblower’s
Procedure; and
|
| •
|
ASML’s Anti-Fraud Policy, which facilitates the development
of controls which will aid in prevention, deterrence and
detection of fraud against ASML.
|
We acknowledge the importance of internal control and risk
management systems. Therefore, in 2004, ASML executed the SOX
Project to establish a framework to properly manage internal
controls over financial reporting, which is required per
section 404 of the Sarbanes-Oxley Act of 2002 (“SOX
404”). The results of ASML’s assessment of the
effectiveness of this framework, which is based on the Committee
of Sponsoring Organizations of the Treadway Commission
(“COSO”) model, as well as significant changes and
improvements, are regularly reported to and discussed with
ASML’s Audit Committee and external auditors. The Audit
Committee reports about these subjects to the Supervisory Board
on a regular basis. In addition, once a year, the Board of
Management discusses the implementation of this internal control
framework, as well as significant changes and major improvements
in internal controls, with the Audit Committee and the full
Supervisory Board.
Summary
Based on the outcome of the above-mentioned measures and to the
best of its knowledge and belief, the Board of Management states
that:
(i) the above-mentioned measures provide a reasonable level
of assurance that ASML’s financial statements as of and for
the year ended December 31, 2010 fairly present in all
material respects the financial condition, results of operations
and cash flows of the Company and that ASML’s financial
statements as of and for the year ended December 31, 2010
do not contain any material inaccuracy;
(ii) the internal risk management and control systems
provide a reasonable assurance that the financial reporting does
not contain any errors of material importance and have worked
adequately in 2010; and
|
|
| (iii) |
there are no indications that the Company’s internal
controls over financial reporting will not operate effectively
in 2011.
|
ASML’s Board of Management is currently not aware of any
significant change in the Company’s internal control over
financial reporting that occurred during 2010 that has
materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
ASML STATUTORY ANNUAL REPORT 2010
48
Operational/strategic
risks and legal and regulatory risks
To comply with our duties in the area of internal risk
management and control systems with respect to
operational/strategic risks and legal and regulatory risks, we
use various measures among which:
|
|
| •
|
strategic evaluations of ASML’s business by the Board of
Management in consultation with the Supervisory Board;
|
| •
|
semi-annual senior management meetings, which are conducted to
assess ASML’s corporate initiatives which are launched in
order to execute ASML’s strategy;
|
| •
|
monthly operational review meetings of the Board of Management
with ASML’s senior management on financial performance and
realization of operational objectives and responses to emerging
issues;
|
| •
|
bi-annual financial planning meetings of the Board of Management
with ASML’s senior management;
|
| •
|
monthly (internal) and quarterly (public) financial reporting;
|
| •
|
letters of representation that are signed by ASML’s key
senior management members on a semi-annual basis in which they
confirm their responsibility for assessing business risks and
ensuring appropriate risk mitigation for their responsible area
based upon their knowledge;
|
| •
|
annual risk review, including a risk workshop, by the Board of
Management with ASML’s senior management to review key
strategic risks and define appropriate mitigating actions.
Outcomes of the review and progress updates are reported to the
Audit Committee annually;
|
| •
|
ASML’s Business Control Principles;
|
| •
|
ASML’s Internal Guidelines on Ethical Business Conduct,
including the Complaints Procedure and Whistleblower’s
Procedure; and
|
| •
|
ASML’s Anti-Fraud Policy, which facilitates the development
of controls which will aid in prevention, deterrence and
detection of fraud against ASML.
|
The establishment of ASML’s internal control and risk
management systems is based on the identification of external
and internal risk factors that could influence the operational
and financial objectives of the Company and contains a system of
monitoring, reporting and operational reviews. All material risk
management activities have been discussed with the Audit
Committee and the Supervisory Board. For more information on our
risk management activities and our internal control and risk
management systems, we refer to Internal Risk Management and
Control Systems, External Factors included in ASML’s
chapter on Corporate Governance. For a summary of ASML’s
Risk Factors, we refer to our Management Board Report in the
Statutory Annual Report.
The Board of Management,
Eric Meurice, President, Chief Executive Officer
Peter T.F.M. Wennink, Executive Vice President, Chief Financial
Officer
Martin A. van den Brink, Executive Vice President, Chief Product
and Technology Officer
Frits J. van Hout, Executive Vice President, Chief Marketing
Officer
Frederic Schneider-Maunoury, Executive Vice President, Chief
Operating Officer
Veldhoven, February 14, 2011
ASML STATUTORY ANNUAL REPORT 2010
49
ASML STATUTORY ANNUAL REPORT 2010
50
ASML STATUTORY ANNUAL REPORT 2010
51
Consolidated
Financial Statements
ASML STATUTORY ANNUAL REPORT 2010
52
Consolidated
Income Statement
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
Notes
|
|
(in thousands, except per share data)
|
|
EUR
|
|
|
EUR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
Net system sales
|
|
|
1,174,858
|
|
|
|
3,894,742
|
|
|
|
|
Net service and field option sales
|
|
|
421,205
|
|
|
|
613,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
Total net sales
|
|
|
1,596,063
|
|
|
|
4,507,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of system sales
|
|
|
925,593
|
|
|
|
2,366,363
|
|
|
|
|
Cost of service and field option sales
|
|
|
285,254
|
|
|
|
329,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Total cost of sales
|
|
|
1,210,847
|
|
|
|
2,696,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit on sales
|
|
|
385,216
|
|
|
|
1,811,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28, 30
|
|
Research and development costs
|
|
|
304,795
|
|
|
|
468,038
|
|
|
28
|
|
Selling, general and administrative
costs1
|
|
|
156,484
|
|
|
|
182,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(76,063
|
)
|
|
|
1,161,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
Interest income
|
|
|
51,139
|
|
|
|
19,300
|
|
|
31
|
|
Interest
charges1
|
|
|
(59,023
|
)
|
|
|
(27,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(83,947
|
)
|
|
|
1,153,614
|
|
|
25
|
|
(Provision for) benefit from income taxes
|
|
|
2,504
|
|
|
|
(168,161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Basic net income (loss) per ordinary share
|
|
|
(0.19
|
)
|
|
|
2.26
|
|
|
|
|
Diluted net income (loss) per ordinary share
|
|
|
(0.19
|
)
|
|
|
2.24
|
|
|
|
|
Number of ordinary shares used in
|
|
|
|
|
|
|
|
|
|
|
|
computing per share amounts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
432,615
|
|
|
|
435,146
|
|
|
|
|
Diluted
|
|
|
432,615
|
|
|
|
438,978
|
|
|
|
|
|
| 1
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
Consolidated
Statement of Comprehensive Income
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
Notes
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
|
|
Net income (loss)
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes:
|
|
|
|
|
|
|
|
|
|
5,18
|
|
Losses on the hedge of a net investment
|
|
|
(13,116
|
)
|
|
|
—
|
|
|
5,18
|
|
Gains on translation of foreign operations
|
|
|
4,573
|
|
|
|
27,306
|
|
|
|
|
Derivative financial instruments, net of taxes:
|
|
|
|
|
|
|
|
|
|
5,18
|
|
Fair value gains in the year
|
|
|
5,217
|
|
|
|
46,733
|
|
|
5,18
|
|
Transfers to net income (loss)
|
|
|
1,277
|
|
|
|
(47,954
|
)
|
|
|
|
|
|
|
|
Other comprehensive income (loss) for the period, net of
taxes
|
|
|
(2,049
|
)
|
|
|
26,085
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for the period, net of
taxes
|
|
|
(83,492
|
)
|
|
|
1,011,538
|
|
|
|
|
Attributable to Equity holders
|
|
|
(83,492
|
)
|
|
|
1,011,538
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
53
Consolidated
Statement of Financial Position
(Before appropriation of net income/loss)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
Notes
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Property, plant and
equipment1
|
|
|
589,005
|
|
|
|
662,214
|
|
|
|
745,331
|
|
|
9
|
|
Goodwill
|
|
|
139,626
|
|
|
|
139,636
|
|
|
|
150,071
|
|
|
10
|
|
Other intangible assets
|
|
|
289,530
|
|
|
|
346,936
|
|
|
|
277,038
|
|
|
25
|
|
Deferred tax assets
|
|
|
225,544
|
|
|
|
266,653
|
|
|
|
234,194
|
|
|
11
|
|
Finance receivables
|
|
|
31,030
|
|
|
|
—
|
|
|
|
28,905
|
|
|
13
|
|
Derivative financial instruments
|
|
|
53,206
|
|
|
|
55,948
|
|
|
|
71,779
|
|
|
14
|
|
Other assets
|
|
|
29,449
|
|
|
|
16,070
|
|
|
|
159,603
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
1,357,390
|
|
|
|
1,487,457
|
|
|
|
1,666,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Inventories
|
|
|
999,150
|
|
|
|
986,341
|
|
|
|
1,500,072
|
|
|
25
|
|
Current tax assets
|
|
|
87,560
|
|
|
|
11,286
|
|
|
|
12,678
|
|
|
13
|
|
Derivative financial instruments
|
|
|
39,240
|
|
|
|
47,436
|
|
|
|
24,401
|
|
|
11
|
|
Finance receivables
|
|
|
6,225
|
|
|
|
21,553
|
|
|
|
12,648
|
|
|
16
|
|
Accounts receivable
|
|
|
463,273
|
|
|
|
377,439
|
|
|
|
1,123,534
|
|
|
14
|
|
Other assets
|
|
|
170,680
|
|
|
|
145,944
|
|
|
|
163,745
|
|
|
17
|
|
Cash and cash equivalents
|
|
|
1,109,184
|
|
|
|
1,037,074
|
|
|
|
1,949,834
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,875,312
|
|
|
|
2,627,073
|
|
|
|
4,786,912
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,232,702
|
|
|
|
4,114,530
|
|
|
|
6,453,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Equity
|
|
|
2,188,743
|
|
|
|
2,050,807
|
|
|
|
3,022,462
|
|
|
19
|
|
Long-term
debt1
|
|
|
699,567
|
|
|
|
704,963
|
|
|
|
705,731
|
|
|
13
|
|
Derivative financial instruments
|
|
|
19,743
|
|
|
|
1,935
|
|
|
|
1,981
|
|
|
25
|
|
Deferred and other tax liabilities
|
|
|
260,360
|
|
|
|
263,972
|
|
|
|
185,009
|
|
|
20
|
|
Provisions
|
|
|
15,495
|
|
|
|
12,694
|
|
|
|
11,811
|
|
|
21
|
|
Accrued and other liabilities
|
|
|
50,293
|
|
|
|
42,424
|
|
|
|
371,089
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
1,045,458
|
|
|
|
1,025,988
|
|
|
|
1,275,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Provisions
|
|
|
4,678
|
|
|
|
2,504
|
|
|
|
2,250
|
|
|
13
|
|
Derivative financial instruments
|
|
|
48,051
|
|
|
|
15,536
|
|
|
|
32,917
|
|
|
25
|
|
Current and other tax liabilities
|
|
|
20,039
|
|
|
|
15,032
|
|
|
|
79,354
|
|
|
21
|
|
Accrued and other liabilities
|
|
|
732,043
|
|
|
|
798,437
|
|
|
|
1,485,832
|
|
|
|
|
Accounts payable
|
|
|
193,690
|
|
|
|
206,226
|
|
|
|
555,397
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
998,501
|
|
|
|
1,037,735
|
|
|
|
2,155,750
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
4,232,702
|
|
|
|
4,114,530
|
|
|
|
6,453,833
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2008 and 2009 have been adjusted to reflect this change in
accounting policy and in accordance with IAS 1.39, three
statements of financial position are presented. See Note 3.
|
ASML STATUTORY ANNUAL REPORT 2010
54
Consolidated
Statement of Changes in Equity
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
|
|
Retained
|
|
|
Shares at
|
|
|
Other
|
|
|
Net
|
|
|
|
|
|
Notes
|
|
|
|
Number1
|
|
|
Amount
|
|
|
Premium
|
|
|
Earnings
|
|
|
cost
|
|
|
Reserves2
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
|
|
Balance at January 1, 2009
|
|
|
432,074
|
|
|
|
40,307
|
|
|
|
915,457
|
|
|
|
1,002,272
|
|
|
|
(254,856
|
)
|
|
|
108,665
|
|
|
|
376,898
|
|
|
|
2,188,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation of net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
376,898
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(376,898
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(81,443
|
)
|
|
|
(81,443
|
)
|
|
5,18
|
|
Foreign currency translation, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,543
|
)
|
|
|
—
|
|
|
|
(8,543
|
)
|
|
5,18
|
|
Derivative financial instruments, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,494
|
|
|
|
—
|
|
|
|
6,494
|
|
|
|
|
Total comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,049
|
)
|
|
|
(81,443
|
)
|
|
|
(83,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,28,29
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
20,542
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Dividend paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,486
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,29
|
|
Issuance of shares and stock options
|
|
|
1,565
|
|
|
|
141
|
|
|
|
(12,512
|
)
|
|
|
(11,362
|
)
|
|
|
35,233
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,500
|
|
|
18
|
|
Development expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(65,830
|
)
|
|
|
—
|
|
|
|
65,830
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
433,639
|
|
|
|
40,448
|
|
|
|
923,487
|
|
|
|
1,215,492
|
|
|
|
(219,623
|
)
|
|
|
172,446
|
|
|
|
(81,443
|
)
|
|
|
2,050,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation of net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(81,443
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
81,443
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
985,453
|
|
|
|
985,453
|
|
|
5,18
|
|
Foreign currency translation, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27,306
|
|
|
|
—
|
|
|
|
27,306
|
|
|
5,18
|
|
Derivative financial instruments, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,221
|
)
|
|
|
—
|
|
|
|
(1,221
|
)
|
|
|
|
Total comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,085
|
|
|
|
985,453
|
|
|
|
1,011,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,28,29
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
16,254
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Dividend paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,960
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,960
|
)
|
|
22,29
|
|
Issuance of shares and stock options
|
|
|
2,954
|
|
|
|
265
|
|
|
|
(17,400
|
)
|
|
|
(18,573
|
)
|
|
|
66,531
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
Development expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,153
|
|
|
|
—
|
|
|
|
(68,153
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
436,593
|
|
|
|
40,713
|
|
|
|
922,341
|
|
|
|
1,096,669
|
|
|
|
(153,092
|
)
|
|
|
130,378
|
|
|
|
985,453
|
|
|
|
3,022,462
|
|
|
|
|
|
|
|
1
|
|
As of December 31, 2010, the
number of issued shares was 444,480,095. This includes the
number of issued and outstanding shares of 436,592,972 and the
number of treasury shares of 7,887,123. As of December 31,
2009, the number of issued shares was 444,480,095. This includes
the number of issued and outstanding shares of 433,638,976 and
the number of treasury shares of 10,841,119.
|
| |
|
2
|
|
Other reserves consist of the
hedging reserve, the currency translation reserve and the
reserve for capitalized development expenditures. See
Note 18.
|
ASML STATUTORY ANNUAL REPORT 2010
55
Consolidated
Statement of Cash Flows
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
Notes
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash
|
|
|
|
|
|
|
|
|
|
|
|
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
8,10
|
|
Depreciation and
amortization1
|
|
|
239,637
|
|
|
|
267,066
|
|
|
8
|
|
Loss on disposals of property, plant and
equipment2
|
|
|
4,053
|
|
|
|
2,913
|
|
|
8,10
|
|
Impairment charges
|
|
|
16,925
|
|
|
|
19,538
|
|
|
22,29
|
|
Share-based payments
|
|
|
13,394
|
|
|
|
12,109
|
|
|
16
|
|
Allowance for doubtful debts
|
|
|
1,889
|
|
|
|
(1,256
|
)
|
|
15
|
|
Allowance for obsolete inventory
|
|
|
19,481
|
|
|
|
28,502
|
|
|
25
|
|
Deferred income taxes
|
|
|
(27,339
|
)
|
|
|
(45,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
16
|
|
Accounts receivable
|
|
|
81,838
|
|
|
|
(748,898
|
)
|
|
11
|
|
Finance receivables
|
|
|
15,702
|
|
|
|
(20,000
|
)
|
|
15
|
|
Inventories2
|
|
|
(113,828
|
)
|
|
|
(657,306
|
)
|
|
14
|
|
Other assets
|
|
|
(13,601
|
)
|
|
|
(111,925
|
)
|
|
20,21
|
|
Accrued and other liabilities
|
|
|
51,337
|
|
|
|
872,840
|
|
|
|
|
Accounts payable
|
|
|
10,430
|
|
|
|
350,231
|
|
|
25
|
|
Income taxes payable
|
|
|
30,994
|
|
|
|
203,768
|
|
|
|
|
|
|
|
|
Cash generated from operations
|
|
|
249,469
|
|
|
|
1,157,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
26,003
|
|
|
|
29,152
|
|
|
|
|
Interest
paid1
|
|
|
(42,123
|
)
|
|
|
(35,559
|
)
|
|
|
|
Income taxes (paid) received
|
|
|
36,705
|
|
|
|
(148,915
|
)
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
270,054
|
|
|
|
1,002,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
8
|
|
Purchases of property, plant and
equipment2
|
|
|
(104,959
|
)
|
|
|
(128,728
|
)
|
|
8
|
|
Proceeds from sale of property, plant and
equipment2
|
|
|
6,877
|
|
|
|
3,825
|
|
|
10
|
|
Purchase of intangible assets
|
|
|
(161,965
|
)
|
|
|
(55,388
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(260,047
|
)
|
|
|
(180,291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
18
|
|
Dividend paid
|
|
|
(86,486
|
)
|
|
|
(86,960
|
)
|
|
22,29
|
|
Net proceeds from issuance of shares and stock options
|
|
|
11,073
|
|
|
|
31,000
|
|
|
19
|
|
Net proceeds from other long-term debt
|
|
|
32
|
|
|
|
—
|
|
|
21
|
|
Deposits from customers
|
|
|
—
|
|
|
|
150,000
|
|
|
19
|
|
Redemption and/or repayment of
debt1
|
|
|
(8,388
|
)
|
|
|
(8,385
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(83,769
|
)
|
|
|
85,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows
|
|
|
(73,762
|
)
|
|
|
907,847
|
|
|
|
|
Effect of changes in exchange rates on cash
|
|
|
1,652
|
|
|
|
4,913
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(72,110
|
)
|
|
|
912,760
|
|
|
17
|
|
Cash and cash equivalents at beginning of the year
|
|
|
1,109,184
|
|
|
|
1,037,074
|
|
|
|
|
|
|
17
|
|
Cash and cash equivalents at end of the year
|
|
|
1,037,074
|
|
|
|
1,949,834
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
| |
|
2
|
|
An amount of EUR 214.1 million
(2009: EUR 159.0 million) of the additions in property,
plant and equipment relates to non-cash transfers from inventory
and an amount of EUR 110.4 million (2009: EUR
27.8 million) of the disposals of property, plant and
equipment relates to non-cash transfers to inventory.
|
ASML STATUTORY ANNUAL REPORT 2010
56
Notes to the
Consolidated Financial Statements
1. General
information
ASML Holding N.V., with its corporate seat in Veldhoven, the
Netherlands, is engaged in the development, production,
marketing, sale and servicing of advanced semiconductor
equipment systems exclusively consisting of lithography systems.
ASML’s principal operations are in the Netherlands, the
United States of America and Asia.
ASML’s shares are listed for trading in the form of
registered shares on the NASDAQ Stock Market LLC
(“NASDAQ”) and in the form of registered shares on
Euronext Amsterdam by NYSE Euronext (“Euronext
Amsterdam”). The principal trading market of ASML’s
ordinary shares is Euronext Amsterdam.
The accompanying consolidated financial statements include the
financial statements of ASML Holding N.V. headquartered in
Veldhoven, the Netherlands, and its consolidated subsidiaries
(together referred to as “ASML” or “the
Company”).
The financial statements of the Company were authorized for
issue by the Board of Management on February 14, 2011 and
will be filed at the Trade Register of the Chamber of Commerce
in Eindhoven, the Netherlands within eight days after adoption
by the General Meeting of Shareholders, scheduled on
April 20, 2011.
2. Adoption
of new and revised International Financial Reporting
Standards
The financial statements have been prepared on the basis of
International Financial Reporting Standards (“IFRS”)
as adopted by the European Union (“EU”). New Standards
and Interpretations, which became effective in 2010, did not
have a material impact on ASML’s consolidated financial
statements.
Standards and
Interpretations effective in 2010
IFRS 2 (Amendments), “Group Cash-settled Share-based
Payment Transactions” (effective for annual periods
beginning on or after January 1, 2010). The amendments to
IFRS 2 clarify the accounting for group cash-settled share-based
payment transactions. The amendments clarify how an individual
subsidiary in a group should account for some share-based
payment arrangements in its own financial statements. In these
arrangements, the subsidiary receives goods or services from
employees or suppliers but its parent or another entity in the
group must pay those suppliers. The amendments make clear that:
(a) an entity that receives goods or services in a
share-based payment arrangement must account for those goods or
services no matter which entity in the group settles the
transaction, and no matter whether the transaction is settled in
shares or cash and (b) in IFRS 2 a ‘group’ has
the same meaning as in IAS 27, that is, it includes only a
parent and its subsidiaries. The adoption of these Amendments
did not have any effect on the Company’s consolidated
financial statements.
IFRS 3 (Revised), “Business combinations” (effective
for annual periods beginning on or after July 1, 2009). The
revised standard continues to apply the acquisition method to
business combinations, with some significant changes. For
example, all payments to purchase a business are to be recorded
at fair value at the acquisition date, with contingent payments
classified as debt subsequently remeasured through the income
statement. There is a choice on an
acquisition-by-acquisition
basis to measure the non-controlling interest in the acquiree
either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets. All
acquisition related costs should be expensed. The adoption of
this Revised standard did not have any effect on the
Company’s consolidated financial statements.
IAS 36 (Amendment), ‘Impairment of assets’, (effective
for annual periods beginning on or after January 1, 2010).
The amendment clarifies that the largest cash-generating unit
(or group of units) to which goodwill should be allocated for
the purposes of impairment testing is an operating segment, as
defined by paragraph 5 of IFRS 8, ‘Operating
segments’ (that is, before the aggregation of segments with
similar economic characteristics). The adoption of this
Amendment did not have any effect on the Company’s
consolidated financial statements.
IAS 39 (Amendment), “Eligible Hedged Items” (effective
for annual periods beginning on or after July 1, 2009). The
Amendment clarifies how the principles that determine whether a
risk or portion of cash flows that is eligible for designation
should be applied in particular situations. The adoption of this
Amendment did not have any effect on the Company’s
consolidated financial statements.
At the date of
authorization of these financial statements, the following
Standards and Interpretations have been issued however are not
yet effective and have not yet been adopted
IFRS 9 “Financial Instruments” (effective for annual
periods beginning on or after January 1, 2013). IFRS 9 is
subject to endorsement by the European Union. IFRS 9 addresses
the classification and measurement of financial assets. The
publication of IFRS 9 represents the completion of the first
part of a three-part project to replace IAS 39 “Financial
Instruments: Recognition
ASML STATUTORY ANNUAL REPORT 2010
57
and Measurement” with IFRS 9. IFRS 9 enhances the ability
of investors and other users of financial information to
understand the accounting of financial assets and reduces
complexity. ASML is currently in the process of determining the
impact of adopting this Standard on the Company’s
consolidated financial statements.
IAS 24 (Revised), “Related Party Disclosures”
(effective for annual periods beginning on or after
January 1, 2011). This revised standard has not yet been
endorsed by the EU. The revised standard simplifies the
disclosure requirements for government-related entities by
providing a partial exemption for government-related entities
and clarifies the definition of a related party. ASML is
currently in the process of determining the impact of adopting
the Revised Standard on the Company’s consolidated
financial statements.
IAS 32 (Amendment) “Classification of Rights Issues”
(effective for annual periods beginning on or after
February 1, 2010). The amendment to IAS 32 is subject to
endorsement by the European Union. The amendment to IAS 32
addresses the accounting for rights issues (rights, options or
warrants) that are denominated in a currency other than the
functional currency of the issuer. The amendment requires that,
provided certain conditions are met, such rights issues are
classified as equity regardless of the currency in which the
exercise price is denominated. ASML is currently in the process
of determining the impact of adopting the Amendment on the
Company’s consolidated financial statements.
IFRIC 19, ‘Extinguishing financial liabilities with equity
instruments’ (effective for annual periods beginning on or
after July 1, 2010 and subject to EU endorsement). The
interpretation clarifies the accounting by an entity when the
terms of a financial liability are renegotiated and result in
the entity issuing equity instruments to a creditor of the
entity to extinguish all or part of the financial liability
(debt for equity swap). It requires a gain or loss to be
recognised in profit or loss, which is measured as the
difference between the carrying amount of the financial
liability and the fair value of the equity instruments issued.
If the fair value of the equity instruments issued cannot be
reliably measured, the equity instruments should be measured to
reflect the fair value of the financial liability extinguished.
ASML is currently in the process of determining the impact of
adopting the Interpretation on the Company’s consolidated
financial statements.
3. Summary
of Significant Accounting Policies
Basis of
preparation
The accompanying consolidated financial statements are stated in
thousands of euros (“EUR”) unless otherwise indicated.
These financial statements, prepared for statutory purposes,
have been prepared in accordance with IFRS as adopted by the
EU — accounting principles generally accepted in the
Netherlands for companies quoted on Euronext Amsterdam. For
internal and external reporting purposes, ASML follows
accounting principles generally accepted in the United States of
America (“U.S. GAAP”). U.S. GAAP is
ASML’s primary accounting standard for the Company’s
setting of financial and operational performance targets.
The financial statements have been prepared on historical cost
convention unless stated otherwise. The principal accounting
policies adopted are set out below.
In accordance with article 402 Part 9 Book 2 of the
Dutch Civil Code the Company income statement is presented in
abbreviated form.
The accounting policies adopted in the preparation of the
consolidated financial statements are consistent with those
applied in the preparation of the Company’s statutory
financial statements 2009, except for the following:
Change in
Accounting Policy
As of January 1, 2010, ASML consolidates its Special
Purpose Entity (“SPE”). In the transition towards IFRS
in 2004, when assessing the accounting treatment of the SPE and
in absence of detailed application guidance in SIC 12, the
Company used U.S. GAAP (ASC
810-10) as
application guidance in accordance with IAS 1.17 and IAS 8.12.
Based on this application guidance, until December 31,
2009, the Company did not consolidate its SPE as it determined
it had no control over the SPE.
As of January 1, 2010, the Company reassessed the
indicators of control included in SIC 12. This reassessment was
initiated by a change in the U.S. GAAP platform regarding
the consolidation of SPE’s (ASC
810-10).
Under the revised
ASC 810-10
an enterprise determines qualitatively whether it has
1) the power to direct the activities that most
significantly impact the entity’s economic performance and
2) the obligation to absorb losses of the SPE or rights to
receive benefits from the SPE that could potentially be
significant to the SPE.
ASML STATUTORY ANNUAL REPORT 2010
58
The application of this revised qualitative application guidance
resulted in a different assessment of the qualitative indicators
of SIC 12, and after careful analyses, the Company came to the
conclusion, based on these new qualitative indicators, that
consolidation of the SPE provides more relevant information
about the condition of the Company’s financial position.
The impact of the change in accounting policy has been
retrospectively applied in accordance with IAS 8
“Accounting Policies, Changes in Accounting Estimates and
Errors”. The change in accounting policy had no impact on
net income and earnings per share; however an immaterial amount
is reclassified from selling, general and administrative costs
to interest expenses.
The impact on the consolidated statement of financial position
on December 31, 2009 and 2010 is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 31,
|
|
|
Dec 31,
|
|
|
|
|
2009
|
|
|
2010
|
|
|
(in millions)
|
|
EUR
|
|
|
EUR
|
|
|
Property, plant and equipment
|
|
|
36.7
|
|
|
|
35.2
|
|
|
Long-term debt
|
|
|
36.7
|
|
|
|
35.2
|
|
|
|
Use of
estimates
The preparation of ASML’s consolidated financial statements
in conformity with IFRS as adopted by the EU requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities on the dates of the statement
of financial position and the reported amounts of revenue and
expense during the reported periods. Actual results could differ
from those estimates.
Basis of
consolidation
The consolidated financial statements include the accounts of
ASML Holding N.V. and all of its majority owned subsidiaries.
All intercompany profits, balances and transactions have been
eliminated in the consolidation.
Subsidiaries
Subsidiaries are all entities over which ASML has the power to
govern financial and operating policies generally accompanying a
shareholding of more than one-half of the voting rights. As from
the date that these criteria are met, the financial data of the
relevant company are included in the consolidation.
Acquisitions of subsidiaries are included on the basis of the
‘purchase accounting’ method. The cost of acquisition
is measured as the cash payment made, the fair value of other
assets distributed and the fair value of liabilities incurred or
assumed at the date of exchange, plus the costs that can be
allocated directly to the acquisition. Identifiable assets
acquired as well as liabilities and contingent liabilities
assumed in a business combination are measured initially at
their fair values at acquisition date. The excess of the costs
of an acquired subsidiary over the net of the amounts assigned
to assets acquired and liabilities incurred or assumed is
capitalized as goodwill.
Special purpose
entities
When the Company has an interest in a Special Purpose Entity
(’SPE’), it shall assess whether ASML has control over
the SPE and, thus, should consolidate the SPE.
Foreign currency
translation
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results
and financial position of each entity are expressed in euros,
which is the functional currency of the Company, and the
presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual
entities, transactions in currencies other than the
entity’s functional currency (foreign currencies) are
recorded at the rates of exchange prevailing on the dates of the
transactions. At each statement of financial position date,
monetary items denominated in foreign currencies are
retranslated at the rates prevailing on the statement of
financial position date. Non-monetary items carried at fair
value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair
value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not
retranslated.
Exchange rate differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are
recognized in the income statement for the period. Exchange rate
differences arising on the retranslation of non-monetary items
carried at fair value are recognized in the income statement for
the period except for differences arising on the retranslation
of
ASML STATUTORY ANNUAL REPORT 2010
59
non-monetary items in respect of which gains and losses are
recognized directly in equity. For such non-monetary items, any
exchange rate component of that gain or loss is also recognized
directly in equity.
In order to hedge its exposure to certain foreign exchange rate
risks, the Company enters into forward contracts and currency
options; see below for details of the Company’s accounting
policies in respect of such derivative financial instruments.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Company’s foreign
subsidiaries (including comparatives) are expressed in euros
using exchange rates prevailing on the statement of financial
position date. Income and expense items (including comparatives)
are translated at the average exchange rates for the period,
unless exchange rates fluctuated significantly during that
period, in which case the exchange rates at the dates of the
transactions are used. Exchange rate differences arising, if
any, are classified as equity and transferred to the
Company’s currency translation reserve. Such translation
differences are recognized in the income statement in the period
in which the foreign operation is disposed of. Goodwill and fair
value adjustments arising on the acquisition of a foreign
subsidiary are treated as assets and liabilities of foreign
subsidiaries and translated at closing rate.
Property, plant
and equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation and any accumulated impairment losses.
Costs of assets manufactured by ASML include direct
manufacturing costs, production overhead and interest costs
incurred for qualifying assets during the construction period.
Depreciation is calculated using the straight-line method based
on the estimated useful lives of the related assets. In the case
of leasehold improvements, the estimated useful lives of the
related assets do not exceed the remaining term of the
corresponding lease. The following table presents the estimated
useful lives of ASML’s property, plant and equipment:
| |
|
|
|
|
|
|
|
Category
|
|
Estimated useful life
|
|
|
Buildings and constructions
|
|
|
5 – 40 years
|
|
|
Machinery and equipment
|
|
|
2 – 5 years
|
|
|
Leasehold improvements
|
|
|
5 – 10 years
|
|
|
Furniture, fixtures and other equipment
|
|
|
3 – 5 years
|
|
|
|
Land is not depreciated.
Certain internal and external costs associated with the purchase
and/or
development of internally used software are capitalized when
both the preliminary project stage is completed and management
has authorized further funding for the project, which it has
deemed probable to be completed and to be usable for the
intended function. These costs are amortized on a straight-line
basis over the period of related benefit, which ranges primarily
from three to five years.
The estimated useful lives and depreciation method are reviewed
at each year-end, with the effect of any changes in estimate
accounted for on a prospective basis.
The gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognized in the income statement.
Goodwill
Goodwill represents the excess of the costs of an acquisition
over the fair value of Company’s share of the net
identifiable assets, liabilities and contingent liabilities of
the acquired subsidiary at the date of acquisition. Goodwill is
initially recognized as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to
each of the Company’s cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually on September 30, or more frequently
when there is an indication that the unit may be impaired. If
the recoverable amount of the cash-generating unit is less than
the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in
the unit. An impairment loss recognized for goodwill is not
reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
ASML STATUTORY ANNUAL REPORT 2010
60
Other intangible
assets
Other intangible assets include internally-generated intangible
assets, acquired intellectual property rights, developed
technology, customer relationships, in-process Research and
Development (“R&D”) and other intangible assets.
Internally-generated
intangible assets — research and development
expenditures
Expenditure on research activities is recognized as an expense
in the period in which it is incurred. IFRS requires
capitalization of development expenditures provided if, and only
if, certain criteria can be demonstrated.
An internally-generated intangible asset arising from the
Company’s development is recognized only if the Company can
demonstrate all of the following conditions:
|
|
| •
|
the technical feasibility of completing the intangible asset so
that it will be available for use or sale;
|
| •
|
the intention to complete the intangible asset and use or sell
it;
|
| •
|
the ability to use or sell the intangible asset;
|
| •
|
the probability that the asset created will generate future
economic benefits;
|
| •
|
the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
|
| •
|
the ability to measure reliably the expenditure attributable to
the intangible asset during its development.
|
For certain development programs, it was not possible to
separate development activities from research activities
(approximately EUR 16.2 million and
EUR 14.5 million for 2010 and 2009, respectively).
Consequently, ASML was not able to reliably determine the amount
of development expenditures incurred for these programs.
Internally-generated intangible assets are amortized on a
straight-line basis over their estimated useful lives, ranging
from one to three years. Where no internally-generated
intangible asset can be recognized, development expenditure is
charged to the income statement in the period in which it is
incurred.
The estimated useful lives and depreciation method are reviewed
at each year-end, with the effect of any changes in estimate
accounted for on a prospective basis.
Intellectual
property rights, developed technology, customer relationships
and other intangible assets
Acquired intellectual property rights, developed technology,
customer relations and other intangible assets are stated at
cost less accumulated amortization and any accumulated
impairment losses. Amortization is charged on a straight-line
basis over their estimated useful lives. The estimated useful
life and amortization method are reviewed at the end of each
annual reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
In-process
research and development
In-process R&D relates to the fair value of the technology
regarding products that were in development at the time of
acquisition. In-process R&D is subsequently stated at cost
less accumulated amortization and any accumulated impairment
losses. Amortization is charged on a straight-line basis over
the estimated useful life. The estimated useful lives and
depreciation method are reviewed at each year-end, with the
effect of any changes in estimate accounted for on a prospective
basis.
The following table presents the estimated useful lives of
ASML’s other intangible assets:
| |
|
|
|
|
|
|
|
Category
|
|
Estimated useful life
|
|
|
Development expenditures
|
|
|
1 – 5 years
|
|
|
Intellectual property rights
|
|
|
3 – 10 years
|
|
|
Developed technology
|
|
|
6 years
|
|
|
Customer relationships
|
|
|
8 years
|
|
|
In-process research and development
|
|
|
4 years
|
|
|
Other intangible assets
|
|
|
2 – 6 years
|
|
|
|
Impairment of
tangible and intangible assets excluding goodwill
At each reporting date, the Company reviews the carrying amounts
of its tangible and intangible assets (other than goodwill) to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it
is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount
of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified,
corporate
ASML STATUTORY ANNUAL REPORT 2010
61
assets are also allocated to individual cash-generating units,
or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment
annually, and whenever there is an indication that the asset may
be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating
unit) is reduced to its recoverable amount. An impairment loss
is recognized immediately in the income statement, unless the
relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been
recognized for the asset (or cash-generating unit) in prior
years. A reversal of an impairment loss is recognized
immediately in the income statement, unless the relevant asset
is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
Financial
assets
Financial assets are classified as at fair value through profit
or loss and loans and receivables.
Financial assets
at fair value through profit or loss
Financial assets are classified as at fair value through profit
or loss where the financial asset is designated as at fair value
through profit or loss. Assets in this category are categorized
as current assets.
Loans and
receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current receivables, except for
maturities greater than 12 months after the date of
statement of financial position. These are classified as
non-current assets. The Company’s loans and receivables
comprise accounts receivable, finance receivables and other
non-current and current assets and cash and cash equivalents in
the statement of financial position.
Loans and receivables are measured at their approximate fair
value.
ASML assesses at each date of statement of financial position
whether there is objective evidence that a financial asset or a
group of financial assets is impaired.
Impairment of
financial assets
Financial assets, other than those at fair value through profit
or loss, are assessed for indicators of impairment at each date
of statement of financial position. Financial assets are
impaired where there is objective evidence that, as a result of
one or more events that occurred after the initial recognition
of the financial asset, the estimated future cash flows of the
investment have been impacted.
Financial
liabilities and equity instruments issued by the
Company
Financial liabilities and equity instruments issued by the
Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a
financial liability and an equity instrument.
Financial liabilities that are classified as fair value through
profit or loss are categorized as current liabilities. An equity
instrument is any contract that evidences a residual interest in
the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Company are
recorded at the proceeds received, net of direct issue costs.
Financial liabilities at fair value through profit or loss are
stated at fair value with any resultant gain or loss recognized
in the income statement.
Derivative
financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a
derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the
resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the
item being hedged. The Company designates certain derivatives as
either:
|
|
| • |
A hedge of the exposure to changes in the fair value of a
recognized asset or liability, or of an unrecognized firm
commitment, that are attributable to a particular risk (fair
value hedge);
|
ASML STATUTORY ANNUAL REPORT 2010
62
|
|
| •
|
A hedge of the exposure of variability in the cash flows of a
recognized asset or liability, of a forecasted transaction, that
is attributable to a particular risk (cash flow hedge); or
|
| •
|
A hedge of the foreign currency exposure of a net investment in
a foreign operation (net investment hedge). In 2009, the Company
decided to no longer hedge these U.S. dollar net
investments exposures.
|
The Company documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as
well as its risk management objectives and strategy for
undertaking various hedging transactions. The Company also
documents its assessment, both at hedge inception and on an
ongoing basis, of whether derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair
values or cash flows of hedged items.
The fair values of various derivative instruments used for
hedging purposes are disclosed in Note 4, Note 5,
Note 12 and Note 13. Movements in the hedging reserve
within equity are shown in Note 18. The fair value part of
a derivative that has a remaining term of less or equal to
12 months is classified as current asset or liability. When
the fair value part of a derivative has a term of more than
12 months it is classified as non-current.
Fair value
hedge
Changes in the fair value of a derivative that is designated and
qualifies as a fair value hedge, along with the gain or loss on
the hedged asset or liability, that is attributable to the
hedged risk, are recorded in the income statement. The Company
designates foreign currency hedging instruments as a hedge of
the fair value of a recognized asset or liability in
non-functional currencies. Hedge accounting is discontinued when
the Company revokes the hedging relationship, the hedging
instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. The adjustment to the
carrying amount of the hedged item arising from the hedged risk
is amortized to the income statement from that date.
The gain or loss relating to the ineffective portion of foreign
currency hedging instruments is recognized in the income
statement as “net sales” or “cost of sales”.
Interest rate swaps that are being used to hedge the fair value
of fixed loan coupons payable are designated as fair value
hedges. The change in fair value is intended to offset the
change in the fair value of the underlying fixed loan coupons,
which is recorded accordingly. The gain or loss relating to the
ineffective portion of interest rate swaps hedging fixed loan
coupons payable is recognized in the income statement as
“interest income” or “interest charges”.
Cash flow
hedge
The effective portion of changes in the fair value of a
derivative that is designated and qualifies as a cash flow hedge
is recorded in the hedging reserve, within equity, until
underlying hedged transaction is recognized in the income
statement. However, when the forecasted transaction that is
hedged results in the recognition of a non-financial asset or a
non-financial liability, the gains and losses previously
deferred in equity are transferred from equity and included in
the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Company revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for hedge
accounting. Any cumulative gain or loss deferred in equity at
that time remains in equity and is recognized when the
forecasted transaction is ultimately recognized in the income
statement. When a forecasted transaction is no longer expected
to occur, the cumulative gain or loss that was deferred in
equity is recognized immediately in the income statement.
Foreign currency hedging instruments that are being used to
hedge cash flows relating to future sales or purchase
transactions in non-functional currencies are designated as cash
flow hedges. The gain or loss relating to the ineffective
portion of the foreign currency hedging instruments is
recognized in the income statement in “net sales” or
“cost of sales”.
Interest rate swaps that are being used to hedge changes in the
variability of future interest receipts are designated as cash
flow hedges. The change in fair value is intended to offset the
change in the fair value of the underlying assets, which is
recorded accordingly in equity as hedging reserve. The maximum
length of time of cash flow hedges is the time elapsed from the
moment the exposure is generated until the actual settlement.
The gain or loss relating to the ineffective portion of interest
rate swaps hedging the variability of future interest receipts
is recognized in the income statement “interest
income” or “interest charges”.
Net investment
hedge
Foreign currency hedging instruments that are being used to
hedge changes in the value of a net investment are designated as
net investment hedges and are treated similarly to cash flow
hedges. The effective portion of changes in the fair value of a
derivative that is designated and qualifies as a net investment
hedge is recorded in the currency translation reserve within
equity. The gain or loss relating to the ineffective portion is
recognized immediately in the income statement as “interest
income” or “interest charges”. Gains and losses
accumulated in equity are recognized in the income statement
when the foreign operation is partially disposed or sold.
ASML STATUTORY ANNUAL REPORT 2010
63
Inventories
Inventories are stated at the lower of cost
(first-in-first-out
method) or net realizable value. The costs of inventories
comprise of net prices paid for materials purchased, charges for
freight and customs duties, production labor cost and factory
overhead. Net realizable value represents the estimated selling
price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Inventory provisions are recognized for slow-moving, obsolete or
unsellable inventory. Impairment losses for inventory are
determined based on the expected demand which is derived from
the sales forecasts as well as the expected market value of the
inventory. A new assessment of net realizable value is made in
each subsequent period. When the circumstances that previously
caused inventories to be written down below cost no longer exist
or when there is clear evidence of an increase in net realizable
value because of changed economic circumstances, the amount of
the write-down is reversed.
Accounts
receivable
Accounts receivable are measured at initial recognition at fair
value and are subsequently measured at amortized cost using the
effective interest rate method, less allowance for doubtful
debts. An allowance for doubtful debts of accounts receivable is
established when there is objective evidence that the Company
will not be able to collect all amounts due according to
original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial restructuring and default or
delinquency in payments are considered indicators that the
accounts receivable are impaired. The allowance recognized is
measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows
discounted at the effective interest rate computed at initial
recognition.
Cash and cash
equivalents
Cash and cash equivalents consist primarily of highly liquid
investments, such as bank deposits, money market funds and
interest-bearing bank accounts with insignificant interest rate
risk and remaining maturities of three months or less at the
date of acquisition.
Equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of income taxes, from the
proceeds.
Treasury shares are deducted from equity for the consideration
paid, including any directly attributable incremental costs (net
of income taxes), until the shares are cancelled or reissued.
Where such shares are subsequently reissued, any consideration
received, net of any directly attributable incremental
transaction costs and related income tax effects is included in
equity.
Provisions
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Company will be required to settle the
probable outflow of resources, and a reliable estimate can be
made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the
statement of financial position date, taking into account the
risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value
of those cash flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognized as an asset if it is virtually certain
that reimbursements will be received and the amount of the
receivable can be measured reliably.
Onerous
contracts
Present obligations arising under onerous contracts are
recognized and measured as provisions. Onerous contracts are
considered to exist where the Company has a contract under which
the unavoidable costs of meeting the obligations under the
contract exceed the economic benefit expected to be received
under the contract.
Employee contract
termination benefits
Provisions for employee contract termination benefits are
recognized when ASML is demonstrably committed to either
terminating the employment of current employees according to a
detailed formal plan or announcing its main features to those
affected by it. The measurement of a provision for employee
contract termination benefits includes only the direct
expenditures arising from the termination.
ASML STATUTORY ANNUAL REPORT 2010
64
Accounts
payable
Accounts payable are initially measured at fair value, and are
subsequently measured at amortized cost, using the effective
interest rate method.
Revenue
recognition
In general, ASML recognizes 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 ASML’s cleanroom facilities,
effectively replicating the operating conditions that will be
present on the customer’s 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. In case not all specifications are met and
the remaining performance obligation is not essential to the
functionality of the system but substantive rather than
inconsequential or perfunctory a portion of the sales price is
deferred. Although each system’s performance is re-tested
upon installation at the customer’s site, the Company has
never failed to successfully complete installation of a system
at a customer’s premises.
In 2010, we shipped our first second-generation EUV system to a
customer’s manufacturing site, and as a result, we deferred
revenue from new technology systems for an amount of
EUR 38.5 million as of December 31, 2010 (2009:
no revenue from new technology was deferred). During 2010 and
2009, the Company did not recognize any revenue from new
technology that had previously been deferred.
In connection with the introduction of new technology, such as
our second-generation EUV systems, we initially defer revenue
recognition until completion of installation and acceptance of
the new technology based system at customer premises. Any such
deferral of revenues, however, could have a material effect on
ASML’s results of operations for the period in which the
deferral occurred and on the succeeding periods. As our systems
are based largely on two product platforms that permit
incremental, modular upgrades, the introduction of genuinely
“new” technology occurs infrequently, and in the past
12 years, has occurred on only two occasions: 2010 (EUV)
and 1999 (TWINSCAN).
With respect to the third-generation EUV systems which are
expected to be available for shipment to customers from 2012
onwards, the Company is currently assessing the conditions upon
which revenue would be recognized and whether or not amounts
should be deferred. Any such deferral of revenues could have a
material effect on ASML’s results of operations for the
period in which the deferral occurred and on the succeeding
periods.
ASML has no significant repurchase commitments in its general
sales terms and conditions. From time to time the Company
repurchases systems that it has manufactured and sold and,
following refurbishment, resells those systems to other
customers. This repurchase decision is driven by market demand
expressed by other customers and not by explicit or implicit
contractual arrangements relating to the initial sale. The
Company considers reasonable offers from any vendor, including
customers, to repurchase used systems so that it can refurbish,
resell and install these systems as part of its normal business
operations. Once repurchased, the repurchase price of the used
system is recorded in
work-in-process
inventory during the period it is being refurbished, following
which the refurbished system is reflected in finished products
inventory until it is sold to the customer. As of
December 31, 2010 and 2009, ASML had no repurchase
commitments.
A portion of the Company’s revenue is derived from
contractual arrangements with its 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 until delivery of these elements.
Revenue from installation and training services is recognized
when the services are completed. Revenue from prepaid extended
and enhanced (optic) warranty contracts is recognized over the
term of the contract.
The deferred revenue balance from installation and training
services as of December 31, 2010 amounted to
EUR 10.1 million (2009: EUR 3.0 million) and
EUR 12.7 million (2009: EUR 10.4 million),
respectively.
The deferred revenue balance from prepaid extended and enhanced
(optic) warranty contracts as of December 31, 2010 amounted
to EUR 243.4 million (2009:
EUR 125.9 million).
ASML offers 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, ASML offers 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. From time to time, ASML offers free or discounted
products or services (award credits) to our customers as part of
a volume purchase agreement.
ASML STATUTORY ANNUAL REPORT 2010
65
The award credits are accounted for as a separately identifiable
component of the sales transaction in which the award credits
are granted. The fair value of the consideration received for
the sales transaction is allocated between the award credits and
the other components of the sales transaction. The consideration
allocated to the award credit is recognized as deferred revenue
until the award credits are delivered to the customer. The
amount allocable to a delivered item is limited to the amount
that is not contingent upon the delivery of additional items or
meeting other specified performance conditions (the
non-contingent amount).
Revenues are recognized excluding the taxes levied on revenues
(net basis).
Warranty
The Company provides 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, the Company calculates the charge of average service
hours and parts per system to determine the estimated warranty
charge. On a semi-annual basis, the Company assesses, and
updates if necessary, its accounting estimates used to calculate
the standard warranty provision based on the latest actual
historical warranty costs and expected future warranty costs.
The extended and enhanced (optic) warranty on our systems and
certain optical parts is accounted for as a separate element of
multiple element revenue recognition transactions.
Accounting for
shipping and handling fees and costs
ASML bills the customer for, and recognizes as revenue, any
charges for shipping and handling costs. The related costs are
recognized as cost of sales.
Cost of
sales
Cost of system sales comprise direct product costs such as
materials, labor, cost of warranty, depreciation, amortization,
shipping and handling costs and related overhead costs. ASML
accrues for the estimated cost of the warranty on its systems,
which includes the cost of labor and parts necessary to repair
systems during the warranty period. The amounts recorded in the
warranty accrual are estimated based on actual historical
expenses incurred and on estimated probable future expenses
related to current sales. Actual warranty costs are charged
against the accrued warranty reserve.
Costs of service sales comprise direct service costs such as
materials, labor, depreciation and overhead costs.
Cost of field option sales comprise direct product costs such as
materials, labor, cost of warranty, shipping and handling costs
and related overhead costs.
Borrowing
costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the cost of
those assets, until such time that the assets are substantially
ready for their intended use or sale.
Government
grants
Government grants are not recognized until there is reasonable
assurance that ASML will comply with the conditions attaching to
them and that the grants will be received.
Government grants whose primary condition is that ASML should
purchase, construct or otherwise acquire non-current assets are
recognized as deferred income in the statement of financial
position and transferred to the income statement on a systematic
and rational basis over the useful lives of the related assets.
Other government grants are recognized as income over the
periods necessary to match them with the costs for which they
are intended to compensate, on a systematic basis. Government
grants that are receivable as compensation for expenses or
losses already incurred, or for the purpose of giving immediate
financial support to ASML with no future related costs are
recognized in the income statement in the period in which they
become receivable.
Income
taxes
Income taxes represent the sum of the current tax position and
deferred tax.
The current tax position is based on taxable base for the year.
Taxable base differs from results as reported in the
consolidated income statement because it excludes items of
income or charges that are taxable or deductible in prior or
later years, for example timing differences between taxable base
and financial results, and it further excludes items that are
never taxable or
ASML STATUTORY ANNUAL REPORT 2010
66
deductible, for example permanent differences between taxable
base and financial results. The Company’s tax position is
calculated using tax rates that have been enacted or
substantively enacted by the date of statement of financial
position.
Deferred tax is recognized on differences between the carrying
amounts of assets and liabilities in the financial statements
and the corresponding tax base used in the computation of
taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are recognized for
all taxable temporary differences and deferred tax assets are
recognized to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilized. Such assets and liabilities are not
recognized if the temporary difference arises from goodwill or
from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting
profit.
The carrying amount of deferred tax assets is reviewed at each
statement of financial position date and reduced to the extent
that it is no longer probable that sufficient taxable profits
will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates
(and tax laws) that have been enacted or substantively enacted
by the statement of financial position date. The measurement of
deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the
Company expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset on the statement
of financial position when there is a legally enforceable right
to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax
assets and liabilities on a net basis.
The Company recognizes a liability for uncertain tax positions
when it is probable that an outflow of economic resources will
occur. Measurement of the liability for uncertain tax positions
is based on management’s best estimate of the amount of tax
benefit that will be realized upon settlement.
The income statement effect of interest and penalties relating
to liabilities for uncertain tax positions are presented based
on their nature, as part of interest charges and as part of
selling, general and administrative costs, respectively.
Current and deferred tax are recognized as an expense or income
in the income statement, except when they relate to items
credited or debited directly to equity, in which case the tax is
also recognized directly in equity, or where they arise from the
initial accounting for a business combination. In the case of a
business combination, the tax effect is taken into account in
calculating goodwill or in determining the excess of the
Company’s interest in the net fair value of the acquired
entity’s identifiable assets, liabilities and contingent
liabilities over the cost of the business combination.
Contingencies and
litigation
We are party to various legal proceedings generally incidental
to our business, as disclosed in Note 24. In connection
with these proceedings and claims, management evaluated, 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 most cases, management determined that
either a loss was not probable or was not reasonably estimable.
In 2010, an amount of EUR 1.5 million loss was
recorded as a charge to the Company’s consolidated income
statement (2009: no estimated losses were recorded). 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 expensive and protracted
litigation, the outcome of which is uncertain.
We accrue legal costs related to litigation in our consolidated
income statement at the time when the related legal services are
actually provided to us.
Share-based
payments
The cost of employee services received (compensation expenses)
in exchange for awards of equity instruments are recognized
based upon the grant date fair value of stock options and
shares. The grant date fair value of stock options is estimated
using a Black-Scholes option valuation model. This Black-Scholes
option valuation model requires the use of assumptions,
including expected stock price volatility, the estimated life of
each award and the estimated dividend yield. The risk-free
interest rate used in
ASML STATUTORY ANNUAL REPORT 2010
67
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. The fair value of the shares is determined
based on the closing price of the Company’s ordinary shares
on the Euronext Amsterdam on the grant date.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on
ASML’s estimate of the equity instruments that will
eventually vest. At each statement of financial position date,
ASML revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original
estimates, if any, is recognized in the income statement in the
period in which the revision is determined, with a corresponding
adjustment to equity. The policy described above is applied to
all equity-settled share-based payments that were granted after
November 7, 2002 that vested after January 1, 2005. No
amount has been recognized in the financial statements in
respect of other equity-settled share-based payments.
Our current share-based payment plans do not provide for cash
settlement for options and shares.
Retirement
benefit costs
Contributions to defined contribution retirement benefit plans
are recognized as an expense when employees have rendered
service entitling them to the contributions. Payments made to
state-managed retirement benefit schemes are dealt with as
payments to defined contribution plans where the Company’s
obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan. ASML accounts for
its multi-employer defined benefit plan as if it were a defined
contribution plan as the pension union managing the plan is not
able to provide ASML with the required Company-specific
information to enable ASML to account for the plan as a defined
benefit plan.
Consolidated
statement of cash flows
The consolidated statement of cash flows has been prepared based
on the indirect method. Cash flows in foreign currencies have
been translated at average exchange rates. Exchange rate
difference on cash and cash equivalents are shown separately in
the consolidated cash flow statement. Acquisitions of
subsidiaries are presented net of cash balances acquired.
|
|
|
4.
|
Fair Value
Measurements
|
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair
value measurement hierarchy prioritizes the inputs to valuation
techniques used to measure fair value as follows:
|
|
| •
|
Level 1: Valuations based on inputs such as quoted prices
for identical assets or liabilities in active markets that the
entity has the ability to access.
|
| •
|
Level 2: Valuations based on inputs other than level 1
inputs such as quoted prices for similar assets or liabilities,
quoted prices in markets that are not active, or other inputs
that are observable or can be corroborated by observable data
for substantially the full term of the assets or liabilities.
|
| •
|
Level 3: Valuations based on inputs that are supported by
little or no market activity and that are significant to the
fair value of the assets or liabilities.
|
The fair value hierarchy gives the highest priority to quoted
prices (unadjusted) in active markets for identical assets or
liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). A financial
instrument’s fair value is based on the lowest level of any
input that is significant in the fair value measurement
hierarchy.
Financial assets
and financial liabilities measured at fair value on a recurring
basis
Cash and cash equivalents include short-term deposits,
investments in money market funds and interest-bearing bank
accounts for which fair value measurements are all based on
quoted prices for similar assets or liabilities.
The principal market in which ASML executes its derivative
contracts is the institutional market in an
over-the-counter
environment with a high level of price transparency. The market
participants usually are large commercial banks. The valuation
inputs for ASML’s derivative contracts are based on quoted
prices and quoting pricing intervals from public data sources;
they do not involve management judgment.
The valuation technique used to determine the fair value of
forward contracts (used for hedging purposes) is the Net Present
Value technique which is the estimated amount that a bank would
receive or pay to terminate the forward contracts at the
reporting date, taking into account current interest rates and
current exchange rates. The valuation technique used to
determine the fair value of forward contracts approximates the
net present value of future cash flows.
The valuation technique used to determine the fair value of
interest rate swaps (used for hedging purposes) is the Net
Present Value technique which is the estimated amount that a
bank would receive or pay to terminate the swap agreements at
the
ASML STATUTORY ANNUAL REPORT 2010
68
reporting date, taking into account current interest rates. The
valuation technique used to determine the fair value of interest
rate swaps approximates the net present value of future cash
flows.
The Eurobond serves as a hedged item in a fair value hedge
relationship in which ASML hedges the variability of changes in
the market value of fixed loan coupons payable on the
Company’s Eurobond due to changes in market interest rates.
The fair value changes of the interest rate swaps are recorded
on the statement of financial position under derivative
financial instruments (within other current and non-current
assets). Therefore, the carrying amount is only adjusted for
fair value changes in interest rate swaps. For the actual fair
value, including credit risk considerations, see Note 19.
The following table presents the Company’s financial assets
and financial liabilities that are measured at fair value on a
recurring basis:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments1
|
|
|
—
|
|
|
|
103,384
|
|
|
|
—
|
|
|
|
103,384
|
|
|
Cash and cash
equivalents2
|
|
|
302,736
|
|
|
|
734,338
|
|
|
|
—
|
|
|
|
1,037,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
302,736
|
|
|
|
837,722
|
|
|
|
—
|
|
|
|
1,140,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt3,4
|
|
|
—
|
|
|
|
704,963
|
|
|
|
—
|
|
|
|
704,963
|
|
|
Derivative financial
instruments1
|
|
|
—
|
|
|
|
17,471
|
|
|
|
—
|
|
|
|
17,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
—
|
|
|
|
722,434
|
|
|
|
—
|
|
|
|
722,434
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments1
|
|
|
—
|
|
|
|
96,180
|
|
|
|
—
|
|
|
|
96,180
|
|
|
Cash and cash equivalents
|
|
|
203,922
|
|
|
|
1,745,912
|
|
|
|
—
|
|
|
|
1,949,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
203,922
|
|
|
|
1,842,092
|
|
|
|
—
|
|
|
|
2,046,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt3
|
|
|
—
|
|
|
|
705,731
|
|
|
|
—
|
|
|
|
705,731
|
|
|
Derivative financial
instruments1
|
|
|
—
|
|
|
|
34,898
|
|
|
|
—
|
|
|
|
34,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
—
|
|
|
|
740,629
|
|
|
|
—
|
|
|
|
740,629
|
|
|
|
|
|
| 1
|
Derivative financial instruments
consist of forward contracts and interest rate swaps. See
Note 5.
|
| |
| 2
|
Based on a reassessment of the
Level classifications, in 2010, the Company concluded that Money
Market Funds should be classified Level 1 instead of
Level 2, as they are valued based on quoted prices for
identical assets in active markets accessible to the Company.
The comparative figures for 2009 were adjusted accordingly to
reflect this change in classification.
|
| |
| 3
|
The long-term debt mainly relates
to the Company’s EUR 600.0 million Eurobond and
excludes accrued interest. See Note 19.
|
| |
| 4
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
As of December 31, 2010, the Company did not have any
assets or liabilities measured at fair value on a recurring
basis using significant unobservable inputs
(Level 3) in its statement of financial position.
|
|
|
5.
|
Financial Risk
Management
|
Financial risk
factors
The Company is exposed to a variety of financial risks: market
risks (including foreign currency exchange risk and interest
rate risk), credit risk, liquidity and capital risk. The overall
risk management program focuses on the unpredictability of
financial markets and seeks to minimize potentially adverse
effects on the Company’s financial performance. The Company
uses derivative instruments to hedge certain risk exposures:
none of the transactions are entered into for trading or
speculative purposes.
ASML believes that market information is the most reliable and
transparent means of measurement for its derivative instruments
that are measured at fair value.
ASML STATUTORY ANNUAL REPORT 2010
69
Risk management is carried out by the central treasury
department under policies approved by the Board of Management.
The treasury department reports information with regard to
financial risks and measures to reduce these risks periodically.
Compared to last year, there have been no significant changes in
our financial risk management policies.
Foreign currency
risk 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 Company’s policy to hedge material transaction
exposures, such as forecasted sales and purchase transactions
and accounts receivable and payable. The Company hedges these
exposures through the use of currency contracts (foreign
exchange options and forward contracts).
As of December 31, 2010 other comprehensive income includes
EUR 40.8 million loss (net of taxes:
EUR 35.9 million loss; 2009:
EUR 41.8 million loss) representing the total
anticipated loss to be charged to sales, and
EUR 7.0 million loss (net of taxes:
EUR 6.1 million loss; 2009: EUR 0.5 million
gain) to be charged to cost of sales, which will offset the
higher EUR equivalent of foreign currency denominated forecasted
sales and purchase transactions. In 2010, as a result of
ineffective cash flow hedges, a loss was recognized in sales for
an amount of EUR 0.4 million (2009: loss of
EUR 10.7 million) related to forecasted sales
transactions. The effectiveness of all outstanding hedge
contracts is monitored on a quarterly basis throughout the life
of the hedges. It is anticipated that an amount of
EUR 40.7 million loss will be charged to sales and
EUR 7.0 million loss will be charged to cost of sales
over the next twelve months, as the forecasted sales and
purchase transactions occur. The remainder of the loss is
anticipated to be charged to sales between one and two years, as
the forecasted sales transactions occur.
It is the Company’s policy to not hedge currency
translation exposures. Prior to 2009, the Company managed its
material currency translation exposures resulting predominantly
from ASML’s U.S. dollar net investments by hedging
these partly with forward contracts. In 2009, the Company
decided to no longer hedge these U.S. dollar net investment
exposures.
It is the Company’s policy to hedge material remeasurement
exposures. These net exposures from certain monetary assets and
liabilities in non-functional currencies are hedged with forward
contracts.
Interest rate
risk 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.
There might be some residual interest rate risks to the extent
that the asset and liability positions do not fully offset.
Furthermore, the Company uses interest rate swaps to hedge
changes in market value of fixed loan coupons payable on its
Eurobond due to changes in market interest rates and to hedge
the variability of future interest receipts as a result of
changes in market interest rates on part of its cash and cash
equivalents. During 2010, the hedge was 100 percent
effective in hedging the fair value exposure to interest rate
movements. This amount was included in consolidated income
statement at the same time that the fair value of the interest
rate swap was included in the consolidated income statement.
Financial
instruments
The Company uses currency contracts to manage its currency risk
and interest rate swaps to manage its interest rate risk. Most
derivatives will mature in one year or less after the statement
of financial position date. The following table summarizes the
notional amounts and estimated fair values of the Company’s
financial instruments:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
|
Notional
|
|
|
|
|
|
Notional
|
|
|
|
|
As of December 31
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Currency
contracts1
|
|
|
527,816
|
|
|
|
7,428
|
|
|
|
(1,933
|
)
|
|
|
(28,974
|
)
|
|
Interest rate
swaps2
|
|
|
641,500
|
|
|
|
78,485
|
|
|
|
641,500
|
|
|
|
90,256
|
|
|
|
|
|
|
|
1
|
|
Relates to forward contracts
assigned as a hedge to forecasted sales and purchase
transactions, to monetary assets and liabilities, mainly in U.S.
dollar and Japanese yen.
|
| |
|
2
|
|
Relates to interest rate swaps
assigned as a hedge to interest bearing assets and liabilities
mainly related to the EUR 600.0 million Eurobond; the fair
value of the interest rate swaps includes accrued interest.
|
ASML STATUTORY ANNUAL REPORT 2010
70
Sensitivity
analysis financial instruments
Foreign currency
sensitivity
ASML is mainly exposed to the U.S. dollar and Japanese yen.
The following table details the Company’s sensitivity to a
10.0 percent strengthening of foreign currencies against
the euro. The sensitivity analysis includes foreign currency
denominated monetary items outstanding and adjusts their
translation at the period end for a 10.0 percent
strengthening in foreign currency rates. A positive amount
indicates an increase in income before income taxes and equity.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
|
Impact on
|
|
|
|
|
|
Impact on
|
|
|
|
|
|
|
|
income before
|
|
|
Impact on
|
|
|
income before
|
|
|
Impact on
|
|
|
|
|
income taxes
|
|
|
equity
|
|
|
income taxes
|
|
|
equity
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
U.S. dollar
|
|
|
(3,689
|
)
|
|
|
24,903
|
|
|
|
(6,048
|
)
|
|
|
39,802
|
|
|
Japanese yen
|
|
|
(1,711
|
)
|
|
|
(32,416
|
)
|
|
|
(4,207
|
)
|
|
|
1,320
|
|
|
Other currencies
|
|
|
(1,620
|
)
|
|
|
12,080
|
|
|
|
(700
|
)
|
|
|
15,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(7,020
|
)
|
|
|
4,567
|
|
|
|
(10,955
|
)
|
|
|
56,756
|
|
|
|
It is the Company’s policy to limit the currency effects
through the consolidated income statement. The negative effect
on income before income taxes as presented in the table above
for 2010 and 2009 is mainly attributable to timing differences
between the arising of exposures and the hedging thereof. The
increase in the U.S. dollar and Japanese yen effect on
income before income taxes in 2010 compared with 2009 is caused
by higher U.S. dollar and Japanese yen liability positions
at year end.
The revaluation effects of investments in foreign entities are
recognized in other comprehensive income, within equity. The
movements of currency rates therefore might have a significant
effect on equity. Furthermore, fair value movements of cash flow
hedges, entered into for U.S. dollar and Japanese yen
transactions, are recognized in equity. The increased
U.S. dollar effect on equity in 2010 compared with 2009 is
caused by the recovery of the semiconductor equipment industry
and resulting increase in purchase hedges in combination with
the fact that early 2009 the Company decided to no longer hedge
its U.S. dollar net investments exposures. The effect on
equity for other currencies mainly relates to investments in
foreign entities in Taiwan dollar and Korean won.
For a 10.0 percent weakening of the foreign currencies
against the euro, there would be approximately an equal but
opposite effect on the income before income taxes. For the
sensitivity for a 10.0 percent weakening of the
U.S. dollar against the euro, there would be a lower
opposite effect than presented in the table shown above of
EUR 7.2 million on equity.
Interest rate
sensitivity
The sensitivity analysis below has been determined based on the
exposure to interest rates for both derivatives and
non-derivative instruments at the statement of financial
position date and the stipulated change taking place at the
beginning of the financial year and held constant throughout the
reporting period. The table below shows the effect of a
1.0 percent increase in interest rates on the
Company’s income from operations before income taxes and
other comprehensive income. For a 1.0 percent decrease in
interest rates there would be approximately an equal but
opposite effect on equity and income before income taxes. A
positive amount indicates an increase in income before income
taxes and equity.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
|
Impact on
|
|
|
|
|
|
Impact on
|
|
|
|
|
|
|
|
income before
|
|
|
Impact on
|
|
|
income before
|
|
|
Impact on
|
|
|
|
|
income taxes
|
|
|
equity
|
|
|
income taxes
|
|
|
equity
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
|
|
|
4,425
|
|
|
|
2,336
|
|
|
|
13,274
|
|
|
|
1,986
|
|
|
|
The positive effect on equity, is mainly attributable to the
fair value movements of the interest rate swaps designated as
cash flow hedges. The effect on income before income taxes has
increased, mainly due to an increase in cash and cash
equivalents in 2010 compared with 2009.
ASML STATUTORY ANNUAL REPORT 2010
71
Credit risk
management
Financial instruments that potentially subject ASML to
significant concentrations of credit risk consist principally of
cash and cash equivalents, accounts receivable and derivative
instruments used in hedging activities.
Cash and cash equivalents and derivative 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
ASML’s counterparties to a sufficient number of major
financial institutions. ASML invests its cash and cash
equivalents mainly in short-term deposits with highly rated
financial institutions and partly in AAAm-rated money market
funds that invest in highly rated short-term debt securities of
financial institutions and governments. ASML does not expect the
counterparties to default given their high credit quality.
ASML’s customers consist of Integrated Circuit
(“IC”) manufacturers located throughout the world.
ASML performs ongoing credit evaluations of its customers’
financial condition. ASML regularly reviews whether an allowance
for doubtful debts is needed by considering factors such as
historical payment experience, credit quality, age of the
accounts receivable balances, and current economic conditions
that may affect a customer’s ability to pay. ASML takes
additional measures to mitigate credit risk when considered
appropriate by means of e.g. down payments, letters of credit,
and retention of ownership provisions in contracts. Retention of
ownership enables ASML to recover the systems in the event a
customer defaults on payment.
Liquidity and
Capital risk management
Prudent liquidity risk management implies maintaining sufficient
cash and cash equivalents and the availability of funding
through an adequate amount of committed credit facilities. As
part of our financing policy we seek to maintain a strategic
level of cash and cash equivalents of between EUR 1.0 and
1.5 billion. In addition to dividend payments, to the
extent the level of cash and cash equivalents exceeds this
target level and there are no investment opportunities that we
wish to pursue, we intend to return cash to our shareholders
through share buybacks or repayment of capital.
The Company’s available credit facilities amount to
EUR 700.0 million as of December 31, 2010 and
December 31, 2009 and consist of two facilities: a
EUR 500.0 million credit facility and a
EUR 200.0 million loan facility. In May 2010, the
Company, in line with its financing policy, cancelled its
EUR 500.0 million credit facility that was due to
expire in May 2012 and replaced it with a new
EUR 500.0 million credit facility from the same group
of banks. The new credit facility has a term of five years and
contains the same restrictive covenant as the credit facility it
replaced. This covenant requires the Company to maintain a
minimum committed capital to net total assets ratio of
40.0 percent calculated in accordance with contractually
agreed definitions. As of December 31, 2010 and
December 31, 2009, this ratio was 78.0 percent and
85.7 percent, respectively. Therefore, the Company was in
compliance with the covenant at the end of 2010 and 2009.
Outstanding amounts under this credit facility will bear
interest at EURIBOR or LIBOR plus a margin that depends on the
Company’s liquidity position. No amounts were outstanding
under this credit facility at the end of 2010 and 2009.
The EUR 200.0 million loan facility is related to the
Company’s EUV investment efforts and was entered into
during the first half of 2009. In June 2010, the Company and the
European Investment Bank agreed to extend the availability
period of the EUR 200.0 million loan facility by six
months, allowing the Company to draw the facility up to
March 31, 2011. When drawn, the loan is repayable in annual
installments starting four years after drawdown, with a final
repayment seven years after drawdown. This facility contains a
covenant that restricts indebtedness, as contractually defined,
to a maximum amount of EUR 2,300.0 million. As of
December 31, 2010 and December 31, 2009, this
indebtedness amounted to EUR 1,319.2 million and
EUR 1,319.0 million, respectively. Therefore, the
Company was in compliance with this covenant at the end of 2010
and 2009. Outstanding amounts under this loan facility will bear
interest at EURIBOR or LIBOR plus a margin. No amounts were
outstanding under this loan facility at the end of 2010 and 2009.
ASML STATUTORY ANNUAL REPORT 2010
72
The Company’s liquidity analysis consists of the following
contractual obligations:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
3-5
|
|
|
After 5
|
|
Payments due by period
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
years
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Long-term debt obligations, including interest
expenses1
|
|
|
951,560
|
|
|
|
35,929
|
|
|
|
71,859
|
|
|
|
71,859
|
|
|
|
771,913
|
|
|
Deposits from customers
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Operating lease obligations
|
|
|
106,671
|
|
|
|
30,088
|
|
|
|
40,188
|
|
|
|
22,802
|
|
|
|
13,593
|
|
|
Purchase obligations
|
|
|
2,098,432
|
|
|
|
2,003,321
|
|
|
|
94,942
|
|
|
|
169
|
|
|
|
—
|
|
|
Liability for uncertain tax positions
|
|
|
162,066
|
|
|
|
29,956
|
|
|
|
30,853
|
|
|
|
40,062
|
|
|
|
61,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,468,729
|
|
|
|
2,249,294
|
|
|
|
237,842
|
|
|
|
134,892
|
|
|
|
846,701
|
|
|
|
|
|
| 1
|
See Note 19 for the amounts
excluding interest charges.
|
For more information on the Company’s contractual
obligations see Note 23. Furthermore, the Company’s
liquidity analysis consists of the following derivative
financial instruments:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
3-5
|
|
|
After 5
|
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
years
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Cash outflows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts
|
|
|
936,979
|
|
|
|
934,855
|
|
|
|
2,124
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest rate swaps
|
|
|
792,851
|
|
|
|
14,147
|
|
|
|
54,851
|
|
|
|
52,824
|
|
|
|
671,029
|
|
|
Cash inflows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts
|
|
|
908,275
|
|
|
|
906,225
|
|
|
|
2,050
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest rate swaps
|
|
|
888,673
|
|
|
|
34,959
|
|
|
|
86,736
|
|
|
|
70,623
|
|
|
|
696,355
|
|
|
|
6. Critical
Accounting Judgments and Key Sources of Estimation
Uncertainty
In the process of applying the Company’s accounting
policies, which are described in Note 3, management has
made some judgments that have significant effect on the amounts
recognized in the financial statements. These also include key
assumptions concerning the future, and other key sources of
estimation uncertainty at the statement of financial position
date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year.
Revenue
Recognition
We refer to Note 3.
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. On a semi-annual basis, the Company
assesses, and updates if necessary, its accounting estimates
used to calculate the standard warranty reserve based on the
latest actual historical warranty costs and expected future
warranty costs. The actual product performance
and/or field
expense profiles may differ, and in those cases we adjust our
warranty reserves accordingly. Future warranty costs may exceed
our estimates, which could lead to an increase in our cost of
sales. In 2010 and 2009, the reassessments of the warranty
reserve, and resulting change in accounting estimate, did not
have a material effect on the Company’s consolidated income
statement and per-share amounts.
Impairment of
non-financial assets
Non-financial assets include goodwill, other intangible assets
and property, plant and equipment.
At each reporting date, the Company reviews the carrying amounts
of its tangible and intangible assets (other than goodwill) to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it
is not
ASML STATUTORY ANNUAL REPORT 2010
73
possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment
annually, and whenever there is an indication that the asset may
be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating
unit) is reduced to its recoverable amount. An impairment loss
is recognized immediately in profit or loss, unless the relevant
asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
During 2010, we recorded impairment charges of
EUR 8.6 million in property, plant and equipment and
EUR 11.0 million in other intangible assets of which
we recorded EUR 18.3 million in cost of sales,
EUR 0.7 million in R&D costs and
EUR 0.6 million in SG&A costs. With respect to
property, plant and equipment the Company impaired several
technical infrastructure items which will cease to be used
during the expected economic life due to technical changes
relating to NXE (EUV) development. The impairment charges were
determined based on the difference between the assets’
recoverable amount (being EUR 0.4 million) and their
carrying amount.
Capitalization of
development expenditures
In determining the development expenditures to be capitalized,
ASML makes estimates and assumptions based on expected future
economic benefits generated by products that are the result of
these development expenditures. Other important estimates and
assumptions in this assessment process are the required internal
rate of return, the distinction between R&D and the
estimated useful life.
Accounts
receivable
A majority of our accounts receivable are derived from sales to
a limited number of 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 management’s 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, management
takes into consideration (i) any circumstances of which we
are aware regarding a customer’s 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 Company’s customers. Where we
deem it prudent to do so, we may require some form of credit
enhancement, such as letters of credit, down payments and
retention of ownership provisions in contracts, before shipping
systems to certain customers, which are intended to recover the
systems in the event a customer defaults on payment. We have not
incurred any material accounts receivable credit losses during
the past three years. Our three largest customers (based on net
sales) accounted for 42.4 percent of accounts receivable at
December 31, 2010, compared with 44.0 percent at
December 31, 2009. A 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 business, financial condition and results
of operations.
Provisions
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Company will be required to settle the
probable outflow of resources, and a reliable estimate can be
made of the amount of the obligation.
Present obligations arising under onerous contracts are
recognized and measured as provisions. Onerous contracts are
considered to exist where the Company has a contract under which
the unavoidable costs of meeting the obligations under the
contract exceed the economic benefit expected to be received
under the contract. As of December 31, 2010, the provision
for onerous contracts amounts to EUR 14.1 million
(2009: EUR 15.2 million) and relates to an operating
lease contract for a building for which no economic benefits are
expected.
Provisions for employee contract termination benefits are
recognized when ASML is demonstrably committed to either
terminating the employment of current employees according to a
detailed formal plan where valid expectations are created that
the obligation will be discharged, or when ASML provides
termination benefits as a result of an offer made to encourage
voluntary redundancy. As of December 31, 2010, ASML had no
obligations arising from employee contract termination benefits.
ASML STATUTORY ANNUAL REPORT 2010
74
Inventories
Inventories are stated at the lower of cost
(first-in-first-out
method) or net realizable value. The cost of inventories
comprise net prices paid for materials purchased, charges for
freight and customs duties, production labor cost and factory
overhead. Net realizable value represents the estimated selling
price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Inventory provisions are recognized for slow-moving, obsolete or
unsellable 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.
As of December 31, 2010, the provision for inventory
obsolescence amounted to EUR 186.3 million (2009:
EUR 190.6 million). The 2010 addition for the year
mainly relates to certain obsolete parts due to technological
developments and design changes. In 2009, the addition was
mainly due to a reassessment by the Company of expected future
demand based on the unexpected customers’ response to the
financial and economic crisis.
In 2010 ASML released EUR 32.8 million from the
provision for obsolete inventory as a result of a subsequent
increase in net realizable value (2009:
EUR 67.2 million).
Contingencies and
Litigation
See Note 3.
Share-based
payments
The cost of employee services received (compensation expenses)
in exchange for awards of equity instruments are recognized
based upon the grant date fair value of stock options and
shares. The grant date fair value of stock options is estimated
using a Black-Scholes option valuation model. This Black-Scholes
option valuation model requires the use of assumptions,
including expected stock price volatility, the estimated life of
each award and the estimated dividend yield. 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. See Note 22 for
further details re the assumptions used in the pricing model.
The total gross amount of recognized expenses associated with
share-based payments was EUR 12.1 million in 2010
(2009: EUR 13.4 million).
Our current share-based payment plans do not provide for cash
settlement of options and shares.
Income
taxes
See Note 3. We operate in various tax jurisdictions in
Asia, the United States and Europe and must comply with the tax
laws of each of these jurisdictions.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates
(and tax laws) that have been enacted or substantively enacted
by the statement of financial position date. The measurement of
deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the
Company expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities.
We continuously assess our ability to realize our deferred tax
assets resulting, among others, from net operating loss
carry-forwards. The total amount of tax effect of the loss
carry-forwards as of December 31, 2010 was
EUR 27.8 million, which resides with ASML US, Inc. and
US based subsidiaries of 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 operating income and possible tax
planning alternatives available to us.
The calculation of our tax liabilities involves uncertainties in
the application of complex tax laws. Our estimate for the
potential outcome of any uncertain tax position is highly
judgmental. However, we believe that we have adequately provided
for uncertain tax positions. Settlement of these uncertainties
in a manner inconsistent with our expectations could have a
material impact on our results of operations, financial
condition and cash flows. The Company recognizes a liability for
uncertain tax positions when it is probable that an outflow of
economic resources will occur. Measurement of the liability for
uncertain tax positions is based on management’s best
estimate of the amount of tax benefit that will be realized upon
settlement.
ASML STATUTORY ANNUAL REPORT 2010
75
The Company provides for the uncertain tax positions for the
duration of the statute of limitations which differs per tax
jurisdiction and generally ranges up to seven years, or in case
of an earlier settlement, when the uncertain tax position is
settled with the tax authorities before the statute of
limitations period lapses. As of December 31, 2010 the
liability for this liability for uncertain tax positions amounts
to EUR 162.1 million (December 31, 2009:
EUR 133.3 million). An amount of
EUR 143.9 million of this liability for uncertain tax
positions is classified as non-current deferred and other tax
liabilities because payment of cash is not expected within one
year, while an amount of EUR 18.2 million of this
liability for uncertain tax positions is classified as current
and other tax liabilities because payment of cash is expected
within one year. The 2009 liability for uncertain tax positions
was classified as non-current deferred and other tax liabilities
since at that time, payment of cash was not expected within one
year. The total liability for uncertain tax positions, if
reversed, would have a favorable effect on the Company’s
effective tax rate.
The Company estimates that the total liability for uncertain tax
positions will decrease by EUR 30.0 million within the
next 12 months. The estimated changes to the liability for
uncertain tax positions within the next 12 months are
mainly due to expected settlements and expiration of statute of
limitations. For the years 2004 and 2005, the applicable tax
rate of taxable profits is subject to tax audits in certain tax
jurisdictions.
The Company is subject to tax audits in its major tax
jurisdictions for years from and including 2007 onwards in the
Netherlands, for years from and including 2004 onwards for Hong
Kong, and for years from and including 2001 onwards for the
United States. In the course of such audits, local tax
authorities may challenge the positions taken by the Company.
In 2009, ASML recognized tax expense of approximately
EUR 40.0 million or approximately 47.5 percent of
loss before taxes attributable to the reversal of the 2007
Royalty Box benefit which had an unfavorable impact on the
effective tax rate for 2009. In 2009, based on a tax law change
effective January 1, 2010, ASML decided to reverse the
Royalty Box benefits of 2007, as management at that time
expected that a clean start of the Innovation Box (which under
Dutch law replaced the Royalty Box as of January 1,
2010) in 2010 would result in a higher cumulative benefit
for ASML.
In December 2010, ASML reached agreement with the Dutch fiscal
authorities regarding the application of the “Innovation
Box”, a facility under Dutch corporate tax law pursuant to
which income associated with R&D is partially exempted from
taxation. This tax ruling has retroactive effect to
January 1, 2007 and is valid through December 31,
2016. Thereafter the validity of this ruling may be extended or
this ruling may be adapted depending on a possible change of
circumstances. While the Company’s domestic nominal rate
was 25.5 percent in 2010, for the ASML entities in the
Dutch fiscal group, the tax rate is effectively reduced as a
result of the Innovation Box effect for current and prior years.
As a result certain Dutch deferred tax assets, Dutch deferred
tax liabilities and other taxes will be realized in future years
against the reduced effective tax rate resulting from the
Innovation Box, the effect amounts to EUR 27.8 million
(gain) or 2.4 percent of income before income taxes.
In 2010, ASML recognized tax benefit of
EUR 22.2 million or 1.9 percent of income before
income taxes mainly attributable to the application of the
Innovation Box for prior years, which had a favorable effect on
the effective tax rate for 2010 (EUR 34.0 million or
2.9 percent). The Innovation Box effect for the current
year amounts to EUR 83.5 million (gain) or
7.2 percent of income before income taxes.
At the end of 2010, the Dutch government enacted a tax rate
reduction from 25.5 percent in 2010 to 25.0 percent in
2011. As a result, the value of certain Dutch deferred tax
assets and liabilities was reduced by EUR 0.1 million
(loss).
ASML STATUTORY ANNUAL REPORT 2010
76
7. Earnings
per share
The earnings per share (EPS) data have been calculated in
accordance with the following schedule:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands, except per share data)
|
|
EUR
|
|
|
EUR
|
|
|
Net income (loss)
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding (after
deduction of treasury stock) during the year
|
|
|
432,615
|
|
|
|
435,146
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per ordinary share
|
|
|
(0.19
|
)
|
|
|
2.26
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
432,615
|
|
|
|
435,146
|
|
|
Plus shares applicable to:
|
|
|
|
|
|
|
|
|
|
Stock options/Restricted
shares1
|
|
|
—
|
|
|
|
3,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares
|
|
|
—
|
|
|
|
3,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average number of shares
|
|
|
432,615
|
|
|
|
438,978
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share1
|
|
|
(0.19
|
)
|
|
|
2.24
|
|
|
|
|
|
| 1
|
The calculation of diluted net
income (loss) per ordinary share assumes the exercise of options
issued under ASML stock option plans and the issue of shares
under ASML share plans for periods in which exercises or issues
would have a dilutive effect. The calculation of diluted net
income (loss) per ordinary share does not assume exercise of
such options or issue of shares when such exercises or issue
would be anti-dilutive.
|
ASML STATUTORY ANNUAL REPORT 2010
77
8. Property,
Plant and Equipment
Property, plant and equipment consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land, buildings
|
|
|
Machinery
|
|
|
|
|
|
Furniture,
|
|
|
|
|
|
|
|
and
|
|
|
and
|
|
|
Leasehold
|
|
|
fixtures and other
|
|
|
|
|
|
|
|
constructions
|
|
|
equipment
|
|
|
improvements
|
|
|
equipment
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
355,531
|
|
|
|
493,679
|
|
|
|
153,824
|
|
|
|
288,297
|
|
|
|
1,291,331
|
|
|
Effect of change in accounting
policy1
|
|
|
54,454
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
54,454
|
|
|
|
|
|
|
Balance, January 1,
20091
|
|
|
409,985
|
|
|
|
493,679
|
|
|
|
153,824
|
|
|
|
288,297
|
|
|
|
1,345,785
|
|
|
Additions
|
|
|
74,135
|
|
|
|
179,050
|
|
|
|
3,484
|
|
|
|
7,258
|
|
|
|
263,927
|
|
|
Disposals
|
|
|
(2,247
|
)
|
|
|
(127,152
|
)
|
|
|
(2,403
|
)
|
|
|
(9,457
|
)
|
|
|
(141,259
|
)
|
|
Effect of exchange rates
|
|
|
360
|
|
|
|
(2,162
|
)
|
|
|
61
|
|
|
|
386
|
|
|
|
(1,355
|
)
|
|
|
|
|
|
Balance, December 31,
20091
|
|
|
482,233
|
|
|
|
543,415
|
|
|
|
154,966
|
|
|
|
286,484
|
|
|
|
1,467,098
|
|
|
Additions
|
|
|
38,528
|
|
|
|
244,123
|
|
|
|
31,015
|
|
|
|
29,129
|
|
|
|
342,795
|
|
|
Disposals
|
|
|
(2,876
|
)
|
|
|
(197,462
|
)
|
|
|
(1,103
|
)
|
|
|
(1,844
|
)
|
|
|
(203,285
|
)
|
|
Effect of exchange rates
|
|
|
8,970
|
|
|
|
19,177
|
|
|
|
757
|
|
|
|
2,475
|
|
|
|
31,379
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
526,855
|
|
|
|
609,253
|
|
|
|
185,635
|
|
|
|
316,244
|
|
|
|
1,637,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
53,909
|
|
|
|
353,468
|
|
|
|
101,102
|
|
|
|
231,931
|
|
|
|
740,410
|
|
|
Effect of change in accounting
policy1
|
|
|
16,370
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,370
|
|
|
|
|
|
|
Balance, January 1,
20091
|
|
|
70,279
|
|
|
|
353,468
|
|
|
|
101,102
|
|
|
|
231,931
|
|
|
|
756,780
|
|
|
Depreciation1
|
|
|
24,041
|
|
|
|
67,041
|
|
|
|
15,851
|
|
|
|
27,568
|
|
|
|
134,501
|
|
|
Impairment charges
|
|
|
—
|
|
|
|
11,185
|
|
|
|
155
|
|
|
|
4,556
|
|
|
|
15,896
|
|
|
Disposals
|
|
|
(2,247
|
)
|
|
|
(88,815
|
)
|
|
|
(2,191
|
)
|
|
|
(9,298
|
)
|
|
|
(102,551
|
)
|
|
Effect of exchange rates
|
|
|
(30
|
)
|
|
|
41
|
|
|
|
12
|
|
|
|
235
|
|
|
|
258
|
|
|
|
|
|
|
Balance, December 31,
20091
|
|
|
92,043
|
|
|
|
342,920
|
|
|
|
114,929
|
|
|
|
254,992
|
|
|
|
804,884
|
|
|
Depreciation
|
|
|
28,125
|
|
|
|
83,397
|
|
|
|
14,919
|
|
|
|
21,548
|
|
|
|
147,989
|
|
|
Impairment charges
|
|
|
6,673
|
|
|
|
1,178
|
|
|
|
500
|
|
|
|
212
|
|
|
|
8,563
|
|
|
Disposals
|
|
|
(1,328
|
)
|
|
|
(78,663
|
)
|
|
|
(1,045
|
)
|
|
|
(1,696
|
)
|
|
|
(82,732
|
)
|
|
Effect of exchange rates
|
|
|
1,996
|
|
|
|
9,194
|
|
|
|
438
|
|
|
|
2,324
|
|
|
|
13,952
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
127,509
|
|
|
|
358,026
|
|
|
|
129,741
|
|
|
|
277,380
|
|
|
|
892,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
390,190
|
|
|
|
200,495
|
|
|
|
40,037
|
|
|
|
31,492
|
|
|
|
662,214
|
|
|
December 31, 2010
|
|
|
399,346
|
|
|
|
251,227
|
|
|
|
55,894
|
|
|
|
38,864
|
|
|
|
745,331
|
|
|
|
|
|
| 1
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
As of December 31, 2010, the carrying amount includes
assets under construction for land, buildings and constructions
of EUR 31.8 million (2009: EUR 5.9 million),
machinery and equipment of EUR 16.3 million (2009:
EUR 30.4 million), leasehold improvements of
EUR 29.1 million (2009: EUR 0.5 million) and
furniture, fixtures and other equipment of
EUR 6.9 million (2009: EUR 1.9 million).
As of December 31, 2010, the carrying amount of land
amounts to EUR 36.1 million (2009:
EUR 34.5 million).
The majority of the additions and disposals in 2010 and 2009
relate to machinery and equipment (including prototypes,
demonstration and training systems). These systems are similar
to those that ASML sells in its ordinary course of business. The
systems are capitalized under property, plant and equipment
because they are held for own use, for rental and for evaluation
purposes, and at the time they are placed in service, they are
expected to be used for a period longer than one year. These
systems are recorded at cost and depreciated over their expected
useful life. From the time that these assets are no longer held
for use but intended for sale in the ordinary course of
business, they are reclassified from property, plant and
equipment to inventory at the lower of their carrying value or
fair market value. Since the transfers between inventory and
property, plant and equipment are non-cash events, these are not
reflected in the consolidated cash flow statement. An amount of
EUR 214.1 million (2009: EUR 159.0 million)
of the additions relates to non-cash transfers from inventory
and an amount of EUR 110.4 million (2009:
EUR 27.8 million) of the disposals relates to non-cash
transfers to inventory. When sold, the proceeds and cost of
these
ASML STATUTORY ANNUAL REPORT 2010
78
systems are recorded as net sales and cost of sales,
respectively, identical to the treatment of other sales
transactions. The cost of sales for these systems includes the
inventory value and the additional costs of refurbishing
(materials and labor).
The impairment charges recorded in 2010 mainly related to
buildings and constructions (EUR 6.7 million). The Company
recorded impairment charges with respect to several technical
infrastructure items which will cease to be used before the end
of the expected economic life due to technical changes relating
to NXE (EUV) development. The impairment charges were determined
based on the difference between the assets’ value in use
(being EUR 0.4 million) and their carrying amount.
The impairment charges recorded in 2009 mainly related to
machinery and equipment (EUR 11.2 million). The Company
impaired certain non-leading-edge systems and machinery and
equipment that have ceased to be used or will cease to be used
during the expected economic life, and which management no
longer believes can be sold because of lack of demand for these
products. The impairment charges were determined based on the
difference between the assets’ estimated fair value (being
EUR 7.0 million) and their carrying amount. In
determining the fair value 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 semiconductor market conditions and the Company’s sales
and cost expectations which are consistent with the plans and
estimates that it uses to manage its business.
As of December 31, 2010, the carrying amount of machinery
and equipment includes an amount of EUR 63.0 million
with respect to evaluation and rental systems (2009:
EUR 73.9 million).
During 2010, the Company recorded impairment charges of
EUR 8.6 million (2009: EUR 15.9 million) of
which it recorded EUR 7.3 million (2009:
EUR 2.1 million) in cost of sales,
EUR 0.7 million (2009: EUR 9.1 million) in
R&D costs and EUR 0.6 million (2009:
EUR 4.7 million) in SG&A costs.
During 2010, the Company recorded depreciation charges of
EUR 148.0 million (2009: EUR 134.5 million)
of which it recorded EUR 80.4 million (2009:
EUR 83.6 million) in cost of sales,
EUR 20.1 million (2009 EUR 25.3 million) in
R&D costs and EUR 47.5 million (2009:
EUR 25.6 million) in SG&A costs.
Special Purpose
Entity
The carrying amount of land, buildings and constructions
includes an amount of EUR 35.2 million (2009:
EUR 36.7 million) relating to the Company’s
headquarters in Veldhoven, the Netherlands, which is owned by
Koppelenweg II B.V., a Special Purpose Entity
(‘SPE’).
In 2003, the Company moved to its current Veldhoven
headquarters. The Company is leasing these headquarters for a
period of 15 years (from 2003) from an entity
(“lessor”) that was incorporated by a syndicate of
three banks (“shareholders”) solely for the purpose of
leasing this building. The lessor’s shareholders equity
amounts to EUR 1.9 million and did not change over
since 2003.
The shareholders each granted a loan of
EUR 11.6 million and a fourth bank granted a loan of
EUR 12.3 million (EUR 47.1 million in total) to
the parent of the lessor. ASML provided the parent of 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 a price equal
to the book value of the assets. The total assets of the lessor
entity amounted to EUR 54.5 million at inception of
the lease. The entity is determined to be a SPE because the
equity investors do not have sufficient equity at risk for the
legal entity to finance its activities without sufficient
additional subordinated support.
The primary purpose for which the SPE was created was to provide
ASML with use of the building for 15 years, where ASML does
not retain substantially all the risks and rewards from changes
in value of the building. The main activities of the entity are
to rent, re-market and ultimately sell the building that is
owned by the SPE. The economic performance of the SPE is most
significantly impacted by the ability of the lessee (ASML) to
exercise the call option at any time during the lease term, and
thus the Company could potentially benefit from increases in the
fair value of the building.
While the debt holders have an interest, and may absorb losses,
and the equity holders have an interest and may receive
benefits, they do not have the power to direct activities that
most significantly impact the entity’s economic performance
and therefore, cannot be the primary beneficiary. Through the
pre-determined price of the call option ASML has the power over
the SPE, therefore only ASML meets both the power and
losses/benefit criterion and consolidates the SPE.
ASML STATUTORY ANNUAL REPORT 2010
79
9.
Goodwill
Changes in goodwill are summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
Balance, January 1
|
|
|
139,626
|
|
|
|
139,636
|
|
|
Effect of exchange rates
|
|
|
10
|
|
|
|
10,435
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
|
139,636
|
|
|
|
150,071
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount, December 31
|
|
|
139,636
|
|
|
|
150,071
|
|
|
|
The goodwill relates to the acquisition of Brion in March 2007.
Goodwill is tested annually for impairment on September 30.
For the purpose of impairment testing, goodwill is allocated to
the cash-generating unit Brion. The recoverable amount of the
cash-generating unit Brion is calculated based on the value in
use. These calculations use pre-tax discounted cash flow
projections based on a strategic plan approved by management.
The material assumptions used by management for the value in use
calculation of the cash-generating unit (based on past
experience) are:
|
|
| •
|
The pre-tax cash flow projections for the coming five years are
based on a significant growth scenario, reflecting the
start-up
nature of Brion. Projections are built
bottom-up,
using estimates for revenue, gross profit, R&D costs and
SG&A costs.
|
| •
|
Brion would reach maturity in the final year of this five year
period and grow at a weighted average growth rate of three
percent from then onwards, which Management believes is a
reasonable estimate that does not exceed the long-term
historical average growth rate for the lithography business in
which Brion operates.
|
| •
|
A pre-tax discount rate of 18.7 percent representing
Brion’s weighted average cost of capital (WACC) based on
markets participants’ view, was determined using an
adjusted version of the Capital Asset Pricing Model. The
discount rate decreased compared to prior year, reflecting the
recovery of the semiconductor equipment industry.
|
ASML performed sensitivity analyses on each of these assumptions
and concluded that any reasonably likely change in these
assumptions would not have caused the carrying amount of Brion
to exceed its value in use. A discussion of the sensitivity
analysis is set out below:
|
|
| •
|
Estimated cash flows associated with Brion’s operations
after the coming five year period accounted for approximately
58.6 percent of the cash-generating unit’s value in
use, based on the assumed three percent growth rate. Assuming
Management’s estimate of cash flows for the five year
period is unchanged; growth in subsequent years could reduce to
zero percent without Brion’s value in use falling below its
carrying amount of EUR 209.3 million. Management does
not believe, however, that such a long-term no growth scenario
is reasonably likely, given that the long-term historical growth
rate of the lithography industry exceeds three percent.
|
| •
|
The estimated cash flows associated with Brion’s initial
five year period including the estimated cash flows after the
initial five year period, could be reduced by up to
23.8 percent without causing the fair value of Brion to
decrease below its carrying amount of
EUR 209.3 million. Management does not believe that
such a decline is reasonably likely based on Management’s
future expectations on the development of these cash flows.
|
| •
|
The pre-tax discount rate used in the value in use calculation
could increase from 18.7 percent to 22.6 percent
without causing the value in use of Brion to decrease below its
carrying amount.
|
ASML STATUTORY ANNUAL REPORT 2010
80
10. Other
intangible assets
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
Intellectual
|
|
|
Developed
|
|
|
Customer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenditures
|
|
|
property
|
|
|
Technology
|
|
|
relationships
|
|
|
In-process R&D
|
|
|
Other
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2009
|
|
|
505,307
|
|
|
|
47,250
|
|
|
|
24,494
|
|
|
|
8,263
|
|
|
|
21,229
|
|
|
|
2,195
|
|
|
|
608,738
|
|
|
Additions
|
|
|
161,965
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
161,965
|
|
|
Effect of exchange rates
|
|
|
(207
|
)
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
(204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
667,065
|
|
|
|
47,250
|
|
|
|
24,495
|
|
|
|
8,263
|
|
|
|
21,230
|
|
|
|
2,196
|
|
|
|
770,499
|
|
|
Additions
|
|
|
55,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,388
|
|
|
Effect of exchange rates
|
|
|
1,903
|
|
|
|
—
|
|
|
|
1,388
|
|
|
|
470
|
|
|
|
1,587
|
|
|
|
35
|
|
|
|
5,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
724,356
|
|
|
|
47,250
|
|
|
|
25,883
|
|
|
|
8,733
|
|
|
|
22,817
|
|
|
|
2,231
|
|
|
|
831,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2009
|
|
|
259,925
|
|
|
|
43,577
|
|
|
|
8,406
|
|
|
|
1,894
|
|
|
|
3,773
|
|
|
|
1,633
|
|
|
|
319,208
|
|
|
Amortization
|
|
|
89,635
|
|
|
|
3,436
|
|
|
|
4,019
|
|
|
|
1,075
|
|
|
|
5,471
|
|
|
|
254
|
|
|
|
103,890
|
|
|
Impairment charges
|
|
|
1,029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,029
|
|
|
Effect of exchange rates
|
|
|
(183
|
)
|
|
|
—
|
|
|
|
(157
|
)
|
|
|
(42
|
)
|
|
|
(163
|
)
|
|
|
(19
|
)
|
|
|
(564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
350,406
|
|
|
|
47,013
|
|
|
|
12,268
|
|
|
|
2,927
|
|
|
|
9,081
|
|
|
|
1,868
|
|
|
|
423,563
|
|
|
Amortization
|
|
|
106,690
|
|
|
|
211
|
|
|
|
4,052
|
|
|
|
1,084
|
|
|
|
5,876
|
|
|
|
108
|
|
|
|
118,021
|
|
|
Impairment charges
|
|
|
10,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,975
|
|
|
Effect of exchange rates
|
|
|
249
|
|
|
|
—
|
|
|
|
723
|
|
|
|
174
|
|
|
|
509
|
|
|
|
18
|
|
|
|
1,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
468,320
|
|
|
|
47,224
|
|
|
|
17,043
|
|
|
|
4,185
|
|
|
|
15,466
|
|
|
|
1,994
|
|
|
|
554,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
316,659
|
|
|
|
237
|
|
|
|
12,227
|
|
|
|
5,336
|
|
|
|
12,149
|
|
|
|
328
|
|
|
|
346,936
|
|
|
December 31, 2010
|
|
|
256,036
|
|
|
|
26
|
|
|
|
8,840
|
|
|
|
4,548
|
|
|
|
7,351
|
|
|
|
237
|
|
|
|
277,038
|
|
|
|
Development expenditures mainly relate to the capitalized
expenditures regarding the Company’s core programs:
immersion, double patterning and EUV.
Intellectual property relates to licenses and patents purchased
from third parties. Developed technology, customer
relationships, in-process R&D and other intangible assets
were obtained from the acquisition of Brion.
The impairment charges were determined based on the difference
between the assets’ recoverable amount (being
EUR 0.0 million) and their carrying amount. In
determining 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 semiconductor market conditions and our sales and
cost expectations which are consistent with the plans and
estimates that it uses to manage its business.
During 2010, we recorded amortization charges of
EUR 118.0 million (2009: EUR 103.9 million)
which were fully recorded in cost of sales in 2010 and 2009.
During 2010, we did not capitalize borrowing costs (2009:
EUR 12.1 million). The capitalization rate used in
determining the borrowing costs in 2009 was 5.75 percent.
ASML STATUTORY ANNUAL REPORT 2010
81
Estimated amortization expenses relating to intangible assets
for the next five years and thereafter are as follows:
| |
|
|
|
|
|
|
|
(in thousands)
|
|
EUR
|
|
|
2011
|
|
|
112,927
|
|
|
2012
|
|
|
97,570
|
|
|
2013
|
|
|
65,254
|
|
|
2014
|
|
|
1,095
|
|
|
2015
|
|
|
186
|
|
|
Thereafter
|
|
|
6
|
|
|
|
|
|
|
|
|
Total
|
|
|
277,038
|
|
|
|
In 2010, the Company reassessed the estimated useful life of its
capitalized development expenditures, which resulted in a change
in accounting estimate. The impact of this change in accounting
estimate on the consolidated income statement and per share
amounts was as follows:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2010
|
|
|
|
|
|
(in thousands, except per share data)
|
|
EUR
|
|
|
%
|
|
|
Operating income
|
|
|
113,488
|
|
|
|
9.8%
|
|
|
Net income
|
|
|
96,945
|
|
|
|
9.8%
|
|
|
Basic net income per ordinary share
|
|
|
0.22
|
|
|
|
9.9%
|
|
|
Diluted net income per ordinary share
|
|
|
0.22
|
|
|
|
9.9%
|
|
|
|
11. Finance
receivables
The finance receivables consist of leases that transfer
ownership of the systems to the lessee by the end of the lease
term. The average lease term is three years. The following table
lists the components of the finance receivables as of
December 31, 2010:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Finance receivables, gross
|
|
|
22,444
|
|
|
|
48,398
|
|
|
Unearned interest
|
|
|
(891
|
)
|
|
|
(6,845
|
)
|
|
|
|
|
|
Finance receivables, net
|
|
|
21,553
|
|
|
|
41,553
|
|
|
Current portion of finance receivables, gross
|
|
|
22,444
|
|
|
|
16,594
|
|
|
Current portion of unearned interest
|
|
|
(891
|
)
|
|
|
(3,946
|
)
|
|
|
|
|
|
Non-current portion of finance receivables, net
|
|
|
—
|
|
|
|
28,905
|
|
|
|
At December 31, 2010, the finance receivables due for
payment in each of the next five years and thereafter are as
follows:
| |
|
|
|
|
|
|
|
(in thousands)
|
|
EUR
|
|
|
2011
|
|
|
16,594
|
|
|
2012
|
|
|
18,898
|
|
|
2013
|
|
|
12,906
|
|
|
2014
|
|
|
—
|
|
|
2015
|
|
|
—
|
|
|
Thereafter
|
|
|
—
|
|
|
|
|
|
|
Total
|
|
|
48,398
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
82
12. Financial
instruments by category
The accounting policies for financial instruments have been
applied to the line items below and represent the fair value of
these financial instruments:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fair value
|
|
|
Derivatives for
|
|
|
|
|
|
|
|
|
|
|
through
|
|
|
which hedge
|
|
|
Loans
|
|
|
|
|
|
|
|
profit
|
|
|
accounting
|
|
|
and
|
|
|
|
|
As of December 31, 2009
|
|
or loss
|
|
|
is applied
|
|
|
receivables
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Assets as per statement of financial position date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
19,981
|
|
|
|
83,403
|
|
|
|
—
|
|
|
|
103,384
|
|
|
Accounts receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
377,439
|
|
|
|
377,439
|
|
|
Finance receivables
|
|
|
—
|
|
|
|
—
|
|
|
|
21,553
|
|
|
|
21,553
|
|
|
Other non-current and current assets
|
|
|
—
|
|
|
|
—
|
|
|
|
64,164
|
|
|
|
64,164
|
|
|
Cash and cash equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
1,037,074
|
|
|
|
1,037,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19,981
|
|
|
|
83,403
|
|
|
|
1,500,230
|
|
|
|
1,603,614
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fair value
|
|
|
Derivatives for
|
|
|
|
|
|
|
|
|
|
|
through
|
|
|
which hedge
|
|
|
Other
|
|
|
|
|
|
|
|
profit
|
|
|
accounting
|
|
|
financial
|
|
|
|
|
As of December 31, 2009
|
|
or loss
|
|
|
is applied
|
|
|
liabilities
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Liabilities as per statement of financial position date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt1,2
|
|
|
—
|
|
|
|
—
|
|
|
|
704,963
|
|
|
|
704,963
|
|
|
Derivative financial instruments
|
|
|
923
|
|
|
|
16,548
|
|
|
|
—
|
|
|
|
17,471
|
|
|
Accrued and other liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
322,939
|
|
|
|
322,939
|
|
|
Accounts payable
|
|
|
—
|
|
|
|
—
|
|
|
|
206,226
|
|
|
|
206,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
923
|
|
|
|
16,548
|
|
|
|
1,234,128
|
|
|
|
1,251,599
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
83
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fair value
|
|
|
Derivatives for
|
|
|
|
|
|
|
|
|
|
|
through
|
|
|
which hedge
|
|
|
Loans
|
|
|
|
|
|
|
|
profit
|
|
|
accounting
|
|
|
and
|
|
|
|
|
As of December 31, 2010
|
|
or loss
|
|
|
is applied
|
|
|
receivables
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Assets as per statement of financial position date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
1,300
|
|
|
|
94,880
|
|
|
|
—
|
|
|
|
96,180
|
|
|
Accounts receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
1,123,534
|
|
|
|
1,123,534
|
|
|
Finance receivables
|
|
|
—
|
|
|
|
—
|
|
|
|
41,553
|
|
|
|
41,553
|
|
|
Other non-current and current assets
|
|
|
—
|
|
|
|
—
|
|
|
|
83,060
|
|
|
|
83,060
|
|
|
Cash and cash equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
1,949,834
|
|
|
|
1,949,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,300
|
|
|
|
94,880
|
|
|
|
3,197,981
|
|
|
|
3,294,161
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fair value
|
|
|
Derivatives for
|
|
|
|
|
|
|
|
|
|
|
through
|
|
|
which hedge
|
|
|
Other
|
|
|
|
|
|
|
|
profit
|
|
|
accounting
|
|
|
financial
|
|
|
|
|
As of December 31, 2010
|
|
or loss
|
|
|
is applied
|
|
|
liabilities
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Liabilities as per statement of financial position date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt1,2
|
|
|
—
|
|
|
|
—
|
|
|
|
705,731
|
|
|
|
705,731
|
|
|
Derivative financial instruments
|
|
|
20,272
|
|
|
|
14,626
|
|
|
|
—
|
|
|
|
34,898
|
|
|
Accrued and other liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
597,861
|
|
|
|
597,861
|
|
|
Accounts payable
|
|
|
—
|
|
|
|
—
|
|
|
|
555,397
|
|
|
|
555,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,272
|
|
|
|
14,626
|
|
|
|
1,858,989
|
|
|
|
1,893,887
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands.
|
|
|
|
The comparative figures for 2009
have been adjusted to reflect this change in accounting policy.
See Note 3.
|
|
2
|
|
Long-term debt includes the
Company’s Eurobond. Because the Eurobond serves as hedged
item in a fair value hedge relationship, the carrying amount is
only adjusted for fair value changes in interest rate swaps. See
note 19.
|
See Note 4 for the fair value measurement hierarchy.
The carrying amounts of the accounts receivable and other assets
approximate their fair value.
There are no significant concentrations of credit risk for loans
and receivables designated at fair value through profit or loss
as of December 31, 2010. The amounts reflected above
represent the Company’s maximum exposure to credit risk for
such loans and receivables.
Credit quality of
financial assets
The credit quality of financial assets that are neither past due
nor impaired can be assessed by reference to the following:
Financial instruments contain an element of risk that the
counterparties are unable to meet their obligations. This
financial credit risk is monitored and minimized per type of
financial instrument by limiting ASML’s counterparties to a
sufficient number of major financial institutions. Also, in
response to the increased volatility of the financial markets, a
material part of the cash and cash equivalents has been invested
in government related securities. ASML does not expect the
counterparties to default given their high credit quality. The
maximum exposure to credit risk at the reporting date is the
fair value of the financial assets in the statement of financial
position.
ASML’s customers consist of IC manufacturers located
throughout the world. ASML performs ongoing credit evaluations
of its customers’ financial condition. ASML regularly
reviews if an allowance for doubtful debts is needed by
considering factors such as historical payment experience,
credit quality, and age of the accounts receivable balances, and
current economic conditions that may affect a customer’s
ability to pay. In response to the increased volatility of the
financial markets, ASML has taken additional measures to
mitigate credit risk when considered appropriate by means of
e.g. down payments, letters of credit, and retention of
ownership (provisions in contracts). Retention of ownership
enables ASML to recover the systems in the event a customer
defaults on payment.
ASML STATUTORY ANNUAL REPORT 2010
84
13. Derivative
financial instruments
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
2010
|
|
|
|
|
As of December 31
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Interest rate swaps – cash flow hedges
|
|
|
—
|
|
|
|
3,326
|
|
|
|
—
|
|
|
|
3,091
|
|
|
Interest rate swaps – fair value hedges
|
|
|
81,811
|
|
|
|
—
|
|
|
|
93,347
|
|
|
|
—
|
|
|
Forward foreign exchange contracts – cash flow hedges
|
|
|
1,592
|
|
|
|
13,222
|
|
|
|
1,533
|
|
|
|
11,535
|
|
|
Forward foreign exchange contracts – other hedges (no
hedge accounting)
|
|
|
19,981
|
|
|
|
923
|
|
|
|
1,300
|
|
|
|
20,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
103,384
|
|
|
|
17,471
|
|
|
|
96,180
|
|
|
|
34,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less non-current portion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps – cash flow hedges
|
|
|
—
|
|
|
|
1,935
|
|
|
|
—
|
|
|
|
1,887
|
|
|
Interest rate swaps – fair value hedges
|
|
|
55,948
|
|
|
|
—
|
|
|
|
71,779
|
|
|
|
—
|
|
|
Forward foreign exchange contracts – cash flow hedges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current portion
|
|
|
55,948
|
|
|
|
1,935
|
|
|
|
71,779
|
|
|
|
1,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current portion
|
|
|
47,436
|
|
|
|
15,536
|
|
|
|
24,401
|
|
|
|
32,917
|
|
|
|
The fair value part of a hedging derivative that has a remaining
term of less or equal to 12 months is classified as current
asset or liability. When the fair value part of a hedging
derivative has a term of more than 12 months it is
classified as non-current.
No ineffectiveness was recognized in the income statement in
2010 arising from fair value hedges; EUR 0.4 million
ineffectiveness (loss) was recognized in the income statement in
2010 arising from cash flow hedges (2009:
EUR 0.0 million and EUR 10.7 million, loss,
from fair value hedges and cash flow hedges, respectively).
There was no ineffectiveness recognized in the income statement
in 2010 and 2009 arising from hedges of net investments in
foreign entities.
Currency
contracts
The notional principal amounts of the outstanding currency
contracts in the main currencies U.S. dollar and Japanese
yen at December 31, 2010 are U.S. dollar
222.6 million and Japanese yen 27.7 billion (2009:
U.S. dollar 152.9 million and Japanese yen
57.1 billion).
The hedged highly probable forecasted transactions denominated
in foreign currency are expected to occur at various dates
during the coming two years. Gains and losses recognized in the
hedging reserve in equity on forward contracts as of
December 31, 2010 are recognized in the income statement in
the period or periods during which the hedged forecasted
transaction affects the income statement.
We recognized a net amount of EUR 13.7 million loss
(2009: EUR 29.3 million gain) in the income statement
resulting from exchange differences including those arising on
financial instruments measured at fair value through profit or
loss.
Interest rate
swaps
The notional principal amounts of the outstanding interest rate
swap contracts as of December 31, 2010 were
EUR 641.5 million (2009: EUR 641.5 million).
14. Other
assets
The other non-current assets consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Advance payments to Zeiss
|
|
|
—
|
|
|
|
140,016
|
|
|
Compensation plan
assets1
|
|
|
8,520
|
|
|
|
9,626
|
|
|
Subordinated loan granted to lessor in respect of Veldhoven
headquarters2
|
|
|
5,445
|
|
|
|
5,445
|
|
|
Other
|
|
|
2,105
|
|
|
|
4,516
|
|
|
|
|
|
|
Total other non-current assets
|
|
|
16,070
|
|
|
|
159,603
|
|
|
|
|
|
|
|
1
|
|
For further details on compensation
plan refer to Note 22.
|
|
2
|
|
For further details on loan granted
to lessor in respect of Veldhoven headquarters refer to
Note 23.
|
ASML STATUTORY ANNUAL REPORT 2010
85
Zeiss is the Company’s sole supplier of lenses. The
non-current part of advance payments to Zeiss relates to
payments made to support the Zeiss investments for the
ASML’s EUV program, which are expected to be repaid through
EUV lens deliveries more than 12 months after statement of
financial position date.
The other current assets consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Advance payments to Zeiss
|
|
|
73,759
|
|
|
|
65,821
|
|
|
VAT
|
|
|
25,211
|
|
|
|
35,065
|
|
|
Prepaid expenses
|
|
|
13,466
|
|
|
|
20,309
|
|
|
Other receivables
|
|
|
30,802
|
|
|
|
41,298
|
|
|
Other
|
|
|
2,706
|
|
|
|
1,252
|
|
|
|
|
|
|
Total other current assets
|
|
|
145,944
|
|
|
|
163,745
|
|
|
|
From time to time, Zeiss receives non-interest bearing advance
payments from the Company that assist in financing Zeiss’
work-in-process
and thereby secure lens deliveries to the Company. Amounts owed
under these advance payments to Zeiss are repaid through lens
deliveries over the next 12 months.
The carrying amount of the other non-current and current assets
approximates the fair value. The other non-current and current
assets do not contain impaired assets.
15.
Inventories
Inventories consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Raw materials
|
|
|
175,045
|
|
|
|
248,969
|
|
|
Work-in-process
|
|
|
799,390
|
|
|
|
1,083,932
|
|
|
Finished products
|
|
|
202,544
|
|
|
|
353,514
|
|
|
|
|
|
|
Total inventories, gross
|
|
|
1,176,979
|
|
|
|
1,686,415
|
|
|
Provision for obsolescence and/or lower market value
|
|
|
(190,638
|
)
|
|
|
(186,343
|
)
|
|
|
|
|
|
Total inventories, net
|
|
|
986,341
|
|
|
|
1,500,072
|
|
|
|
During 2010, the Company changed its presentation of the
allowance for inventory obsolescence relating to the valuation
of defect lenses. In the past, defect lenses were valued at
standard cost price with the repair costs included in the
allowance for inventory obsolescence. From January 1, 2010,
repair costs are included in the standard cost price of the
defect lenses as this better reflects the value of the defect
lens. The comparative figures were adjusted to reflect this
change in presentation. For the year ended December 31,
2010 this resulted in a decrease of EUR 18.8 million
(2009: EUR 20.1 million) in both gross inventories and
a similar decrease in the provision for obsolescence; operating
income, net income and per-share amounts were not affected by
this change in presentation.
A summary of activity in the provision for obsolescence is as
follows:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Balance at beginning of year
|
|
|
(167,353
|
)
|
|
|
(190,638
|
)
|
|
Addition of the year
|
|
|
(86,636
|
)
|
|
|
(61,316
|
)
|
|
Effect of exchange rates
|
|
|
(260
|
)
|
|
|
(4,148
|
)
|
|
Release of the provision
|
|
|
67,155
|
|
|
|
32,814
|
|
|
Utilization of the provision
|
|
|
17,705
|
|
|
|
28,554
|
|
|
Transfers from property, plant and equipment
|
|
|
(21,249
|
)
|
|
|
8,391
|
|
|
|
|
|
|
Balance at end of year
|
|
|
(190,638
|
)
|
|
|
(186,343
|
)
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
86
In 2010, the addition for the year is recorded in cost of sales
for an amount of EUR 54.6 million and R&D costs
for an amount of EUR 6.7 million (2009: cost of sales
EUR 68.1 million and R&D costs
EUR 18.5 million). The 2010 addition for the year
mainly relates to certain obsolete parts due to technological
developments and design changes. In 2009, the addition was
mainly due to a reassessment by the Company of expected future
demand based on the unexpected customers’ response to the
financial and economic crisis.
In 2010 ASML released EUR 32.8 million from the
provision for obsolete inventory as a result of a subsequent
increase in net realizable value (2009:
EUR 67.2 million).
The cost of inventories recognized as expense and included in
cost of sales amounted to EUR 1.9 billion (2009:
EUR 0.7 billion).
16. Accounts
receivable
The accounts receivable consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Accounts receivable, gross
|
|
|
380,678
|
|
|
|
1,125,479
|
|
|
Allowance for doubtful debts
|
|
|
(3,239
|
)
|
|
|
(1,945
|
)
|
|
|
|
|
|
Accounts receivable, net
|
|
|
377,439
|
|
|
|
1,123,534
|
|
|
|
The carrying amount of the accounts receivable approximates the
fair value. The maximum exposure to credit risk at
December 31, 2010 is the fair value of the accounts
receivable mentioned above. ASML has taken additional measures
to mitigate credit risk when considered appropriate by means of
e.g. down payments, letters of credit and retention of ownership
provisions in contracts, which are intended to enable ASML to
recover the systems in the event a customer defaults on payment.
The main part of the carrying value of accounts receivable
consists of euro balances.
Accounts receivable are impaired and provided for on an
individual basis. As of December 31, 2010, accounts
receivable of EUR 334.3 million (2009:
EUR 46.1 million) were past due but not impaired.
These balances are still considered to be recoverable because
they relate to customers for whom there is no recent history of
default and there has not been a significant change in credit
quality. The table below shows the ageing analysis of the
accounts receivable that are up to three months past due and
over three months past due. Accounts receivable are past due
when the payment term has expired.
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
|
Up to three months past due
|
|
|
41,474
|
|
|
|
316,727
|
|
|
Over three months past due
|
|
|
4,631
|
|
|
|
17,538
|
|
|
|
|
|
|
Total
|
|
|
46,105
|
|
|
|
334,265
|
|
|
|
ASML provided extended payment terms to some of its customers.
The average days outstanding increased from 87 days in 2009
to 91 days in 2010.
Movements in the allowance for doubtful debts are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Balance, January 1
|
|
|
(1,430
|
)
|
|
|
(3,239
|
)
|
|
Utilization of the provision
|
|
|
80
|
|
|
|
38
|
|
|
(Addition) Release for the
year1
|
|
|
(1,889
|
)
|
|
|
1,256
|
|
|
|
|
|
|
Balance, December 31
|
|
|
(3,239
|
)
|
|
|
(1,945
|
)
|
|
|
|
|
|
|
1
|
|
(Addition) Release for the year is
recorded in cost of sales.
|
ASML STATUTORY ANNUAL REPORT 2010
87
17. Cash and cash
equivalents
Cash and cash equivalents at December 31, 2010 include
short-term deposits of EUR 1,644.9 million (2009:
EUR 652.3 million), investments in money market funds
of EUR 203.9 million (2009:
EUR 302.8 million) and interest-bearing bank accounts
of EUR 101.0 million (2009:
EUR 82.0 million).
Cash and cash equivalents have insignificant interest rate risk
and remaining maturities of three months or less at the date of
acquisition. No further restrictions on usage of cash and cash
equivalents exist. The carrying amount of these assets
approximates their fair value.
18.
Equity
Share
Capital
ASML’s authorized share capital amounts to
EUR 126,000,200 and is divided into:
|
|
| •
|
3,150,005,000 cumulative preference shares with a nominal value
of EUR 0.02 each;
|
| •
|
700,000,000 ordinary shares with a nominal value of
EUR 0.09 each; and
|
| •
|
10,000 ordinary shares with a nominal value of EUR 0.01
each.
|
Currently, only 436,592,972 ordinary shares with a nominal value
of EUR 0.09 each are outstanding and fully paid in. The
number of issued shares was 444,480,095, which includes the
number of repurchased (“treasury”) shares of 7,887,123.
Our Board of Management has the power to issue shares if and to
the extent 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).
However, the Supervisory Board must approve any issuance of
shares.
Ordinary
shares
At ASML’s Annual General Meeting of Shareholders, held on
March 24, 2010, the Board of Management was granted the
authorization to issue shares
and/or
rights thereto representing up to a maximum of 5.0 percent
of the Company’s issued share capital as of the date of
authorization, plus an additional 5.0 percent of the
Company’s issued share capital as of the date of
authorization that may be issued in connection with mergers and
acquisitions. At ASML’s Annual General Meeting of
Shareholders to be held on April 20, 2011, its 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 20, 2012.
Holders of ASML’s ordinary shares have a preemptive right
of subscription to any issuance of ordinary shares for cash,
which right may be limited 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 ASML’s Articles of
Association), the Board of Management has the power, with the
approval of the Supervisory Board, to limit or exclude the
preemptive rights of holders of ordinary shares. A designation
may be renewed. At ASML’s Annual General Meeting of
Shareholders, held on March 24, 2010, the Board of
Management was authorized, subject to the aforementioned
approval, to restrict or exclude preemptive rights of holders of
ordinary shares. At ASML’s Annual General Meeting of
Shareholders to be held on April 20, 2011, its shareholders
will be asked to grant this authority through October 20,
2012. At this Annual General Meeting of Shareholders, the
shareholders will be asked to grant authority to the Board of
Management to issue shares and options separately for a period
of 18 months.
The Company may repurchase its issued ordinary shares at any
time, subject to compliance with the requirements of Dutch law
and the Company’s Articles of Association. Although since
June 11, 2008, Dutch law provides that after such
repurchases the aggregate nominal value of the ordinary shares
held by ASML or a subsidiary must not exceed 50.0 percent
of the issued share capital, the Company’s current Articles
of Association provide that after such repurchases the aggregate
nominal value of the ordinary shares held by ASML or a
subsidiary must not exceed 10.0 percent of the issued share
capital. It will be proposed to the Annual General Meeting of
Shareholders to be held on April 20, 2011, to amend the
Articles of Association to refer to applicable Dutch law. Any
such repurchases are subject to the approval of the Supervisory
Board and the authorization of shareholders at ASML’s
Annual 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 24, 2011, up to a maximum of
three times 10.0 percent of the Company’s issued share
capital as of the date of authorization (March 24,
2010) at a price between the nominal value of the ordinary
shares purchased and 110.0 percent of the market price of
these securities on Euronext Amsterdam or NASDAQ. At the
Company’s Annual General Meeting of Shareholders to be held
on April 20, 2011, the Company’s shareholders will be
asked to extend this authority through October 20, 2012.
ASML STATUTORY ANNUAL REPORT 2010
88
Cumulative
preference shares
In 1998, the Company granted to the preference share foundation,
“Stichting Preferente Aandelen ASML” (the
“Foundation”) an option to acquire cumulative
preference shares in the capital of the Company (the
“Preference Share Option”). This option was amended
and extended in 2003 and 2007. A third amendment to the option
agreement between the Foundation and ASML became effective on
January 1, 2009, to clarify the procedure for the
repurchase and cancellation of the preference shares when issued.
The Foundation may exercise the Preference Share Option in
situations where, in the opinion of the Board of Directors of
the Foundation, the interests of the Company, its business or
the interests of its stakeholders are at stake. This may be the
case if a public bid for the ordinary shares of the Company has
been announced or has been made, or the justified expectation
exists that such a bid will be made without any agreement having
been reached in relation to such a bid with the Company. The
same may apply if one shareholder, or more shareholders acting
in concert, hold a substantial percentage of the issued ordinary
shares of the Company without making an offer or if, in the
opinion of the Board of Directors of the Foundation, the
(attempted) exercise of the voting rights by one shareholder or
more shareholders, acting in concert, is materially in conflict
with the interests of the Company, its business or its
stakeholders.
The objects of the Foundation are to look after the interests of
ASML and of the enterprises maintained by ASML and of the
companies which are affiliated in a group with ASML, in such way
that the interests of ASML, of those enterprises and of all
parties concerned are safeguarded in the best possible way, and
influences in conflict with these interests which might affect
the independence or the identity of ASML and those companies are
deterred to the best of the Foundation’s ability, and
everything related to the above or possibly conducive thereto.
The Foundation seeks to realize its objects by the acquiring and
holding of cumulative preference shares in the capital of ASML
and by exercising the rights attached to these shares,
particularly the voting rights attached to these shares.
The Preference Share Option gives the Foundation the right to
acquire a number of cumulative preference shares, provided that
the aggregate nominal value of such number of cumulative
preference shares shall not exceed the aggregate nominal value
of the ordinary shares that have been issued at the time of
exercise of the Preference Share Option for a subscription price
equal to their EUR 0.02 nominal value. Exercise of the
Preference Share Option could effectively dilute the voting
power of the outstanding ordinary shares by one-half. Only
one-fourth of the subscription price is payable at the time of
initial issuance of the cumulative preference shares.
Cancellation and repayment of the issued cumulative preference
shares by the Company requires the authorization by the General
Meeting of Shareholders of a proposal to do so by the Board of
Management approved by the Supervisory Board. If the Preference
Share Option is exercised and as a result cumulative preference
shares are issued, the Company, at the request of the
Foundation, will initiate the repurchase or cancellation of all
cumulative preference shares held by the Foundation as a result
of such issuance with repayment of the amount paid and exemption
from the obligation to pay up on the cumulative preference
shares. In that case the Company is obliged to effect the
repurchase and cancellation respectively as soon as possible.
If the Foundation will not request the Company to repurchase or
cancel all cumulative preference shares held by the Foundation
within 20 months after issuance of these shares, the
Company will be obliged to convene a General Meeting of
Shareholders in order to decide on a repurchase or cancellation
of these shares.
The Foundation is independent of the Company. The Board of
Directors of the Foundation comprises four independent voting
members from the Dutch business and academic communities:
Mr. R.E. Selman, Mr. M.W. den Boogert, Mr. J.M.
de Jong and Mr. A. Baan.
ASML STATUTORY ANNUAL REPORT 2010
89
Other
reserves
Changes in other reserves during 2009 and 2010 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reserves
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
Capitalized
|
|
|
|
|
|
|
|
Hedging
|
|
|
translation
|
|
|
development
|
|
|
|
|
|
|
|
reserve
|
|
|
reserve
|
|
|
expenditures
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Balance at January 1, 2009
|
|
|
(49,642
|
)
|
|
|
(104,531
|
)
|
|
|
262,838
|
|
|
|
108,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses on the hedge of a net investment
|
|
|
—
|
|
|
|
(13,116
|
)
|
|
|
—
|
|
|
|
(13,116
|
)
|
|
Gain on translation of foreign operations
|
|
|
—
|
|
|
|
4,573
|
|
|
|
—
|
|
|
|
4,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gains in the year
|
|
|
5,217
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,217
|
|
|
Transfers to net loss
|
|
|
1,277
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,277
|
|
|
Development expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
65,830
|
|
|
|
65,830
|
|
|
Currency translation on development expenditures
|
|
|
—
|
|
|
|
(140
|
)
|
|
|
140
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
(43,148
|
)
|
|
|
(113,214
|
)
|
|
|
328,808
|
|
|
|
172,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on translation of foreign operations
|
|
|
—
|
|
|
|
27,306
|
|
|
|
—
|
|
|
|
27,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gains in the year
|
|
|
46,733
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,733
|
|
|
Transfers to net income
|
|
|
(47,954
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(47,954
|
)
|
|
Development expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
(68,153
|
)
|
|
|
(68,153
|
)
|
|
Currency translation on development expenditures
|
|
|
—
|
|
|
|
(2,732
|
)
|
|
|
2,732
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
(44,369
|
)
|
|
|
(88,640
|
)
|
|
|
263,387
|
|
|
|
130,378
|
|
|
|
Exchange rate differences relating to the translation from the
Company’s foreign subsidiaries into euro are recognized in
the currency translation reserve. Gains and losses on hedging
instruments that are designated as hedges of net investments in
foreign operations (ended in 2009) are included in the
currency translation reserve.
Hedging reserve represents hedging gains and losses on the
effective portion of cash flow hedges. The cumulative gain or
loss on the hedge is recognized in net income (loss) when the
hedge transaction impacts net income (loss).
ASML is a company incorporated under Dutch Law. In accordance
with the Dutch Civil Code, legal reserves have to be established
in certain circumstances. The legal reserves consist of the
hedging reserve, the currency translation reserve and the
reserve for capitalized development expenditures. Legal reserves
are not for distribution to ASML’s shareholders. If the
currency translation reserve or the hedging reserve has a
negative balance, distributions to ASML’s shareholders are
restricted to the extent of the negative balance.
Appropriation of
net income (loss)
As part of its financing policy, ASML aims to pay a sustainable
annual dividend that will be stable or growing over time.
Annually, the Supervisory Board, upon proposal of the Board of
Management, will assess the amount of dividend that will be
proposed to the Annual General Meeting of Shareholders. For
2009, a dividend was declared of EUR 0.20 per ordinary
share of EUR 0.09 which was paid in April 2010.
A proposal will be submitted to the Annual General Meeting of
Shareholders on April 20, 2011 to declare a dividend for
2010 of EUR 0.40 per ordinary share of EUR 0.09.
Dividends on ordinary shares are payable out of net income or
retained earnings as shown in the Financial Statements of the
Company as adopted by the General Meeting of Shareholders of the
Company, after payment first of (accumulated) dividends out of
net income on any issued cumulative preference shares.
ASML STATUTORY ANNUAL REPORT 2010
90
Share buyback
programs
The following table provides a summary of shares repurchased by
the Company between 2006 and 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
|
|
|
Total Value of Shares
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Shares Purchased
|
|
|
Maximum Number of
|
|
|
Purchased as Part of
|
|
|
|
|
|
|
Total Number
|
|
|
Price Paid
|
|
|
as Part of Publicly
|
|
|
Shares That May Yet
|
|
|
Publicly Announced
|
|
|
|
|
|
|
of Shares
|
|
|
per Share
|
|
|
Announced Plans or
|
|
|
be Purchased Under
|
|
|
Plans or Programs
|
|
|
Program
|
|
Period
|
|
purchased
|
|
|
(EUR)
|
|
|
Programs
|
|
|
the Programs
|
|
|
(in EUR million)
|
|
|
2006-2007 Share
program
|
|
May 17-26, 2006
|
|
|
6,412,920
|
|
|
|
15.59
|
|
|
|
6,412,920
|
|
|
|
19,037,376
|
|
|
|
100
|
|
|
2006-2007 Share
program
|
|
June 7-30, 2006
|
|
|
13,517,078
|
|
|
|
15.81
|
|
|
|
19,929,998
|
|
|
|
5,520,298
|
|
|
|
314
|
|
|
2006-2007 Share
program
|
|
July 3-13, 2006
|
|
|
5,520,298
|
|
|
|
15.62
|
|
|
|
25,450,296
|
|
|
|
—
|
|
|
|
400
|
|
|
2006-2007 Share
program
|
|
October 12, 2006
|
|
|
14,934,843
|
|
|
|
18.55
|
|
|
|
14,934,843
|
|
|
|
—
|
|
|
|
277
|
|
|
2006-2007 Share
program
|
|
February 14-23, 2007
|
|
|
8,000,000
|
|
|
|
19.53
|
|
|
|
8,000,000
|
|
|
|
—
|
|
|
|
156
|
|
|
Capital repayment program 2007
|
|
September - October 2007
|
|
|
55,093,409
|
|
|
|
18.36
|
|
|
|
55,093,409
|
|
|
|
—
|
|
|
|
1,012
|
|
|
2007-2008 Share
program
|
|
November 14-26, 2007
|
|
|
9,000,000
|
|
|
|
22.62
|
|
|
|
9,000,000
|
|
|
|
5,000,000
|
|
|
|
204
|
|
|
2007-2008 Share
program
|
|
January 17-22, 2008
|
|
|
5,000,000
|
|
|
|
17.52
|
|
|
|
14,000,000
|
|
|
|
—
|
|
|
|
292
|
|
|
|
2006-2007 Share
program
On March 23, 2006, the General Meeting of Shareholders
authorized the repurchase of up to a maximum of
10.0 percent of our issued shares through
September 23, 2007. The number of shares bought back in the
initial phase of this Repurchase Program was
25,450,296 shares, representing 100 percent of the
announced objective for the initial phase of the Repurchase
Program of up to EUR 400.0 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 the second phase of the Repurchase Program, ASML repurchased
14,934,843 additional shares pursuant to a call option
transaction announced on October 9, 2006. These repurchased
shares represented 100 percent of the announced objective
of the second phase of the Repurchase Program. In order to
mitigate the dilution due to the issuance of shares upon
conversion of its convertible bond due October 2006, these
shares were subsequently used to satisfy the conversion rights
of holders of ASML’s 5.75 percent Convertible
Subordinated Notes. The Company paid an aggregate of
EUR 277.2 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 repurchased the final phase of shares
under the Repurchase Program of the remaining 1.7 percent
of outstanding shares, being 8,000,000 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 outstanding stock options and to satisfy
partly the conversion rights of holders of ASML’s
5.50 percent Convertible Subordinated Notes.
Capital repayment
program 2007
On July 17, 2007 the Extraordinary General Meeting of
Shareholders approved three proposals to amend the
Company’s 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 nine
ordinary shares with a nominal value of EUR 0.08 each were
consolidated into eight 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 1,011.9 million has been repaid to our
shareholders and the outstanding number of ordinary shares was
reduced by 55,093,409 shares or 11.1 percent. The
capital repayment program was completed in October 2007.
2007-2008 Share
program
On March 28, 2007, the General Meeting of Shareholders
authorized the repurchase of up to a maximum of three times
10.0 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.
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 14,000,000 shares.
ASML STATUTORY ANNUAL REPORT 2010
91
Authorization of
share repurchases
On March 24, 2010, the General Meeting of Shareholders
authorized the repurchase of up to a maximum of three times
10.0 percent of our issued share capital as of the date of
authorization (March 24, 2010) through
September 24, 2011. The Company did not buyback any shares
in 2010.
19. Long-term
debt
The long-term debt consists of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
5.75 percent Eurobond, carrying amount
|
|
|
641,508
|
|
|
|
658,051
|
|
|
|
670,506
|
|
|
Special Purpose Entity
|
|
|
38,084
|
|
|
|
36,654
|
|
|
|
35,225
|
|
|
Other
|
|
|
19,975
|
|
|
|
10,258
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
699,567
|
|
|
|
704,963
|
|
|
|
705,731
|
|
|
|
The Company’s obligations to make principal repayments
under the Eurobond and other borrowing arrangements as of
December 31, 2010, for the next five years and thereafter
and excluding interest charges are as follows:
| |
|
|
|
|
|
|
|
|
(in thousands)
|
|
EUR
|
|
|
2011
|
|
|
1,429
|
|
|
2012
|
|
|
1,429
|
|
|
2013
|
|
|
1,429
|
|
|
2014
|
|
|
1,429
|
|
|
2015
|
|
|
1,429
|
|
|
Thereafter
|
|
|
628,080
|
|
|
|
|
|
|
|
|
Total
|
|
|
635,225
|
|
|
Less: current portion of long-term debt
|
|
|
1,429
|
|
|
|
|
|
|
|
|
Non-current portion of long-term debt
|
|
|
633,796
|
|
|
|
Eurobond
The following table summarizes the carrying amount of the
Company’s outstanding Eurobond, including transaction costs
and the fair value of interest rate swaps used to hedge the
change in the fair value of the Eurobond:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
5.75 percent Eurobond
|
|
|
|
|
|
|
|
|
|
Principal
amount1
|
|
|
594,963
|
|
|
|
595,670
|
|
|
Fair value hedge
adjustment2
|
|
|
63,088
|
|
|
|
74,836
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
658,051
|
|
|
|
670,506
|
|
|
|
|
|
| 1
|
The principal amount is adjusted
for transaction costs.
|
| |
| 2
|
The fair value of the interest rate
swaps excludes accrued interest.
|
In June 2007, ASML completed an offering of
EUR 600.0 million principal amount of its
5.75 percent notes due 2017, with interest payable annually
on June 13 of each year. The notes are redeemable at the option
of ASML, in whole or in part, at any time by paying a make whole
premium, and unless previously redeemed, will be redeemed at
100 percent of their principal amount on June 13, 2017.
The Eurobond serves as a hedged item in a fair value hedge
relationship in which ASML hedges the variability of changes in
the market value of fixed loan coupons payable on the
Company’s Eurobond due to changes in market interest rates;
the fair value changes of the interest rate swaps are recorded
on the statement of financial position under derivative
financial instruments (within current and non-current assets).
Therefore, the carrying amount is only adjusted for fair value
changes in interest rate swaps.
ASML STATUTORY ANNUAL REPORT 2010
92
The following table summarizes the estimated fair value of the
Company’s Eurobond:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
|
|
As of December 31
|
|
Amount
|
|
|
Amount
|
|
|
Fair
Value1
|
|
|
Amount
|
|
|
Amount
|
|
|
Fair
Value1
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
5.75 percent Eurobond
|
|
|
600,000
|
|
|
|
658,051
|
|
|
|
599,232
|
|
|
|
600,000
|
|
|
|
670,506
|
|
|
|
631,452
|
|
|
|
|
|
| 1
|
Source: Bloomberg Finance LP
|
The fair value of the Company’s Eurobond is estimated based
on the quoted market prices as of December 31, 2010. The
fair value of the Eurobond is higher than the principal amount
as a result of lower interest rates.
Special Purpose
Entity
Long-term debt includes an amount of EUR 35.2 million
relating to the Company’s SPE. As of January 1, 2010
ASML consolidates its Special Purpose Entity which owns
ASML’s headquarters located in The Netherlands. The
comparative figures have been adjusted to reflect this change in
accounting policy. See also Note 3.
Lines of
credit
The Company’s available credit facilities amount to
EUR 700.0 million as of December 31, 2010 and
December 31, 2009 and consist of two facilities: a
EUR 500.0 million credit facility and a
EUR 200.0 million loan facility. In May 2010, the
Company, in line with its financing policy, cancelled its
EUR 500.0 million credit facility that was due to
expire in May 2012 and replaced it with a new
EUR 500.0 million credit facility from the same group
of banks. The new credit facility has a term of five years and
contains the same restrictive covenant as the credit facility it
replaced. This covenant requires the Company to maintain a
minimum committed capital to net total assets ratio of
40.0 percent calculated in accordance with contractually
agreed definitions. As of December 31, 2010 and
December 31, 2009, this ratio was 78.0 percent and
85.7 percent, respectively. Therefore, the Company was in
compliance with the covenant at the end of 2010 and 2009.
Outstanding amounts under this credit facility will bear
interest at EURIBOR or LIBOR plus a margin that depends on the
Company’s liquidity position. No amounts were outstanding
under this credit facility at the end of 2010 and 2009.
The EUR 200.0 million loan facility is related to the
Company’s EUV investment efforts and was entered into
during the first half of 2009. In June 2010, the Company and the
European Investment Bank agreed to extend the availability
period of the EUR 200.0 million loan facility by six
months, allowing the Company to draw the facility up to
March 31, 2011. When drawn, the loan is repayable in annual
installments starting four years after drawdown, with a final
repayment seven years after drawdown. This facility contains a
covenant that restricts indebtedness, as contractually defined,
to a maximum amount of EUR 2,300.0 million. As of
December 31, 2010 and December 31, 2009, this
indebtedness amounted to EUR 1,319.2 million and
EUR 1,319.0 million, respectively. Therefore, the
Company was in compliance with this covenant at the end of 2010
and 2009. Outstanding amounts under this loan facility will bear
interest at EURIBOR or LIBOR plus a margin. No amounts were
outstanding under this loan facility at the end of 2010 and 2009.
ASML STATUTORY ANNUAL REPORT 2010
93
20.
Provisions
Provisions consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
|
|
|
|
|
Employee contract
|
|
|
contract
|
|
|
|
|
|
|
|
termination benefits
|
|
|
termination costs
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Balance, January 1, 2009
|
|
|
2,265
|
|
|
|
17,908
|
|
|
|
20,173
|
|
|
Utilization of the provision
|
|
|
(2,244
|
)
|
|
|
(2,747
|
)
|
|
|
(4,991
|
)
|
|
Unwinding of discount
|
|
|
—
|
|
|
|
136
|
|
|
|
136
|
|
|
Effect of exchange rates
|
|
|
(21
|
)
|
|
|
(99
|
)
|
|
|
(120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
—
|
|
|
|
15,198
|
|
|
|
15,198
|
|
|
Utilization of the provision
|
|
|
—
|
|
|
|
(2,576
|
)
|
|
|
(2,576
|
)
|
|
Unwinding of discount
|
|
|
—
|
|
|
|
305
|
|
|
|
305
|
|
|
Effect of exchange rates
|
|
|
—
|
|
|
|
1,134
|
|
|
|
1,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
—
|
|
|
|
14,061
|
|
|
|
14,061
|
|
|
Non-current portion of provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
—
|
|
|
|
12,694
|
|
|
|
12,694
|
|
|
December 31, 2010
|
|
|
—
|
|
|
|
11,811
|
|
|
|
11,811
|
|
|
|
Provision for lease contract termination costs relates to an
operating lease contract for a building for which no economic
benefits are expected. The provision for lease contract
termination costs is expected to be utilized by 2017.
21. Accrued and
other liabilities
Accrued and other liabilities consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Deferred revenue
|
|
|
215,990
|
|
|
|
543,145
|
|
|
Costs to be paid
|
|
|
208,684
|
|
|
|
270,836
|
|
|
Deposits from customers
|
|
|
—
|
|
|
|
150,000
|
|
|
Down payments from customers
|
|
|
274,074
|
|
|
|
675,636
|
|
|
Personnel related items
|
|
|
114,255
|
|
|
|
177,025
|
|
|
Warranty
|
|
|
23,208
|
|
|
|
37,965
|
|
|
Other
|
|
|
4,650
|
|
|
|
2,314
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accrued and other liabilities
|
|
|
840,861
|
|
|
|
1,856,921
|
|
|
Less: non-current portion of accrued and other liabilities
|
|
|
42,424
|
|
|
|
371,089
|
1
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of accrued and other liabilities
|
|
|
798,437
|
|
|
|
1,485,832
|
|
|
|
|
|
| 1
|
The main part of the non current
portion of accrued and other liabilities relates to down
payments received from customers regarding 2012 shipments of
high-volume EUV systems.
|
Deferred revenue mainly consists of prepaid extended and
enhanced (optic) warranty contracts and award credits regarding
free or discounted products or services.
Cost to be paid mainly relate to accrued cost for unbilled
services provided by vendors including contracted labor,
outsourced services and consultancy.
The Company receives advances from customers prior to shipment
for systems included in ASML’s current product portfolio or
systems currently under development in the form of down payments.
Personnel related items mainly consist of accrued management
bonuses, accrued profit sharing, accrued vacation days, accrued
vacation allowance, accrued wage tax, social securities and
accrued pension premiums.
ASML STATUTORY ANNUAL REPORT 2010
94
Changes in product warranty liabilities for the years 2009 and
2010 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Balance, January 1
|
|
|
35,225
|
|
|
|
23,208
|
|
|
Additions of the year
|
|
|
15,047
|
|
|
|
46,467
|
|
|
Utilization of the provision
|
|
|
(19,360
|
)
|
|
|
(14,325
|
)
|
|
Release of the provision
|
|
|
(7,666
|
)
|
|
|
(18,480
|
)
|
|
Effect of exchange rates
|
|
|
(38
|
)
|
|
|
1,095
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
|
23,208
|
|
|
|
37,965
|
|
|
|
In 2009, the release was due to a change in accounting estimate
based on lower than expected historical warranty expenses as a
result of an improved learning curve concerning our systems. The
release has been included in cost of sales. In 2010 the
reassessments of the warranty reserve, and resulting change in
accounting estimate, did not have a material effect on the
Company’s consolidated income statement and per-share
amounts.
22. Employee
Benefits
Deferred
Compensation Plans
In February 1997, SVG (a company that merged with ASML in May
2001) adopted a non-qualified deferred compensation plan
that allowed a select group of management and highly compensated
employees and directors to defer a portion of their salary,
bonus and directors fees. The plan allowed SVG to credit
additional amounts to participants’ account balances,
depending on the amount of the employee’s contribution, up
to a maximum of 5.0 percent of an employee’s annual
salary and bonus. In addition, interest is credited to the
participants’ account balances at 120.0 percent of the
average Moody’s corporate bond rate. For the calendar year
2009, participants’ accounts were credited at
9.07 percent. SVG’s contributions and related interest
became 100 percent vested in May 2001 with the merger of
SVG and ASML. Effective January 1, 2010, the plan was
terminated. This termination did not have a material impact on
the Company’s consolidated income statement. No expenses
were incurred under this plan during 2010 (2009:
EUR 0.2 million). As of December 31, 2010, the
Company’s liability under the deferred compensation plan
was zero (2009: EUR 2.0 million).
In July 2002, ASML adopted a non-qualified deferred compensation
plan for its United States employees that allows a select group
of management or highly compensated employees to defer a portion
of their salary, bonus, and commissions. The plan allows ASML to
credit additional amounts to the participants’ account
balances. The participants divide their funds among the
investments available in the plan. Participants elect to receive
their funds in future periods after the earlier of their
employment termination or their withdrawal election, at least
three years after deferral. There were minor expenses relating
to this plan in 2010 and 2009. On December 31, 2010 and
2009, the Company’s liability under the deferred
compensation plan was EUR 9.4 million and
EUR 6.7 million, respectively.
Pension
plans
ASML maintains various pension plans covering substantially all
of its employees. The Company’s employees in the
Netherlands, approximately 4,100 in full-time employees
(“FTEs”), participate in a multi-employer union plan
(“Bedrijfstakpensioenfonds Metalektro”) determined in
accordance with the collective bargaining agreements effective
for the industry in which ASML operates. This multi-employer
plan covers approximately 1,220 companies and 147,000
contributing members. The plan monitors its risks on a global
basis, not by company or employee, and is subject to regulation
by Dutch governmental authorities. By law (the Dutch Pension
Act), a multi-employer union plan must be monitored against
specific criteria, including the coverage ratio of the
plan’s assets to its obligations. This coverage ratio must
exceed 104.3 percent for the total plan. Every company
participating in a Dutch multi-employer union plan contributes a
premium calculated as a percentage of its total pensionable
salaries, with each company subject to the same percentage
contribution rate. The pension rights of each employee are based
upon the employee’s average salary during employment.
ASML’s net periodic pension cost for this multi-employer
plan for any period is the amount of the required contribution
for that period. A contingent liability may arise from, for
example, possible actuarial losses relating to other
participating entities because each entity that participates in
a multi-employer plan shares in the actuarial risks of every
other participating entity or any responsibility under the terms
of a plan to finance any shortfall in the plan if other entities
cease to participate.
The coverage ratio of the multi-employer plan decreased to
96.0 percent as of December 31, 2010
(December 31, 2009: 99.0 percent). Because of the low
coverage ratio, PME prepared and executed a so-called
“Recovery Plan” which was approved
ASML STATUTORY ANNUAL REPORT 2010
95
by De Nederlandsche Bank (the Dutch central bank, which is the
supervisor of all pension companies in the Netherlands). For
2011, the pension premium percentage will not increase as the
current premium level, which is 23.0 percent of the total
pensionable salaries, is the maximum premium determined in the
articles of association of the Pension Company. The coverage
ratio is calculated by dividing the fund’s capital by the
total sum of pension liabilities and is based on actual market
interest.
ASML also participates in several defined contribution pension
plans, with ASML’s expenses for these plans equaling the
contributions made in the relevant period.
The Company’s pension costs for all employees for the two
years ended December 31, 2009 and 2010 were:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Pension plan based on multi-employer union plan
|
|
|
30,930
|
|
|
|
29,643
|
|
|
Pension plans based on defined contribution
|
|
|
8,895
|
|
|
|
10,950
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
39,825
|
|
|
|
40,593
|
|
|
|
Bonus
plan
ASML has a performance-related bonus plan for senior management,
who are not members of the Board of Management. Under this plan,
the bonus amount is dependent on the actual performance on
corporate, departmental and personal targets. The bonus for
members of senior management can range between 0.0 percent
and 40.0 percent, or 0.0 percent and 70.0 percent
of their annual salaries, depending upon their seniority. The
performance targets for 2010 are set per half year. The bonus of
the first half of 2010 was paid in the second half of 2010. The
bonus of the second half is accrued for in the consolidated
statement of financial position as of December 31, 2010 and
is expected to be paid in the first quarter of 2011. The
Company’s bonus expenses for all participants under this
plan were:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Bonus expenses
|
|
|
9,167
|
|
|
|
9,694
|
|
|
|
ASML has a retention bonus plan for employees and executives of
Brion including three retention bonuses. The first retention
bonus was conditional on the first year of employment after the
acquisition date and was paid in March 2008. The second
retention bonus is conditional on the second year of employment
after the acquisition date and was paid in March 2009. The third
retention bonus is conditional on the third year of employment
after the acquisition date and is paid in March 2010. ASML has a
new retention bonus plan for the period from March 2010 to March
2012 for executives of Brion including two retention bonuses.
The first retention bonus is conditional over the first year of
employment and is payable in April 2011. The second retention
bonus is conditional over the second year of employment and is
payable in April 2012. The Company’s bonus expenses for all
participants under these plans were:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Bonus expenses
|
|
|
5,222
|
|
|
|
1,165
|
|
|
|
Profit-sharing
plan
ASML has a profit-sharing plan covering all employees who are
not members of the Board of Management or senior management.
Under the plan, eligible employees receive an annual
profit-sharing bonus, based on a percentage of net income
relative to sales ranging from 0.0 to 20.0 percent of
annual salary. The profit-sharing percentage for the years 2010
and 2009 was 18.0 percent and 0.0 percent,
respectively.
Share-based
payments
The total gross amount of recognized expenses associated with
share-based payments was EUR 12.1 million in 2010 and
EUR 13.4 million in 2009.
ASML STATUTORY ANNUAL REPORT 2010
96
Total compensation expenses related to non-vested awards to be
recognized in future periods amount to
EUR 16.7 million as per December 31, 2010 (2009:
EUR 15.4 million). The weighted average period over
which these costs are expected to be recognized is calculated at
1.3 years (2009: 1.2 years).
Stock option transactions are summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
exercise price
|
|
|
|
|
Number of
|
|
|
per share
|
|
|
|
|
options
|
|
|
(EUR)
|
|
|
Outstanding, January 1, 2008
|
|
|
15,036,599
|
|
|
|
20.90
|
|
|
Granted
|
|
|
1,151,203
|
|
|
|
15.76
|
|
|
Exercised
|
|
|
(1,119,426
|
)
|
|
|
12.03
|
|
|
Forfeited
|
|
|
(984,832
|
)
|
|
|
11.99
|
|
|
Expired
|
|
|
(2,008,620
|
)
|
|
|
17.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2008
|
|
|
12,074,924
|
|
|
|
22.57
|
|
|
Granted
|
|
|
368,752
|
|
|
|
15.67
|
|
|
Exercised
|
|
|
(1,014,287
|
)
|
|
|
10.73
|
|
|
Forfeited
|
|
|
(197,346
|
)
|
|
|
19.56
|
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
Transfer to/from Board of
Management1
|
|
|
79,536
|
|
|
|
23.40
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009
|
|
|
11,311,579
|
|
|
|
23.47
|
|
|
Granted
|
|
|
55,565
|
|
|
|
23.37
|
|
|
Exercised
|
|
|
(2,263,276
|
)
|
|
|
11.22
|
|
|
Forfeited
|
|
|
(60,376
|
)
|
|
|
18.53
|
|
|
Expired
|
|
|
(60,067
|
)
|
|
|
15.38
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2010
|
|
|
8,983,425
|
|
|
|
26.66
|
|
|
Exercisable, December 31, 2010
|
|
|
8,161,139
|
|
|
|
27.66
|
|
|
Exercisable, December 31, 2009
|
|
|
10,264,985
|
|
|
|
24.06
|
|
|
Exercisable, December 31, 2008
|
|
|
9,717,891
|
|
|
|
24.32
|
|
|
|
|
|
|
|
1
|
|
In 2009, as a result of a change in
the Board of Management stock options were transferred between
employee benefits and Board of Management remuneration.
|
The estimated weighted average fair value of options granted
during 2010 and 2009 was EUR 8.14 and EUR 6.03,
respectively, on the date of grant.
The weighted average share price at the date of exercise for
stock options for the year ended December 31, 2010 was
EUR 24.61 (2009: EUR 20.31).
Details with respect to the outstanding stock options are set
out in the following table:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
Number
|
|
|
Number
|
|
|
Weighted average
|
|
|
exercise price of
|
|
|
|
|
oustanding
|
|
|
exercisable
|
|
|
remaining
|
|
|
oustanding
|
|
Range of exercise
|
|
December 31,
|
|
|
December 31,
|
|
|
contractual life
|
|
|
options
|
|
|
prices (EUR)
|
|
2010
|
|
|
2010
|
|
|
(years)
|
|
|
(EUR)
|
|
|
0.15 — 7.94
|
|
|
325,482
|
|
|
|
288,516
|
|
|
|
4.56
|
|
|
|
1.22
|
|
|
8.17 — 12.62
|
|
|
2,894,858
|
|
|
|
2,874,158
|
|
|
|
4.38
|
|
|
|
11.46
|
|
|
12.75 — 19.13
|
|
|
1,518,478
|
|
|
|
1,003,914
|
|
|
|
6.03
|
|
|
|
16.81
|
|
|
19.45 — 29.18
|
|
|
653,677
|
|
|
|
403,621
|
|
|
|
7.28
|
|
|
|
23.41
|
|
|
29.65 — 44.48
|
|
|
21,000
|
|
|
|
21,000
|
|
|
|
1.07
|
|
|
|
36.89
|
|
|
45.02 — 67.53
|
|
|
3,569,930
|
|
|
|
3,569,930
|
|
|
|
1.07
|
|
|
|
46.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,983,425
|
|
|
|
8,161,139
|
|
|
|
3.56
|
|
|
|
26.66
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
97
Details with respect to stock options and shares are set out in
the following table:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
|
|
|
|
|
|
(in thousands, except for contractual term)
|
|
2009
|
|
|
2010
|
|
|
Aggregate intrinsic value of stock options exercised (EUR)
|
|
|
10,140
|
|
|
|
30,546
|
|
|
Total fair value at vesting date of shares vested during the
year (EUR)
|
|
|
8,465
|
|
|
|
9,469
|
|
|
Aggregate remaining contractual term of currently exercisable
options (years)
|
|
|
4.28
|
|
|
|
3.14
|
|
|
Aggregate intrinsic value of exercisable stock options (EUR)
|
|
|
77,813
|
|
|
|
71,524
|
|
|
Aggregate intrinsic value of outstanding stock options (EUR)
|
|
|
84,554
|
|
|
|
81,402
|
|
|
|
Employee share issuances in 2010 are summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conditionally
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conditionally
|
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
Number of
|
|
|
Share
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
|
|
|
|
|
|
|
|
shares at
|
|
|
conditionally
|
|
|
price at
|
|
|
|
|
|
|
|
|
shares at
|
|
|
End of
|
|
|
|
|
|
|
|
January 1,
|
|
|
shares
|
|
|
grant date
|
|
|
Forfeited/
|
|
|
|
|
|
December 31,
|
|
|
vesting
|
|
|
Share plan
|
|
Year
|
|
|
2010
|
|
|
granted
|
|
|
(EUR)
|
|
|
expired
|
|
|
Vested
|
|
|
2010
|
|
|
period
|
|
|
Employee plan
|
|
|
2007
|
|
|
|
42,570
|
|
|
|
—
|
|
|
|
24.26
|
|
|
|
(1,854
|
)
|
|
|
(40,716
|
)
|
|
|
—
|
|
|
|
10/19/2010
|
|
|
Brion stock plan
|
|
|
2007
|
|
|
|
110,675
|
|
|
|
—
|
|
|
|
17.50
|
|
|
|
—
|
|
|
|
(110,675
|
)
|
|
|
—
|
|
|
|
03/07/2010
|
|
|
Brion performance stock plan
|
|
|
2007
|
|
|
|
40,822
|
|
|
|
—
|
|
|
|
23.12
|
|
|
|
(2,000
|
)
|
|
|
(38,822
|
)
|
|
|
—
|
|
|
|
12/31/2010
|
|
|
New hire performance stock plan
|
|
|
2007
|
|
|
|
8,182
|
|
|
|
—
|
|
|
|
22.00
|
|
|
|
(2,727
|
)
|
|
|
(5,455
|
)
|
|
|
—
|
|
|
|
12/31/2010
|
|
|
Senior management
plan1
|
|
|
2007
|
|
|
|
31,164
|
|
|
|
—
|
|
|
|
17.80
|
|
|
|
(5,662
|
)
|
|
|
(25,502
|
)
|
|
|
—
|
|
|
|
10/19/2010
|
|
|
Employee plan
|
|
|
2008
|
|
|
|
34,622
|
|
|
|
—
|
|
|
|
14.87
|
|
|
|
(1,180
|
)
|
|
|
—
|
|
|
|
33,442
|
|
|
|
07/18/2011
|
|
|
Brion performance stock plan
|
|
|
2008
|
|
|
|
134,752
|
|
|
|
—
|
|
|
|
12.95
|
|
|
|
(6,604
|
)
|
|
|
(64,074
|
)
|
|
|
64,074
|
|
|
|
12/31/2011
|
|
|
New hire performance stock plan January
|
|
|
2008
|
|
|
|
4,362
|
|
|
|
—
|
|
|
|
17.60
|
|
|
|
(727
|
)
|
|
|
(1,454
|
)
|
|
|
2,181
|
|
|
|
01/19/2011
|
|
|
Incentive share plan January
|
|
|
2008
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
17.60
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
01/19/2011
|
|
|
New hire performance stock plan July
|
|
|
2008
|
|
|
|
22,698
|
|
|
|
—
|
|
|
|
14.83
|
|
|
|
(2,523
|
)
|
|
|
(5,044
|
)
|
|
|
15,131
|
|
|
|
12/31/2011
|
|
|
New hire performance stock plan October
|
|
|
2008
|
|
|
|
7,875
|
|
|
|
—
|
|
|
|
11.43
|
|
|
|
—
|
|
|
|
(2,625
|
)
|
|
|
5,250
|
|
|
|
10/17/2011
|
|
|
Senior management plan
|
|
|
2008
|
|
|
|
91,104
|
|
|
|
—
|
|
|
|
13.05
|
|
|
|
(9,257
|
)
|
|
|
—
|
|
|
|
81,847
|
|
|
|
07/18/2011
|
|
|
Employee plan
|
|
|
2009
|
|
|
|
93,150
|
|
|
|
—
|
|
|
|
24.24
|
|
|
|
(1,200
|
)
|
|
|
—
|
|
|
|
91,950
|
|
|
|
10/16/2012
|
|
|
Senior management plan
|
|
|
2009
|
|
|
|
225,875
|
|
|
|
—
|
|
|
|
19.85
|
|
|
|
(13,475
|
)
|
|
|
—
|
|
|
|
212,400
|
|
|
|
10/16/2012
|
|
|
New hire performance stock plan January
|
|
|
2010
|
|
|
|
—
|
|
|
|
27,066
|
|
|
|
23.38
|
|
|
|
(4,116
|
)
|
|
|
—
|
|
|
|
22,950
|
|
|
|
01/22/2013
|
|
|
New hire performance stock plan April
|
|
|
2010
|
|
|
|
—
|
|
|
|
6,595
|
|
|
|
25.59
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,595
|
|
|
|
04/16/2013
|
|
|
Brion performance stock plan
|
|
|
2010
|
|
|
|
—
|
|
|
|
79,395
|
|
|
|
25.59
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79,395
|
|
|
|
04/16/2013
|
|
|
Employee plan
|
|
|
2010
|
|
|
|
—
|
|
|
|
118,100
|
|
|
|
23.37
|
|
|
|
—
|
|
|
|
—
|
|
|
|
118,100
|
|
|
|
10/15/2013
|
|
|
New hire performance stock plan October
|
|
|
2010
|
|
|
|
—
|
|
|
|
9,042
|
|
|
|
23.37
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,042
|
|
|
|
10/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
850,351
|
|
|
|
240,198
|
|
|
|
|
|
|
|
(51,325
|
)
|
|
|
(294,367
|
)
|
|
|
744,857
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
In 2009, as a result of a change in
the Board of Management shares were transferred between employee
benefits and Board of Management remuneration.
|
Options granted under ASML’s stock option plans have fixed
exercise prices equal to the closing price of the Company’s
ordinary shares on Euronext Amsterdam on the applicable
grant-dates. Granted stock options generally vest over a
three-year period with any unexercised stock options expiring
ten years after the grant-date.
The fair value of the stock options is determined using a
Black-Scholes option valuation model.
The Black-Scholes option valuation of the fair value of the
Company’s stock options is based on the following
assumptions:
| |
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
Weighted average share price (in EUR)
|
|
|
16.7
|
|
|
|
24.1
|
|
|
Volatility (in
percentage)1
|
|
|
51.7
|
|
|
|
36.4
|
|
|
Expected life (in years)
|
|
|
4.6
|
|
|
|
4.6
|
|
|
Risk free interest rate
|
|
|
3.2
|
|
|
|
2.5
|
|
|
Expected dividend yield (in EUR)
|
|
|
1.06
|
|
|
|
1.06
|
|
|
Forfeiture
rate2
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
1
|
|
The Company uses the expected
(implied) volatility method to determine the volatility.
|
| |
|
2
|
|
As per year-end 2009 and 2010 we
estimate forfeitures to be nil.
|
ASML STATUTORY ANNUAL REPORT 2010
98
When establishing the expected life assumption the Company
annually takes into account the contractual terms of the options
as well as historical employee exercise behavior.
Share-based
payment plans
The Company has adopted various share and option plans for its
employees. Each year, the Board of Management determines, by
category of ASML personnel, the total available number of share
options and maximum number of shares that can be granted in that
year. The determination is subject to the approval of the
Supervisory Board of the Company.
Senior management
plan
The senior management plan consists of two parts, both including
a half year performance condition based on a targeted Return On
Average Invested Capital (“ROAIC”) and a three-year
service condition. ROAIC is determined by dividing the average
income (loss) from operations less provision for (benefit from)
income taxes by the average invested capital. The average
invested capital is determined by total assets less cash and
cash equivalents, less current liabilities.
Shares are granted two times per year under the senior
management plan. Stock options granted under the senior
management plan have fixed exercise prices equal to the closing
price of the Company’s ordinary shares on Euronext
Amsterdam on the date the plan was communicated to senior
management (announcement date). The fair value of shares is
determined based on the closing price of the Company’s
ordinary shares on Euronext Amsterdam on the announcement date.
The announcement date may differ from the grant-date for reason
of later approval and mutual understanding of the performance
condition. Granted awards generally vest over a two to
three-year period with any unexercised share options expiring
ten years after the announcement date.
Employee
plan
The employee plan includes a three-year service condition. Stock
options granted under the employee plan have fixed exercise
prices equal to the closing price of the Company’s ordinary
shares on Euronext Amsterdam on the grant-date. The fair value
of shares is determined based on the closing price of the
Company’s ordinary shares on Euronext Amsterdam on the
grant-date. Granted awards vest over a three-year period with
any unexercised share options expiring ten years after the
grant-date.
Employee Purchase
Plan
Every quarter, ASML offers its worldwide payroll employees the
opportunity to buy ASML shares or ASML share options against
fair value out of their net salary. The fair value for shares is
determined based on the closing price of the ordinary shares on
Euronext Amsterdam on the grant-date. The fair value of the
share options is determined using a Black-Scholes option
valuation model. For the assumptions on which the Black-Scholes
option valuation model is used, see the disclosure above under
the caption “Share Option Plans”. The maximum net
amount for which employees can participate in the plan amounts
to 10.0 percent of gross base salary. When employees retain
the shares
and/or stock
options for a minimum of 12 months, ASML will pay out a
20.0 percent cash bonus on the net invested amount.
New hire
performance stock plan
Some new hires are eligible to conditional performance stock
awards, under the conditions set out in the general terms and
conditions. The maximum number of performance stock will be
determined on the day of conditional grant and will be based
upon the market fair value of an ASML share per that day. The
ultimately awarded number of shares of performance stock will be
determined on yearly targets over a three-year period of
achievement. These targets are financial parameters relating to
ROAIC parameters of a benchmark group or financial parameters
relating to ASML ROAIC.
Brion stock
plan
The Brion stock plan includes a three-year service condition.
The fair value of the stock is determined based on the closing
price of the Company’s ordinary shares on NASDAQ on the
grant-date.
Brion performance
stock plan
The performance stock awards are conditional on the executive
completing a three to four-year requisite service period and on
achievement of the performance conditions. The performance
target is based on multiple metrics, each with its own weight.
The fair value of the stock is determined based on the closing
price of the Company’s ordinary shares on the NASDAQ on the
grant-date.
Brion stock
option plan
At the effective date of the acquisition the existing stock
options of Brion have been converted to ASML stock options
leaving the vesting terms and conditions unchanged. The fair
value of the stock options was determined using a Black-Scholes
option valuation model. The fair value of the stock options
relating to past services is part of the total purchase
consideration. The fair value of the stock options relating to
future services will be part of future compensation expenses.
Granted awards vest over a four-year period.
ASML STATUTORY ANNUAL REPORT 2010
99
Stock Option
Extension Plans and Financing
In 2002, employees were offered an extension of the option
period for options granted in 2000. As a result the option
period was extended until 2012. Employees who accepted the
extension became subject to additional exercise periods in
respect of their options. At the modification date, there was no
intrinsic value of the modified award because the exercise price
under each plan still exceeded ASML’s share price on the
modification date. As a result, these stock option extensions
did not result in recognition of any compensation expense in
accordance with IFRS 2.
Stock option plans that were issued before 2001 were constructed
with a virtual financing arrangement in compliance with the
applicable laws and after obtaining the necessary corporate
approvals, whereby ASML loaned the tax value of the options
granted to employees subject to the Dutch tax-regime. The
interest-free loans issued under this arrangement are repayable
to ASML on the exercise date of the respective option, provided
that the option is actually exercised. If the options expire
unexercised, the loans are forgiven. ASML’s Supervisory
Board approved the Stock Option Plans 2000 at the time,
including the loans, as these were part of the Stock Option Plan.
In 2006, the Company launched a stock option plan for Dutch
employees holding stock options granted in 2000 (option
“A”), which expire in 2012. In this plan the Company
granted options (option “B”) which only become
effective after option “A” expires unexercised in
2012. The virtual employee loan in conjunction with option
“A” will then be transferred to option “B”
and consequentially gets the status of a perpetual loan. In
total 932 employees chose to join this plan. Under the plan
ASML granted 1,515,643 stock options and recognized additional
compensation expenses of EUR 0.8 million for the year
ended December 31, 2006.
Policy for
issuing shares upon exercise
In 2010 and 2009, only repurchased shares were used to satisfy
the option rights upon exercise.
23. Commitments,
Contingencies and Guarantees
The Company has various contractual obligations, some of which
are required to be recorded as liabilities in the Company’s
consolidated financial statements, including long- and
short-term debt. Others, namely operating lease commitments,
purchase obligations and guarantees, are generally not required
to be recognized as liabilities on the Company’s statement
of financial position but are required to be disclosed.
Tabular
Disclosure of Contractual Obligations
The Company’s contractual obligations as of
December 31, 2010 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
|
|
|
951,560
|
|
|
|
35,929
|
|
|
|
71,859
|
|
|
|
71,859
|
|
|
|
771,913
|
|
|
Deposits from customers
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Operating lease obligations
|
|
|
106,671
|
|
|
|
30,088
|
|
|
|
40,188
|
|
|
|
22,802
|
|
|
|
13,593
|
|
|
Purchase obligations
|
|
|
2,098,432
|
|
|
|
2,003,321
|
|
|
|
94,942
|
|
|
|
169
|
|
|
|
—
|
|
|
Liability for uncertain tax positions
|
|
|
162,066
|
|
|
|
29,956
|
|
|
|
30,853
|
|
|
|
40,062
|
|
|
|
61,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,468,729
|
|
|
|
2,249,294
|
|
|
|
237,842
|
|
|
|
134,892
|
|
|
|
846,701
|
|
|
|
|
|
|
|
1
|
|
See Note 19 for the amounts
excluding interest charges.
|
Long-term debt obligations relate to interest payments and the
redemption of the principal amount of the Eurobond. See
Note 19.
Operating lease obligations include leases of equipment and
facilities. Lease payments recognized as an expense were
EUR 37.1 million and EUR 37.9 million for
the years ended December 31, 2009 and 2010, respectively.
ASML STATUTORY ANNUAL REPORT 2010
100
Several operating leases for the Company’s buildings
contain purchase options, exercisable 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 as of December 31, 2010 can be summarized
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
After
|
|
Purchase options due by period
|
|
Total
|
|
|
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
5 years
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Purchase options
|
|
|
31,232
|
|
|
|
—
|
|
|
|
8,250
|
|
|
|
8,999
|
|
|
|
13,983
|
|
|
|
Purchase obligations include purchase commitments with vendors
in the ordinary course of business. ASML expects that it will
honor these purchase obligations to fulfill future sales, in
line with the timing of those future sales. If not, the general
terms and conditions of the agreements relating to the major
part of the Company’s purchase commitments as of
December 31, 2010 contain clauses that enable ASML to delay
or cancel delivery of ordered goods and services up to the dates
specified in the corresponding purchase contracts. These terms
and conditions that ASML has agreed with its supply chain
partners give ASML additional flexibility to adapt its purchase
obligations to its requirements in light of the inherent
cyclicality of the industry in which the Company operates. The
Company establishes a provision for cancellation fees when it is
probable that the liability has been incurred and the amount of
cancellation fees is reasonably estimable.
For further disclosure regarding the liability for uncertain tax
positions, see Note 25.
Furthermore, the Company’s contractual obligations consist
of the following derivative financial instruments:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
After
|
|
|
|
|
Total
|
|
|
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
5 years
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Cash outflows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts
|
|
|
936,979
|
|
|
|
934,855
|
|
|
|
2,124
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest rate swaps
|
|
|
792,851
|
|
|
|
14,147
|
|
|
|
54,851
|
|
|
|
52,824
|
|
|
|
671,029
|
|
|
Cash inflows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts
|
|
|
908,275
|
|
|
|
906,225
|
|
|
|
2,050
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest rate swaps
|
|
|
888,673
|
|
|
|
34,959
|
|
|
|
86,736
|
|
|
|
70,623
|
|
|
|
696,355
|
|
|
|
For further disclosure regarding these derivative financial
instruments, see Note 5.
Tax
unity
ASML Holding N.V. forms a tax unity together with its Dutch
subsidiaries for purposes of Dutch tax law and are as such
jointly and severally liable for the tax debts of the unity.
24. Legal
Contingencies
ASML is party to various legal proceedings generally incidental
to its business. ASML also faces exposure from other actual or
potential claims and legal proceedings. In addition, ASML
customers may be subject to claims of infringement from third
parties alleging that the ASML equipment used by those customers
in the manufacture of semiconductor products,
and/or the
methods relating to use of the ASML equipment, infringes one or
more patents issued to those third parties. If these claims were
successful, ASML could be required to indemnify such customers
for some or all of any losses incurred or damages assessed
against them as a result of that infringement.
The Company accrues for legal costs related to litigation in its
income statement at the time when the related legal services are
actually provided to ASML.
From late 2001 through 2004, the Company was party to a series
of civil litigations and administrative proceedings in which
Nikon alleged ASML’s infringement of Nikon patents relating
to lithography. ASML in turn filed claims against Nikon.
Pursuant to agreements executed on December 10, 2004, ASML,
Zeiss and Nikon agreed to settle all pending worldwide patent
litigation between the companies. The settlement included an
exchange of releases, a patent Cross-License agreement related
to lithography equipment used to manufacture semiconductor
devices (the “Nikon Cross-License Agreement”) and
payments to Nikon by ASML and Zeiss. In connection with the
settlement, ASML and Zeiss made settlement payments to Nikon
from 2004 to
ASML STATUTORY ANNUAL REPORT 2010
101
2007. The license period for certain patents subject to the
Nikon Cross-License Agreement, which were not perpetually
licensed, ended on December 31, 2009. Pursuant to the terms
of the Nikon Cross-License Agreement, the parties have agreed,
from January 1, 2010 to December 31, 2014 (the
“Cross-License Transition Period”), not to bring suit
for claims related to infringement of those patents or for
claims related to infringement of patents issued during the
Cross-License Transition Period. However, beginning on
January 1, 2015, the parties may bring suit for
infringement of patents subject to the Nikon Cross-License
Agreement, including any infringement that occurred during the
Cross-License Transition Period. Damages related to claims for
patent infringement occurring during the Cross-License
Transition Period are limited to three percent of the net sales
price of products utilizing patents that are valid and
enforceable.
25. Income
Taxes
The components of (provision for) benefit from income taxes are
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Current tax
|
|
|
(33,208
|
)
|
|
|
(202,347
|
)
|
|
Deferred tax
|
|
|
35,712
|
|
|
|
34,186
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,504
|
|
|
|
(168,161
|
)
|
|
|
The Dutch statutory tax rate was 25.5 percent in 2010 and
2009. Tax amounts in other jurisdictions are calculated at the
rates prevailing in the relevant jurisdictions.
The reconciliation between the (provision for) benefit from
income taxes shown in the income statement, based on the
effective tax rate, and expense based on the Dutch tax rate, is
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
|
|
|
2010
|
|
|
|
|
|
(in thousands)
|
|
EUR
|
|
|
%
|
|
|
EUR
|
|
|
%
|
|
|
Income (loss) before income taxes
|
|
|
(83,947
|
)
|
|
|
100.0
|
|
|
|
1,153,614
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision) based on the Company’s
domestic tax rate
|
|
|
21,406
|
|
|
|
25.5
|
|
|
|
(294,172
|
)
|
|
|
25.5
|
|
|
Effects of tax rates in foreign jurisdictions
|
|
|
18,762
|
|
|
|
22.3
|
|
|
|
34,741
|
|
|
|
(3.0
|
)
|
|
Adjustments of taxes in respect of changes in the applicable tax
rate
|
|
|
—
|
|
|
|
—
|
|
|
|
111,216
|
|
|
|
(9.6
|
)
|
|
Adjustment in respect of prior years’ current taxes
|
|
|
(39,946
|
)
|
|
|
(47.5
|
)
|
|
|
22,212
|
|
|
|
(1.9
|
)
|
|
Other credits and non-taxable items
|
|
|
2,282
|
|
|
|
2.7
|
|
|
|
(42,158
|
)
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Provision for) benefit from income taxes shown in the
consolidated income statement
|
|
|
2,504
|
|
|
|
3.0
|
|
|
|
(168,161
|
)
|
|
|
14.6
|
|
|
|
Income tax
benefit (provision) from income taxes based on the
Company’s domestic rate
(Provision for) benefit from income taxes is based on the
Company’s domestic income tax rate and reflects the
(provision for) benefit from income taxes that would have been
applicable if all of the Company’s income (loss) was
derived from its Dutch operations and there were no permanent
book tax differences and no other tax facilities.
Effects of tax
rates in foreign jurisdictions
A portion of ASML’s results are realized in countries other
than the Netherlands where different tax rates are applicable.
Adjustments in
respect of changes in the applicable tax rate
In December 2010, ASML reached agreement with the Dutch fiscal
authorities regarding the application of the “Innovation
Box”, a facility under Dutch corporate tax law pursuant to
which income associated with R&D is partially exempted from
taxation. This tax ruling has retroactive effect to
January 1, 2007 and is valid through December 31,
2016. Thereafter the validity of this ruling may be extended or
this ruling may be adapted depending on a possible change of
circumstances. While the Company’s domestic nominal rate
was 25.5 percent in 2010, for the ASML entities in the
Dutch fiscal group, the tax rate is effectively reduced as a
result of the Innovation Box effect for current and prior years.
As a result certain Dutch deferred tax assets, Dutch deferred
tax liabilities and other taxes will be realized in future years
against the reduced effective tax rate resulting from the
Innovation Box, the effect amounts to EUR 27.8 million
(gain) or 2.4 percent of income before income taxes. The
Innovation Box effect for the current year amounts to
EUR 83.5 million (gain) or 7.2 percent of income
before income taxes.
ASML STATUTORY ANNUAL REPORT 2010
102
At the end of 2010, the Dutch government enacted a tax rate
reduction from 25.5 percent in 2010 to 25.0 percent in
2011. As a result, the value of certain Dutch deferred tax
assets and liabilities was reduced by EUR 0.1 million
(loss).
Adjustments in
respect of prior years’ current taxes
In 2009, ASML recognized tax expense of approximately
EUR 40.0 million or approximately 47.5 percent of
loss before taxes attributable to the reversal of the 2007
Royalty Box benefit which had an unfavorable impact on the
effective tax rate for 2009. In 2009, based on a tax law change
effective January 1, 2010, ASML decided to reverse the
Royalty Box benefits of 2007 as management at that time expected
that a clean start of the Innovation Box (which under Dutch law
replaces the Royalty Box as of January 1, 2010) in
2010 would result in a higher cumulative benefit for ASML.
In 2010, ASML recognized tax benefit of
EUR 22.2 million or 1.9 percent of income before
income taxes mainly attributable to the application of the
Innovation Box for prior years, which had a favorable effect on
the effective tax rate for 2010 (EUR 34.0 million or
2.9 percent).
Other credits and
non-taxable items
Other credits and non-taxable items reflect the impact on
statutory rates of permanent non-taxable items such as
non-deductible taxes, non-deductible interest expense, and
non-deductible meals and entertainment, as well as the impact of
(the reversal of) various tax credits on the Company’s
provision for income taxes and movements in the liability for
uncertain tax positions.
Income taxes
recognized directly in equity
Income taxes recognized directly in equity (including other
comprehensive income) is as follows:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Current tax
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments1
|
|
|
—
|
|
|
|
8,262
|
|
|
Share-based payments
|
|
|
—
|
|
|
|
(106
|
)
|
|
Deferred tax
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments1
|
|
|
813
|
|
|
|
—
|
|
|
Share-based payments
|
|
|
(8,489
|
)
|
|
|
(3,861
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax recognized in equity
|
|
|
(7,676
|
)
|
|
|
4,295
|
|
|
|
|
|
|
|
1
|
|
Recognized directly in Other
Comprehensive Income
|
Liability for
uncertain tax positions and deferred tax position
The non-current liability for uncertain tax positions and
deferred tax position recorded on the statement of financial
position are as follows:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Liability for uncertain tax positions
|
|
|
(133,270
|
)
|
|
|
(143,908
|
)
|
|
Deferred tax position
|
|
|
135,951
|
|
|
|
193,093
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,681
|
|
|
|
49,185
|
|
|
|
Liability for
uncertain tax positions
The calculation of the Company’s liability for uncertain
tax positions involves uncertainties in the application of
complex tax laws. The Company’s estimate for the potential
outcome of any uncertain tax issue is highly judgmental. The
Company believes that it has adequately provided for uncertain
tax positions. However, settlement of these uncertain tax
positions in a manner inconsistent with its expectations could
have a material impact on its consolidated financial statements.
The liability for uncertain tax positions mainly relates to
transfer pricing positions, operational activities in countries
where ASML is not tax registered and tax deductible costs. The
Company provides for the uncertain tax positions for the
duration of the statute of limitations which differs per tax
jurisdiction and generally ranges up to seven years, or in case
of an earlier settlement, when the uncertain tax position is
settled with the tax authorities before the statute of
limitations period lapses. As of December 31, 2010 the
liability for this liability for uncertain tax positions amounts
to EUR 162.1 million (December 31, 2009:
EUR 133.3 million). An amount of
EUR 143.9 million of this liability for uncertain tax
positions is classified as non-current deferred and other tax
ASML STATUTORY ANNUAL REPORT 2010
103
liabilities because payment of cash is not expected within one
year, while an amount of EUR 18.2 million of this
liability for uncertain tax positions is classified as current
and other tax liabilities because payment of cash is expected
within one year.
A reconciliation of the beginning and ending balance of the
liability for uncertain tax positions is as follows:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in millions)
|
|
EUR
|
|
|
EUR
|
|
|
Balance, January 1
|
|
|
124.2
|
|
|
|
133.3
|
|
|
Gross increases – tax positions in prior period
|
|
|
6.4
|
|
|
|
8.6
|
|
|
Gross decreases – tax positions in prior period
|
|
|
(1.8
|
)
|
|
|
(1.1
|
)
|
|
Gross increases – tax positions in current period
|
|
|
10.6
|
|
|
|
24.7
|
|
|
Settlements
|
|
|
(4.3
|
)
|
|
|
(3.4
|
)
|
|
Lapse of statute of limitations
|
|
|
(1.8
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liability for uncertain tax positions
|
|
|
133.3
|
|
|
|
162.1
|
|
|
Less: current portion of liability for uncertain tax positions
|
|
|
—
|
|
|
|
18.2
|
|
|
Non-current portion of liability for uncertain tax
positions
|
|
|
133.3
|
|
|
|
143.9
|
|
|
|
For the year ended December 31, 2010, there were no
material changes related to the liability for uncertain tax
positions that impacted the Company’s effective tax rate.
The Company estimates that the total liability for uncertain tax
positions will decrease by EUR 30.0 million within the
next 12 months. The estimated changes to the liability for
uncertain tax positions within the next 12 months are
mainly due to expected settlements and expiration of statute of
limitations. For the years 2004 and 2005, the applicable tax
rate of taxable profits is subject to tax audits in certain tax
jurisdictions.
The Company is subject to tax audits in its major tax
jurisdictions for years from and including 2007 onwards in the
Netherlands, for years from and including 2004 onwards for Hong
Kong, and for years from and including 2001 onwards for the
United States. In the course of such audits, local tax
authorities may challenge the positions taken by the Company.
Deferred tax
position
The changes in deferred income tax assets and liabilities
consist of the following elements:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Balance, January 1
|
|
|
89,386
|
|
|
|
135,951
|
|
|
Income statement
|
|
|
39,889
|
|
|
|
38,898
|
|
|
Equity
|
|
|
7,676
|
|
|
|
3,861
|
|
|
Exchange differences
|
|
|
(1,000
|
)
|
|
|
14,383
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
|
135,951
|
|
|
|
193,093
|
|
|
|
The deferred tax position is classified in the consolidated
financial statements as follows:
| |
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
Deferred tax assets – non-current
|
|
|
153,104
|
|
|
|
100,112
|
|
|
Deferred tax assets – current
|
|
|
113,549
|
|
|
|
134,082
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities – non-current
|
|
|
(97,456
|
)
|
|
|
(41,036
|
)
|
|
Deferred tax liabilities – current
|
|
|
(33,246
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
135,951
|
|
|
|
193,093
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
104
Non-current deferred tax assets and liabilities decreased as a
result of a reduction of the effective tax rate in the
Netherlands pursuant to the application of the Innovation Box
and a reduction of the Dutch statutory income tax rate to
25.0 percent as of January 1, 2011. Both current and
non-current deferred tax assets decreased as a result of the use
of tax carry-forward losses in 2010 in the Netherlands and the
United States. For the current deferred tax assets, this
decrease was more than offset by an increase in deferred tax
assets relating to
work-in-process
inventories. Furthermore, non-current deferred tax liabilities
decreased mainly relating to a temporarily depreciated
investment which was repaid in the period 2006 through 2010 in
five equal installments. As of December 31, 2010, this
repayment obligation has been fulfilled.
The composition of total deferred tax assets and liabilities in
the consolidated financial statements is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
temporary differences
|
|
January 1, 2009
|
|
|
Income statement
|
|
|
Equity
|
|
|
Exchange differences
|
|
|
31, 2009
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Tax effect carry-forward losses
|
|
|
57,832
|
|
|
|
48,977
|
|
|
|
1,141
|
|
|
|
(890
|
)
|
|
|
107,060
|
|
|
Unrealized profits resulting from intercompany transactions
|
|
|
30,949
|
|
|
|
(223
|
)
|
|
|
—
|
|
|
|
(379
|
)
|
|
|
30,347
|
|
|
Inventories
|
|
|
33,298
|
|
|
|
(3,398
|
)
|
|
|
—
|
|
|
|
3
|
|
|
|
29,903
|
|
|
Capitalized research and development
expenditures1
|
|
|
20,204
|
|
|
|
174
|
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
20,344
|
|
|
Bilateral advance pricing agreement
|
|
|
20,856
|
|
|
|
(6,379
|
)
|
|
|
—
|
|
|
|
(87
|
)
|
|
|
14,390
|
|
|
Fixed assets
|
|
|
5,840
|
|
|
|
7,821
|
|
|
|
—
|
|
|
|
(271
|
)
|
|
|
13,390
|
|
|
Provisions
|
|
|
16,406
|
|
|
|
(4,018
|
)
|
|
|
|
|
|
|
34
|
|
|
|
12,422
|
|
|
Restructuring and impairment
|
|
|
12,840
|
|
|
|
(5,248
|
)
|
|
|
—
|
|
|
|
412
|
|
|
|
8,004
|
|
|
Share-based payments
|
|
|
1,444
|
|
|
|
(710
|
)
|
|
|
6,535
|
|
|
|
(74
|
)
|
|
|
7,195
|
|
|
Deferred revenue
|
|
|
6,107
|
|
|
|
(1,858
|
)
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
4,235
|
|
|
Installation and warranty reserve
|
|
|
4,718
|
|
|
|
(1,041
|
)
|
|
|
—
|
|
|
|
68
|
|
|
|
3,745
|
|
|
Alternative minimum tax
credits2
|
|
|
3,016
|
|
|
|
(151
|
)
|
|
|
—
|
|
|
|
31
|
|
|
|
2,896
|
|
|
Other temporary differences
|
|
|
12,034
|
|
|
|
588
|
|
|
|
—
|
|
|
|
100
|
|
|
|
12,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
225,544
|
|
|
|
34,534
|
|
|
|
7,676
|
|
|
|
(1,101
|
)
|
|
|
266,653
|
|
|
|
|
|
|
|
1
|
|
The Bilateral advance pricing
agreement relates to IP which is capitalized from a tax
perspective resulting in a temporary difference.
|
| |
|
2
|
|
Alternative minimum tax credits
relate to prepaid United States taxes which are credited against
future taxable profits after the carry-forward losses used.
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
temporary differences
|
|
January 1, 2009
|
|
|
Income statement
|
|
|
Equity
|
|
|
Exchange differences
|
|
|
31, 2009
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Temporary depreciation
investments1
|
|
|
(72,587
|
)
|
|
|
36,294
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(36,293
|
)
|
|
Capitalized research and development expenditures
|
|
|
(45,975
|
)
|
|
|
(26,489
|
)
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
(72,521
|
)
|
|
Fixed assets
|
|
|
—
|
|
|
|
(7,508
|
)
|
|
|
—
|
|
|
|
154
|
|
|
|
(7,354
|
)
|
|
Brion intellectual property
|
|
|
(8,862
|
)
|
|
|
1,953
|
|
|
|
—
|
|
|
|
21
|
|
|
|
(6,888
|
)
|
|
Transfer pricing
|
|
|
—
|
|
|
|
(2,878
|
)
|
|
|
—
|
|
|
|
(108
|
)
|
|
|
(2,986
|
)
|
|
Borrowing costs
|
|
|
(2,020
|
)
|
|
|
(696
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,716
|
)
|
|
Share-based payments
|
|
|
(4,538
|
)
|
|
|
4,538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other temporary differences
|
|
|
(2,176
|
)
|
|
|
141
|
|
|
|
—
|
|
|
|
91
|
|
|
|
(1,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(136,158
|
)
|
|
|
5,355
|
|
|
|
—
|
|
|
|
101
|
|
|
|
(130,702
|
)
|
|
|
|
|
|
|
1
|
|
The Company has temporarily
depreciated part of its investments in its United States Group
Companies which has been deducted from the taxable base in the
Netherlands.
|
ASML STATUTORY ANNUAL REPORT 2010
105
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
temporary differences
|
|
January 1, 2010
|
|
|
Income statement
|
|
|
Equity
|
|
|
Exchange differences
|
|
|
31, 2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Tax effect carry-forward losses
|
|
|
107,060
|
|
|
|
(84,794
|
)
|
|
|
—
|
|
|
|
5,490
|
|
|
|
27,756
|
|
|
Unrealized profits resulting from intercompany transactions
|
|
|
30,347
|
|
|
|
(3,377
|
)
|
|
|
—
|
|
|
|
4,181
|
|
|
|
31,151
|
|
|
Inventories
|
|
|
29,903
|
|
|
|
39,663
|
|
|
|
—
|
|
|
|
1,211
|
|
|
|
70,777
|
|
|
Capitalized research and development
expenditures1
|
|
|
20,344
|
|
|
|
(2,552
|
)
|
|
|
—
|
|
|
|
860
|
|
|
|
18,652
|
|
|
Bilateral advance pricing agreement
|
|
|
14,390
|
|
|
|
(6,778
|
)
|
|
|
—
|
|
|
|
381
|
|
|
|
7,993
|
|
|
Fixed assets
|
|
|
13,390
|
|
|
|
(9,244
|
)
|
|
|
—
|
|
|
|
240
|
|
|
|
4,386
|
|
|
Provisions
|
|
|
12,422
|
|
|
|
8,671
|
|
|
|
—
|
|
|
|
735
|
|
|
|
21,828
|
|
|
Restructuring and impairment
|
|
|
8,004
|
|
|
|
(2,572
|
)
|
|
|
—
|
|
|
|
642
|
|
|
|
6,074
|
|
|
Share-based payments
|
|
|
7,195
|
|
|
|
(3,414
|
)
|
|
|
3,861
|
|
|
|
578
|
|
|
|
8,220
|
|
|
Deferred revenue
|
|
|
4,235
|
|
|
|
6,475
|
|
|
|
—
|
|
|
|
180
|
|
|
|
10,890
|
|
|
Installation and warranty reserve
|
|
|
3,745
|
|
|
|
4,137
|
|
|
|
—
|
|
|
|
210
|
|
|
|
8,092
|
|
|
Alternative minimum tax
credits2
|
|
|
2,896
|
|
|
|
1,588
|
|
|
|
—
|
|
|
|
174
|
|
|
|
4,658
|
|
|
Other temporary differences
|
|
|
12,722
|
|
|
|
(916
|
)
|
|
|
—
|
|
|
|
1,911
|
|
|
|
13,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
266,653
|
|
|
|
(53,113
|
)
|
|
|
3,861
|
|
|
|
16,793
|
|
|
|
234,194
|
|
|
|
|
|
|
|
1
|
|
The Bilateral advance pricing
agreement relates to IP which is capitalized from a tax
perspective resulting in a temporary difference.
|
| |
|
2
|
|
Alternative minimum tax credits
relate to prepaid United States taxes which are credited against
future taxable profits after the carry-forward losses used.
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
temporary differences
|
|
January 1, 2010
|
|
|
Income statement
|
|
|
Equity
|
|
|
Exchange differences
|
|
|
31, 2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Temporary depreciation
investments1
|
|
|
(36,293
|
)
|
|
|
36,293
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Capitalized research and development expenditures
|
|
|
(72,521
|
)
|
|
|
43,684
|
|
|
|
—
|
|
|
|
(415
|
)
|
|
|
(29,252
|
)
|
|
Fixed assets
|
|
|
(7,354
|
)
|
|
|
7,981
|
|
|
|
—
|
|
|
|
(1,094
|
)
|
|
|
(467
|
)
|
|
Brion intellectual property
|
|
|
(6,888
|
)
|
|
|
(1,741
|
)
|
|
|
—
|
|
|
|
(566
|
)
|
|
|
(9,195
|
)
|
|
Transfer pricing
|
|
|
(2,986
|
)
|
|
|
3,237
|
|
|
|
—
|
|
|
|
(251
|
)
|
|
|
—
|
|
|
Borrowing costs
|
|
|
(2,716
|
)
|
|
|
1,485
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,231
|
)
|
|
Other temporary differences
|
|
|
(1,944
|
)
|
|
|
1,072
|
|
|
|
—
|
|
|
|
(84
|
)
|
|
|
(956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(130,702
|
)
|
|
|
92,011
|
|
|
|
—
|
|
|
|
(2,410
|
)
|
|
|
(41,101
|
)
|
|
|
|
|
|
|
1
|
|
The Company has temporarily
depreciated part of its investments in its United States Group
Companies which has been deducted from the taxable base in the
Netherlands.
|
Tax effect
carry-forward losses
Deferred tax assets from carry-forward losses result
predominantly from net operating loss carry-forwards incurred in
the Netherlands and the United States prior to 2010. Available
Dutch net operating losses were fully utilized to offset taxable
income during 2010.
Net operating losses qualified as tax losses under United States
federal tax laws incurred by United States group companies can
in general be offset against future profits realized in the
20 years following the year in which the losses are
incurred. The Company’s ability to use its carry forward
United States federal tax losses in existence at
December 31, 2010, will expire in the period 2021 through
2023. Net operating losses qualified as tax losses under United
States state tax laws incurred by United States group companies
can in general be offset against future profits realized in the
5 to 20 years following the year in which the losses are
incurred. The period of net operating loss carry forward for
United States state tax purposes depends on the state in which
the tax loss arose. The Company’s ability to use United
States state tax loss carry forwards in existence at
December 31, 2010, is subject to varying state statutes
(providing for periods of between 5 and 20 years) and
valuation allowances have been set up for state carry forward
losses that are not expected to be realized before they expire.
The total amount of losses carried forward under United States
federal tax laws as of December 31, 2010, is
EUR 72.1 million tax basis or
EUR 27.8 million tax effect. Management believes that
all qualified federal tax losses will be offset by future
taxable income before the Company’s ability to utilize
those losses expires. This analysis takes into account the
Company’s projected future taxable income from operations
and possible tax planning alternatives available to the Company.
ASML STATUTORY ANNUAL REPORT 2010
106
26.
Subsidiaries
Details of the Company’s
subsidiaries1
at December 31, 2010 are as follows:
| |
|
|
|
|
Legal entity
|
|
Country of Incorporation
|
|
Subsidiaries of ASML Holding N.V.:
|
|
|
|
ASML Netherlands B.V.
|
|
Netherlands (Veldhoven)
|
|
ASML MaskTools B.V.
|
|
Netherlands (Veldhoven)
|
|
ASML Systems B.V.
|
|
Netherlands (Veldhoven)
|
|
ASML Germany GmbH
|
|
Germany (Dresden)
|
|
ASML France S.a.r.l.
|
|
France (Montbonnot)
|
|
ASML (UK) Ltd.
|
|
UK (Paisley (Scotland))
|
|
ASML Israel (2001) Ltd.
|
|
Israel (Ramat-Gan)
|
|
ASML Ireland Ltd.
|
|
Ireland (Dublin)
|
|
ASML Dublin Ltd.
|
|
Ireland (Dublin)
|
|
ASML Italy S.r.l.
|
|
Italy (Avezzano)
|
|
ASML Hong Kong Ltd.
|
|
Hong Kong SAR
|
|
ASML Singapore Pte. Ltd.
|
|
Singapore
|
|
ASML Korea Co. Ltd.
|
|
Korea (Kyunggi-Do)
|
|
ASML Japan Co. Ltd.
|
|
Japan (Kawasaki-shi, Kanagawa-Ken)
|
|
ASML Lithography Facilities Science and Technology Co.
Ltd.2
|
|
China (Tianjin)
|
|
ASML Taiwan Ltd.
|
|
Taiwan (Hsinchu)
|
|
ASML Equipment Malaysia Sdn. Bhd.
|
|
Malaysia (Penang)
|
|
ASML Belgium BVBA
|
|
Belgium (Essen)
|
|
ASML Belgium Finance CV
|
|
Belgium
(Essen)3
|
|
Brion Technologies (Shenzhen) Co. Ltd.
|
|
China (Shenzhen)
|
|
|
|
|
|
|
|
|
|
Subsidiary of ASML Belgium Finance CV:
|
|
|
|
ASML US Inc.
|
|
US (Delaware)
|
|
|
|
|
|
|
|
|
|
Subsidiaries of ASML US, Inc.:
|
|
|
|
ASML Capital US Inc.
|
|
US (Delaware)
|
|
ASML MaskTools Inc.
|
|
US (Delaware)
|
|
Brion Technologies Inc.
|
|
US (Delaware)
|
|
ASML Participation US Inc.
|
|
US (Tempe)
|
|
Lehrer Pearson Inc.
|
|
US (Richmond)
|
|
ASML Ventures 1 Inc.
|
|
US (Tempe)
|
|
|
|
|
|
|
|
|
|
Subsidiaries of Brion Technologies, Inc:
|
|
|
|
Brion Technologies Int.
|
|
Cayman Islands (Georgetown)
|
|
|
|
|
|
|
|
|
|
Subsidiary of ASML Hong Kong Ltd.:
|
|
|
|
ASML Hong Kong Logistic Services Ltd.
|
|
Hong Kong SAR
|
|
|
|
|
|
|
1
|
|
All of the Company’s
subsidiaries are directly or indirectly wholly-owned.
|
| |
|
2
|
|
ASML (Tianjin) Co Ltd. was renamed
to ASML Lithography Facilities Science and Technology Co. Ltd.
as of August 3, 2010.
|
| |
|
3
|
|
Limited partnership with ASML
Belgium BVBA as managing partner and ASML Holding N.V. as
limited partner.
|
27. Segment
Disclosure
ASML’s Chief Executive Officer has been identified as the
chief operating decision-maker, who reviews operating results to
make decisions about allocating resources and assessing
performance for the entire Company.
Management reporting includes net system sales figures of new
and used systems. Net sales for new and used systems were as
follows:
| |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
New systems
|
|
|
993,260
|
|
|
|
3,704,290
|
|
|
Used systems
|
|
|
181,598
|
|
|
|
190,452
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net system sales
|
|
|
1,174,858
|
|
|
|
3,894,742
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
107
Segment performance is evaluated by the Company’s
management based on U.S. GAAP net income or loss which in
certain respect, as explained in the table below, is measured
differently from net income or loss reported by the Company in
its consolidated financial statements, which are based on IFRS,
as adopted by the EU.
| |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Net system sales
|
|
|
1,174,858
|
|
|
|
3,894,742
|
|
|
Net service and field option sales
|
|
|
421,205
|
|
|
|
613,196
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
|
1,596,063
|
|
|
|
4,507,938
|
|
|
Cost of system sales
|
|
|
852,417
|
|
|
|
2,222,965
|
|
|
Cost of service and field option sales
|
|
|
285,254
|
|
|
|
329,803
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
1,137,671
|
|
|
|
2,552,768
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit on sales
|
|
|
458,392
|
|
|
|
1,955,170
|
|
|
Research and development costs
|
|
|
466,761
|
|
|
|
523,426
|
|
|
Selling, general and administrative
costs1
|
|
|
154,756
|
|
|
|
181,045
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(163,125
|
)
|
|
|
1,250,699
|
|
|
Interest income
|
|
|
42,766
|
|
|
|
15,125
|
|
|
Interest
expense1
|
|
|
(51,191
|
)
|
|
|
(23,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
(171,550
|
)
|
|
|
1,242,523
|
|
|
Benefit from income taxes
|
|
|
20,625
|
|
|
|
(220,703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(150,925
|
)
|
|
|
1,021,820
|
|
|
Differences U.S. GAAP and IFRS
|
|
|
69,482
|
|
|
|
(36,367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for IFRS
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
Segment performance is also evaluated by the Company’s
management based on U.S. GAAP for total assets. The table
below presents the measurements and the reconciliation to total
assets in the consolidated statement of financial position:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Total assets for management reporting
purposes1
|
|
|
3,764,151
|
|
|
|
6,180,358
|
|
|
Differences U.S. GAAP and IFRS
|
|
|
350,379
|
|
|
|
273,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for
IFRS1
|
|
|
4,114,530
|
|
|
|
6,453,833
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
ASML STATUTORY ANNUAL REPORT 2010
108
For geographical reporting, net sales are attributed to the
geographic location in which the customers’ facilities are
located. Total non-current assets are attributed to the
geographic location in which they are located and exclude
deferred tax assets and derivative financial instruments. Net
sales and non-current assets by geographic region were as
follows:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
Net sales
|
|
|
Non-current assets
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
41,075
|
|
|
|
36,647
|
|
|
Korea
|
|
|
377,677
|
|
|
|
1,906
|
|
|
Singapore
|
|
|
155,825
|
|
|
|
561
|
|
|
Taiwan
|
|
|
440,222
|
|
|
|
41,849
|
|
|
Rest of Asia
|
|
|
144,004
|
|
|
|
1,193
|
|
|
Europe1
|
|
|
68,652
|
|
|
|
833,280
|
|
|
United States
|
|
|
368,608
|
|
|
|
249,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,596,063
|
|
|
|
1,164,856
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
396,748
|
|
|
|
3,837
|
|
|
Korea
|
|
|
1,396,028
|
|
|
|
4,701
|
|
|
Singapore
|
|
|
215,357
|
|
|
|
1,079
|
|
|
Taiwan
|
|
|
1,380,400
|
|
|
|
50,130
|
|
|
Rest of Asia
|
|
|
239,914
|
|
|
|
1,619
|
|
|
Europe
|
|
|
203,548
|
|
|
|
1,031,792
|
|
|
United States
|
|
|
675,943
|
|
|
|
267,790
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,507,938
|
|
|
|
1,360,948
|
|
|
|
|
|
|
|
1
|
|
As of January 1, 2010 ASML
consolidates its Special Purpose Entity which owns ASML’s
headquarters located in The Netherlands. The comparative figures
for 2009 have been adjusted to reflect this change in accounting
policy. See Note 3.
|
In 2010, sales to the largest customer accounted for
EUR 1,270.8 million or 28.2 percent of net sales.
In 2009, sales to the largest customer accounted for
EUR 348.8 million or 21.9 percent of net sales.
ASML’s three largest customers (based on net sales)
accounted for 42.4 percent of accounts receivable at
December 31, 2010 and 44.0 percent of accounts
receivable at December 31, 2009.
Substantially all our sales were export sales in 2009 and 2010.
28.
Personnel
Personnel expenses for all payroll employees were:
| |
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Wages and salaries
|
|
|
436,888
|
|
|
|
551,683
|
|
|
Social security expenses
|
|
|
38,533
|
|
|
|
42,468
|
|
|
Pension and early retirement expenses
|
|
|
39,825
|
|
|
|
40,593
|
|
|
Share-based payments
|
|
|
13,394
|
|
|
|
12,109
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
528,640
|
|
|
|
646,853
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
109
The average number of payroll employees in FTEs during 2009 and
2010 was 6,624 and 6,785 respectively. The total number of
payroll personnel employed in FTEs per sector was:
| |
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
Customer Support
|
|
|
1,910
|
|
|
|
2,236
|
|
|
SG&A
|
|
|
679
|
|
|
|
727
|
|
|
Industrial Engineering
|
|
|
277
|
|
|
|
398
|
|
|
Manufacturing & Logistics
|
|
|
1,639
|
|
|
|
2,475
|
|
|
R&D
|
|
|
2,813
|
|
|
|
3,225
|
|
|
Sourcing
|
|
|
367
|
|
|
|
125
|
|
|
Quality & Process Improvement
|
|
|
—
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employees (in FTEs)
|
|
|
7,685
|
|
|
|
9,245
|
|
|
Less: Temporary employees (in FTEs)
|
|
|
1,137
|
|
|
|
2,061
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll employees (in FTEs)
|
|
|
6,548
|
|
|
|
7,184
|
|
|
|
In 2009 and 2010, a total of 3,601 and 3,805 (on average)
payroll employees in FTEs (excluding temporary employees),
respectively, were employed in the Netherlands.
29. Board of
Management and Supervisory Board Remuneration
The remuneration of the members of the Board of Management is
determined by the Supervisory Board on the advice of the
Remuneration Committee, in cooperation with the Audit Committee
and the Technology and Strategy Committee of the Supervisory
Board. The Supervisory Board, upon recommendation of its
Remuneration Committee, submitted an update of the Remuneration
Policy for the Board of Management to the General Meeting of
Shareholders, which was adopted on March 24, 2010 (the
“2010 remuneration policy”). Under the 2010
remuneration policy, the level of total direct compensation was
maintained although adjustments were made to better reflect:
1. The shifting focus from short-term incentives
(“STI”) to long-term incentives (“LTI”);
2. Further improved alignment of performance criteria to
business needs; and
3. Alignment of the pension arrangement with the adjusted
excedent pension arrangement for ASML employees in the
Netherlands and with common market practice for executive
pensions in the Netherlands.
The 2010 Remuneration Policy enables ASML to continue to
attract, reward and retain qualified and experienced industry
professionals in an international labor market. The remuneration
structure and levels are determined by referencing to the market
median of the appropriate top executive reference markets by
benchmarking positions. The total remuneration consists of base
salary, short-term performance incentives (in cash), long-term
performance incentives (in shares) and other benefits.
Total direct
compensation, pension and other benefits
Total direct compensation consists of base salary, a short-term
performance incentive in the form of cash and a long-term
performance incentive in the form of shares. In addition, the
remuneration of the board of management contains pension and
other benefits.
ASML STATUTORY ANNUAL REPORT 2010
110
The remuneration of the members of the Board of Management was
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
Short-term (variable)
|
|
|
(variable)
|
|
|
Remuneration
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTI
|
|
|
|
|
|
|
|
|
Other benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
(share
|
|
|
|
|
|
|
|
|
and expense
|
|
|
|
|
Financial
|
|
|
Base salary
|
|
|
STI
(Cash)1
|
|
|
awards2
|
|
|
awards)3
|
|
|
Total5
|
|
|
Pension6
|
|
|
reimbursement7
|
|
|
|
|
Year
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
E. Meurice
|
|
|
2010
|
|
|
|
757,000
|
|
|
|
566,236
|
|
|
|
42,648
|
|
|
|
935,6174
|
|
|
|
2,301,501
|
|
|
|
136,697
|
|
|
|
132,630
|
|
|
|
|
|
2009
|
|
|
|
735,000
|
|
|
|
507,150
|
|
|
|
466,164
|
|
|
|
1,042,576
|
|
|
|
2,750,890
|
|
|
|
91,950
|
|
|
|
141,377
|
|
|
|
|
|
2008
|
|
|
|
735,000
|
|
|
|
414,569
|
|
|
|
279,316
|
|
|
|
1,194,544
|
|
|
|
2,623,429
|
|
|
|
91,982
|
|
|
|
129,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.T.F.M. Wennink
|
|
|
2010
|
|
|
|
469,000
|
|
|
|
280,650
|
|
|
|
26,401
|
|
|
|
579,3214
|
|
|
|
1,355,372
|
|
|
|
84,229
|
|
|
|
43,627
|
|
|
|
|
|
2009
|
|
|
|
455,000
|
|
|
|
251,160
|
|
|
|
288,578
|
|
|
|
646,055
|
|
|
|
1,640,793
|
|
|
|
56,317
|
|
|
|
44,886
|
|
|
|
|
|
2008
|
|
|
|
455,000
|
|
|
|
205,311
|
|
|
|
172,929
|
|
|
|
747,238
|
|
|
|
1,580,478
|
|
|
|
56,350
|
|
|
|
49,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.A. van den Brink
|
|
|
2010
|
|
|
|
497,000
|
|
|
|
297,405
|
|
|
|
28,025
|
|
|
|
617,0044
|
|
|
|
1,439,434
|
|
|
|
90,388
|
|
|
|
44,817
|
|
|
|
|
|
2009
|
|
|
|
483,000
|
|
|
|
266,616
|
|
|
|
306,336
|
|
|
|
681,179
|
|
|
|
1,737,131
|
|
|
|
59,880
|
|
|
|
44,992
|
|
|
|
|
|
2008
|
|
|
|
483,000
|
|
|
|
217,945
|
|
|
|
183,276
|
|
|
|
785,809
|
|
|
|
1,670,030
|
|
|
|
59,913
|
|
|
|
43,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.J. van Hout
|
|
|
2010
|
|
|
|
412,000
|
|
|
|
246,541
|
|
|
|
23,209
|
|
|
|
471,700
|
|
|
|
1,153,450
|
|
|
|
65,300
|
|
|
|
34,549
|
|
|
|
|
|
2009
|
|
|
|
400,000
|
|
|
|
220,800
|
|
|
|
241,522
|
|
|
|
123,111
|
|
|
|
985,433
|
|
|
|
40,800
|
|
|
|
35,199
|
|
|
|
|
|
2008
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.
Schneider-Maunoury8
|
|
|
2010
|
|
|
|
400,000
|
|
|
|
239,360
|
|
|
|
—
|
|
|
|
326,947
|
|
|
|
966,307
|
|
|
|
55,011
|
|
|
|
34,788
|
|
|
|
|
|
2009
|
|
|
|
33,333
|
|
|
|
58,095
|
|
|
|
—
|
|
|
|
—
|
|
|
|
91,428
|
|
|
|
4,736
|
|
|
|
3,163
|
|
|
|
|
|
2008
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
1
|
|
Actual STI (cash) chargeable to the
company in the financial year (i.e. STI relating to performance
in the current year but paid out in the next financial year).
The accrued STI (cash) with respect to 2009 were paid out after
ASML achieved a cumulative income from operations of at least
100 million Euro in two consecutive quarters after
January 1, 2010. This was achieved on the basis of the
first and second quarter results for 2010. The 2008 short-term
incentives (cash) for Mr. Meurice, Mr. Wennink and Mr.
van den Brink were partly paid in unconditional shares on
February 3, 2009.
|
| |
|
2
|
|
The remuneration reported as part
of the option awards is based on costs incurred under IFRS. The
costs of the option awards are based on the actual vested number
of option awards multiplied by the fair value of the option
awards at grant date and are recorded in the income statement on
a straight line basis over the vesting period. The 2009 number
of option awards that actually vested was 100 percent,
whereas the 2008 number of option awards that actually vested
was 50 percent.
|
| |
|
3
|
|
The remuneration reported as part
of the LTI (share awards) is based on costs incurred under IFRS.
The costs of share awards are charged to the income statement
over the three year vesting period based on the maximum
achievable number of share awards. Therefore the costs for the
financial year 2010 include costs of the Board of Management
performance share plan 2010, 2009 and 2008. Furthermore, the
difference between the amount based on the maximum achievable
number of share awards and the amount based on the actual number
of share awards that vest, is released to the income statement
in the financial year in which the share awards vest.
|
| |
|
4
|
|
The remuneration reported as part
of the LTI (share awards) for the year 2010 includes a
correction for the Board of Management performance share plan
2007 based on the actual number of share awards vested in 2010.
The correction for Mr. Meurice, Mr. Wennink and for
Mr. van den Brink amounts to EUR -296,287, EUR -183,612 and EUR
-191,972, respectively.
|
| |
|
5
|
|
This total reflects base salary,
STI (cash), option awards and LTI (share awards).
|
| |
|
6
|
|
The pension arrangement has been
adjusted upwards to match common market practice as from 2010.
Furthermore, since the pension arrangement for members of the
Board of Management is a defined contribution plan, the Company
does not have additional pension obligations beyond the annual
premium contribution. As per 2010, the employee contribution to
the pension plan is 4 percent of the pension base.
|
| |
|
7
|
|
Other benefits and expense
reimbursement include housing costs, company car costs, social
security costs, health and disability insurance costs and
representation allowances. As of 2009, all other benefits and
expense reimbursement are gross amounts. Comparative figures for
the year 2008 have been adjusted.
|
| |
|
8
|
|
For 2009, the remuneration for
Mr. Schneider-Maunoury regards only the month December.
|
Short-term
incentive
The annual performance-related STI will have an on-target level
of 75.0 percent of base salary for the Chief Executive
Officer (“CEO”) and 60.0 percent for the other
members of the Board of Management. The payouts are pro-rated,
on a linear basis to the level of achievement of six performance
criteria of which the weighting of each of the first five
quantitative criteria is equal (80.0 percent in total) and
the weighting of the sixth target, being based on qualitative
objectives, is 20.0 percent. Of the five quantitative
performance criteria, three are based on the achievement of
measurable financial targets, one on technology based objectives
and one on achievements in the market place. Additionally, the
qualitative target is based on the achievement of agreed key
objectives. The setting of the first four targets is
semi-annual; the setting of the fifth and sixth targets is
annual. The overall payout is annual and the cash incentive is
accrued during the performance period. On January 17, 2011,
the Remuneration Committee evaluated the Board of
Managements’ performance on these six criteria and based on
this evaluation, the payout level was determined to be
99.7 percent of the target level.
Performance
Stock Options
In order to shift the focus from the short-term to the
long-term, performance stock options are not a part of the new
2010 Remuneration Policy. The value of this part of the
remuneration has been moved into the long-term incentive plan
which is paid in shares. 2009 was the final year in which
performance stock options were granted to the members of the
Board of Management, which means the actual number of
performance stock options for 2009 achievement were awarded for
the last time in 2010. Once
ASML STATUTORY ANNUAL REPORT 2010
111
the options are unconditionally awarded after fulfillment of the
performance conditions, the options will be retained
(lock-up
period) by the Board of Management member for at least two years
after the date of unconditional award or until the termination
of employment, whichever period is shorter. The fair value of
the options granted is determined based on the Black-Scholes
option valuation model.
Details of options awarded to members of the Board of Management
are set out below:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
at grant
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
Full
|
|
|
options at
|
|
|
date1
|
|
|
Vesting
|
|
|
Number of options
|
|
|
|
|
date
|
|
|
Status
|
|
|
control
|
|
|
grant date
|
|
|
(EUR)
|
|
|
date
|
|
|
at vesting date
|
|
|
E. Meurice
|
|
|
02/02/2009
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
84,895
|
|
|
|
5.73
|
|
|
|
02/02/2010
|
|
|
|
84,895
|
|
|
|
|
|
02/04/2008
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
84,895
|
|
|
|
6.41
|
|
|
|
02/04/2009
|
|
|
|
42,448
|
|
|
|
|
|
01/17/2007
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
100,154
|
|
|
|
6.74
|
|
|
|
01/17/2008
|
|
|
|
95,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.T.F.M. Wennink
|
|
|
02/02/2009
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
52,554
|
|
|
|
5.73
|
|
|
|
02/02/2010
|
|
|
|
52,554
|
|
|
|
|
|
02/04/2008
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
52,554
|
|
|
|
6.41
|
|
|
|
02/04/2009
|
|
|
|
26,277
|
|
|
|
|
|
01/17/2007
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
62,067
|
|
|
|
6.74
|
|
|
|
01/17/2008
|
|
|
|
58,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.A. van den Brink
|
|
|
02/02/2009
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
55,788
|
|
|
|
5.73
|
|
|
|
02/02/2010
|
|
|
|
55,788
|
|
|
|
|
|
02/04/2008
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
55,788
|
|
|
|
6.41
|
|
|
|
02/04/2009
|
|
|
|
27,894
|
|
|
|
|
|
01/17/2007
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
64,888
|
|
|
|
6.74
|
|
|
|
01/17/2008
|
|
|
|
61,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.J. van
Hout2
|
|
|
02/02/2009
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
46,201
|
|
|
|
5.73
|
|
|
|
02/02/2010
|
|
|
|
46,201
|
|
|
|
|
|
07/18/2008
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
8,000
|
|
|
|
5.45
|
|
|
|
07/18/2011
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F. Schneider-Maunoury
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
1
|
|
The fair value of the option award
as of the grant date.
|
| |
|
2
|
|
The options granted to Mr. Van
Hout on and before October 17, 2008, relate to his
pre-Board of Management period at ASML
|
ASML STATUTORY ANNUAL REPORT 2010
112
Details of vested options held by members of the Board of
Management to purchase ordinary shares of ASML Holding N.V. are
set out below:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free
|
|
|
With lock-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
Share price on exercise
|
|
|
|
|
|
tradable
|
|
|
restriction
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
during
|
|
|
date
|
|
|
Vested
|
|
|
(Dec.31,
|
|
|
(Dec. 31,
|
|
|
price
|
|
|
Expiration
|
|
|
|
|
Jan. 1, 2010
|
|
|
2010
|
|
|
(EUR)
|
|
|
during 2010
|
|
|
2010)
|
|
|
2010)
|
|
|
(EUR)
|
|
|
date
|
|
|
E. Meurice
|
|
|
125,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,000
|
|
|
|
—
|
|
|
|
10.62
|
|
|
|
10/15/2014
|
|
|
|
|
|
57,770
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,770
|
|
|
|
—
|
|
|
|
11.53
|
|
|
|
01/19/2015
|
|
|
|
|
|
12,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,500
|
|
|
|
—
|
|
|
|
11.52
|
|
|
|
01/21/2015
|
|
|
|
|
|
88,371
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
88,371
|
|
|
|
—
|
|
|
|
17.90
|
|
|
|
01/18/2016
|
|
|
|
|
|
95,146
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
95,146
|
|
|
|
—
|
|
|
|
20.39
|
|
|
|
01/17/2017
|
|
|
|
|
|
42,448
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
42,448
|
|
|
|
17.20
|
|
|
|
02/04/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,895
|
|
|
|
—
|
|
|
|
84,895
|
|
|
|
12.39
|
|
|
|
02/02/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.T.F.M. Wennink
|
|
|
31,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,500
|
|
|
|
—
|
|
|
|
58.00
|
|
|
|
01/20/2012
|
|
|
|
|
|
32,379
|
|
|
|
12,379
|
|
|
|
23.08
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
11.53
|
|
|
|
01/19/2015
|
|
|
|
|
|
56,236
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,236
|
|
|
|
—
|
|
|
|
17.90
|
|
|
|
01/18/2016
|
|
|
|
|
|
58,964
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
58,964
|
|
|
|
—
|
|
|
|
20.39
|
|
|
|
01/17/2017
|
|
|
|
|
|
26,277
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,277
|
|
|
|
17.20
|
|
|
|
02/04/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
52,554
|
|
|
|
—
|
|
|
|
52,554
|
|
|
|
12.39
|
|
|
|
02/02/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.A. van den Brink
|
|
|
31,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,500
|
|
|
|
—
|
|
|
|
58.00
|
|
|
|
01/20/2012
|
|
|
|
|
|
59,098
|
|
|
|
19,098
|
|
|
|
23.08
|
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
17.90
|
|
|
|
01/18/2016
|
|
|
|
|
|
61,644
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
61,644
|
|
|
|
—
|
|
|
|
20.39
|
|
|
|
01/17/2017
|
|
|
|
|
|
27,894
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27,894
|
|
|
|
17.20
|
|
|
|
02/04/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,788
|
|
|
|
—
|
|
|
|
55,788
|
|
|
|
12.39
|
|
|
|
02/02/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.J. van Hout
|
|
|
4,100
|
|
|
|
4,100
|
|
|
|
23.08
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7.88
|
|
|
|
01/20/2013
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
10.11
|
|
|
|
07/18/2013
|
|
|
|
|
|
1,365
|
|
|
|
1,365
|
|
|
|
23.08
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10.11
|
|
|
|
07/18/2013
|
|
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
17.34
|
|
|
|
01/19/2014
|
|
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
12.02
|
|
|
|
07/16/2014
|
|
|
|
|
|
9,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,000
|
|
|
|
—
|
|
|
|
11.56
|
|
|
|
04/15/2015
|
|
|
|
|
|
14,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,000
|
|
|
|
—
|
|
|
|
17.90
|
|
|
|
10/20/2016
|
|
|
|
|
|
1,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,388
|
|
|
|
—
|
|
|
|
24.26
|
|
|
|
10/19/2017
|
|
|
|
|
|
3,987
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,987
|
|
|
|
—
|
|
|
|
11.43
|
|
|
|
10/17/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,201
|
|
|
|
—
|
|
|
|
46,201
|
|
|
|
12.39
|
|
|
|
02/02/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F. Schneider-Maunoury
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Long-term
incentive
The members of the Board of Management are eligible to receive
performance shares which will be awarded annually under the
condition of fulfillment of predetermined performance targets,
which are measured over a period of three calendar years. The
performance measures for obtaining performance targets will be
ASML’s ROAIC position compared with the Peer Group
(weighted 80.0 percent) and a qualitative target related to
ASML’s long-term ability to keep performing at high
standards (weighted 20.0 percent).
The maximum number of performance shares to be conditionally
awarded will equal 146.25 percent of base salary divided by
the value of one performance share (i.e. reflecting maximum
achievement). ASML defines stretching targets, whereas for on
target achievement, the value of performance shares will be
80.0 percent of base salary.
For the determination of the number of performance shares that
will be conditionally awarded, ASML applies a fixed number
approach. Under this approach, the number of shares is fixed for
two consecutive years. Every two years, the fixed number is
calculated using the maximum achievable value of
146.25 percent of base salary divided by the value of the
performance share at the moment of grant in the respective year.
In 2010, the fixed number calculation has been conducted.
Once the shares are unconditionally awarded after fulfillment of
the performance conditions, the shares will be retained (for a
lock-up
period) by the Board of Management member for at least two years
after the date of unconditional award or until the termination
of employment, whichever period is shorter. ASML accounts for
this share award performance plan as a variable plan.
ASML STATUTORY ANNUAL REPORT 2010
113
Details of performance shares granted to members of the Board of
Management are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
at grant
|
|
|
|
|
|
Number of
|
|
|
|
|
Grant
|
|
|
|
|
|
Full
|
|
|
shares at
|
|
|
date1
|
|
|
Vesting
|
|
|
shares at
|
|
|
|
|
date
|
|
|
Status
|
|
|
control
|
|
|
grant date
|
|
|
(EUR)
|
|
|
date
|
|
|
vesting date
|
|
|
E. Meurice
|
|
|
02/01/2010
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
88,732
|
|
|
|
22.93
|
|
|
|
02/01/2013
|
|
|
|
—
|
|
|
|
|
|
02/02/2009
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
57,002
|
|
|
|
13.05
|
|
|
|
02/02/2012
|
|
|
|
—
|
|
|
|
|
|
02/04/2008
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
57,002
|
|
|
|
18.18
|
|
|
|
02/04/2011
|
|
|
|
—
|
|
|
|
|
|
01/17/2007
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
66,338
|
|
|
|
20.39
|
|
|
|
01/17/2010
|
|
|
|
51,807
|
|
|
|
|
|
01/18/2006
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
72,136
|
|
|
|
17.90
|
|
|
|
01/18/2009
|
|
|
|
72,136
|
|
|
|
|
|
01/19/2005
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
36,972
|
|
|
|
11.53
|
|
|
|
01/19/2008
|
|
|
|
36,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.T.F.M. Wennink
|
|
|
02/01/2010
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
54,974
|
|
|
|
22.93
|
|
|
|
02/01/2013
|
|
|
|
—
|
|
|
|
|
|
02/02/2009
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
35,287
|
|
|
|
13.05
|
|
|
|
02/02/2012
|
|
|
|
—
|
|
|
|
|
|
02/04/2008
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
35,287
|
|
|
|
18.18
|
|
|
|
02/04/2011
|
|
|
|
—
|
|
|
|
|
|
01/17/2007
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
41,111
|
|
|
|
20.39
|
|
|
|
01/17/2010
|
|
|
|
32,106
|
|
|
|
|
|
01/18/2006
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
45,905
|
|
|
|
17.90
|
|
|
|
01/18/2009
|
|
|
|
45,905
|
|
|
|
|
|
01/19/2005
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
20,721
|
|
|
|
11.53
|
|
|
|
01/19/2008
|
|
|
|
20,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.A. van den Brink
|
|
|
02/01/2010
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
58,256
|
|
|
|
22.93
|
|
|
|
02/01/2013
|
|
|
|
—
|
|
|
|
|
|
02/02/2009
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
37,458
|
|
|
|
13.05
|
|
|
|
02/02/2012
|
|
|
|
—
|
|
|
|
|
|
02/04/2008
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
37,458
|
|
|
|
18.18
|
|
|
|
02/04/2011
|
|
|
|
—
|
|
|
|
|
|
01/17/2007
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
42,980
|
|
|
|
20.39
|
|
|
|
01/17/2010
|
|
|
|
33,565
|
|
|
|
|
|
01/18/2006
|
|
|
|
Unconditional
|
|
|
|
No
|
|
|
|
48,241
|
|
|
|
17.90
|
|
|
|
01/18/2009
|
|
|
|
48,241
|
|
|
|
|
|
01/19/2005
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
25,902
|
|
|
|
11.53
|
|
|
|
01/19/2008
|
|
|
|
25,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F.J. van
Hout2
|
|
|
02/01/2010
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
48,293
|
|
|
|
22.93
|
|
|
|
02/01/2013
|
|
|
|
—
|
|
|
|
|
|
02/02/2009
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
31,021
|
|
|
|
13.05
|
|
|
|
02/02/2012
|
|
|
|
—
|
|
|
|
|
|
07/18/2008
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
4,000
|
|
|
|
17.20
|
|
|
|
07/18/2011
|
|
|
|
—
|
|
|
|
|
|
10/19/2007
|
|
|
|
Unconditional
|
|
|
|
Yes
|
|
|
|
3,334
|
|
|
|
20.39
|
|
|
|
10/19/2010
|
|
|
|
1,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F. Schneider-Maunoury
|
|
|
02/01/2010
|
|
|
|
Conditional
|
|
|
|
No
|
|
|
|
46,886
|
|
|
|
22.93
|
|
|
|
02/01/2013
|
|
|
|
—
|
|
|
|
|
|
|
|
1
|
|
The fair value of the shares as of
the grant date.
|
| |
|
2
|
|
The shares granted to Mr. Van
Hout on and before October 17, 2008, relate to his
pre-Board of Management period at ASML. No
lock-up
period is applicable for the shares granted to Mr. Van Hout
in his pre-Board of Management period.
|
Pension
Benefits
Members of the Board of Management are offered a pension plan
based on defined contribution. The total defined contribution is
a percentage of the pensionable salary and is dependent on the
participant’s age at the beginning of the year. The
Supervisory Board decided to adjust the pension arrangement for
the Board of Management to be in line with common market
practice.
Benefits upon
termination of employment
Term of appointment/employment
Members of the Board of Management appointed after the 2004
amendment of the Articles of Association, are appointed for a
period of four years, after which reappointment is possible for
consecutive four-year terms. Messrs. P. Wennink and M. van
den Brink’s appointment to the Board of Management is for
an indefinite period of time, as their initial appointment was
before 2004. The existing employment contracts, including all
rights and obligations under these contracts, will be honored.
Severance agreement
Employment agreements with the Board of Management members
concluded prior to March 31, 2004 (i.e.
Messrs. Wennink and Van den Brink) do not contain specific
provisions regarding benefits upon termination of those
agreements. Potential severance payments in such case will be
according to applicable law (e.g. cantonal formula in the
Netherlands).
Employment agreements for members of the Board of Management
appointed after March 31, 2004 (i.e. Messrs. Meurice,
Van Hout and Schneider-Maunoury) do contain specific
provisions regarding benefits upon termination of those
agreements.
If the Company gives notice of termination of the employment
agreement for reasons which are exclusively or mainly found in
acts or omissions on the side of the Board of Management member,
no severance amount will be granted. If this is not the case, a
severance amount equal to one year base salary or a severance
consistent with the Dutch Labor laws will be made available upon
the effective date of termination.
ASML STATUTORY ANNUAL REPORT 2010
114
This severance payment will also be made available in case the
Board of Management member gives notice of termination of the
employment agreement due to a significant difference of opinion
between the respective executives and the Supervisory Board
regarding his employment agreement, his function or the
Company’s strategy.
Change in control
Board of Management members with an employment agreement dated
after March 31, 2004 (i.e. Messrs. Meurice, Van Hout
and Schneider-Maunoury) shall also be entitled to the
aforementioned severance amount in the event ASML or its legal
successor gives notice of termination due to a Change of Control
(as defined in the employment agreement) or if the Board of
Management member gives notice of termination, which is directly
related to such Change of Control and such notice is given
within twelve months from the date on which the Change of
Control occurs.
Supervisory
Board
The annual remuneration for Supervisory Board members covers the
period from one Annual General Meeting of Shareholders to the
next one. The annual remuneration is paid in quarterly
installments starting after the Annual General Meeting of
Shareholders.
The following table sets forth an overview of the remuneration
awarded to Supervisory Board Members in 2010 and 2009:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selection and
|
|
|
Technology and
|
|
|
|
|
|
|
|
|
|
|
Supervisory
|
|
|
Audit
|
|
|
Remuneration
|
|
|
Nomination
|
|
|
Strategy
|
|
|
|
|
|
Year ended December 31
|
|
2010
|
|
|
Board
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Other1
|
|
|
Arthur P.M. van der Poel
|
|
|
80,000
|
|
|
|
55,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
—
|
|
|
Jos W.B. Westerburgen
|
|
|
60,000
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
OB Bilous
|
|
|
95,000
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
10,000
|
|
|
Frits W. Fröhlich
|
|
|
55,000
|
|
|
|
40,000
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Hendrika (Ieke) C.J. van den Burg
|
|
|
47,500
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
William T. Siegle
|
|
|
80,000
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
Pauline F.M. van der Meer Mohr
|
|
|
47,500
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Wolfgang H. Ziebart
|
|
|
57,500
|
|
|
|
40,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
522,500
|
|
|
|
395,000
|
|
|
|
35,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
32,500
|
|
|
|
10,000
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selection and
|
|
|
Technology and
|
|
|
|
|
|
|
|
|
|
|
Supervisory
|
|
|
Audit
|
|
|
Remuneration
|
|
|
Nomination
|
|
|
Strategy
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
Board
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Other1
|
|
|
Arthur P.M. van der Poel
|
|
|
80,000
|
|
|
|
55,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
—
|
|
|
Jos W.B. Westerburgen
|
|
|
60,000
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
OB Bilous
|
|
|
95,000
|
|
|
|
70,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
10,000
|
|
|
Frits W. Fröhlich
|
|
|
55,000
|
|
|
|
40,000
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Hendrika (Ieke) C.J. van den Burg
|
|
|
47,500
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
William T. Siegle
|
|
|
79,375
|
|
|
|
69,375
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
Pauline F.M. van der Meer
Mohr2,3
|
|
|
47,500
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Wolfgang H.
Ziebart2
|
|
|
43,125
|
|
|
|
25,625
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
J.A.
Dekker4
|
|
|
15,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
522,500
|
|
|
|
380,000
|
|
|
|
35,000
|
|
|
|
32,500
|
|
|
|
25,000
|
|
|
|
40,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
1
|
|
To compensate for certain
obligations ASML has towards the U.S. government as a result of
the merger with SVG in 2001, one U.S. member receives an
additional EUR 10,000 to fulfill these obligations.
|
| |
|
2
|
|
Membership started March 26,
2009.
|
| |
|
3
|
|
The amount paid to Ms. P. van
der Meer Mohr in 2009 consists of an amount paid to Ms. P.
van der Meer Mohr as observer to the Supervisory Board prior to
her appointment, and an amount for her membership of the
Supervisory Board and Remuneration Committee.
|
| |
|
4
|
|
Membership ended March 26,
2009.
|
In addition, a net cost allowance was paid to each Supervisory
Board member in 2010, amounting to EUR 1,800 per year, and
EUR 2,400 per year for the Chairman of the Supervisory
Board.
ASML STATUTORY ANNUAL REPORT 2010
115
Members of the Board of Management
and/or
Supervisory Board are free to acquire or dispose of ASML shares
or options for their own account, provided they comply with the
applicable ASML Insider Trading Rules. Those securities are not
part of members’ remuneration from the Company and are
therefore not included.
30. Research and
development costs
R&D costs include R&D credits of
EUR 22.4 million and EUR 26.3 million during
2009 and 2010, respectively. R&D credits relate to
world-wide (inter)governmental funding for certain strategic
development programs.
31. Interest
income and charges
Interest and similar income of EUR 19.3 million (2009:
EUR 51.1 million) mainly relates to interest income on
deposits, money market funds, income taxes and on bank accounts,
of which EUR 3.6 million (2009:
EUR 27.9 million) relates to interest on cash pools
which is reported on a gross basis in the consolidated income
statement. From an economic and legal perspective this
EUR 3.6 million (2009: EUR 27.9 million)
interest income nets off against the same amount of interest
charge.
32. Vulnerability
due to certain concentrations
ASML relies on outside vendors to manufacture the components and
subassemblies used in its systems, each of which is obtained
from a sole supplier or a limited number of suppliers.
ASML’s reliance on a limited group of suppliers involves
several risks, including a potential inability to obtain an
adequate supply of required components and reduced control over
pricing and timely delivery of these subassemblies and
components. In particular, from time to time, the number of
systems ASML has been able to produce has been limited by the
production capacity of Zeiss. Zeiss is currently ASML’s
sole external supplier of lenses and other critical optical
components and is capable of producing these lenses only in
limited numbers and only through the use of its manufacturing
and testing facility in Oberkochen and Wetzlar, Germany. During
2010, ASML’s sales were not limited by the deliveries from
Zeiss.
ASML sells a substantial number of lithography systems to a
limited number of customers. See Note 27. Business failure
of one of our main customers may result in adverse effects on
our business, financial condition and results of operations.
33. Principal
Accountant Fees and Services
Deloitte Accountants B.V. has served as our independent auditor
firm for each of the two financial years up to December 31,
2010. The following table sets out the aggregate fees for
professional audit services and other services rendered by
Deloitte Accountants B.V. and its member firms
and/or
affiliates in 2009 and 2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
|
|
Deloitte
|
|
|
|
|
|
|
|
|
Deloitte
|
|
|
|
|
|
|
|
|
|
|
Accountants
|
|
|
Deloitte
|
|
|
|
|
|
Accountants
|
|
|
Deloitte
|
|
|
|
|
Year ended December 31
|
|
B.V.
|
|
|
Network
|
|
|
Total
|
|
|
B.V.
|
|
|
Network
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Audit fees in relation to annual reports
|
|
|
744
|
|
|
|
—
|
|
|
|
744
|
|
|
|
860
|
|
|
|
—
|
|
|
|
860
|
|
|
Other audit fees
|
|
|
40
|
|
|
|
407
|
|
|
|
447
|
|
|
|
40
|
|
|
|
584
|
|
|
|
624
|
|
|
Audit-related fees
|
|
|
75
|
|
|
|
—
|
|
|
|
75
|
|
|
|
75
|
|
|
|
—
|
|
|
|
75
|
|
|
Tax fees
|
|
|
—
|
|
|
|
723
|
|
|
|
723
|
|
|
|
—
|
|
|
|
598
|
|
|
|
598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal accountant fees and services
|
|
|
859
|
|
|
|
1,130
|
|
|
|
1,989
|
|
|
|
975
|
|
|
|
1,182
|
|
|
|
2,157
|
|
|
|
Audit fees and
other audit fees
Audit fees primarily relate to the audit of our annual
consolidated and company financial statements set out in the
statutory annual report and the annual consolidated financial
statements set out in our Annual Report on
Form 20-F,
agreed upon procedures 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 and IFRS.
Audit-related
fees
Audit-related fees mainly related to various audit services not
related to the Company’s consolidated financial statements.
ASML STATUTORY ANNUAL REPORT 2010
116
Tax
fees
Tax fees can be detailed as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Corporate Income Tax compliance services
|
|
|
113
|
|
|
|
350
|
|
|
Tax assistance for expatriate employees
|
|
|
172
|
|
|
|
163
|
|
|
Other tax advisory and compliance
|
|
|
438
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax fees
|
|
|
723
|
|
|
|
598
|
|
|
|
The Audit Committee has approved the external audit plan and
related audit fees for the year 2010. 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.
Veldhoven, the Netherlands
February 14, 2011
Prepared by
The Board of Management:
Eric Meurice
Peter T.F.M. Wennink
Martin A. van den Brink
Frits J. van Hout
Frederic Schneider-Maunoury
ASML STATUTORY ANNUAL REPORT 2010
117
ASML STATUTORY ANNUAL REPORT 2010
118
ASML STATUTORY ANNUAL REPORT 2010
119
Company Financial
Statements
ASML STATUTORY ANNUAL REPORT 2010
120
Company Balance
Sheet
(Before appropriation of net income / loss)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
2009
|
|
|
2010
|
|
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
2,475,617
|
|
|
|
3,416,355
|
|
|
|
|
Loans to subsidiaries
|
|
|
105,707
|
|
|
|
1,281
|
|
|
|
|
Deferred tax assets
|
|
|
76,116
|
|
|
|
56,301
|
|
|
|
|
Derivative financial instruments
|
|
|
55,948
|
|
|
|
71,779
|
|
|
|
|
Other assets
|
|
|
857
|
|
|
|
3,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
2,714,245
|
|
|
|
3,549,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due from subsidiaries
|
|
|
141,262
|
|
|
|
293,856
|
|
|
|
|
Current tax assets
|
|
|
11,286
|
|
|
|
11,696
|
|
|
|
|
Derivative financial instruments
|
|
|
45,439
|
|
|
|
37,548
|
|
|
|
|
Other assets
|
|
|
1,528
|
|
|
|
3,062
|
|
|
|
|
Cash and cash equivalents
|
|
|
13,411
|
|
|
|
9,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
212,926
|
|
|
|
355,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
2,927,171
|
|
|
|
3,904,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Preference Shares, EUR 0.02 nominal value;
3,150,005,000 shares authorized; none outstanding at
December 31, 2009 and 2010
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares, EUR 0.09 and EUR 0.01 nominal value;
respectively 700,000,000 and 10,000 shares authorized;
respectively 433,638,976 and none outstanding at
December 31, 2009; respectively 436,592,972 and none
outstanding at December 31, 2010
|
|
|
40,448
|
|
|
|
40,713
|
|
|
|
|
Share premium
|
|
|
923,487
|
|
|
|
922,341
|
|
|
|
|
Retained earnings
|
|
|
1,215,492
|
|
|
|
1,096,669
|
|
|
|
|
Treasury shares at cost
|
|
|
(219,623
|
)
|
|
|
(153,092
|
)
|
|
|
|
Legal reserves
|
|
|
172,446
|
|
|
|
130,378
|
|
|
|
|
Net income (loss)
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,050,807
|
|
|
|
3,022,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
658,052
|
|
|
|
670,506
|
|
|
|
|
Deferred and other tax liabilities
|
|
|
181,833
|
|
|
|
113,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
839,885
|
|
|
|
784,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Accrued and other liabilities
|
|
|
17,655
|
|
|
|
20,040
|
|
|
|
|
Current and other tax liabilities
|
|
|
156
|
|
|
|
59,132
|
|
|
|
|
Derivative financial instruments
|
|
|
18,668
|
|
|
|
18,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
36,479
|
|
|
|
97,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
|
|
2,927,171
|
|
|
|
3,904,466
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
121
Abbreviated
Company Income Statement
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31
|
|
2009
|
|
|
2010
|
|
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
|
|
Net income (loss) from subsidiaries
|
|
|
(52,956
|
)
|
|
|
1,015,958
|
|
|
|
|
Loss after taxes
|
|
|
(28,487
|
)
|
|
|
(30,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(81,443
|
)
|
|
|
985,453
|
|
|
|
ASML STATUTORY ANNUAL REPORT 2010
122
Notes to the
Company Financial Statements
1. General
Information
The description of the Company’s activities and the Company
structure, as included in the Notes to the consolidated
financial statements, also apply to the Company financial
statements.
In accordance with article 362 sub 8 Part 9 of Book 2
of the Dutch Civil Code, ASML has prepared its Company financial
statements in accordance with accounting principles generally
accepted in the Netherlands applying the accounting principles
as adopted in the consolidated financial statements. Investments
in subsidiaries are stated at net asset value as the Company
effectively exercises influence of significance over the
operational and financial activities of these investments. The
net asset value is determined on the basis of the IFRS
accounting principles applied by the Company in its consolidated
financial statements.
In accordance with article 402 Part 9 of Book 2 of the
Dutch Civil Code the Company income statement is presented in
abbreviated form.
2. Summary of
Significant Accounting Policies
Significant
accounting policies
The accounting policies used in the preparation of the Company
financial statements are the same as those used in the
preparation of the consolidated financial statements (in
accordance with article 362 sub 8 Part 9 of Book 2 of
the Dutch Civil Code). See the Notes to the consolidated
financial statements. In addition to those accounting policies,
the following accounting policy applies to the Company financial
statements.
Investments in
subsidiaries
Investments in subsidiaries are stated at net asset value as the
Company effectively exercises influence of significance over the
operational and financial activities of these investments. The
net asset value is determined on the basis of the accounting
principles applied by the Company.
3. Investments in
Subsidiaries
Changes in investments in subsidiaries during 2009 and 2010 were
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
Balance, January 1
|
|
|
2,557,728
|
|
|
|
2,475,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions
|
|
|
1,360
|
|
|
|
378
|
|
|
Dividends received
|
|
|
(41,301
|
)
|
|
|
(101,684
|
)
|
|
Net income (loss) from subsidiaries
|
|
|
(52,956
|
)
|
|
|
1,015,958
|
|
|
Effect of exchange rates
|
|
|
4,599
|
|
|
|
27,306
|
|
|
Other
changes1
|
|
|
6,187
|
|
|
|
(1,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
|
2,475,617
|
|
|
|
3,416,355
|
|
|
|
|
|
|
|
1
|
|
Other changes mainly consist of
movements in hedging reserve.
|
ASML STATUTORY ANNUAL REPORT 2010
123
4.
Equity
Changes in equity during 2009 and 2010 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and
|
|
|
|
|
|
|
|
|
Treasury
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
outstanding shares
|
|
|
Share
|
|
|
Retained
|
|
|
Shares at
|
|
|
Legal
|
|
|
Income
|
|
|
|
|
|
|
|
Number1
|
|
|
|
|
|
Amount
|
|
|
Premium
|
|
|
Earnings
|
|
|
cost
|
|
|
Reserves2
|
|
|
(Loss)
|
|
|
Total
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2009
|
|
|
432,074
|
|
|
|
|
|
|
|
40,307
|
|
|
|
915,457
|
|
|
|
1,002,272
|
|
|
|
(254,856
|
)
|
|
|
108,665
|
|
|
|
376,898
|
|
|
|
2,188,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation of net income
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
376,898
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(376,898
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(81,443
|
)
|
|
|
(81,443
|
)
|
|
Foreign currency translation, net of taxes
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,543
|
)
|
|
|
—
|
|
|
|
(8,543
|
)
|
|
Derivative financial instruments, net of taxes
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,494
|
|
|
|
—
|
|
|
|
6,494
|
|
|
Total comprehensive loss
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,049
|
)
|
|
|
(81,443
|
)
|
|
|
(83,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
20,542
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend paid
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,486
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares and stock options
|
|
|
1,565
|
|
|
|
|
|
|
|
141
|
|
|
|
(12,512
|
)
|
|
|
(11,362
|
)
|
|
|
35,233
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development expenditures
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(65,830
|
)
|
|
|
—
|
|
|
|
65,830
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
433,639
|
|
|
|
|
|
|
|
40,448
|
|
|
|
923,487
|
|
|
|
1,215,492
|
|
|
|
(219,623
|
)
|
|
|
172,446
|
|
|
|
(81,443
|
)
|
|
|
2,050,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation of net loss
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(81,443
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
81,443
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
985,453
|
|
|
|
985,453
|
|
|
Foreign currency translation, net of taxes
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27,306
|
|
|
|
—
|
|
|
|
27,306
|
|
|
Derivative financial instruments, net of taxes
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,221
|
)
|
|
|
—
|
|
|
|
(1,221
|
)
|
|
Total comprehensive income
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,085
|
|
|
|
985,453
|
|
|
|
1,011,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
16,254
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend paid
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,960
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(86,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares and stock options
|
|
|
2,954
|
|
|
|
|
|
|
|
265
|
|
|
|
(17,400
|
)
|
|
|
(18,573
|
)
|
|
|
66,531
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development expenditures
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,153
|
|
|
|
—
|
|
|
|
(68,153
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
436,593
|
|
|
|
|
|
|
|
40,713
|
|
|
|
922,341
|
|
|
|
1,096,669
|
|
|
|
(153,092
|
)
|
|
|
130,378
|
|
|
|
985,453
|
|
|
|
3,022,462
|
|
|
|
|
|
|
|
1
|
|
As of December 31, 2010, the
number of issued shares was 444,480,095. This includes the
number of issued and outstanding shares of 436,592,972 and the
number of treasury shares of 7,887,123. As of December 31,
2009, the number of issued shares was 444,480,095. This includes
the number of issued and outstanding shares of 433,638,976 and
the number of treasury shares of 10,841,119.
|
| |
|
2
|
|
Legal reserves consist of the
hedging reserve, the currency translation reserve and the
reserve for capitalized development expenditures. See below for
further information.
|
Share
Capital
ASML’s authorized share capital amounts to
EUR 126,000,200 and is divided into:
|
|
| •
|
3,150,005,000 cumulative preference shares with a nominal value
of EUR 0.02 each;
|
| •
|
700,000,000 ordinary shares with a nominal value of
EUR 0.09 each; and
|
| •
|
10,000 ordinary shares with a nominal value of EUR 0.01
each.
|
Currently, only 436,592,972 ordinary shares with a nominal value
of EUR 0.09 each are outstanding and fully paid in. The
number of issued shares was 444,480,095, which includes the
number of repurchased (“treasury”) shares of 7,887,123.
Our Board of Management has the power to issue shares if and to
the extent 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).
However, the Supervisory Board must approve any issuance of
shares.
Ordinary
shares
At ASML’s Annual General Meeting of Shareholders, held on
March 24, 2010, the Board of Management was granted the
authorization to issue shares
and/or
rights thereto representing up to a maximum of 5.0 percent
of the Company’s issued share capital as of the date of
authorization, plus an additional 5.0 percent of the
Company’s issued share capital as of the date of
ASML STATUTORY ANNUAL REPORT 2010
124
authorization that may be issued in connection with mergers and
acquisitions. At ASML’s Annual General Meeting of
Shareholders to be held on April 20, 2011, its 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 20, 2012.
Holders of ASML’s ordinary shares have a preemptive right
of subscription to any issuance of ordinary shares for cash,
which right may be limited 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 ASML’s Articles of
Association), the Board of Management has the power, with the
approval of the Supervisory Board, to limit or exclude the
preemptive rights of holders of ordinary shares. A designation
may be renewed. At ASML’s Annual General Meeting of
Shareholders, held on March 24, 2010, the Board of
Management was authorized, subject to the aforementioned
approval, to restrict or exclude preemptive rights of holders of
ordinary shares. At ASML’s Annual General Meeting of
Shareholders to be held on April 20, 2011, its shareholders
will be asked to grant this authority through October 20,
2012. At this Annual General Meeting of Shareholders, the
shareholders will be asked to grant authority to the Board of
Management to issue shares and options separately for a period
of 18 months.
The Company may repurchase its issued ordinary shares at any
time, subject to compliance with the requirements of Dutch law
and the Company’s Articles of Association. Although since
June 11, 2008, Dutch law provides that after such
repurchases the aggregate nominal value of the ordinary shares
held by ASML or a subsidiary must not exceed 50.0 percent
of the issued share capital, the Company’s current Articles
of Association provide that after such repurchases the aggregate
nominal value of the ordinary shares held by ASML or a
subsidiary must not exceed 10.0 percent of the issued share
capital. It will be proposed to the Annual General Meeting of
Shareholders to be held on April 20, 2011, to amend the
Articles of Association to refer to applicable Dutch law. Any
such repurchases are subject to the approval of the Supervisory
Board and the authorization of shareholders at ASML’s
Annual 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 24, 2011, up to a maximum of
three times 10.0 percent of the Company’s issued share
capital as of the date of authorization (March 24,
2010) at a price between the nominal value of the ordinary
shares purchased and 110.0 percent of the market price of
these securities on Euronext Amsterdam or NASDAQ. At the
Company’s Annual General Meeting of Shareholders to be held
on April 20, 2011, the Company’s shareholders will be
asked to extend this authority through October 20, 2012.
Cumulative
preference shares
In 1998, the Company granted to the preference share foundation,
“Stichting Preferente Aandelen ASML” (the
“Foundation”) an option to acquire cumulative
preference shares in the capital of the Company (the
“Preference Share Option”). This option was amended
and extended in 2003 and 2007. A third amendment to the option
agreement between the Foundation and ASML became effective
on January 1, 2009, to clarify the procedure for the
repurchase and cancellation of the preference shares when issued.
The Foundation may exercise the Preference Share Option in
situations where, in the opinion of the Board of Directors of
the Foundation, the interests of the Company, its business or
the interests of its stakeholders are at stake. This may be the
case if a public bid for the ordinary shares of the Company has
been announced or has been made, or the justified expectation
exists that such a bid will be made without any agreement having
been reached in relation to such a bid with the Company. The
same may apply if one shareholder, or more shareholders acting
in concert, hold a substantial percentage of the issued ordinary
shares of the Company without making an offer or if, in the
opinion of the Board of Directors of the Foundation, the
(attempted) exercise of the voting rights by one shareholder or
more shareholders, acting in concert, is materially in conflict
with the interests of the Company, its business or its
stakeholders.
The objects of the Foundation are to look after the interests of
ASML and of the enterprises maintained by ASML and of the
companies which are affiliated in a group with ASML, in such way
that the interests of ASML, of those enterprises and of all
parties concerned are safeguarded in the best possible way, and
influences in conflict with these interests which might affect
the independence or the identity of ASML and those companies are
deterred to the best of the Foundation’s ability, and
everything related to the above or possibly conducive thereto.
The Foundation seeks to realize its objects by the acquiring and
holding of cumulative preference shares in the capital of ASML
and by exercising the rights attached to these shares,
particularly the voting rights attached to these shares.
The Preference Share Option gives the Foundation the right to
acquire a number of cumulative preference shares, provided that
the aggregate nominal value of such number of cumulative
preference shares shall not exceed the aggregate nominal value
of the ordinary shares that have been issued at the time of
exercise of the Preference Share Option for a subscription price
equal to their EUR 0.02 nominal value. Exercise of the
Preference Share Option could effectively dilute the voting
power of the outstanding ordinary shares by one-half. Only
one-fourth of the subscription price is payable at the time of
initial issuance of the cumulative preference shares.
Cancellation and repayment of the issued cumulative preference
shares by the Company requires the authorization by the General
Meeting of Shareholders of a proposal to do so by the Board of
Management approved by the Supervisory Board. If the
ASML STATUTORY ANNUAL REPORT 2010
125
Preference Share Option is exercised and as a result cumulative
preference shares are issued, the Company, at the request of the
Foundation, will initiate the repurchase or cancellation of all
cumulative preference shares held by the Foundation as a result
of such issuance with repayment of the amount paid and exemption
from the obligation to pay up on the cumulative preference
shares. In that case the Company is obliged to effect the
repurchase and cancellation respectively as soon as possible.
If the Foundation will not request the Company to repurchase or
cancel all cumulative preference shares held by the Foundation
within 20 months after issuance of these shares, the
Company will be obliged to convene a General Meeting of
Shareholders in order to decide on a repurchase or cancellation
of these shares.
The Foundation is independent of the Company. The Board of
Directors of the Foundation comprises four independent voting
members from the Dutch business and academic communities:
Mr. R.E. Selman, Mr. M.W. den Boogert, Mr. J.M.
de Jong and Mr. A. Baan.
Legal
reserves
Changes in legal reserves during 2009 and 2010 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal reserves
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
Capitalized
|
|
|
|
|
|
|
|
Hedging
|
|
|
translation
|
|
|
development
|
|
|
|
|
|
|
|
reserve
|
|
|
reserve
|
|
|
expenditures
|
|
|
Total
|
|
|
(in thousands)
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
EUR
|
|
|
Balance at January 1, 2009
|
|
|
(49,642
|
)
|
|
|
(104,531
|
)
|
|
|
262,838
|
|
|
|
108,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses on the hedge of a net investment
|
|
|
—
|
|
|
|
(13,116
|
)
|
|
|
—
|
|
|
|
(13,116
|
)
|
|
Gain on translation of foreign operations
|
|
|
—
|
|
|
|
4,573
|
|
|
|
—
|
|
|
|
4,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gains in the year
|
|
|
5,217
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,217
|
|
|
Transfers to net loss
|
|
|
1,277
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,277
|
|
|
Development expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
65,830
|
|
|
|
65,830
|
|
|
Currency translation on development expenditures
|
|
|
—
|
|
|
|
(140
|
)
|
|
|
140
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
(43,148
|
)
|
|
|
(113,214
|
)
|
|
|
328,808
|
|
|
|
172,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of statement of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on translation of foreign operations
|
|
|
—
|
|
|
|
27,306
|
|
|
|
—
|
|
|
|
27,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gains in the year
|
|
|
46,733
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,733
|
|
|
Transfers to net income
|
|
|
(47,954
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(47,954
|
)
|
|
Development expenditures
|
|
|
—
|
|
|
|
—
|
|
|
|
(68,153
|
)
|
|
|
(68,153
|
)
|
|
Currency translation on development expenditures
|
|
|
—
|
|
|
|
(2,732
|
)
|
|
|
2,732
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
(44,369
|
)
|
|
|
(88,640
|
)
|
|
|
263,387
|
|
|
|
130,378
|
|
|
|
Exchange rate differences relating to the translation from the
Company’s foreign subsidiaries into euro are recognized in
the currency translation reserve. Gains and losses on hedging
instruments that are designated as hedges of net investments in
foreign operations (ended in 2009) are included in the
currency translation reserve.
Hedging reserve represents hedging gains and losses on the
effective portion of cash flow hedges. The cumulative gain or
loss on the hedge is recognized in net income (loss) when the
hedge transaction impacts net income (loss).
ASML is a company incorporated under Dutch Law. In accordance
with the Dutch Civil Code, legal reserves have to be established
in certain circumstances. The legal reserves consist of the
hedging reserve, the currency translation reserve and the
reserve for capitalized development expenditures. The hedging
reserve and the reserve for capitalized development expenditures
are not for distribution to ASML’s shareholders.
Appropriation of
net income (loss)
As part of its financing policy, ASML aims to pay a sustainable
annual dividend that will be stable or growing over time.
Annually, the Supervisory Board, upon proposal of the Board of
Management, will assess the amount of dividend that will be
proposed to
ASML STATUTORY ANNUAL REPORT 2010
126
the Annual General Meeting of Shareholders. For 2009, a dividend
was declared of EUR 0.20 per ordinary share of
EUR 0.09 which was paid in April 2010. A proposal will be
submitted to the Annual General Meeting of Shareholders on
April 20, 2011 to declare a dividend for 2010 of
EUR 0.40 per ordinary share of EUR 0.09.
Dividends on ordinary shares are payable out of net income or
retained earnings as shown in the Financial Statements of the
Company as adopted by the General Meeting of Shareholders of the
Company, after payment first of (accumulated) dividends out of
net income on any issued cumulative preference shares.
Share buyback
programs
The following table provides a summary of shares repurchased by
the Company between 2006 and 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
|
|
|
Total value of Shares
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Shares Purchased
|
|
|
Maximum Number of
|
|
|
Purchased as Part of
|
|
|
|
|
|
|
Total Number
|
|
|
Price Paid
|
|
|
as Part of Publicly
|
|
|
Shares That May Yet
|
|
|
Publicly Announced
|
|
|
|
|
|
|
of Shares
|
|
|
per Share
|
|
|
Announced Plans or
|
|
|
be Purchased Under
|
|
|
Plans or Programs
|
|
|
Program
|
|
Period
|
|
purchased
|
|
|
(EUR)
|
|
|
Programs
|
|
|
the Programs
|
|
|
(in EUR million)
|
|
|
2006-2007 Share
program
|
|
May 17-26, 2006
|
|
|
6,412,920
|
|
|
|
15.59
|
|
|
|
6,412,920
|
|
|
|
19,037,376
|
|
|
|
100
|
|
|
2006-2007 Share
program
|
|
June 7-30, 2006
|
|
|
13,517,078
|
|
|
|
15.81
|
|
|
|
19,929,998
|
|
|
|
5,520,298
|
|
|
|
314
|
|
|
2006-2007 Share
program
|
|
July 3-13, 2006
|
|
|
5,520,298
|
|
|
|
15.62
|
|
|
|
25,450,296
|
|
|
|
—
|
|
|
|
400
|
|
|
2006-2007 Share
program
|
|
October 12, 2006
|
|
|
14,934,843
|
|
|
|
18.55
|
|
|
|
14,934,843
|
|
|
|
—
|
|
|
|
277
|
|
|
2006-2007 Share
program
|
|
February 14-23, 2007
|
|
|
8,000,000
|
|
|
|
19.53
|
|
|
|
8,000,000
|
|
|
|
—
|
|
|
|
156
|
|
|
Capital repayment program 2007
|
|
September - October 2007
|
|
|
55,093,409
|
|
|
|
18.36
|
|
|
|
55,093,409
|
|
|
|
—
|
|
|
|
1,012
|
|
|
2007-2008 Share
program
|
|
November 14-26, 2007
|
|
|
9,000,000
|
|
|
|
22.62
|
|
|
|
9,000,000
|
|
|
|
5,000,000
|
|
|
|
204
|
|
|
2007-2008 Share
program
|
|
January 17-22, 2008
|
|
|
5,000,000
|
|
|
|
17.52
|
|
|
|
14,000,000
|
|
|
|
—
|
|
|
|
292
|
|
|
|
Authorization of
share repurchases
On March 24, 2010, the General Meeting of Shareholders
authorized the repurchase of up to a maximum of three times
10.0 percent of our issued share capital as of the date of
authorization (March 24, 2010) through
September 24, 2011. The Company did not buyback any shares
in 2010. See note 18 of the consolidated financial
statements for more information.
5.
Personnel
The number of employees employed by the ASML Holding N.V. at
year-end 2010 was five (2009: five). The Board of Management
consists of five members. For information regarding the
remuneration of the Board of Management reference is made to
Note 29 of the consolidated financial statements.
6. Commitments
and Contingencies
ASML Holding N.V. has assumed joint and several liabilities in
accordance with article 403 Part 9 of Book 2 of The
Dutch Civil Code with respect to the following subsidiaries of
the Company in the Netherlands: ASML Netherlands B.V., ASML
MaskTools B.V. and ASML Systems B.V.
From time to time we provide guarantees to third parties in
connection with transactions entered into by our Dutch
subsidiaries in the ordinary course of business.
ASML Holding N.V. forms a tax unity together with its Dutch
subsidiaries, for purposes of Dutch tax laws and are as such
jointly and severally liable for the tax debts of the unity.
Veldhoven, the Netherlands
February 14, 2011
Prepared by
The Board of Management:
Eric Meurice
Peter T.F.M. Wennink
Martin A. van den Brink
Frits J. van Hout
Frederic Schneider-Maunoury
ASML STATUTORY ANNUAL REPORT 2010
127
Other Information
The additional information below includes a brief summary of the
most significant provisions of the Articles of Association of
the Company. See Note 18 of the consolidated financial
statements.
Adoption of
Financial Statements
The Board of Management will submit the Company’s statutory
annual report, together with a certificate of the auditor in
respect thereof, to the General Meeting of Shareholders for
adoption.
Statements
Appropriation and Determination of Net
Income / (Loss)
Dividends may be payable out of net income or retained earnings
for shown in the Financial Statements of the Company as adopted
by the General Meeting of Shareholders of the Company, after
payment first of (accumulated) dividends on any outstanding
cumulative preference shares. At its discretion, however,
subject to statutory provisions, the Board of Management may,
with the prior approval of the Supervisory Board, distribute one
or more interim dividends on the ordinary shares before the
Financial Statements for any financial year have been adopted by
the General Meeting of Shareholders. The Board of Management,
with the approval of the Supervisory Board, may decide that all
or part of the Company’s net income should be retained and
not be made available for distribution to shareholders, except
for dividends on the cumulative preference shares. Those net
incomes that are not retained may be distributed to shareholders
pursuant to a shareholders’ resolution, provided that the
distribution does not reduce equity below the amount of reserves
required by Dutch law. Existing reserves that are distributable
in accordance with Dutch law may be made available to the
General Meeting of Shareholders for distribution upon a proposal
by the Board of Management, subject to prior approval of the
Supervisory Board. As regards cash payments, the rights to
dividends and distributions shall lapse if such dividends or
distributions are not claimed within five years following the
day after the date on which they were made available.
Annually, the Board of Management will assess the amount of
dividend that will be proposed to the Annual General Meeting of
Shareholders. For 2009, a dividend was declared of EUR 0.20
per ordinary share of EUR 0.09 which was paid in 2010.
A proposal will be submitted to the Annual General Meeting of
Shareholders on April 20, 2011 to declare a dividend for
2010 of EUR 0.40 per ordinary share of EUR 0.09.
Voting
Rights
The Company is subject to the relevant provisions of Dutch law
applicable to large corporations (the
“structuurregime”). These provisions have the effect
of concentrating control over certain corporate decisions and
transactions in the hands of the Supervisory Board. Members of
the Board of Management are appointed by the Supervisory Board.
The Supervisory Board shall notify the General Meeting of
Shareholders of intended appointments to the Board of
Management. General Meetings of Shareholders will be held at
least once a year. The Company does not solicit from or nominate
proxies for its shareholders. However, shareholders and other
persons entitled to attend General Meetings of Shareholders may
be represented by proxies.
Extraordinary General Meetings of Shareholders may be held as
often as deemed necessary by the Supervisory Board or Board of
Management and must be held if one or more ordinary or
cumulative preference shareholders jointly representing at least
ten percent of the issued share capital make a written request
to that effect to the Supervisory Board and the Board of
Management specifying in detail the business to be dealt with.
Resolutions are adopted at General Meetings of Shareholders by
an absolute majority of the votes cast (except where a different
proportion of votes are required by the Articles of Association
or Dutch law) and there are generally no quorum requirements
applicable to such meetings. The number of votes that may be
cast by a shareholder equals the multiple of one eurocent
(EUR 0.01) included in the aggregate nominal amount of his
shares.
Subsequent
Events
Subsequent events have been evaluated by the Company until
February 14, 2011 which is the issuance date of this Annual
Report 2010. There are no subsequent events to report.
ASML STATUTORY ANNUAL REPORT 2010
128
Independent
auditor’s report
To: the Supervisory Board and Shareholders of ASML Holding N.V.
Report on the
financial statements
We have audited the accompanying financial statements for the
year 2010 of ASML Holding N.V., Veldhoven. The financial
statements include the consolidated financial statements and the
company financial statements. The consolidated financial
statements comprise the consolidated statement of financial
position as at December 31, 2010, the consolidated income
statement and the consolidated statements of comprehensive
income, changes in equity and cash flows for the year then
ended, and notes, comprising a summary of the significant
accounting policies and other explanatory information. The
company financial statements comprise the company balance sheet
as at December 31, 2010, the company income statement for
the year then ended and the notes, comprising a summary of the
accounting policies and other explanatory information.
Management’s
responsibility
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union and with Part 9 of Book 2 of the Dutch Civil
Code, and for the preparation of the management board report in
accordance with Part 9 of Book 2 of the Dutch Civil Code.
Furthermore management is responsible for such internal control
as it determines is necessary to enable the preparation of the
financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s
responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with Dutch law, including the Dutch Standards on
Auditing. This requires that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material
misstatement. An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks
of material misstatement of the financial statements, whether
due to fraud or error.
In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall
presentation of the financial statements. We believe that the
audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion with
respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a
true and fair view of the financial position of ASML Holding
N.V. as at December 31, 2010 and of its result and its cash
flows for the year then ended in accordance with International
Financial Reporting Standards as adopted by the European Union
and with Part 9 of Book 2 of the Dutch Civil Code.
Opinion with
respect to the company financial statements
In our opinion, the company financial statements give a true and
fair view of the financial position of ASML Holding N.V. as at
December 31, 2010 and of its result for the year then ended
in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Report on other
legal and regulatory requirements
Pursuant to the legal requirement under Section 2:393 sub 5
at e and f of the Dutch Civil Code, we have no deficiencies to
report as a result of our examination whether the management
board report, to the extent we can assess, has been prepared in
accordance with Part 9 of Book 2 of this Code, and whether
the information as required under Section 2:392 sub 1 at
b-h has been annexed. Further we report that the management
board report, to the extent we can assess, is consistent with
the financial statements as required by Section 2:391 sub 4
of the Dutch Civil Code.
Deloitte Accountants B.V.
Eindhoven, The Netherlands
February 14, 2011
ASML STATUTORY ANNUAL REPORT 2010
129
Information and
Investor Relations
Financial
calendar
April 13,
2011
Announcement of First Quarter results for 2011
April 20,
2011
General meeting of Shareholders
Auditorium, ASML Building 7,
De Run 6665
Veldhoven, the Netherlands
July 13,
2011
Announcement of Second Quarter results for 2011
October 12,
2011
Announcement of Third Quarter results for 2011
January 18,
2012
Announcement of Fourth Quarter results for 2011 and Annual
Results for 2011.
Fiscal
Year
ASML’s fiscal year ends on December 31, 2011
Listing
The ordinary shares of the Company are listed on the official
market of the Euronext Amsterdam by NYSE Euronext and in the
United States on the NASDAQ Stock Market LLC, under the symbol
“ASML”. ASML’s ordinary shares may also trade on
other stock exchanges from time to time, although ASML has not
applied for listings on those exchanges and does not endorse and
may not be notified of such trading.
Investor
Relations
ASML Investor Relations will supply information or copies of the
Annual Report on
Form 20-F
filed with the US Securities and Exchange Commission and the
Statutory Annual Report. These Annual Reports, quarterly
releases and other information are also available on the ASML
website (www.asml.com).
ASML STATUTORY ANNUAL REPORT 2010
130
ASML Worldwide
Contact Information
Corporate
Headquarters
De Run 6501
5504 DR Veldhoven
The Netherlands
Mailing
address
P.O. Box 324
5500 AH Veldhoven
The Netherlands
United States
main offices
8555 South River Parkway
Tempe, AZ 85284
U.S.A.
77 Danbury Road
Wilton, CT 06897
U.S.A.
Asia main
office
Suite 603
One International Finance Center
1, Harbour View Street
Central, Hong Kong
Corporate
Communications
phone: +31 40 268 4941
fax: +31 40 268 3655
email: corpcom@asml.com
Investor
Relations
phone: +31 40 268 3938
fax: +31 40 268 3655
email: investor.relations@asml.com
For more information please visit our
website www.asml.com
ASML STATUTORY ANNUAL REPORT 2010
131
