ASML Holding N.V. — 2013 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2013; filed February 11, 2014. This is an annual report, not a standalone fourth-quarter filing. The provided text does not give a complete Q4 income statement or cash-flow statement. Financial statements are in euros and prepared under U.S. GAAP. ASML develops and sells semiconductor lithography systems and related services. Cymer was acquired on May 30, 2013; prior-year comparisons generally exclude Cymer.
Key financial metrics
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Net sales | EUR 5,245.3 million | EUR 4,731.6 million |
| Gross profit / margin | EUR 2,177.3 million / 41.5% | EUR 2,005.3 million / 42.4% |
| Operating income / margin | EUR 1,047.9 million / 20.0% | EUR 1,156.8 million / 24.4% |
| Net income / margin | EUR 1,015.5 million / 19.4% | EUR 1,146.3 million / 24.2% |
| Basic / diluted EPS | EUR 2.36 / EUR 2.34 | EUR 2.70 / EUR 2.68 |
| Cash from operating activities | EUR 1,054.2 million | EUR 703.5 million |
| Cash and cash equivalents | EUR 2,330.7 million | EUR 1,767.6 million |
| Short-term investments | EUR 679.9 million | EUR 930.0 million |
| Working capital | EUR 4,156.9 million | EUR 3,745.6 million |
| Long-term debt, including current portion | EUR 1,074.6 million | EUR 759.5 million |
Revenue rose 10.9%, led by service and field-option sales, up 34.7% to EUR 1,252.2 million. System sales increased 5.0% to EUR 3,993.1 million as higher average selling prices offset fewer systems sold (157 versus 170). Gross margin declined 0.9 percentage points, partly due to a 1.6-point impact from non-cash Cymer purchase-accounting adjustments. Operating income fell 9.4% as R&D costs rose 49.7% to EUR 882.0 million and SG&A increased 20.2% to EUR 311.7 million.
Net cash from investing activities was EUR 368.3 million used, including EUR 443.7 million cash paid for Cymer and EUR 210.8 million of property, plant and equipment purchases. Financing activities used EUR 113.1 million net: ASML issued EUR 750 million of 3.375% notes due 2023 and partially repurchased 5.75% notes due 2017. Cash and short-term investments totaled EUR 3,010.6 million at year-end. The company reported an undrawn EUR 700 million revolving credit facility, maturing in 2018, and compliance with its 40% minimum-capital covenant.
Business changes, outlook and notable items
- Cymer acquisition: Consideration was EUR 3.1 billion, including EUR 2.35 billion in ASML shares. Cymer contributed EUR 178.7 million in sales and a EUR 138.5 million net loss after acquisition through year-end. The acquisition added EUR 2,058.3 million of goodwill; management expects it to support EUV development, but benefits depend on integration and technical execution.
- R&D co-funding: The Customer Co-Investment Program provides EUR 1.38 billion of customer funding for R&D projects over 2013–2017. EUR 64.4 million was recognized as other income in 2013.
- 450mm program: ASML paused development of 450mm lithography systems in November 2013 pending clearer customer demand and timing; discussions with Intel on applying its committed funding to other projects were ongoing.
- EUV outlook: Management said it remained on target for EUV throughput of 70 wafers per hour in 2014, upgradeable to 125 wafers per hour in 2015. EUV adoption remains dependent on light-source performance and supporting mask and photoresist infrastructure.
- Near-term guidance: For Q1 2014, ASML expected sales of about EUR 1.4 billion, gross margin of about 42%, R&D costs of about EUR 280 million, other income of about EUR 20 million and SG&A of about EUR 85 million.
- Investment and shareholder returns: 2014 capital expenditure was expected to be about EUR 480 million, mainly for EUV capacity and strategic programs. The Board proposed a EUR 0.61-per-share 2013 dividend, subject to shareholder approval. ASML repurchased EUR 300 million of shares in 2013.
- Unusual financial items: The effective tax rate was 0.8%, influenced by R&D incentives and a non-taxable gain on settlement of pre-existing Cymer relationships. Inventory-obsolescence charges were EUR 164.9 million; an EUR 171.2 million liability was recorded for upgrading the first 11 EUV sources. The filing reports EUR 3.2 million of estimated legal losses recognized in 2013.
Principal risks and contingencies
- Semiconductor equipment demand is cyclical; customer order timing, shipment delays or cancellations can materially affect quarterly results.
- Customer concentration increased: the largest customer represented 39.2% of 2013 sales, versus 26.1% in 2012. The three largest customers represented 73.3% of accounts and finance receivables at year-end.
- ASML depends on a limited supplier base, particularly Zeiss for critical optical components. Zeiss supplied 27.4% of aggregate cost of sales in 2013; production was not constrained by Zeiss deliveries during the year.
- Technology and execution risks include EUV light-source productivity, customer adoption, rising R&D costs, and the possibility that alternative technologies reduce demand for lithography.
- Currency exposure, especially to the U.S. dollar and Japanese yen, as well as geopolitical and economic risks in key markets, may affect results. Taiwan generated 42.4% of 2013 sales.
- Contractual obligations totaled EUR 3,503.3 million, including EUR 2,012.9 million of purchase obligations, most of which were due within one year. The filing states that many supplier commitments allow delivery delays or cancellations under contract terms.
- The Nikon cross-license transition period ends December 31, 2014; from January 1, 2015, parties may bring specified patent-infringement claims, with transition-period damages subject to a stated cap.
Most important facts for investors to verify
- Whether annual and Q1 guidance translated into reported quarterly results; this 20-F does not provide standalone Q4 financial statements.
- Cymer’s subsequent contribution to sales, profitability and cash flow, and progress against EUV throughput milestones.
- Customer concentration, order cancellations and delivery timing; year-end non-EUV systems backlog was 56 units valued at EUR 1,953.3 million, with assigned shipment and revenue dates within 12 months.
- Inventory quality and whether elevated obsolescence provisions or EUV source upgrade costs require further charges.
- Execution of planned capital spending, liquidity and debt service, including the 2017 and 2023 bond maturities.
- Effects of the 450mm pause on customer funding commitments and the allocation of Intel’s committed funding.