ASM INTERNATIONAL REPORTS SECOND QUARTER 2010 OPERATING RESULTS

ALMERE, THE NETHERLANDS, July 28, 2010 - ASM International N.V. (NASDAQ: ASMI and Euronext Amsterdam: ASM) reports today its second quarter 2010 (unaudited) operating results in accordance with US GAAP.
·    Second quarter 2010 net sales of EUR 302.4 million a new record, up 38% quarter to quarter and up 153% year to year;

 

·    For our Front-end segment this quarter we achieved our operating cost (including manufacturing overhead) reduction target of 40% compared to the fourth quarter 2008 run rate;

 

·    Earnings from operations excluding impairment and restructuring charges increased from negative EUR 6.7 million in the second quarter of 2009 to EUR 83.5 million;

 

·    The Front-end segment increased from negative EUR 22.5 million to  EUR 6.9 million;
·    The Back-end segment increased from EUR 15.8 million to EUR 76.6 million;

 

·    Net earnings of the second quarter of 2010 were EUR 47.5 million, or EUR 0.61 diluted net earnings per share, as compared to net earnings of EUR 4.2 million, or EUR 0.08 diluted net earnings per share for the first quarter of 2010 and a net loss of EUR 55.7 million or EUR 1.08 diluted net loss per share for the second quarter of 2009;

 

·    Bookings in the second quarter of 2010 were EUR 526.1 million, up 48% from the first quarter of 2010. Bookings from our Front-end segment were up 32% and bookings from our Back-end segment were up 52%. Quarter-end backlog was EUR 556.6 million, up 67% from the end of the previous quarter;
 
Commenting on the results, Chuck del Prado, President and Chief Executive Officer of ASM International, said, "ASMI's second quarter performance reflects strong growth in both our wafer processing and assembly and packaging operations.

Our Front-end business returned to profitability, we reached the cost reduction targets as set out in our global restructuring program PERFORM!, and we experienced an acceleration of orders compared to prior quarters. In Back-end, revenues, orders, and profits once again set quarterly records for our assembly and packaging operations serving the semiconductor and LED markets".

Contacts:
Erik Kamerbeek
+31 88100 8500

Mary Jo Dieckhaus
+1 212 986 2900

Media Contact:  
Charles Huijskens
+31 20 6855 955
+31 653 105 072

 

The following table shows the operating performance for the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:

(EUR millions)










Q2 2009









Q1 2010









Q2 2010
% Change Q1 2010
to
Q2 2010
% Change Q2 2009
to
Q2 2010
Net sales 119.5 219.1 302.4 38% 153%
Gross profit before impairment of inventories 33.7 92.5 133.4 44% 296%
Gross profit margin % 28.2% 42.2% 44.1%

Impairment inventories (20.6) - -

Gross profit 13.1 92.5 133.4 44% 916%
Selling, general and administrative expenses (25.7) (26.6) (31.6) 19% 23%
Research and development expenses (14.6) (17.5) (18.2) 4% 25%
Amortization of other intangible assets (0.2) (0.1) (0.1)

Restructuring expenses (15.4) (3.6) (3.3)

Earnings (loss) from operations (42.7) 44.7 80.2 80%






Net earnings (loss) allocated to the shareholders of the of the parent


(55.7)



4.2



47.5





Net earnings (loss) per share, diluted (1.08) 0.08 0.61

 




New orders 155.8 355.4 526.1 48% 238%
Backlog at end of period


122.4 333.0 556.6 67% 355%


Net Sales. The following table shows net sales of our Front-end and Back-end segments for the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:











(EUR millions)









Q2 2009









Q1 2010









Q2 2010
% Change Q1 2010
to
Q2 2010
% Change Q2 2009
to
Q2 2010
Front-end 27.6 54.0 66.1 22% 139%
Back-end 91.9 165.1 236.4 43% 157%
Total net sales 119.5 219.1 302.4 38% 153%


The increase in the second quarter of 2010 in our Front-end segment compared to the previous quarter was driven by increased equipment sales in particular for our ALD enabling technologies and higher spares and service sales as a result of increased activity levels at our customers. In our Back-end segment record quarterly sales again were realized in the second quarter of 2010 due to the continued strong demand for our traditional products and increasing demand for our LED related products.

The strengthening of the Yen, US dollar and US dollar related currencies against the euro in the second quarter of 2010 as compared to the first quarter of 2010 impacted total net sales positively by 7%. The strengthening of these currencies as compared to the second quarter of 2009 impacted total net sales positively by 4%.

Gross Profit Margin. The following table shows our gross profit and gross profit margin for our Front-end and Back-end segments for the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:

















(EUR millions)






Gross profit1)



Q2 2009



Q2 2009






Gross profit



Q1 2010






Gross profit


Q2 2010



Gross profit margin


Q2 2009



Gross profit margin



Q1 2010



Gross profit margin



Q2 2010
Increase or (decrease)

percentage points

Q1 2010 to Q2 2010
Increase or (decrease)

percentage points

Q2 2009 to

Q2 2010
Front-end 0.4 18.0 26.0 1.7% 33.4% 39.4% 6.0 37.7
Back-end 33.3 74.5 107.3 36.2% 45.1% 45.4% 0.3 9.2
Total gross profit 33.7 92.5 133.4 28.2% 42.2% 44.1% 1.9 15.9
  1. before impairment inventories


The gross profit margin of both our Front-end segment and our Back-end segment continued to improve when compared to the first quarter of 2010 driven by higher activity levels. The increase of the gross margin in our Front-end segment, both compared to the same period last year and to the previous quarter is partly attributable to the lower cost levels and manufacturing overhead as a result of the transfer of our manufacturing activities to our plant in Singapore and a favorable product mix.

The impact of currency changes quarter to quarter was an increase of 7% and year to year an increase of 4%.

Selling, General and Administrative Expenses. The following table shows selling, general and administrative expenses for our Front-end and Back-end segments for the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:










(EUR millions)









Q2 2009









Q1 2010









Q2 2010
% Change Q1 2010
to
Q2 2010
% Change Q2 2009
to
Q2 2010
Front-end 14.7 11.0 11.2 2% (24)%
Back-end 11.0 15.6 20.4 31% 85%
Total selling, general and administrative expenses


25.7



26.6



31.6



19%



23%


As a percentage of net sales, selling, general and administrative (SG&A) expenses were 10% in the second quarter of 2010, 12% in the first quarter of 2010 and 21% in the second quarter of 2009.

In the Front-end segment SG&A as a precentage of sales was 17% in Q2 as compared to 20% in Q1 and 53% in Q2 2009, reflecting our focus to reduce the fixed cost base as part of our restructuring program Perform!.

In the Back-end segment SG&A, as a percentage of net sales, decreased due to the higher activity level.

The impact of currency changes quarter to quarter was an increase of 6% and year to year an increase of 4%. 

Research and Development Expenses. The following table shows research and development expenses for our Front-end and Back-end segments for the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:











(EUR millions)









Q2 2009









Q1 2010









Q2 2010
% Change Q1 2010
to
Q2 2010
% Change Q2 2009
to
Q2 2010
Front-end 8.1 8.3 7.8 (6)% (4)%
Back-end 6.5 9.2 10.3 12% 58%
Total research and development expenses 14.6 17.5 18.2 4% 25%


As a percentage of net sales, research and development expenses were 6% in the second quarter of 2010, 8% in the first quarter of 2010 and 12% in the second quarter of 2009.

We continue to focus and prioritize our programs carefully in line with our strategic objectives.

The impact of currency changes quarter to quarter was an increase of 6% and year to year an increase of 5%.

Restructuring expenses. In 2009 ASMI started the implementation of a major restructuring in the Front-end segment. Related to these restructuring projects EUR 3.3 million of expenses were incurred during the second quarter of 2010. These related mainly to severance packages, retention costs, provisions for vacancy and other costs related to the transfer of activities to Singapore.

Earnings (Loss) from Operations. The following table shows earnings (loss) from operations for our Front-end and Back-end segments for the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:










(EUR millions)









Q2 2009









Q1 2010









Q2 2010
Change Q1 2010
to
Q2 2010
Change Q2 2009
to
Q2 2010
Front-end:




Excluding impairments and restructuring (22.5) (1.4) 6.9 8.3 29.4
Impairments and restructuring (36.0) (3.6) (3.3) 0.3 32.7
Including impairments and restructuring (58.5) (5.0) 3.6 8.6 62.1
Back-end 15.8 49.7 76.6 26.9 60.8
Total earnings (loss) from operations (42.7) 44.7 80.2 35.5 122.9


Net Earnings (Loss) allocated to the shareholders of the parent. The following table shows net earnings(loss) for our Front-end and Back-end segments for the second quarter of 2010 as compared to the first quarter of 2009 and the second quarter of 2009:











(EUR millions)









Q2 2009









Q1 2010









Q2 2010
Change Q1 2010
to
Q2 2010
Change Q2 2009
to
Q2 2010
Front-end




Excluding impairments, restructuring expenses, result on early extinguishment of debt and fair value changes conversion option





(23.9)






(10.1)






1.4






11.5






25.3






Impairments and restructuring (34.9) (3.6) (3.3) 0.3 31.6
Result on early extinguishment of debt - (2.3) - 2.3 -
Fair value changes conversion options (4.7) (2.6) 14.0 16.6 18.7
Special items (39.6) (8.5) 10.7 19.2 50.3






Including impairments, restructuring expenses, result on early extinguishment of debt and fair value changes conversion option





(63.5)






(18.6)






12.1






30.7






75.6
Back-end 7.8 22.7 35.4 12.7 27.6
Total net earnings (loss) allocated to the (55.7) 4.2 47.5 43.3 103.2
shareholders of the parent





Net earnings for the Back-end segment reflect our 52.59% ownership of ASM Pacific Technology.

Six months ended June 30, 2010

The following table shows the operating performance and the percentage change for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions, except earnings per share) Six months ended June 30,

2009 2010 % Change
Net sales 208.6 521.5 150%
Gross profit before impairment of inventories


55.0 225.9 311%
Gross profit margin % 26.4% 43.3%
Impairment inventories (20.6) -
Gross profit 34.4 225.9 556%




Selling, general and administrative expenses (50.9) (58,2) 14%
Research and development expenses (31.1) (35.7) 15%
Amortization of other intangible assets (0.3) (0.2)
Restructuring expenses (19.5) (7.0)
Earnings(loss) from operations (67.4) 124.9




Net earnings (loss) 1) (79.0) 51.7
 


Net earnings (loss) per share, diluted1) (1.53) 0.77




New orders 240.2 881.5 267%
Backlog at end of period


122.4 556.6 167%

1) allocated to the shareholders of the parent


Net Sales. The following table shows net sales of our Front-end and Back-end segments for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions) Six months ended June 30,

2009 2010 % Change
Front-end 73.4 120.0 63%
Back-end 135.2 401.5 197%
Total net sales 208.6 521.5 150%


The increase of net sales in the first six months of 2010 in our Front-end segment compared to the same period last year was driven by increased equipment and higher spares and service sales as a result of increased activity at our customers. In our Back-end segment record quarterly sales was realized both in the first quarter and in the second quarter of 2010 due to the high continued strong demand for our traditional products and increasing demand for our LED related products.

The strengthening of the Yen, US dollar and US dollar related currencies against the euro in the first six months of 2010 as compared to the first six months of 2009 impacted total net sales positively by 2%.

Gross Profit Margin. The following table shows gross profit and gross profit margin for the Front-end and Back-end segments for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions) Six months ended June 30,

Gross profit Gross profit margin

20091)


2010


2009 2010 Increase or (decrease) percentage points
Front-end 12.6 44.0 17.2% 36.7% 19.5
Back-end 42.4 181.8 31.4% 45.3% 13.9
Total gross profit 55.0 225.9 26.4% 43.3% 16.9

1) before impairment inventories


The gross profit margin of both our Front-end segment and our Back-end segment strongly improved when compared to the first six months of 2009 driven by significantly higher activity levels. The increase of the gross margin in our Front-end segment, both compared to the same period last year is partly attributable to the lower manufacturing overhead as a result of the transfer of our manufacturing activities to Singapore.

The impact of currency changes year to year was an increase of 2%.

Selling, General and Administrative Expenses. The following table shows selling, general and administrative expenses for our Front-end and Back-end segments for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions) Six months ended June 30,

2009 2010 % Change
Front-end 30.6 22.2 (27)%
Back-end 20.3 36.0 77%
Total selling, general and administrative expenses 50.9 58.2 14%


As a percentage of net sales, selling, general and administrative expenses were 11% in the first half year of 2010 and 24% in the same period of 2009.

For the first six months of 2010 selling, general and administrative expenses as a percentage of net sales of our Front-end segment, were reduced to 19% compared with 42% for the first 6 months of 2009, reflecting our focus to reduce the fixed cost base as part of our restructuring program Perform!. For the period under review the selling, general and administrative expenses in the Back-end segment as a percentage of net sales decreased from 15% in 2009 to 9% in 2010.

The impact of currency changes year to year was an increase of 1%.

Research and Development Expenses. The following table shows research and development expenses for our Front-end and Back-end segments for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions) Six months ended June 30,

2009 2010 % Change
Front-end 18.1 16.1 (11)%
Back-end 13.0 19.5 50%
Total research and development expenses 31.1 35.7 15%


As a percentage of net sales, research and development expenses were 7% in the first six months of 2010 and 15% in the first six months of 2009.

The decrease in our Front-end segment is the result of a further prioritisation of research and development projects.

The impact of currency changes year to year was an increase of 2%.

Restructuring Expenses. In 2009 ASMI started the implementation of a major restructuring in the Front-end segment. Related to these restructuring projects, during the first six months of 2010 EUR 7.0 million of expenses were incurred. These related mainly to severance packages, retention costs, provisions for vacancy and other costs related to the transition of activities to Singapore.

Earnings (Loss) from Operations. The following table shows earnings (loss) from operations for our Front-end and Back-end segments for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions) Six months ended June 30,

2009 2010 Change
Front-end:


Excluding impairments and restructuring charges (36.4) 5.6 42.0
Impairments and restructuring charges (40.1) (7.0) 33.1
Including impairments and restructuring charges (76.5) (1.4) 75.1
Back-end 9.1 126.3 117.2
Total earnings (loss) from operations (67.4) 124.9 192.3


Net Earnings (Loss) allocated to the shareholders of the parent. The following table shows net earnings (loss) for our Front-end and Back-end segments for the six months ended June 30, 2010 compared to the same period in 2009:


(EUR millions) Six months ended June 30,

2009 2010 Change
Front-end:


Excluding impairments, restructuring charges, result on early extinguishment of debt and fair value change conversion option


(40.7)



(8.6)



32.1
Loss from early extinguishment of debt - (2.3) (2.3)
Impairments and restructuring charges (37.8) (7.0) 30.8
Fair value change conversion options (4.1) 11.4 15.5
Including impairments, restructuring charges result on early extinguishment of debt and fair value change conversion options





(82.6)






(6.4)









76.2
Back-end 3.6 58.1 54.5
Total earnings (loss) 1) (79.0) 51.7 130.7

1) Allocated to the shareholders of the parent


Net earnings for the Back-end segment reflect our 52.59% ownership of ASM Pacific Technology.

Bookings and backlog

The following table shows, for our Front-end and Back-end segments, the level of new orders for the second quarter of 2010 and the backlog at the end of the second quarter of 2010 as compared to the first quarter of 2010 and the second quarter of 2009:


(EUR millions, except book-to-bill ratio)



















Q2 2009









Q1 2010









Q2 2010
% Change Q1 2010
to
Q2 2010
% Change Q2 2009
to
Q2 2010
Front-end:




New orders for the quarter 22.1 65.4 86.5 32% 291%
Backlog at the end of the quarter 36.2 61.7 82.1 33% 127%
Book-to-bill ratio (new orders divided by

net sales)



0.80



1.21



1.31








Back-end:




New orders for the quarter 133.7 290.0 439.6 52% 229%
Backlog at the end of the quarter 86.2 271.3 474.5 75% 450%
Book-to-bill ratio (new orders divided by

net sales)



1.45



1.76



1.86








Total




New orders for the quarter 155.8 355.4 526.1 48% 238%
Backlog at the end of the quarter 122.4 333.0 556.6 67% 355%
Book-to-bill ratio (new orders divided by

net sales)



1.30



1.62



1.74









In our Front-end segment we have seen increased order bookings. Both 200mm and 300mm Epitaxy equipment led our second quarter Front-end order book. 200mm Epitaxy system bookings included Epitaxy orders for power management applications. In July, we received an order, valued in excess of US $25 million (approximately EUR 20 million), for multiple 300 mm Epitaxy tools, in addition to continued strong performance to date in our overall Front-end orderbook. Our Back-end segment bookings level in the second quarter was a new record. The demand for equipment to assemble both integrated circuits and LEDs was very strong.

Liquidity and capital resources

Net cash provided by operations was EUR 61.2 million for the second quarter of 2010 as compared to net cash used by operations of EUR 6.4 million for the second quarter of 2009. For the six months ended June 30, 2010 net cash provided from operations of EUR 87.0 million compared to net cash used in operations of EUR 0.5 million for the comparable period in 2009. This increase results mainly from the improved net earnings, partly offset by investments in working capital resulting from the increased level of activity.

Net cash used in investing activities was EUR 19.3 million for the second quarter of 2010 as compared to EUR 2.3 million for the second quarter of 2009. For the six months ended June 30, 2010 net cash used in investing activities of EUR 30.1 million compared to EUR 5.3 million for the comparable period in 2009. The increase results mainly from increased capital expenditures in our Back-end segment.

Net cash used in financing activities was EUR 30.5 million for the second quarter of 2010 as compared to net cash used in financing activities of EUR 15.3 million for the second quarter of 2009. For the six months ended June 30, 2010 net cash used in financing activities of EUR 70.6 million compared to EUR 17.6 million for the comparable period in 2009. The increase mainly results from the increased payment of dividend to minority shareholders and the repurchase of convertible bonds during the first quarter of 2010.

Net working capital, consisting of accounts receivable, inventories, other current assets, accounts payable, accrued expenses, advance payments from customers and deferred revenue, increased from EUR 214.1 million at March 31, 2010 to EUR 262.6 million at June 30, 2010. This increase is primarily the result of increased activity levels and exchange rates. The number of outstanding days of working capital, measured based on quarterly sales, decreased from 90 days at March 31, 2010 to 80 days at June 30, 2010. For the same period, our Front-end segment increased from 84 days to 104 days and our Back-end segment decreased from 92 days to 73 days.

At June 30, 2010, the Company's principal sources of liquidity consisted of EUR 308.2 million in cash and cash equivalents and EUR 127.6 million in undrawn bank lines. Approximately EUR 148.7 million of the cash and cash equivalents and EUR 31.6 million of the undrawn bank lines are restricted to use in the Company's Back-end operations. EUR 27.4 million of the cash and cash equivalents and EUR 6.1 million in undrawn bank lines are restricted to use in the Company's Front-end operations in Japan. The use of EUR 33.7 of cash and cash equivalents is restricted in use for buy-back of outstanding convertible bonds due 2011.

Outlook

For the 2010 third quarter, we expect to generate positive revenue growth in both our Front-end and Back-end business segments.

We expect Front-end orders to strengthen further. Based on current order visibility, we believe this trend will continue through the rest of the year, as the semiconductor industry transitions to the more advanced technology nodes. We anticipate third quarter Back-end orders will continue to reflect the robust demand of both the semiconductor and LED markets.

Overall, we look forward to further improving our Front-end operating performance, complete PERFORM!, and to realizing another strong results' quarter for our Back-end operations.

Proposed Acquisition by ASM Pacific Technology Limited

After pursuing our very successful Back-end strategy of internal organic growth for the past thirty years, we believe that it is time for us to adopt a new strategy of pursuing multiple growth engines. One of the challenges of changing a core strategic vision is to change it while one's business is still performing strongly.

The Group's proposed acquisition of the entire interest of the Electronics Assembly Systems business from Siemens AG represents an exciting and excellent opportunity for the Company. It offers ASM a significant growth opportunity and a chance to replicate our success in the assembly and packaging equipment business to the surface mount technology ("SMT") equipment business.

The SMT placement equipment business that has been built up by Siemens AG has excellent market-leading technologies, good market reputation and a commendable market position. Currently, it enjoys strong market shares for products in the high-end market segments, particularly in Europe and the USA, which it is well-placed to maintain its leadership position. In terms of synergy, it shares many of the key enabling technologies and manufacturing processes of the assembly and packaging equipment offered by ASM. By contributing ASM's experience and expertise in cost-efficient manufacturing and marketing networks in Asia, we aim to lower the costs of SMT equipment hitherto offered to the market. Hence, we are confident of expanding the market share of the acquired business in Asia, particularly in China. We also aim to repeat our successful total solution strategy by horizontally expanding the product portfolio of this new SMT equipment business to cater to the needs of diverse customers.

We strongly believe that the proposed acquisition represents an excellent combination of advanced technologies with vast experience in cost-efficient manufacturing and marketing networks in Asia. The synergistic effects of combining the strengths of the two organizations will serve to push this new SMT business unit and the whole ASM Group to new heights.

Details of the proposed acquisition are set out in the announcement on "Major Transaction - Acquisition of the SEAS Business" of ASM Pacific Technology dated 28 July 2010.

Interim Financial Report

On August 31, 2010 ASM International will publish its Interim Financial report for the six months ended June 30, 2010. This report is in accordance with the requirements of the EU Transparency Directive as implemented in the Netherlands and includes consolidated condensed interim financial statements prepared in accordance with IAS 34, "Interim Financial Reporting", an interim management board report and a management board responsibility statement. The interim financial report for the six months ended June 30, 2010 will be available online at www.asm.com as from August 31, 2010.

 

ASM International will host an investor conference call and web cast on Thursday, July 29, 2010 at 15:00 Continental European Time (9:00 a.m. - US Eastern Time).

The teleconference dial-in numbers are as follows:

United States - +1 718 247 0888

International - + 44 (0)20 7806 1967

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

The teleconference will be available for replay, beginning one hour after completion of the live broadcast, through August 11, 2010.

The replay dial-in numbers are:

United States - +1 347 366 9565

International - + 44 (0)20 7111 1244

Access Code: 9715249#

About ASM International

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

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



PR Q2 2010