ASML Holding N.V. — 2011 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2011. This is an annual report, not a standalone Q4 filing; the provided filing text does not give a complete Q4 income statement or cash-flow statement. Financial statements are audited and prepared under U.S. GAAP, in euros.
Business context and financial performance
ASML develops, manufactures, sells and services semiconductor lithography systems. Its results are strongly linked to semiconductor manufacturers’ capital spending and technology roadmaps.
| Metric | 2011 | 2010 |
|---|---|---|
| Net sales | EUR 5,651.0 million | EUR 4,507.9 million |
| Gross profit / margin | EUR 2,449.4 million / 43.3% | EUR 1,955.2 million / 43.4% |
| Operating income / margin | EUR 1,641.2 million / 29.0% | EUR 1,250.7 million / 27.7% |
| Net income / margin | EUR 1,467.0 million / 26.0% | EUR 1,021.8 million / 22.7% |
| Basic / diluted EPS | EUR 3.45 / EUR 3.42 | EUR 2.35 / EUR 2.33 |
| Operating cash flow | EUR 2,070.4 million | EUR 940.0 million |
| Cash and cash equivalents at year-end | EUR 2,731.8 million | EUR 1,949.8 million |
| Working capital | EUR 3,473.8 million | EUR 2,787.2 million |
| Long-term debt, including current portion | EUR 736.4 million | EUR 710.1 million |
Capital expenditure was EUR 300.9 million, primarily for EUV and NXT capacity, facilities and IT. At year-end, ASML had EUR 500 million of committed revolving credit available, with none drawn; the EUR 600 million principal Eurobond is due in 2017. Management reported compliance with the credit facility’s 40% minimum capital-to-net-assets covenant. Cash exceeded reported debt by approximately EUR 2.0 billion.
Material changes versus the prior year
- Sales increased 25.4%, reflecting higher demand for immersion and dry lithography systems, along with increased service and field-option sales. Systems sold rose to 222 from 197; average system selling price increased to EUR 22.0 million from EUR 19.8 million.
- Operating income rose 31.2% and net income rose 43.6%. Gross margin was nearly flat, edging down from 43.4% to 43.3%.
- R&D spending increased 12.8% to EUR 590.3 million; SG&A rose 20.4% to EUR 217.9 million.
- Operating cash flow more than doubled. Financing outflows included EUR 700.5 million for share repurchases, EUR 172.6 million of dividends and EUR 150 million repayment of customer deposits.
- Systems backlog excluding EUV fell to 71 systems, valued at EUR 1,732.5 million, from 157 systems and EUR 3,855.7 million. ASML booked 137 systems, had four cancellations or push-outs beyond 12 months, and recognized sales for 219 systems.
- Shares outstanding declined to 413.7 million from 436.6 million, following repurchases; 25.7 million shares were repurchased for EUR 700 million during 2011.
Outlook, commentary and risks
- For Q1 2012, management expected net sales of approximately EUR 1.2 billion, gross margin of about 43%, R&D expense of approximately EUR 145 million and SG&A of approximately EUR 54 million. ASML also expected longer-term sales growth based on industry growth, market share, selling prices and broader products and services.
- ASML expected high-volume EUV systems to become available in 2012, subject to successful technology development, particularly light-source performance. It had shipped six NXE:3100 systems through 2011 and received 11 orders for the next-generation NXE:3300.
- EUV introduction costs weighed on profitability: three NXE:3100 systems recognized in 2011 generated about EUR 119.3 million of revenue with zero gross profit at recognition; EUV-related costs reduced 2011 gross margin by an estimated 1.5 percentage points. EUR 48.6 million of revenue for one uninstalled system remained deferred. Revenue-recognition treatment for NXE:3300 shipments was still under assessment.
- Key risks include semiconductor-industry cyclicality, customer concentration, dependence on Zeiss as sole supplier of critical optics, foreign-exchange movements, competition, and execution or customer adoption risks for new technologies. The largest customer contributed 23.2% of 2011 sales; the three largest customers represented 40.7% of receivables. Zeiss accounted for 28.7% of aggregate cost of sales.
- Other exposures include EUR 1,884.5 million of purchase obligations, generally with provisions allowing some delay or cancellation; EUR 155.4 million of unrecognized tax benefits; and a Dutch multi-employer pension plan with a 90% coverage ratio, down from 96% in 2010. Legal proceedings were described as ordinary-course matters; no estimated legal losses were recorded for 2011.
- The proposed 2011 dividend was EUR 0.46 per share, subject to shareholder approval. The auditor gave an unqualified opinion and concluded internal control over financial reporting was effective at year-end.
Important facts for investors to verify
- Whether the 2012 EUV high-volume shipment timetable, light-source performance and customer adoption met management’s expectations.
- How the substantial reduction in non-EUV backlog translated into subsequent orders, shipments and revenue, including the timing of cancellations or delivery changes.
- The impact of EUV ramp costs and deferred revenue on future gross margins and reported sales.
- Customer and supplier concentration, particularly exposure to the largest customer and to Zeiss’s optical-component capacity.
- Developments in tax audits and uncertain tax positions, the pension plan recovery measures, and the use of cash for buybacks, dividends and capacity investment.