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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 20-F/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
COMMISSION FILE NUMBER: 0-27298
BE SEMICONDUCTOR INDUSTRIES N.V.
(Exact Name of Registrant as Specified in Its Charter)
THE NETHERLANDS
(Jurisdiction of Incorporation or Organization)
MARCONILAAN 4
5151 DR DRUNEN
THE NETHERLANDS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None`
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Ordinary shares Nasdaq National Market
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
OF THE ACT:
None
The number of outstanding shares of each of the issuer's classes of capital or
common stock as of December 31, 2004: 30,794,660 ordinary shares, nominal value
(euro) 0.91 per share (of which amount, 5,726,285 are traded on the NASDAQ
National Market in the form of New York Shares and 25,068,375 are traded on the
Amsterdam Stock Exchange in the form of Bearer Shares).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the Registrant has elected
to follow.
Item 17 [ ] Item 18 [X]
TABLE OF CONTENTS
PART I
Item 5: Operating and Financial Review and Prospects 1
Item 6: Directors, Senior Management and Employees 14
EXPLANATORY NOTE
This Form 20-F/A is being filed to clarify that BE Semiconductor
Industries N.V. (the "Company") operates in one reporting segment, to provide
additional information regarding the amount of bonuses paid to the Company's
executive officers in 2005 relating to services performed in the fiscal year
ended December 31, 2004 to clarify or confirm certain other items in Items 5 and
6.
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with "Selected Consolidated Financial
Data" and our consolidated financial statements and notes thereto appearing
elsewhere in this Annual Report on Form 20-F. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of several factors, including those
set forth under "Risk Factors" and elsewhere in this Annual Report on Form 20-F.
OVERVIEW
We design, develop, manufacture, market and service products for the
semiconductor industry's back-end assembly operations.
Our net sales and results of operations depend in significant part on the level
of capital expenditures by semiconductor manufacturers, which in turn depends on
the current and anticipated market demand for semiconductors and for products
utilizing semiconductors. Demand for semiconductor devices and expenditures for
the equipment required to assemble semiconductors is cyclical, depending in
large part on levels of demand worldwide for computing and peripheral equipment,
telecommunications devices and automotive and industrial components as well as
the production capacity of global semiconductor manufacturers. Historically, as
demand for these devices has increased, semiconductor manufacturers have sought
to increase their capacity by increasing the number of wafer fabrication
facilities and equipment production lines, and installing equipment that
incorporates new technology to increase the number of devices and the amount of
computing power per device. As demand has increased, semiconductor prices have
also typically risen. Conversely, if the additional capacity outstrips the
demand for semiconductor devices, manufacturers historically have cancelled or
deferred additional equipment purchases until demand again begins to outstrip
aggregate capacity. Under such circumstances, semiconductor prices typically
fall.
Due to the lead times associated with the production of our semiconductor
manufacturing equipment, our sales orders historically have lagged any downturn
or recovery in the semiconductor market by approximately nine to twelve months.
Our results of operations historically have fluctuated significantly both on an
annual and quarterly basis depending on overall levels of semiconductor demand
globally and the specific production requirements of our principal customers.
During 2001, we saw a significant deterioration in industry conditions. Although
we experienced increased order levels in 2002, the slowdown in the semiconductor
and semiconductor equipment industry continued throughout 2002 and 2003. In the
first half of 2004, industry conditions improved and we saw a significant
increase in bookings as compared to the first half of 2003. However, in the
third quarter of 2004, we saw a deterioration in industry conditions, resulting
in a significant decrease in bookings in the second half of 2004 as compared to
the first half of 2004.
Our sales are generated primarily by shipments to the Asian manufacturing
operations of leading U.S. and European semiconductor manufacturers and, to a
lesser extent, Korean and other Asian manufacturers and subcontractors. Most of
our principal competitors on a worldwide basis are Japanese, which historically
have dominated the Japanese market, because Japanese semiconductor manufacturers
typically purchase equipment from domestic suppliers. To date, our sales to
Japanese customers have been limited.
Our sales to specific customers tend to vary significantly from year to year
depending on customers' capital expenditure budgets, new product introductions,
production capacity and packaging requirements. In addition, we derive a
substantial portion of our net sales from products that have an average selling
price in excess of (euro) 300,000 and that have significant lead times between
the initial order and delivery of the product. The timing and recognition of net
sales from customer orders can cause significant fluctuations in operating
results from quarter to quarter.
In the first quarter of 2004, the Board of Management, in consultation with the
Supervisory Board, re-evaluated the Company's functional and operational
organization and determined that the Company was engaged in one line of
business, the design, manufacture, marketing and servicing of assembly equipment
for the semiconductor industry. The change in reporting segments, as compared to
the Company's Annual Report on Form 20-F for the year ended
1
December 31, 2003, was due to an internal change in reporting structure and
decision making responsibilities, whereby all key policies and decisions with
respect to the Company's global product lines and manufacturing operations will
reside now with the Company's Board of Management (under the supervision of the
Company's Chief Executive Officer) which is the Company's key decision-making
authority.
In accordance with SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information,", or SFAS 131, the Company's chief operating
decision-maker has been identified as the President and Chief Executive Officer,
who reviews operating results to make decisions about allocating resources and
assessing performance for the entire company. All material operating units have
the identical customer base and similarities in: economic characteristics;
nature of products and services; and procurement, manufacturing and distribution
processes. Since the Company operates in one segment and in one group of similar
products and services, all financial segment and product line information
required by SFAS 131 can be found in the Consolidated Financial Statements.
RECENT EVENTS
ACQUISITION OF DATACON
On January 4, 2005, we completed the acquisition of 100% of the outstanding
ordinary shares of Datacon for total consideration of (euro) 72.6 million, of
which (euro) 65 million was paid in cash and the remainder through the issuance
of 1,933,842 ordinary shares.
Datacon, a private company founded in 1986 and located in Radfeld, Austria, is,
according to 2003 data compiled by VLSI, a leading global manufacturer of flip
chip bonding, multi-chip die bonding and other related assembly equipment for
the semiconductor and telecommunications industries, with (euro) 58.3 million
reported revenue for the fiscal year ended March 31, 2004 and (euro) 39.1
million for the six months ended September 30, 2004 in accordance with IFRS.
See also "Acquisition of Datacon" under Item 4 "Information on the Company".
ISSUANCE OF (EURO) 46 MILLION 5.5% CONVERTIBLE NOTES
In January 2005, we issued (euro) 46 million principal amount of convertible
notes, or the Notes, due 2012. The Notes mature seven years from the date of
issue and carry an interest rate of 5.5% per annum, payable semi-annually, with
the first payment on or around July 28, 2005 and an initial conversion price of
(euro) 5.125. The Notes will be repaid at maturity in 2012 at a price of 100% of
their principal amount. If not converted, we may redeem the outstanding Notes at
their par value on or after four years from the date of issue, subject to the
share price exceeding 130% of the then effective conversion price.
Application for listing of the Notes on the official segment of the stock market
of Euronext Amsterdam N.V. coincided with publication of the prospectus on
January 25, 2005. Listing took place on January 28, 2005.
The Notes were offered to institutional investors in the Netherlands and
internationally to professional investors through an international private
placement, in reliance on Regulation S promulgated under the United States
Securities Act of 1933, as amended.
The net proceeds from the issuance of the Notes will be used by us for general
corporate purposes, including working capital and capital expenditures. In
addition, we may choose to repay all or a portion of the credit facilities that
were assumed upon closing of the acquisition of Datacon. At December 31, 2004,
Datacon had net debt of (euro) 23.7 million. Pending such uses, we intend to
invest all or a portion of the net proceeds in short-term, interest-bearing
instruments.
EVALUATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations
is based upon our consolidated financial statements, which are included
elsewhere in this Annual Report on Form 20-F and which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires management to
2
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Areas where significant
judgments are made include, but are not limited to, revenue recognition,
inventories, long-lived assets and goodwill and intangible assets. Actual
results could differ materially from these estimates.
REVENUE RECOGNITION
Our revenue recognition policy conforms to Emerging Issues Task Force, or EITF
00-21 and the SEC Staff Accounting Bulletin No. 101 and 104. Advance payments
received from customers are recorded as a liability until the products have been
shipped. Shipment of products occurs after a customer accepts the product at our
premises. We recognize revenues from sales of products upon shipment. The risk
of loss and rewards of ownership with respect to products transfer to customers
at that time. The sale of the product to the customer is thereby considered
complete and no significant obligations remain after the sale is completed.
Installation services are treated as separate deliverables in accordance with
EITF 00-21. A customer's sole recourse against us is to enforce our obligations
relating to installation and warranty. Operating expenses and other income and
expense items are recognized in the income statement as incurred or earned.
INVENTORIES
We periodically evaluate whether or not the carrying value of our inventories is
in excess of market value or whether we have excess or obsolete items in our
inventory. Our evaluation includes judgments regarding future market
developments that might have an adverse effect on the valuation of our
inventories.
Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Cost includes net prices paid for materials purchased, charges for
freight and custom duties, production labor costs and factory overhead.
LONG-LIVED ASSETS
Long-lived assets, such as property, plant and equipment, and purchased
intangibles subject to amortization, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is determined
by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows. If the sum of the estimated undiscounted future cash flows is
less than the carrying amount of the related asset, then an impairment charge is
recognized. The measurement of the impairment charge is based upon the amount
that the carrying value of the asset exceeds its fair value. Fair value is
generally determined on the basis of estimated future discounted cash flows.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell, and depreciation ceases.
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the costs of purchased businesses over the
fair value of their net assets at date of acquisition and, through December 31,
2001, was being amortized by the straight-line method. As of January 1, 2002,
goodwill is no longer amortized, but is required to be evaluated for impairment
at least annually in accordance with Statement of Financial Accounting
Standards, or SFAS, No. 142, "Goodwill and Other Intangible Assets".
The amortization of patents and other identifiable intangible assets is based on
the weighted average remaining lives of 13 years for the plating, singulation
and die sorting product lines and 16 years for the molding and trim and form
product lines as determined by an independent valuation at the date of
acquisition.
Goodwill and intangible assets not subject to amortization are tested annually
for impairment. An impairment loss is recognized to the extent that the carrying
amount exceeds the asset's fair value.
We do not have any identifiable assets with indefinite lives.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
3
The following table discloses our contractual obligations and commercial
commitments as of December 31, 2004.
Payments Due by Period
--------------------------------------------------------------
(Euro in thousands) Less than 1 year 1-3 years 4-5 years After 5 years Total
------------------- ---------------- --------- --------- -------------- ------
Long term debt obligations - 1,632 - - 1,632
Capital lease obligations
including imputed interest 1,248 2,550 2,624 9,357 15,779
Operating lease obligations 1,188 1,952 1,492 3,532 8,164
Unconditional purchase
obligations 10,549 - - - 10,549
------ ----- ----- ------ ------
Total contractual obligations and
commercial commitments 12,985 6,134 4,116 12,889 36,124
====== ===== ===== ====== ======
Unconditional purchase obligations relate to equipment and materials.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in foreign currency exchange rates
and interest rates, which may adversely affect our results of operations and
financial condition. We seek to minimize the risks associated with interest rate
and foreign currency exchange rate fluctuations through our regular operating
and financing activities and, when deemed appropriate, through the use of
derivative financial instruments. We do not use financial instruments for
trading or other speculative purposes.
FOREIGN CURRENCY EXCHANGE RATE RISK
As a consequence of the global nature of our businesses, our operations and
reported financial results and cash flows are exposed to the risks associated
with fluctuations in exchange rates between the euro and other major world
currencies. Currency exchange rate movements typically also affect economic
growth, inflation, interest rates, government actions and other factors. These
changes can cause us to adjust our financing and operating strategies. The
discussion below of changes in currency exchange rates does not incorporate
these other economic factors. For example, the sensitivity analysis presented in
the foreign exchange rate risk discussion below does not take into account the
possibility that rates can move in opposite directions and that gains from one
category may or may not be offset by losses from another category. Operations
outside the Netherlands and other countries that have adopted the euro as their
currency for 2004 constitute 19% of our net sales. As currency exchange rates
change, translation of the statements of operations of our international
business into euro affects year-over-year comparability. We historically have
not hedged translation risks, because cash flows from international operations
have generally been reinvested locally. We estimate that a 10% change in foreign
exchange rates would affect our reported operating income (loss) by less than
(euro) 1.0 million.
Our currency risk exposure primarily occurs because we generate a portion of our
net sales in currencies other than the euro while the major share of the
corresponding cost of sales is incurred in euro. The percentage of our
consolidated net sales which is denominated in euro amounted to approximately
54% of total net sales in the year ended December 31, 2004, whereas net sales
represented by U.S. dollars or dollar-linked currencies amounted to
approximately 46%. Approximately 83% of our costs and expenses were denominated
in the euro and the remaining 17% in various currencies, principally the U.S.
dollar and U.S.-dollar linked currencies. In order to mitigate the impact of
currency exchange rate fluctuations, we continually assess our remaining
exposure to currency risks and hedge such risks through the use of derivative
financial instruments. The principal derivative financial instruments currently
used by us to cover foreign currency exposures are forward foreign currency
exchange contracts that
4
qualify for hedge accounting.
INTEREST RATE RISK
Our long-term capital lease obligations, long-term debt and lines of credit
currently bear a variable rate of interest. An immediate 10% change in interest
rates would not have a material effect on our results of operations over the
next fiscal year.
5
RESULTS OF OPERATIONS
SUMMARY FINANCIAL AND OTHER OPERATING DATA
Year Ended December 31,
----------------------------------------------------
2002 2003 2004 2004
(Amounts in thousands except share and per share data) EURO EURO EURO USD(1)
------------------------------------------------------ ---------- ---------- ---------- ----------
Net sales 83,228 85,500 126,341 171,040
Cost of sales 55,849 63,345 88,352 119,611
---------- ---------- ---------- ----------
Gross profit 27,379 22,155 37,989 51,429
Selling, general and administrative expenses 26,235 25,436 27,145 36,749
Research and development expenses 12,470 13,564 12,500 16,923
Restructuring charges 786 - 5,616 7,603
Impairment of intangibles 3,302 287 - -
Amortization of intangible assets 2,591 2,522 2,465 3,337
---------- ---------- ---------- ----------
Total operating expenses 45,384 41,809 47,726 64,612
Operating loss (18,005) (19,654) (9,737) (13,183)
Interest income, net 3,395 2,815 1,811 2,452
---------- ---------- ---------- ----------
Loss before taxes and minority interest (14,610) (16,839) (7,926) (10,731)
Income taxes (benefit) 2,404 (3,292) (2,435) (3,297)
---------- ---------- ---------- ----------
Loss before minority interest (17,014) (13,547) (5,491) (7,434)
Minority interest 3 50 64 87
---------- ---------- ---------- ----------
Net loss (17,011) (13,497) (5,427) (7,347)
---------- ---------- ---------- ----------
Loss per share:
Basic (0.54) (0.44) (0.18) (0.24)
Diluted (0.54) (0.44) (0.18) (0.24)
Weighted average number of shares used to
compute net loss per share:
Basic 31,462,482 30,813,681 30,794,660 30,794,660
Diluted 31,462,482 30,813,681 30,794,660 30,794,660
========== ========== ========== ==========
(1) Translated solely for convenience of the reader at the noon buying rate on
December 31, 2004 ((euro) 1.00 = US$ 1.3538)
2003 COMPARED TO 2004
NET SALES
Our net sales consist of sales of molding systems, trim and form integration
systems, singulation systems, plating systems and die handling systems.
Our net sales increased from (euro) 85.5 million in 2003 to (euro) 126.3 million
in 2004, an increase of 47.7%. The increase in net sales in 2004 as compared to
2003 was due to increased order levels in the first half of 2004, resulting in
increased shipments in 2004 for most product lines.
6
Our net sales per product line for the periods indicated were as follows:
(Euro in million) 2003 2004 % change
--------------------------------- ---- ----- --------
Molding systems 36.6 50.7 38.5%
Trim and form integration systems 22.1 21.8 (1.4)%
Singulation systems 4.6 15.5 237.0%
Plating systems 20.1 29.3 45.8%
Die handling systems 2.1 9.0 328.6%
---- ----- -----
Total net sales 85.5 126.3 47.7%
==== ===== =====
BACKLOG
Our backlog at December 31, 2004 decreased by 20.1% to (euro) 31.8 million from
(euro) 39.8 million at December 31, 2003. The decrease in backlog was due to the
significant deterioration in market conditions and corresponding reduction in
customer orders in the second half of 2004.
New orders in 2004 were (euro) 118.3 million, an increase of 42.7% as compared
to (euro) 82.9 million in 2003. The book-to-bill ratio for 2004 was 0.94
compared to 0.97 for 2003.
We include in backlog only those orders for which we have received a completed
purchase order. Such orders are subject to cancellation by the customer with
payment of a negotiated charge. Because of the possibility of customer changes
in delivery schedules, cancellation of orders and potential delays in product
shipments, our backlog as of any particular date may not be representative of
actual sales for any succeeding period.
GROSS PROFIT
Cost of sales includes materials, purchased components and subassemblies from
subcontractors, direct labor and manufacturing overhead. It also includes costs
relating to the pre-production and customization of new equipment once a product
has advanced beyond the prototype stage. Changes in our cost of sales typically
lag changes in net sales due to our manufacturing lead times.
Gross profit increased by 71.2% from (euro) 22.2 million in 2003 to (euro) 38.0
million in 2004. As a percentage of net sales, gross profit increased from 25.9%
in 2003 to 30.1% in 2004. The gross profit in 2004 was adversely affected by
charges of (euro) 1.9 million for inventory write-downs recorded in the fourth
quarter of 2004. In the fourth quarter of 2003, charges of (euro) 2.9 million
were recorded for higher engineering and modification costs and inventory
write-downs associated with the completion of a multi-unit order with a specific
customer.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist of expenses related to
sales of products and services, administrative and other corporate level
expenses not related to the production of products and all expenses associated
with ongoing customer support.
Our selling, general and administrative expenses in 2003 totaled (euro) 25.4
million and represented 29.7% of net sales compared to (euro) 27.1 million or
21.5% of net sales in 2004. The decrease in selling, general and administrative
expenses as percentage of net sales resulted primarily from the increase in net
sales levels.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development spending relating to packaging and die handling
equipment varies from year to year depending on our new product development
cycle. As research and development expenses do not include pre-
7
production and customization costs, our research and development expenses
decrease as products move from prototype development to production and final
customer acceptance.
Research and development expenses relating to plating equipment include costs
related solely to new product development efforts and exclude new product
pre-production and customization expenses and design and engineering expenses
incurred in sustaining and enhancing existing product lines. Our research and
development expenses decreased from (euro) 13.6 million in 2003 to (euro) 12.5
million in 2004. As a percentage of net sales, research and development expenses
were 15.9% and 9.9% in 2003 and 2004, respectively. Research and development
spending in 2004 reflects our investment in research and development, mainly for
the development of trim and form systems, our AMS-i molding system, as well as
spending for new generation singulation and die handling systems.
RESTRUCTURING CHARGES
On December 14, 2004, as part of a plan to address the current downturn in the
semiconductor industry, we announced a restructuring of our operations focused
principally on a workforce reduction of 81 employees at our Dutch packaging and
tooling manufacturing operations in Duiven and Brunssum, the Netherlands, or
approximately 10% of total fixed headcount worldwide. In addition, we announced
that we will phase out approximately 50 temporary workers at the Duiven
facility. A component of the restructuring will be the closing of our tooling
facility in Brunssum, the Netherlands in the first half of 2005. The workforce
reductions are expected to occur during the first quarter of 2005.
We recorded a restructuring charge of (euro) 5.6 million in the fourth quarter
ending December 31, 2004 to cover the estimated costs of this workforce
reduction.
Ongoing economic uncertainties and industry over-capacity resulted in customers
delaying scheduled deliveries, capacity investment and the funding of strategic
programs in the second half of 2004. We have taken steps to realign our
operations in response to reduced demand. The restructuring also is consistent
with our plans to reduce exposure in high cost geographies and to rely more on
low cost manufacturing regions.
Changes in the restructuring reserve were as follows:
(Euro in thousands) 2002 2003 2004
----------------------- ------- ------ ------
Balance at January 1, 5,487 1,281 521
Additions 1,991 - 5,616
Releases (1,201) - -
Impairment on assets (107) - -
Cash payment (4,889) (760) (317)
----- ----- -----
Balance at December 31, 1,281 521 5,820
===== ===== =====
The 2001 provision for the reduction in workforce included severance and other
benefits for approximately 180 employees in the Netherlands and Asia. The
additions to the restructuring reserve in 2002 related to higher than expected
severance cost, later than expected final employment terminations and severance
payments for the reduction in workforce in the United States and relocation
cost. The releases in 2002 mainly relate to social security expenses and
disabled personnel included for which we were not obliged to pay. Total
remaining cash outlays for these restructuring activities are expected to be
(euro) 0.3 million, which relate mainly to pension premiums to be paid for laid
off employees over a period of two to five years.
The 2004 provision for the reduction in workforce included severance and other
benefits for approximately 81 employees, mainly in the Netherlands. Total
remaining cash outlays for restructuring activities in 2004 are expected to be
(euro) 5.5 million, and will mainly be paid in the first half of 2005.
OPERATING LOSS
Operating loss decreased from (euro) 19.7 million in 2003 to (euro) 9.7 million
in 2004. Operating loss for 2004 included
8
restructuring charges of (euro) 5.6 million and (euro) 1.9 million for inventory
write-downs. Operating loss for 2003 included a non-cash patent impairment
charge of (euro) 0.3 million and charges of (euro) 2.9 million related to higher
engineering and modification costs and inventory write-downs associated with the
completion of a multi-unit order with a specific customer. Operating loss in
2004 decreased as compared to 2003 due to increased gross order margins as well
as slightly decreased spending on research and development.
We incurred annual patent and other identifiable assets amortization charges of
(euro) 2.5 million in 2004, which related to the acquisitions of our Fico, Meco,
RDA and Laurier subsidiaries.
In the fourth quarter of 2004, we tested our intangibles for impairment. No
impairment on intangibles was required.
INTEREST INCOME, NET
Our interest income, net, decreased from (euro) 2.8 million in 2003 to (euro)
1.8 million in 2004, mainly due to lower market interest rates, increased
capital lease obligations and slightly lower cash balances.
INCOME TAXES
Our income tax benefit amounted to (euro) 3.3 million in 2003 compared to (euro)
2.4 million in 2004. The effective tax rate was 19.5% in 2003 and 30.7% in 2004.
The increase of the effective tax rate was due to decreased losses as compared
to 2003 in certain foreign subsidiaries in which we were not able to recognize a
tax benefit. Management believes that the recent losses of these subsidiaries
should be given substantially more weight than forecasts of future profitability
in the evaluation.
NET LOSS
Our net loss amounted to (euro) 13.5 million in 2003 and (euro) 5.4 million in
2004. Net loss for 2004 was negatively impacted by (i) after-tax restructuring
charges of (euro) 3.7 million and (ii) lower margins due to the devaluation of
the U.S. dollar against the euro, as well as by pre-tax charges of (euro) 1.9
million related to inventory write-downs.
2002 COMPARED TO 2003
NET SALES
Our net sales increased from (euro) 83.2 million in 2002 to (euro) 85.5 million
in 2003, an increase of 2.8%. The increase in net sales in 2003 as compared to
2002 was due to increased order levels in the second half of 2002, resulting in
increased shipments in 2003, especially for trim and form integration systems
and singulation systems, offset by lower sales for die handling systems.
Our net sales per product line for the periods indicated were as follows:
(Euro in million) 2002 2003 % change
--------------------------------- ------ ------ ---------
Molding systems 35.2 36.6 4.0%
Trim and form integration systems 15.8 22.1 39.9%
Singulation systems 2.9 4.6 58.6%
Plating systems 21.7 20.1 (7.4%)
Die handling systems 7.6 2.1 (72.4%)
---- ---- ----
Total net sales 83.2 85.5 2.8%
==== ==== ====
BACKLOG
Our backlog at December 31, 2003 decreased by 6.4% to (euro) 39.8 million from
(euro) 42.5 million at December 31, 2002. This decrease was primarily due to a
relatively high backlog for trim and form integration systems at January 1, 2003
that
9
decreased as a result of increased shipments of these systems in 2003. The
decrease in trim and form integration systems' backlog was partly offset by an
increased backlog for singulation systems and die handling systems. New orders
in 2003 were (euro) 82.9 million, a decrease of 7.0% as compared to (euro) 89.1
million in 2002, which included (euro) 1.8 million of die handling systems'
backlog that was acquired as part of our purchase of Laurier. The book-to-bill
ratio for 2003 was 0.97 compared to 1.07 for 2002.
GROSS PROFIT
Gross profit decreased by 19.0% from (euro) 27.4 million in 2002 to (euro) 22.2
million in 2003. As a percentage of net sales, gross profit decreased from 32.9%
in 2002 to 25.9% in 2003. The gross profit in 2003 was adversely affected by
slightly lower margins, mainly caused by the devaluation of the U.S. dollar
against the euro. Furthermore, charges of (euro) 2.9 million were recorded in
the fourth quarter of 2003 for higher engineering and modification costs and
inventory write-downs associated with the completion of a multi-unit order with
a specific customer.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Our selling, general and administrative expenses in 2002 totaled (euro) 26.2
million and represented 31.5% of net sales compared to (euro) 25.4 million or
29.7% of net sales in 2003. The decrease in selling, general and administrative
expenses resulted primarily from our ongoing efforts to reduce our operating
expenses.
RESEARCH AND DEVELOPMENT EXPENSES
Our research and development expenses increased from (euro) 12.5 million in 2002
to (euro) 13.6 million in 2003. As a percentage of net sales, research and
development expenses were 15.0% and 15.9% in 2002 and 2003, respectively. The
increase in research and development spending in 2003 reflects our continued
investment in research and development, mainly for the development of new trim
and form systems, our new AMS-i molding system, as well as spending for
singulation systems.
RESTRUCTURING CHARGES
On June 15, 2001, we adopted an initial restructuring plan that included a
reduction of our global workforce (including temporary workers) of approximately
13%. These actions were necessitated by the semiconductor industry downturn that
resulted in a significant reduction in new orders. We undertook this
restructuring: (i) to better align our cost structure with anticipated revenues
and (ii) to improve manufacturing efficiency and productivity. We recorded
pre-tax restructuring charges of (euro) 3.6 million in connection with the
reduction of our workforce in the second quarter of 2001. As a result of
continued adverse market conditions in the semiconductor equipment industry, we
took additional restructuring measures in each of the third and fourth quarters
of 2001, which resulted in a cumulative workforce reduction of approximately
26%. In connection with those additional restructuring measures, we incurred
additional restructuring charges for employee severance and benefits of (euro)
1.7 million and (euro) 3.0 million in the third and fourth quarter of 2001,
respectively.
In the third quarter of 2002, we relocated our flip chip die attach operations
from New Jersey to New Hampshire in the United States and consolidated these
activities with our die sorting business to form a single die handling systems
business unit. In the fourth quarter of 2002, we restructured the combined
business by reducing our workforce by approximately 28%. We recorded a
restructuring charge relating to these actions of (euro) 0.8 million in 2002.
Changes in the restructuring reserve were as follows:
(Euro in thousands) 2001 2002 2003
----------------------- -------- -------- -------
Balance at January 1, - 5,487 1,281
Additions 8,306 1,991 -
Releases - (1,201) -
10
Impairment on assets - (107) -
Cash payments (2,819) (4,889) (760)
------ ------ ----
Balance at December 31, 5,487 1,281 521
------ ------ ----
The 2001 provision for the reduction in workforce included severance and other
benefits for approximately 180 employees in the Netherlands and Asia. The
additions to the restructuring reserve in 2002 related to higher than expected
severance costs, later than expected final employment terminations and severance
payments for the reduction in workforce in the United States and relocation
cost. The releases in 2002 mainly relate to social security expenses and
disabled personnel included for which we were not obliged to pay. Total
remaining cash outlays for restructuring activities are expected to be (euro)
0.5 million, which relate mainly to pension premiums to be paid for laid off
employees over a period of two to five years.
OPERATING LOSS
Operating loss increased from (euro) 18.0 million in 2002 to (euro) 19.7 million
in 2003. Operating loss for 2002 included non-cash goodwill impairment of (euro)
3.3 million and restructuring charges of (euro) 0.8 million. Operating loss for
2003 included non-cash patent impairment of (euro) 0.3 million and charges of
(euro) 2.9 million related to higher engineering and modification costs and
inventory write-downs associated with the completion of a multi-unit order with
a specific customer. Furthermore, operating loss in 2003 increased as compared
to 2002 due to slightly lower order margins as well as increased spending on
research and development.
We incurred annual patent and other identifiable assets amortization charges of
(euro) 2.5 million in 2003, which related to the acquisitions of our Fico, Meco,
RD Automation and Laurier subsidiaries in October 1993, May 1995, September 2000
and January 2002, respectively.
As of January 1, 2002, we adopted SFAS No. 142 and SFAS No. 144, "Accounting for
the impairment or disposal of long-lived assets". SFAS No. 142 eliminates the
amortization of goodwill and indefinite-lived intangible assets, addresses the
amortization of intangible assets with finite lives and addresses impairment
testing and recognition for goodwill and intangible assets with indefinite
lives. SFAS No. 144 establishes a single model for the impairment of long-lived
assets and broadens the presentation of discontinued operations to include
disposal of an individual business. As a result of the adoption of SFAS No. 142,
goodwill amortization ceased.
We reviewed our business and determined that there are four reporting units to
be reviewed for impairment in accordance with the standard - the reporting units
were: packaging equipment, plating and singulation equipment, flip chip die
attach equipment and die sorting equipment. Upon adoption of SFAS No. 142 in the
first quarter of 2002, we completed the required transitional impairment testing
of goodwill, and based upon those analyses, did not identify any impairment
charges as a result of adoption of this standard effective January 1, 2002.
We have determined that our annual test for impairment of goodwill will take
place at the end of the fourth quarter of each year, which coincides with the
completion of our annual forecasting process. In the third quarter of 2002, we
consolidated our die attach equipment business unit and die sort equipment
business into a single die handling equipment business unit. Due to the severity
and the length of the current industry downturn and uncertainty of the timing of
improvement in industry conditions, we have revised our earnings forecasts for
each of our business units that were tested for impairment. As a result, in the
fourth quarter of fiscal year 2002, we recognized a goodwill impairment loss of
(euro) 3.3 million in the die handling equipment reporting unit. The fair value
of each reporting unit was estimated using the expected present value of future
cash flows.
In the fourth quarter of 2003, we tested our intangibles for impairment. As a
result of this impairment test, an impairment of patents of die handling
equipment to an amount of (euro) 0.3 million was recorded. No impairment on
other intangibles was required.
We do not have any identifiable assets with indefinite lives.
11
INTEREST INCOME, NET
Our interest income, net, decreased from (euro) 3.4 million in 2002 to (euro)
2.8 million in 2003, mainly due to lower market interest rates and slightly
lower cash balances.
INCOME TAXES
Our income tax expense was (euro) 2.4 million in 2002 as compared to an income
tax benefit of (euro) 3.3 million in 2003. The income tax rate as shown in the
results of operations was 19.6% in 2003. The tax rate for 2002 was not
meaningful as we recorded a valuation allowance of (euro) 6.0 million in the
fourth quarter of 2002. The tax rate for 2003 is significantly lower than our
domestic tax rate, due to losses in certain foreign subsidiaries in which we
were not able to recognize a tax benefit, as management believes that the recent
losses of these subsidiaries should be given substantially more weight than
forecasts of future profitability. In 2003, an amount of (euro) 2.8 million of
available tax benefit was not recognized.
In the fourth quarter of fiscal year 2002, as part of the income tax provision
for the period, we recorded a charge of (euro) 6.0 million through the
establishment of a valuation allowance against our deferred tax asset consisting
primarily of U.S. net operating loss carry forwards and temporary differences.
We determined that the valuation allowance was required based on our recent
losses, which were given substantially more weight than forecasts of future
profitability calculating tax valuation allowances. Until we utilize these U.S.
operating loss carry forwards, our income tax provision will reflect mainly
domestic taxation.
NET LOSS
Our net loss amounted to (euro) 17.0 million in 2002 and (euro) 13.5 million in
2003. Net loss for 2002 was negatively impacted by (i) goodwill impairment of
(euro) 3.3 million, (ii) a non-cash valuation allowance of (euro) 6.0 million
against our net deferred tax assets and (iii) after tax restructuring charges of
(euro) 0.6 million related to our die handling operations.
Net loss for 2003 was negatively impacted by slightly lower margins due to the
devaluation of the U.S. dollar against the euro, as well as by charges of (euro)
2.9 million related to higher engineering and modification costs and inventory
write-downs associated with the completion of a multi-unit order with a specific
customer and a (euro) 0.3 million charge for the impairment of intangibles.
LIQUIDITY AND CAPITAL RESOURCES
We had (euro) 108.9 million and (euro) 106.6 million in cash and cash
equivalents at December 31, 2003 and December 31, 2004, respectively.
We finance our Meco subsidiary and, to an extent, our Fico subsidiary, on a
stand-alone basis. We intend to finance our subsidiary Datacon on a stand-alone
basis. Meco utilizes funds generated from its results of operations and
available bank lines of credit to finance its working capital and capital
expenditure requirements. Meco and Fico maintain lines of credit with various
local commercial banks. The credit lines of Meco and Fico are currently
unsecured, except for pledges on the accounts of Fico and Meco with the banks
that provide the facilities. The principal restrictive covenant in each line is
related to solvency ratios, which generally are based on a ratio of each
subsidiary's equity to its assets. We expect to finance the Datacon group using
funds generated from its results of operations and available lines of credit.
Datacon utilizes long-term loans, short-term bank lines of credit and government
granted loans for export and research and development activities in these
financing activities. Some of these loans are secured by a pledge of real
property. Currently, RD Automation and Laurier and, to an extent, Fico are
financed through intercompany loans. Fico Tooling Leshan Company Ltd. in China,
87% of which is owned by us, is partly financed by long-term loans issued by a
local bank.
The working capital requirements of our subsidiaries are affected by the receipt
of periodic payments on orders from their customers. Although Fico, RD
Automation and Laurier and Datacon generally receive partial payments for
12
automated molding systems, automated trim and form integration systems, die
handling systems and bonding systems prior to final installation, initial
payments generally do not cover a significant portion of the costs incurred in
the manufacturing of such systems. Meco generally receives a higher initial
payment upon receipt of orders than Fico, RD Automation and Laurier and Datacon.
Net cash (used in) provided by operating activities was (euro) 5.3 million and
((euro) 4.6) million in 2003 and 2004, respectively. The primary uses of cash in
operations in 2004 were working capital requirements of (euro) 5.8 million as a
result of the substantial increase in bookings activity during the first half of
2004.
At December 31, 2004, our cash and cash equivalents totaled (euro) 106.6 million
and our total debt and capital lease obligations totaled (euro) 14.1 million. At
December 31, 2004, shareholders' equity stood at (euro) 177.0 million.
Our capital expenditures were (euro) 4.9 million in 2002, (euro) 11.9 million in
2003 and (euro) 3.4 million in 2004. The expenditures in 2003 were incurred
primarily for the construction of an 80,000 square foot facility in Duiven, the
Netherlands for molding systems and tooling manufacturing and the establishment
of our first manufacturing facility in China for the production of tools. A
majority of the capital expenditures of 2004 was used to further expand our
production capacity in China and Malaysia.
On February 6, 2004, Fico sold the land and buildings in Duiven, the Netherlands
in a sale and lease-back transaction for (euro) 14.5 million in cash. At the
date of the transaction, the net book value of the real estate sold was
approximately equal to the selling price of the real estate. Fico granted the
buyer a (euro) 1.5 million loan which is payable over a maximum period of 24
months. The loan can be repaid at any time during the term of the loan. The loan
is secured by a second mortgage on the land and buildings which were the subject
of the sale and lease back transaction. The loan bears interest at the rate of
4.5% per annum. The transaction will be accounted for as a financing until the
buyer pays off the loan. Once the buyer repays the loan, this finance obligation
and the related real estate assets will be derecognized. Settlement of this
obligation will not result in a cash outflow from Besi.
At December 31, 2004, Meco and Fico had available lines of credit amounting to
in aggregate (euro) 13.5 million, under which no borrowings were outstanding,
but with the amount available to be drawn under the lines reduced by (euro) 0.6
million in outstanding bank guarantees. At December 31, 2004, (euro) 0.4 million
of the lines of credit was reserved for foreign exchange contracts. Interest is
charged at the bank's base lending rates plus an increment of 1.5%. The credit
facility agreements include covenants requiring us to maintain certain financial
ratios. The relevant companies were in compliance with, or had received waivers
for, all loan covenants at December 31, 2004.
In January 2005, we issued (euro) 46 million in Notes due 2012. The Notes mature
seven years from the date of issue and carry an interest rate of 5.5% per annum,
payable semi-annually, with the first payment on or around July 28, 2005 and an
initial conversion price of (euro) 5.1250. The Notes will be repaid at maturity
in 2012 at a price of 100% of their principal amount. If not converted, we may
redeem the outstanding Notes at their par value on or after four years from the
date of issue, subject to the share price exceeding 130% of the then effective
conversion price.
We believe that our cash position, internally generated funds and available
lines of credit will be adequate to meet its levels of capital spending,
research and development and working capital requirements for at least the next
twelve months.
MATERIAL DIFFERENCES BETWEEN U.S. GAAP AND IFRS
13
Beginning in 2005, the European Commission will require companies that are
quoted on a European stock market to publish their financial statements in
accordance with IFRS. While we intend to continue publishing U.S. GAAP financial
statements, we also will publish our consolidated financial statements in
accordance with IFRS from January 1, 2005 onwards. Our consolidated financial
statements have been prepared in accordance with U.S. GAAP, which differ in
certain significant respects from IFRS. We have not prepared financial
statements in accordance with IFRS and, accordingly cannot offer any assurances
that the differences described below would, in fact, be the accounting
principles creating the greatest differences between our financial statements
prepared under U.S. GAAP and under IFRS.
The following paragraphs summarize certain significant differences between U.S.
GAAP and IFRS as of December 31, 2004 and not differences that may have existed
throughout the period covered in the financial statements. This description is
not intended to provide a comprehensive listing of all such differences
specifically related to us or the industries in which we operate. U.S. GAAP is
generally more restrictive and comprehensive than IFRS regarding recognition and
measurement of transactions, account classification and disclosure requirements.
No attempt has been made to identify all disclosure, presentation or
classification differences that would affect the manner in which transactions
and events are presented in the financial statements or the notes thereto. We
are currently investigating the possible impact of differences identified
between IFRS and U.S. GAAP. In spite of the fairly large number of potential
differences between U.S. GAAP and IFRS, only a relatively small number appears
to be relevant to us in practice. The following summary may not include all
major differences that exist between U.S. GAAP and IFRS as they relate to our
business.
LEASES
U.S. GAAP generally requires profit or loss deferral on a sale and lease-back
transaction that is classified as an operating lease. The exceptions to that
general rule are the same as those for a sale and lease-back transaction
classified as a capital lease. U.S. GAAP has stringent rules on accounting for
sale and leaseback transactions of real estate.
IFRS requires immediate profit or loss recognition for a sale and lease-back
transaction classified as an operating lease if the sale transaction is
established at fair value because, in those situations, the sale transaction is
deemed to be a normal sale transaction that would typically result in profit or
loss being recognized immediately. If the sale price is less than the property's
fair value, IFRS requires immediate profit or loss recognition unless the loss
is compensated by future rentals at a below-market price, in which case the loss
is deferred and amortized in relation to the rental payments over the period
that the asset is expected to be used. If the sale price is above fair value,
IFRS requires that the excess over fair value be deferred and amortized over the
period for which the asset is expected to be used.
IMPAIRMENT OF LONG LIVED ASSETS
Under U.S. GAAP, when events or changes in circumstances indicate possible
impairment, the sum of expected undiscounted future cash flows, related to the
fixed asset (or group of assets) being measured, is compared to the carrying
amount of the respective assets. Estimates of future cash flows used to test the
recoverability of a long lived asset group should include only the future cash
flows that are directly associated with, and are expected to arise as a direct
result of, the use and eventual disposition of that asset group. If the carrying
amount of the asset exceeds this value, an impairment loss exists and a
write-down is necessary. The impairment charge is measured as the excess of
carrying value over fair value. Fair value may be measured using quoted market
prices in active markets, if available or using discounted cash flows.
Under IFRS, when events or changes in circumstances indicate possible
impairment, the sum of expected future discounted cash flows is compared to the
carrying amount of the respective assets. If the carrying amount of the asset
exceeds the sum
14
of the discounted cash flows, an impairment loss exists and a write-down is
necessary. The impairment loss is based on the recoverable amount (the higher of
the asset's value-in-use and net selling price).
Under U.S. GAAP, reversals of impairment losses for assets to be held and used
are prohibited, as the impairment loss results in a new cost basis for the
asset. Subsequent revisions to the carrying amount of an asset to be disposed of
must be reported as adjustments to the asset's carrying amount, but limited by
the carrying amount at the date on which the decision to dispose of the asset is
made.
Under IFRS, reversal of impairment losses, other than on goodwill, is required
when there has been a change in economic conditions or in the expected use of
the asset.
RESEARCH AND DEVELOPMENT
Under U.S. GAAP, research and development costs are expensed as incurred.
Under IFRS, research costs should be expensed as incurred. An intangible asset
arising from development (or from the development phase of an internal project)
must be recognized as an intangible if, and only if, an enterprise can
demonstrate all of the following:
- the technical feasibility of completing the intangible asset so that it
will be available for use or sale;
- its intention to complete the intangible asset and use or sell it;
- its ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits.
Among other things, the enterprise should demonstrate the existence of a
market for the output of the intangible asset or the intangible asset
itself or, if it is to be used internally, the usefulness of the
intangible asset;
- the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
- its ability to reliably measure the expenditure attributable to the
intangible asset during its development.
PENSIONS
Multi-Employer Plans
Under U.S. GAAP, defined contribution accounting must be used.
Under IFRS, defined benefit accounting must be used, unless sufficient
information cannot be obtained.
STOCK OPTIONS
Prior to January 1, 2006, under U.S. GAAP, companies may elect to follow the
accounting prescribed by either Accounting Principles Board Opinion 25,
"Accounting for Stock Issued co Employees," (APB 25) or SFAS No 123. "Accounting
for Stock-Based Compensation" (SFAS 123).
Under U.S. GAAP, compensation is recorded for the cost of providing the options
to the employee over the relevant service period. The costs can be determined
based on either the intrinsic value method (APB 25) or the fair value method
(SFAS 123). Under the intrinsic value method, the compensation cost is the
difference between the market price of the stock at the measurement date and the
price to be contributed by the employee (exercise price). Under the intrinsic
method, the measurement date is the first date on which the employee knows the
number of shares that such employee is entitled to receive and the exercise
price. The measurement date is often the grant date; however, it may be later
than the grant date in plans with variable terms that depend on events which
occur after the grant date These terms may be variable by design, may become
variable due to their modification after the date of grant, or may be considered
variable due to their relation to other stock option features. In such cases,
compensation is measured at the end of each reporting period until the
measurement date or in some cases, until the stock option's exercise,
forfeiture, or expiry. Under the fair value
15
method, the cost associated with options is based on the fair value at the date
of grant. Cost is estimated using an option-pricing model. If an entity chooses
to follow the intrinsic value method, it must make pro-forma disclosures of net
income and earnings per share as if the fair value method had been applied.
IFRS requires expensing of stock option plans based on fair value.
16
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board, or FASB, issued a
revision of FASB Statement No. 123, Accounting for Stock-Based Compensation ,
SFAS No. 123 (revised 2004), or SFAS 123(R). SFAS 123(R), supersedes Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
its related implementation guidance. SFAS 123(R) addresses the accounting for
share-based payment transactions in which a company receives employee services
in exchange for either equity instruments of the Company or liabilities that are
based on the fair value of the Company's equity instruments that may be settled
by the issuance of such equity instruments. SFAS 123(R) eliminates the ability
to account for share-based compensation transactions using the intrinsic method
that we currently use and generally requires that such transactions be accounted
for using a "fair-value"-based method and recognized as expense in our
consolidated statements of operations. SFAS 123(R) will become effective as of
January 1, 2006. The effects of the change are still being determined by us.
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
SUPERVISORY BOARD
The members of the Supervisory Board as of December 31, 2004 are as follows:
Name Age Title Term Expires
---- --- -------------------------------- ------------
W.D. Maris 65 Chairman of the Supervisory Board 2006
E.B. Polak 60 Member of the Supervisory Board 2004
D. Sinninghe Damste 65 Member of the Supervisory Board 2004
T. de Waard 58 Member of the Supervisory Board 2007
Mr. Maris - Chairman of the Supervisory Board
Mr. Maris became a member of the Supervisory Board in May 2000 and has served as
Chairman since June 2000. From 1990 to January 2000, Mr. Maris served as
President and Chief Executive Officer of ASM Lithography N.V., the Netherlands,
a semiconductor equipment manufacturer. From 1979 to 1990, Mr. Maris was active
in the IC division of Philips Electronics N.V. Mr. Maris also serves as a member
of the Supervisory Board of Vanderlande Transport Mechanismen B.V. Furthermore,
Mr. Maris serves as a member of the board of directors of Photronics Inc., FSI
International Inc., and the European Asset Trust.
Mr. Polak - Member of the Supervisory Board
Mr. Polak became a member of the Supervisory Board in November 2000. From 1984
until 2001, Mr. Polak has served in various capacities with ASM Lithography
N.V., the Netherlands. From 1969 to 1984, Mr. Polak served in various capacities
with Philips.
Mr. Sinninghe Damste - Member of the Supervisory Board
Mr. Sinninghe Damste became a member of the Supervisory Board in November 2000.
From 1988 to his retirement in 2001, Mr. Sinninghe Damste served as a member of
the Board of Management of Hollandsche Beton Groep N.V., a multi-sector
construction company. From 1968 to 1988, Mr. Sinninghe Damste served in various
capacities with Royal Dutch/Shell Group of Companies. Mr. Sinninghe Damste also
serves as Chairman of the Supervisory Board of Holland Institute of Traffic
Technology N.V. and as a member of the Supervisory Boards of Vedior N.V. and NKI
\ AvL.
Mr. De Waard - Member of the Supervisory Board
Mr. De Waard became a member of the Supervisory Board in November 2000. Since
2001, Mr. De Waard has been a partner of Clifford Chance Limited Liability
Partnership, a law firm. Previously, Mr. De Waard was a partner of
17
the law firm Stibbe. Mr. De Waard also serves as a member of the Supervisory
Board of STMicroelectronics N.V.
The business address of each of the members of the Supervisory Board is our
registered office.
18
BOARD OF MANAGEMENT AND OTHER KEY MEMBERS OF MANAGEMENT
The members of the Board of Management and the other key members of management
as of December 31, 2004 are as follows:
Board of Management
Name Age Title Term Expires
---- --- ---------------------------------------- ------------
R.W. Blickman 50 President and Chief Executive Officer, N/a (1)
Chairman of the Board of Management
J.A. Wunderl 53 Member of the Board of Management, October 2007
appointed as of March 25, 2004, Managing
Director of
RD Automation and Laurier
Other Key Members of Management
Name Age Title
---- --- ----------------------------------------
W.M. Enzing 45 Managing Director of Fico Trim and Form N/a (1)
Integration
R.J. Foppen 57 Worldwide Sales and Marketing Manager of N/a (1)
Meco Plating
P.A. Govaert 48 Managing Director of Fico Molding and N/a (1)
Fico Tooling
J.C. te Hennepe 46 Director of Finance N/a (1)
F.J.M. Jonckheere 45 Managing Director of Meco Plating N/a (1)
H.F. Menschaar 58 Director of Corporate Technology N/a (1)
H.G.E.M. van der Sande 36 Co-Director of Finance, Secretary of the N/a (1)
Company
G. A. in `t Veld 48 Managing Director of Fico Singulation N/a (1)
(1) There are no specified terms for these members appointed prior to March 2004
Mr. Blickman - President, Chief Executive Officer and Chairman of the Board of
Management
Mr. Blickman is President and Chief Executive Officer and Chairman of the Board
of Management, positions he has held since November 1995. He also is Managing
Director of the Fico subsidiary, a position he has held since February 1991, and
Managing Director of the Meco subsidiary, a position he has held since November
1995. Previously, Mr. Blickman held the position of Worldwide Sales Manager of
Fico from September 1989 to February 1991. Prior to joining Fico, he served as
the European Marketing and Sales Manager for Advanced Semiconductor Materials
International N.V. (ASMI). Furthermore, Mr. Blickman serves as a member of the
Supervisory Board of ZBG Holdings N.V. and of Ennismore Fund Management Limited.
Mr. Wunderl - Executive Member and Managing Director of Besi Die Handling Inc.
(RD Automation and Laurier)
Mr. Wunderl has served as Managing Director of Besi Die Handling Inc. since
January 5, 2004 and was appointed a member of the Board of Management on March
25, 2004. From 2002 to 2004, Mr. Wunderl worked at Esec Switzerland and between
1990 and 2002 he held various positions at ASMI.
Mr. Enzing - Managing Director of Fico Trim and Form Integration
Mr. Enzing has served as Managing Director of Fico Trim and Form Integration
Systems since September 2001. Prior to joining Fico, Mr. Enzing served as Sector
Director at Atos Orgin from 1997 and as Account Manager from 1995. Prior to
that, Mr. Enzing was an Associate Consultant at McKinsey & Company, and held
various positions at ASMI.
Mr. Foppen - Worldwide Sales and Marketing Manager of Meco Plating
Mr. Foppen is Worldwide Sales and Marketing Manager of Meco Plating and also
serves as the Director of Sales and Marketing, a position he has held since
1985. From 1973 to 1985, Mr. Foppen served as the Sales Manager for
19
the United Kingdom and Benelux Countries for Cetema B.V.
Mr. Govaert - Managing Director of Fico Molding and Fico Tooling
Mr. Govaert is Managing Director of Fico Molding, a position he has held since
November 1, 2004, and Managing Director of Fico Tooling, a position he has held
since May 1, 1999. Prior to joining the Fico subsidiary, Mr. Govaert served at
Berkhof Heerenveen B.V. as General Manager from 1997 to 1998 and at WBM
Staalservice Centrum B.V. from 1987 to 1997 as General Manager.
Mr. te Hennepe - Director of Finance
Mr. te Hennepe has served as Director of Finance since March 1, 2002. From March
1999 until February 2002, Mr. te Hennepe served as Finance Manager of Possehl
Besi Electronics N.V. Prior to joining Possehl Besi Electronics N.V., Mr. te
Hennepe served as Finance Manager/Controller for Yokogawa, GTI, HCS, ABB and
ASMI in the Netherlands.
Mr. Jonckheere - Managing Director of Meco Plating
Mr. Jonckheere is Managing Director of Meco Plating, a position he has held
since October 1, 2003. Formerly, Mr. Jonckheere served as Director of Operations
of Meco Plating Systems and Chemicals from January 1996. From 1986 until joining
Besi, Mr. Jonckheere served in various positions at Holec Machines and Apparaten
B.V.
Mr. Menschaar - Director of Corporate Technology
Mr. Menschaar is Director of Corporate Technology, a position he has held since
January 1999. Mr. Menschaar served as Strategic Business Development manager for
Fico and Meco. Prior to joining Besi, Mr. Menschaar served variously as Managing
Director for AFAM B.V., as Managing Director for Advanced Production Automation
and as Chief Development for Patent Machinebouw B.V.
Mrs. van der Sande - Co-Director of Finance, Secretary of the Company
Mrs. van der Sande is Co-Director of Finance since March 2002 and acts as
Secretary of the Company. From March 2000 to March 2002, Mrs. van der Sande
served as our Director of Finance and from July 1996 to March 2000 as our
Manager of Finance. Prior to joining Besi, Mrs. van der Sande spent nine years
in public accountancy with KPMG Accountants N.V.
Mr. in 't Veld - Managing Director of Fico Singulation
Mr. in 't Veld has served as Managing Director of Fico Singulation (formely
Meco) since November 1, 2003. Prior to joining Besi, Mr. in 't Veld served as
Managing Director of Multin Technology Group from 2000 to 2003. From 1982 to
2000, Mr. in 't Veld held various positions at Delft Instruments.
The business address of each of the members of the Board of Management and of
the other key members of management is our registered office.
FUTURE MEMBERS OF THE BOARD OF MANAGEMENT
It is intended that Messrs. H. Rutterschmidt and G. Zeindl, members of the
Datacon management board, will be appointed by the Supervisory Board as members
of the Board of Management after the notification of the General Meeting of
Shareholders at the next annual General Meeting of Shareholders which will be
held on March 24, 2005. In connection with the acquisition of Datacon, H.
Rutterschmidt acquired a total of 444,784 ordinary shares, which shares are
subject to a two year lock up arrangement (subject to certain exceptions), which
expires on January 4, 2007. Messrs. H. Rutterschmidt and G. Zeindl are two of
the partners in a partnership that sold real property to a subsidiary of the
Company.
B. COMPENSATION OF DIRECTORS AND OFFICERS
20
The aggregate cash compensation paid to, or accrued by us for our management
including members of the Board of Management was (euro) 2.0 million in 2004,
excluding one-time payments of (euro) 0.7 million. Amounts accrued to provide
pension, retirement or similar benefits to these individuals, as a group, were
(euro) 0.2 million in 2004.
REMUNERATION OF THE BOARD OF MANAGEMENT
The aggregate cash compensation paid to members of the Board of Management was
(euro) 715,089 in 2004 (including pension, but excluding one-time payments of
(euro) 739,392). The remuneration of the members of the Board of Management is
determined by the Supervisory Board, all with due observance of the remuneration
policy to be adopted by the General Meeting of Shareholders. The Supervisory
Board is required to present any scheme providing for the remuneration of the
members of the Board of Management in the form of shares or options, to the
General Meeting of Shareholders for adoption.
21
The total cash remuneration and related costs of the individual members of the
Board of Management for the year ended December 31, 2002, 2003 and 2004 was as
follows:
Year ended December 31,
-------------------------------
(In euros, except as specified otherwise) 2002 2003 2004
----------------------------------------- ------- ------- -------
R.W. Blickman
Salaries and related costs (4) 311,497 312,637 317,847
Bonus - 35,458 36,443
Pension 54,326 54,326 55,231
Other (6) - - 344,392
J. A. Wunderl (1) (in U.S.$)
Salaries and related costs (4) - - 190,797
Bonus - 43,200
Pension - - -
M.A.H. Wartenbergh (2)
Salaries and related costs (4) - 124,219 169,050
Bonus - 13,755 -
Pension - 14,329 19,499
Severance payment - - 395,000
J.W. Rischke (3)
Salaries and related costs (4) 145,948 - -
Bonus - - -
Pension 32,367 - -
Other (5) - - 40,884
======= ======= =======
(1) Member of the Board of Management from March 25, 2004, remuneration
relates to the period from March 25, 2004 onwards.
(2) Member of the Board of Management from March 27, 2003; remuneration
relates to the period from March 27, 2003 until his exit as of January 1,
2005.
(3) Member of the Board of Management until October 23, 2002; remuneration
relates to the period until October 23, 2002.
(4) Includes salaries, holiday allowance, medical insurance and social
security premiums.
(5) This amount was paid as part of a settlement reached with certain holders
of options issued under the Company's Incentive Plan 1995 (as defined
under "Stock Option Plans"), following a court interlocutory judgment in a
legal proceeding filed by a former employee that indicated that the
Company should compensate for dilution that arose as a result of the
Company's secondary share offering in 2000.
A portion of the compensation of the Board of Management is performance related.
REMUNERATION OF THE SUPERVISORY BOARD
The aggregate remuneration paid to current members of the Supervisory Board was
(euro) 87,488 in 2004. The remuneration of the Supervisory Board is determined
by the General Meeting of Shareholders.
The total remuneration of the individual members of the Supervisory Board
members for the years ended December 31, 2002, 2003 and 2004 was as follows:
Year ended December 31,
----------------------------
(In euros) 2002 2003 2004
---------- ------ ------ ------
W. D. Maris 15,882 15,882 23,038
22
E. B. Polak 15,882 15,882 19,206
D. Sinninghe Damste 15,882 15,882 26,038
T. de Waard 15,882 15,882 19,206
====== ====== ======
In 2002, 2003 and 2004, part of the cash compensation, not exceeding 50%, paid
to the Supervisory Board members has been replaced by the granting of options to
purchase ordinary shares to three Supervisory Board members. The fair value of
the option awards to the Supervisory Board members was estimated using the
Black-Scholes option-pricing model. Total remuneration to Supervisory Board
members after the grant of said options did not change compared to the
remuneration approved by the General Meeting of Shareholders.
ORDINARY SHARES AND OPTIONS HELD BY MEMBERS OF THE BOARD OF MANAGEMENT
The aggregate number of ordinary shares and the aggregate number of options on
ordinary shares owned by the current members of the Board of Management as of
December 31, 2004 is as follows:
Number of shares
----------------
R.W. Blickman 270,485
Exercise price Number of options
Year of grant in euros outstanding
------------- -------------- -----------------
R.W. Blickman 1999 4.35 8,500
2000 17.90 20,000
2000 9.80 142,000
2001 9.55 40,000
2002 8.94 36,000
2003 3.22 35,042
2004 5.95 15,000
J.A. Wunderl 2003 5.20 8,000
2004 5.95 5,500
-------
Total 310,042
Loans outstanding relating to the stock options granted to the members of the
Board of Management amounted to (euro) 286,795 as of December 31, 2004. The
principal amount and other loan conditions have not changed since the inception
of the loan agreements in 1999 and 2000.
OPTIONS AND ORDINARY SHARES HELD BY MEMBERS OF THE SUPERVISORY BOARD
The aggregate number of ordinary shares and the aggregate number of options on
ordinary shares owned by the current members of the Supervisory Board as of
December 31, 2004 is as follows:
Exercise price Number of options
Year of grant in euros outstanding
------------- -------------- -----------------
E.B. Polak 2002 8.94 1,322
2003 3.22 3,667
2004 5.95 1,937
D. Sinninghe Damste 2002 8.94 1,322
2003 3.22 3,667
2004 5.95 2,629
T. de Waard 2002 8.94 1,322
2003 3.22 3,667
2004 5.95 1,937
------
Total 21,470
23
OPTIONS AND ORDINARY SHARES HELD BY FORMER MEMBERS OF THE BOARD OF MANAGEMENT
Details of options on ordinary shares held by former members of the Board of
Management as of December 31, 2004 are as follows:
Exercise price Number of options
Year of grant in euros outstanding
------------- -------------- -----------------
J.W. Rischke 1999 4.35 8,500
2000 17.90 16,000
2001 9.55 32,000
2002 8.94 23,000
2003 3.22 13,221
------
Total 92,721
Loans outstanding relating to the stock options granted to the former executive
members of the Board of Management amounted to (euro) 78,286 as of December 31,
2004. The principal amount and other loan conditions have not changed since the
inception of the loan agreement in 1999.
C. BOARD PRACTICES
BOARD PRACTICES
We acknowledge the importance of good corporate governance, including elements
such as transparency, independence and accountability. We continuously review
corporate governance developments in the jurisdictions in which we operate.
We pursue a policy of active communication with our shareholders through the
active participation of our shareholders at the general meeting and the
publication of our annual and quarterly results. Our corporate governance
structure is intended to:
- provide shareholders with regular, reliable and relevant transparent
information regarding our activities, structure, financial condition,
performance and other information, including information on our social,
ethical and environmental records and policies;
- apply high quality standards for disclosure, accounting and auditing; and
- apply stringent rules with regard to insider securities trading.
MANAGEMENT STRUCTURE
We have a two-tier board structure consisting of a Board of Management and a
Supervisory Board which is entrusted with supervising and guiding the Board of
Management. The Board of Management is currently comprised of two members and
the Supervisory Board is currently comprised of four members. The Board of
Management, the Chairman of the Board of Management or two members of the Board
of Management acting jointly, are authorized to represent Besi. In addition to
the two members of the Board of Management, our management team is currently
also comprised of seven key members of management which do not form a part of
the Board of Management itself.
The Supervisory Board supervises the policy of the Board of Management, as well
as the general course of our corporate affairs and business, and provides advice
to the Board of Management. The Board of Management must keep the Supervisory
Board informed, consult with the Supervisory Board on important matters and
submit certain important decisions to the Supervisory Board for its prior
approval. In performing its duties, the Supervisory Board is required to act in
the interests of Besi's business as a whole. The members of the Supervisory
Board are not authorized to represent Besi. All of the members of the
Supervisory Board are independent as defined under the rules of the Nasdaq
National Market,
24
including the independence requirements contemplated by Rule 10A-3 under the
United States Exchange Act of 1934, as amended, the Exchange Act, and as defined
in article III.2.3 of the Besi Code, which is in compliance with the Tabaksblat
Code.
The Supervisory Board has adopted corporate governance guidelines to assist the
Supervisory Board in the exercise of its duties and responsibilities and to
serve our best interests and the best interests of our shareholders. These
guidelines, which provide a framework for the conduct of the Board's business,
include that:
- the principal responsibility of the Supervisory Board is to oversee the
management of Besi;
- the members meet regularly in executive session;
- members have full and free access to management and, as necessary and
appropriate, independent advisors; and
- at least annually the board and its committees will conduct a
self-evaluation to determine whether they are functioning effectively.
The Supervisory Board met ten times during 2004. Special attention was paid to
recent developments related to corporate governance, especially changes stemming
from the passage and enactment of the Sarbanes-Oxley Act of 2002 in the United
States and the developments regarding the Tabaksblat corporate governance code
in The Netherlands, the acquisition of Datacon finalized on January 4, 2005 and
the issuance of the Notes listed on January 28, 2005.
Topics of the meetings included, among other items:
- our general strategy;
- our financial performance;
- approval of all periodic filings with the United States Securities and
Exchange Commission, or the Commission, and Euronext Amsterdam;
- the performance and internal division of tasks of the Board of Management;
- potential strategic alliances and acquisitions;
- the general risks associated with our operations; and
- the Supervisory Board's own performance.
In 2004, the Supervisory Board conducted a self-evaluation of the functioning of
the Supervisory Board as a whole and the performance of individual members.
Management of the Company was not present at this meeting. In addition, at the
meeting, the Supervisory Board discussed the functioning of the Board of
Management as a whole and the performance of the individual members of the Board
of Management.
The Chairman of the Supervisory Board and our management met on a regular basis.
Members of the Board of Management are appointed by the Supervisory Board and
serve until voluntary retirement, or suspension or dismissal by the Supervisory
Board. If a member of the Board of Management is to be dismissed, the General
Meeting of Shareholders must be consulted on the intended dismissal.
The Supervisory Board has established three committees, the Audit Committee, the
Remuneration Committee and the Selection, Appointment and Governance Committee.
The Remuneration Committee, Audit Committee and Selection, Appointment and
Governance Committee operate under a charter that has been approved by the
Supervisory Board. Members of these committees are appointed from and among the
Supervisory Board members.
Members of the Board of Management and Supervisory Board, as well certain senior
management members, are insured under the Besi's Directors and Officers
Insurance Policy. Although the insurance policy provides for a wide coverage,
our directors and officers may occur additional uninsured liabilities. Besi has
agreed to indemnify its Board of Management and Supervisory Board against any
claims arising in connection with their position as director and officer of the
Company, provided that such claim is not attributable to willful misconduct or
intentional recklessness.
25
AUDIT COMMITTEE
In view of the limited number of members of the Supervisory Board, the
Supervisory Board acts as the Audit Committee. The Audit Committee therefore has
four independent members. The Audit Committee fulfills its responsibilities by
carrying out the activities enumerated in its internal checklist as follows:
- the committee assists the Supervisory Board in fulfilling its oversight
responsibilities by reviewing:
- the financial reports and other financial information provided by
the Company to any governmental body or the public;
- the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics; and
- the Company's auditing, accounting and financial reporting processes
generally;
- the committee is directly responsible for the oversight of the Company's
independent auditor and has sole authority and responsibility for their
appointment (subject to shareholder ratification), termination and
compensation. The independent auditor reports directly to the Audit
Committee and the committee is responsible for the resolution of any
disagreements between management and the independent auditor regarding
financial reporting;
- the committee approves all audit fees and terms and all non-audit services
provided by the independent auditor, and considers whether these services
are compatible with the auditor's independence;
- the committee serves as an independent and objective party to monitor the
Company's financial reporting process and internal control systems;
- the committee provides an open avenue of communication among the Company's
independent accountants, financial and senior management, and the
Supervisory Board; and
- the committee has established and maintains procedures for (i) the
receipt, retention and treatment of complaints and (ii) the anonymous
submission of confidential concerns by employees regarding accounting
matters.
In 2004, the Audit Committee met eight times to discuss the scope and results of
audits and reviews of our external auditor, KPMG, to review our internal
accounting control policies and procedures, and to review all periodic filings
with the Commission and Euronext Amsterdam. Our external auditor, KPMG, attended
six meetings. Furthermore, the Audit Committee separately met with the auditor
outside the presence of management. Frequent contact took place between the
chairman of the Audit Committee and our management. During 2004, the Audit
Committee focused on identifying our critical accounting policies, new
accounting pronouncements and the developments of IFRS and the convergence
between IFRS and U.S. GAAP.
In 2004, the Audit Committee evaluated the performance of KPMG and advised the
Supervisory Board to propose that KPMG be appointed as our auditor for the
fiscal year ending December 31, 2005. This proposal will be presented to our
shareholders for approval at the Annual General Shareholders Meeting to be held
on March 24, 2005.
The Supervisory Board has determined that Mr. D. Sinninghe Damste qualifies as
an Audit Committee Financial Expert. In determining whether members of the Audit
Committee qualify as financial experts within the meaning of Commission
regulations and the Nasdaq listing standards, the Supervisory Board considered
the nature and scope of experiences and responsibilities members of our Audit
Committee have previously had with other reporting companies. Furthermore, the
Supervisory Board determined that all members of the Audit Committee are
financially literate.
REMUNERATION COMMITTEE
Besi has a Remuneration Committee which has responsibility for:
26
- annually reviewing and approving the corporate goals and objectives
relevant to the compensation of senior management;
- overseeing and administering the equity incentive plans;
- overseeing and making recommendations to the Supervisory Board with
respect to director compensation; and
- determining the compensation of the chief executive officer and reviewing
and approving, or make recommendations to the Supervisory Board, with
respect to the compensation of the other executive officers.
The Remuneration Committee consists of Mr. T. de Waard, Chairman of the
Remuneration Committee, Mr. W.D. Maris, Mr. Polak and Mr. Sinninghe Damste. The
Remuneration Committee met once in 2004.
SELECTION, APPOINTMENT AND GOVERNANCE COMMITTEE
The Selection, Appointment and Governance Committee consist of its Chairman Mr.
Polak, Mr. W.D. Maris, Mr. De Waard and Mr. Sinninghe Damste. The Selection,
Appointment and Governance Committee prepares, within its duties, the
decision-making of the Supervisory Board on:
- drawing up selection criteria and appointment procedures for Supervisory
Board members and Board of Management members;
- periodically assessing the size and composition of the Supervisory Board
and the Board of Management, and making a proposal for a composition
profile of the Supervisory Board;
- periodically assessing the functioning of individual Supervisory Board
members and Board of Management members, and reporting on this to the
Supervisory Board;
- making proposals for appointments and re-appointments; and
- supervising the policy of the Board of Management on the selection
criteria and appointment procedures for senior management.
In 2004, the committee met once.
DISCLOSURE COMMITTEE
Besi has a Disclosure Committee to ensure compliance with applicable disclosure
requirements arising under United States and Dutch law. The Disclosure Committee
reports to and assists our chief executive officer in the maintenance and
evaluation of disclosure controls and procedures. The Audit Committee is kept
informed about the outcome of the Disclosure Committee meetings. The Disclosure
Committee gathers all relevant financial and non-financial information and
assesses materiality, timeliness and necessity for disclosure of such
information. The Disclosure Committee comprises various members of senior
management. Furthermore, members of the Disclosure Committee are in close
contact with our external legal counsel and our external auditor.
During the year 2004, the Disclosure Committee met once.
EXEMPTIONS FROM CERTAIN NASDAQ CORPORATE GOVERNANCE RULES
The Nasdaq corporate governance rules provide that Nasdaq may provide exemptions
from the Nasdaq corporate governance standards to a foreign issuer when (i)
those standards are contrary to a law, rule or regulation of any public
authority exercising jurisdiction over such issuer or (ii) contrary to generally
accepted business practices in the issuer's country of domicile. Besi has
received from Nasdaq exemptions from the following rules:
- Besi is exempt from Nasdaq's quorum requirements applicable to meetings of
ordinary shareholders. In keeping with Dutch law and Netherlands generally
accepted business practice, Besi's Articles of Association provide that
there are no quorum requirements generally applicable to General Meetings
of Shareholders.
- Besi is exempt from Nasdaq's requirements regarding the solicitation of
proxies and provision of proxy statements for meetings of shareholders. We
do not solicit proxies or prepare proxy statements for General
27
Meetings of Shareholders. Dutch law does not have a regulatory regime for
the solicitation of proxies and the solicitation of proxies is not a
generally accepted business practice in The Netherlands.
D. EMPLOYEES
NUMBERS OF EMPLOYEES
The following table indicates the composition of our workforce (full time
equivalents) by geography as of December 31:
2002 2003 2004
---- ---- ----
The Netherlands 460 464 477
Asia/Pacific 117 233 254
United States 65 49 67
--- --- ---
Total 642 746 798
=== === ===
The following table indicates the composition of our workforce (full time
equivalents) by role as of December 31:
2002 2003 2004
---- ---- ----
Manufacturing 371 459 484
Sales, Marketing and Customer Service 120 114 128
Research and Development 78 90 103
General and Administrative 73 83 83
--- --- ---
Total 642 746 798
=== === ===
As of December 31, 2004, Besi had approximately 798 employees (full time
equivalents), of whom 339 were employed at Fico in the Netherlands, 130 at Meco
in the Netherlands, 61 at RD Automation and Laurier in the United States, 101 at
Fico Tooling Leshan, China, 122 at Fico Asia, Malaysia, 37 at Fico and Meco
sales and service offices outside the Netherlands and 8 at Besi headquarters in
the Netherlands. In addition, we employed 51 temporary workers (full time
equivalents), principally in product development and engineering activities in
the Netherlands.
RESTRUCTURING
On December 14, 2004, Besi announced a restructuring of its operations focused
principally on a workforce reduction at its Dutch packaging and tooling
manufacturing operations in Duiven and Brunssum of 81 employees, or
approximately 10% of total fixed headcount worldwide, as part of a plan to
address the current downturn in the semiconductor industry. In addition, Besi
will phase out the use of approximately 50 temporary workers at the Duiven
facility. The personnel terminations are expected to occur in the first quarter
of 2005. A component of the restructuring will be the closing of Besi's tooling
facility in Brunssum, the Netherlands in the first half of 2005.
COLLECTIVE BARGAINING ARRANGEMENTS AND WORKS COUNCIL
Approximately 98% of the employees in the Netherlands are covered by nationwide
collective bargaining agreements. We do not have any employee unions in any of
the other jurisdictions in which it operates.
Pursuant to the requirements of Dutch law, several of our subsidiaries have an
employee works council. A central works council has been established at the
level of Fico for the operations of Fico Molding, Fico Tooling and Fico Trim and
Form. In addition, Meco Plating and Fico Singulation (formerly Meco) have a
joint works council. Each works council has the right to be informed by and/or
to advise management on specific matters in accordance with the Dutch Works
Council Act. In addition, the Works Council Act provides that various decisions
with respect to employment conditions of general application require the works
council's consent. If withheld, such consent may be replaced
28
with a judgment from the cantonal court. These works councils may make
non-binding recommendations for the nominations made by the Supervisory Board to
the General Meeting of Shareholders for the appointment of new Supervisory Board
members. In addition, the central works council of Fico and the works council of
Meco Plating and Fico Singulation jointly have the statutory right to make
binding recommendations for up to one third of the members of the Supervisory
Board.
Datacon's employees in Austria are all covered by the nationwide collective
bargain agreement for employees and workers in the metal business. No other
Datacon employees are subject to collective bargain agreements.
Pursuant to the requirements of Austrian law, the Datacon plant in Austria has a
works council. The works council has the right to be informed by and/or to
advise management on specific matters in accordance with Austrian mandatory law.
In addition, the Austrian law provides the works council's consent for matters
referring to controlling and disciplining the employees' performance. With
regard to other issues such as introduction of administrative data processing
systems and introduction of employee evaluation systems, the consent may be
replaced by a judgement from the district court. Datacon does not have any other
works councils.
OPTION PLAN(s)
DESCRIPTION OF STOCK OPTION PLANS
In 1995, we established the BE Semiconductor Industries Incentive Plan 1995 (the
"Incentive Plan 1995"). We granted 1,101,236 options to purchase ordinary shares
("1995 Plan Shares") under the Incentive Plan 1995. During the years 1995 to
2001, we made awards under the Incentive Plan 1995 to our executive officers and
senior employees. Options granted between 1999 and 2001 vest after three years.
The Incentive Plan 1995 expired in 2001. Stock options granted under the
Incentive Plan 1995 have exercise prices which were equal to the market price of
the ordinary shares on the date of grant.
In 2001, we established the BE Semiconductor Industries Incentive Plan 2001 -
2005 (the "Incentive Plan 2001"). The total number of ordinary shares ("2001
Plan Shares") that we may issue under the Incentive Plan 2001, may not exceed
1.5% per year of the total number of ordinary shares outstanding in the
applicable fiscal year, subject to adjustments for share splits, share
dividends, recapitalizations and similar events. 2001 Plan Shares may consist,
in whole or in part, of unauthorized and unissued ordinary shares or treasury
shares. We anticipate that, on an annual basis, we will make awards under the
Incentive Plan 2001 to our executive officers and senior employees. Options
granted in 2002, 2003 and 2004 vest after three years. Stock options granted
under the Incentive Plan 2001 will have exercise prices equal to the market
price of the ordinary shares on the date of grant.
Under separate stock option plans, in the years 2000 through 2004, we granted
options to all of our employees. The options vest after three years and have
exercise prices equal to the market price of the ordinary shares on the date of
grant. Under the grants of 2001 through 2004, the Dutch employees have a right
to receive payment of an amount that corresponds with the profit achieved with
the sale of newly issued ordinary shares by us after exercise of the options.
These options receive variable accounting treatment. All other options granted
by us receive fixed accounting treatment.
We account for stock-based compensation using the intrinsic value method.
Accordingly, no compensation has been recorded for the stock options granted
from 2001 through 2004, which received fixed accounting treatment. As of
December 31, 2004, there were outstanding options to purchase an aggregate of
1,005,181 ordinary shares which receive fixed accounting treatment at a weighted
average exercise price of (euro) 9.79 per share. For the stock options granted
from 2001 through 2004
29
that receive variable accounting treatment, we recognized a compensation release
of (euro) 12 net of tax, based on the market value of the ordinary shares for
the year ended December 31, 2004. As of December 31, 2004, 229,079 options that
receive variable accounting treatment were outstanding at a weighted average
exercise price of (euro) 7.06 per share.
We account for stock based employee compensation plans under the recognition and
measurement principles of Accounting Principles Board Opinion ("APB") No. 25
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its plans. SFAS No. 123 "Accounting for Stock-Based Compensation"
allows companies to elect to either account for stock options using fair value
based method, or continue to account for stock option plans under APB No. 25,
and disclose pro forma disclosure of net income and earnings per share as if
SFAS No. 123 were applied. Under APB No. 25, no stock-based employee
compensation cost is reflected in net income (loss) for the fixed stock options,
as all options granted under our stock option plans had an exercise price equal
to the market value of the underlying ordinary shares on the date of grant. We
have elected to continue to account for our stock options under the provisions
of APB No. 25 and disclose the pro forma effect of SFAS No. 123.
FINANCING OF STOCK OPTION PLANS
Option plans that were issued in 1999 and 2000 contained a virtual financing
arrangement pursuant to which Besi financed the fiscal value of the options
granted to employees subject to the Dutch tax-regime. The loans issued under
this arrangement are repayable to Besi on the exercised date of the respective
option, provided that the option was actually exercised. If the options expire
unexercised, the respective loans are forgiven. Besi accrues a liability for the
respective fiscal implication of this arrangement.
30
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for
filing a Form 20-F/A and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
BE SEMICONDUCTOR INDUSTRIES N.V.
By: /s/ Richard W. Blickman
____________________________________________
Name: Richard W. Blickman
Title: President and Chief Executive Officer
Date: June 17, 2004
31