GENERAL INFORMATION
ASM International N.V. (ASM, or the company) is a Dutch public liability company domiciled in the Netherlands with its principal operations in Europe, the United States of America, and Asia. The company dedicates its resources to the research, development, manufacturing, marketing and servicing of equipment and materials used to produce mainly semiconductor devices. The company is registered at Versterkerstraat 8, 1322 AP Almere, the Netherlands.
The company's shares are listed for trading on the Euronext Amsterdam Stock Exchange (symbol ASM).
The accompanying consolidated financial statements include the financial statements of ASM International N.V. and its consolidated subsidiaries (together also referred to as ASM, or the company). ASM's subsidiaries are listed in Note 28 and investments in associates are listed in Note 7.
BASIS FOR ACCOUNTING
The consolidated financial statements for the year ended December 31, 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and also comply with the financial reporting requirements included in Section 362(9) of Part 9, Book 2 of the Dutch Civil Code.
The consolidated financial statements have been prepared by the Management Board of the company and authorized for issue on March 2, 2023, and will be submitted for adoption to the Annual General Meeting of Shareholders (AGM) on May 15, 2023.
The consolidated financial statements will be filed with the AFM and at the Trade Register of the Chamber of Commerce in Almere, the Netherlands within eight days of adoption by the 2023 AGM.
FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in Euros (\u20ac), which is the company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
BASIS OF PREPARATION
The consolidated financial statements have been prepared under the historical cost convention, unless otherwise indicated. The company applies the going concern basis in preparing its consolidated financial statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
A number of the company\u2019s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The company has an established approach with respect to the measurement of fair values. If third-party information, such as broker quotes or pricing services, is used to measure fair values, the company assesses and documents the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair-value hierarchy, in which such valuations should be classified.
Fair values are categorized into different levels in a fair-value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair-value hierarchy, then the fair-value measurement is categorized in its entirety in the same level of the fair-value hierarchy as the lowest level input that is significant to the entire measurement.
Further information about the assumptions made in measuring fair values is included in the following notes:
\u2022Note 1 - Acquisition of subsidiaries;
\u2022Note 7 - Investments in Associates
\u2022Note 13 - Employee benefits; and
\u2022Note 17 - Financial instruments and financial risk management.
USE OF ESTIMATES AND JUDGMENTS
In preparing these consolidated financial statements, management has made judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the year ended December 31, 2022 is included in the following notes:
\u2022Note 1 - Acquisition of subsidiaries, fair value of the consideration transferred (including contingent consideration) and fair value of the assets acquired and liabilities assumed, measured on a provisional basis.
\u2022Notes 3, 4, 5, 6 and 7 - Valuation of non-financial assets; and
\u2022Note 8 - Valuation of allowance for obsolescence inventories.
CRITICAL ACCOUNTING POLICIES
A critical accounting policy is defined as one that is both material to the presentation of ASM\u2019s consolidated financial statements and that requires management to make difficult, subjective or complex judgments that could have a material effect on ASM\u2019s financial condition or results of operations. Specifically, these policies have the following attributes: (1)\u00a0ASM is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2)\u00a0different
estimates ASM could reasonably have used, or changes in the estimate that are reasonably likely to occur, could have a material effect on ASM\u2019s financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. ASM bases its estimates on historical experience and various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, additional information is obtained, and as ASM\u2019s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that ASM\u2019s consolidated financial statements are fairly stated in accordance with IFRS, and provide a meaningful presentation of ASM\u2019s financial condition and results of operations. An analysis of specific sensitivity to changes of estimates and assumptions is included in the notes to the (consolidated) financial statements.
Management believes that the following accounting policies are critical:
\u2022business combinations;
\u2022revenue recognition;
\u2022inventories;
\u2022evaluation of long-lived assets for impairment;
\u2022evaluation of investments in associates for impairment; and
\u2022intangible assets for capitalization and for impairment.
CHANGES IN ACCOUNTING POLICIES
Application of new and revised International Financial Reporting Standards (IFRS).
New and amended IFRS Standards that are effective for the current year
The accounting policies applied in the financial statements are the same as those applied in the last annual financial statements, except for the IFRS standards and interpretations effective on January 1, 2022. These include among others amendments to IAS 16, IAS 37 and IFRS 3. These changes have been assessed for their potential impact and do not have a material effect on ASM\u2019s (consolidated) financial statements.
ACCOUNTING POLICIES
The company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.
Business combinations
The company accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the company. In determining whether a particular set of activities and assets is a business, the company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Goodwill is capitalized as the excess of the costs of an acquired subsidiary, net of the amounts assigned to identifiable assets acquired and liabilities incurred or assumed. Acquisition-related costs are expensed when incurred in the period they arise or the service is received.
Any contingent consideration payable is measured at fair value at the acquisition date. The contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Consolidation
The consolidated financial statements include the accounts of ASM and all of its subsidiaries where ASM holds a controlling interest. Non-controlling interest is disclosed separately, where appropriate, in the consolidated financial statements.
Control is achieved when ASM has:
\u2022the power over an investee;
\u2022exposure, or rights, to variable returns from its involvement with the investee; and
\u2022the ability to use its power over the investee to affect the amount of the investor's returns.
ASM reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
As from the date these criteria are met, financial data of the relevant subsidiary are included in the consolidation and deconsolidated from the date on which ASM's control ceases.
Loss of control
Upon loss of control, ASM derecognizes the assets and liabilities of the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If ASM retains any interest in this subsidiary, then such interest is measured at fair value at the date on which control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained.
Subsidiaries
Subsidiaries are entities controlled by the company. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Interests in equity-accounted investees
The company\u2019s interests in equity-accounted investees comprise investments in associates.
Associates are those entities in which the company has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Upon acquisition of the investment in an associate, any excess of the cost of the investment over the company\u2019s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included in the carrying amount of the investment.
Subsequent to initial recognition, the consolidated financial statements include the company's share of the profit or loss and other comprehensive income (OCI) of equity-accounted investees, until the date on which significant influence ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the company\u2019s interest
in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
Foreign currency translation
The individual financial statements of each group entity are presented in their local functional currency. For the purpose of the consolidated financial statements, the results and financial position of each entity is expressed in euros, which is ASM's functional currency and the presentation currency for the consolidated financial statements.
Foreign currency transactions
In preparing the financial statements of the individual entities, transactions in foreign currencies are recorded at the exchange rates on the date of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined.
Exchange rate differences arising on the settlement of monetary items, and on the translation of monetary items, are recognized in the consolidated statement of profit or loss in the period in which they arise. Exchange rate differences arising on the translation of non-monetary items carried at fair value are recognized in the consolidated statement of profit or loss for the period except for differences arising on the translation of non-monetary items in respect of which gains and losses are recognized directly in equity.
Foreign operations
For the purpose of presenting consolidated financial statements, assets and liabilities of foreign operations are translated into euros at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into euros at the exchange rates at the dates of the transactions.
Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interest.
When a foreign operation is disposed of in its entirety or partially such that control or significant influence is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the company disposes of
part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the company disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.
Segment reporting
ASM has one reportable segment, consistent with the internal reporting provided to the Chief Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM).
The company manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The operation is a product-driven organizational unit comprised of manufacturing, service, and sales operations in Asia, Europe and the United States. The performance of the individual product lines is reviewed by the CODM based on its revenues, gross margin and EBIT. The company operates under a uniform global operating strategy. The CODM alone makes operating decisions regarding strategic investments and resource allocation based on aggregated information of the overall company's operation. Therefore, the company's operation do not represent separate operating nor reportable segments.
Property, plant and equipment
Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:
Land | Infinite | |
Building and leasehold improvements | 1-25 years | |
Machinery equipment | 2-10 years | |
Furniture and fixtures and other equipment | 2-10 years |
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain on disposal of an item of property, plant and equipment is recognized in profit or loss and included in 'other income'. Any loss is recognized as part of impairment expenses.
Intangible assets
Goodwill
The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment.
Goodwill represents the excess of the costs of an acquisition over the fair value of the amounts assigned to assets acquired and liabilities incurred or assumed of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is allocated to cash generating units (CGUs) for the purpose of impairment testing. The allocation is made to those CGUs that are expected to benefit from the business combination in which the goodwill arose. Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is recognized. An impairment loss recognized for goodwill is not reversed in a subsequent period. Goodwill is stated at cost less accumulated impairment losses.
The company\u2019s goodwill arising on the acquisitions of subsidiaries in the current year is described in Note 1 'Acquisition of subsidiaries''.
The company\u2019s goodwill arising on the acquisition of an associate is described in Note 7 'Investments in Associates'.
Other intangible assets
Other intangible assets include capitalized development expenses, software, purchased technology, and remaining other intangible assets. Other intangible assets that are acquired by the company with finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.
Expenditure on research activities is recognized in profit or loss as incurred.
In determining the capitalization of development expenses, the company makes estimates and assumptions based on expected future economic benefits generated by products that are the result of these development expenses. Other important estimates and assumptions are the required internal rate of return, the distinction between research, development and high-volume manufacturing, and the estimated useful life.
Development expenses are capitalized when all of the following criteria are demonstrated by the entity:
\u2022the technical feasibility of completing the intangible asset so that it will be available for use or sale;
\u2022its intention to complete the intangible asset and use or sell it;
\u2022its ability to use or sell the intangible asset;
\u2022how the intangible asset will generate probable future economic benefits;
\u2022the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
\u2022its ability to reliably measure the expenditure attributable to the intangible asset during its development.
The company capitalizes development expenses that meet the above-mentioned criteria in its consolidated financial statements. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Amortization of capitalized development expenses is calculated using the straight-line method over the estimated useful lives of the developed product. Amortization starts when the developed
product is ready for its intended use. In the development cycle, this is when the product is transferred from the validation (beta) phase to high-volume manufacturing.
Amortization method, useful life, and residual value are reviewed at each reporting date with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives of other intangible assets for current and comparative periods are as follows:
Development cost | 5 years | |
Software | 3 years | |
Purchased technology | 5-15 years | |
Other intangibles | 1-17 years |
Investments in associates
Investments in associates are investments in entities in which ASM can exert significant influence but which ASM does not control, generally having between 20% and 50% of the voting rights. These entities are accounted for using the equity method and are initially recognized at cost. Dividend income from the company\u2019s associated companies is recognized when the right to receive payment is established. Their carrying value includes goodwill identified upon acquisition, net of any accumulated impairment.
When ASM\u2019s share of losses in an associate equals or exceeds its interest in the associate, including any other receivables for which settlement is neither planned nor likely to occur in the foreseeable future, ASM does not recognize further losses, unless ASM has obligations to or made payments on behalf of the associate.
At each reporting date, the company determines if there is any objective evidence that the associate is impaired. An impairment, being the difference between the recoverable amount of the associate and its carrying value, is recognized in the consolidated statement of profit or loss.
ASM does not separately test associates' underlying assets for impairment. However, ASM recognizes its share of any impairment charge recorded by an investee and considers the effect, if any, of the impairment on the basis difference in the assets giving rise to the investee\u2019s impairment charge. A loss in value of an investment which is significant or prolonged will be recognized.
Significant is defined as at least 20% on the reporting date. Prolonged is defined as measured below cost for more than nine months.
Equity method investments are tested for prolonged decline in value. If the fair value of an investment is less than its carrying value, the company determines whether the decline in value is temporary or prolonged. A prolonged decline in value is measured as of a balance sheet date. If after a prior recognized impairment the fair value is more than its carrying value, this impairment is reversed to the extent that the recoverable amount of the net investment subsequently increases. The determination of whether an investment is impaired is made at the individual security level in each reporting period.
Evaluation tools at customers
Evaluation tools at customers are systems generally delivered to customers under evaluation and include substantial customization by our engineers and R&D staff in the field. Evaluation tools are recorded at cost and depreciated using the straight-line method over their estimated useful life of five years, or their shorter economic life. The depreciation expenses are reported as cost of sales.
On final written technical acceptance and purchase order from the customer, the purchase consideration is recognized as revenue at a point in time and the carrying value of the evaluation system is recognized as cost of sales. In the circumstance that the system is returned, at the end of the evaluation period, a detailed impairment review takes place, and future sales opportunities and additional costs are identified. It is only when the fair value is below the carrying value of the evaluation tool that an additional depreciation is recognized. The remaining carrying value is recognized as finished goods in inventories.
Inventories
Inventories are stated at the lower of cost or net realizable value. The cost of inventories is based on the first-in, first-out principle. Costs include net prices paid for materials purchased, charges for freight and custom duties, production labor costs and factory overhead. Allowances are made for slow-moving, obsolete or unsellable inventory.
Allowances for obsolescence of inventory are determined based on the expected demand as well as the expected market value of the inventory. The company regularly evaluate the value of our inventory of components and raw materials, work in progress, and finished goods, based on a combination of factors including the following: forecasted sales, historical usage, product end
of lifecycle, estimated current and future market values, service inventory requirements, and new product introductions, as well as other factors. Purchasing requirements and alternative uses for the inventory are explored within these processes to mitigate inventory exposure. The company record write-downs for inventory based on the above factors and take into account worldwide quantities and demand into our analysis.
Financial instruments
The company classifies non-derivative financial assets into loans and receivables. The company classifies non-derivative financial liabilities into other financial liabilities.
Non-derivative financial assets and financial liabilities \u2013\u00a0 Recognition and derecognition
The company initially recognizes receivables on the date when they are originated. Receivables comprise account (trade) and other receivables and cash and cash equivalents. Receivables are measured at amortized cost using the effective interest method, less any impairment. Financial assets and financial liabilities are initially recognized on the trade date when the entity becomes a party to the contractual provisions of the instrument.
The company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognized financial asset that is created or retained by the company is recognized as a separate asset or liability.
The company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expired.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the company currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
Non-derivative financial assets \u2013 Measurement
Loans and receivables are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.
Accounts receivable
A significant percentage of our accounts receivable is derived from revenue to a limited number of large multinational semiconductor device manufacturers located throughout the world. In order to monitor potential credit losses, the company performs ongoing credit evaluations of our customers' financial condition. An allowance for doubtful accounts is maintained for potential credit losses based upon management's assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which the company are aware regarding a customer's inability to meet its financial obligations, aging of the accounts receivable, expected lifetime losses; and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the company's customers.
The expected credit loss allowance is based on historical experience, credit evaluations, specific customer-collection history, and any customer-specific issues ASM has identified. Changes in circumstances, such as an unexpected adverse material change in a major customer\u2019s ability to meet its financial obligation to ASM or its payment trends, may require us to further adjust our estimates of the recoverability of amounts due to ASM. This could have an adverse material effect on ASM\u2019s financial condition and results of operations.
Cash and cash equivalents
Cash and cash equivalents consist of bank deposits and investment in money market funds that invest in marketable debt obligations and securities of governments, corporates and financial institutions and other short-term highly liquid investments with original maturity of three months or less. Bank overdrafts are included in notes payable to banks in current liabilities.
Non-derivative financial liabilities \u2013 Measurement
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.
Preference share capital
Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the company\u2019s option, and any dividends are discretionary. Discretionary dividends thereon are recognized as distributions within equity upon approval by the company\u2019s shareholders.
Preference share capital is classified as a financial liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Non-discretionary dividends thereon are recognized as interest expense in profit or loss as accrued.
Repurchase and reissue of common shares (treasury shares)
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is accounted for at average cost and presented within capital in excess of par value.
Issuance of shares by an equity-accounted investee
The associate ASMPT yearly issues common shares pursuant to their employee share incentive scheme. The effect of these issuances is a dilution of the company's ownership in ASMPT. The company recognizes the impact of these issuances directly into equity.
Comprehensive income
Comprehensive income consists of net earnings (loss) and other comprehensive income. Other comprehensive income includes gains and losses that are not included in net earnings, but are recorded directly in equity.
Provisions
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Impairment
Non-derivative financial assets
Financial assets, other than those at fair value through profit or loss, are assessed using an 'expected credit loss' (ECL) model. In accordance with the model the company allocate a probability of loss to each financial asset, based on data that is determined to be predictive of the risk of loss and applying experienced credit judgment.
ASM measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:
\u2022debt securities that are determined to have low credit risk at the reporting date; and
\u2022other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, ASM considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on ASM's historical experience and informed credit assessment, that includes forward-looking information. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which ASM is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that ASM expects to receive). ECLs are discounted at the effective interest rate of the financial asset.
Equity-accounted investees
An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognized in profit or loss, and is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.
Non-financial assets
At each reporting date, the company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset\u2019s recoverable amount is estimated. Goodwill and assets not yet available for its intended use is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Commitments and contingencies
The company has various contractual obligations such as purchase commitments and commitments for capital expenditure. These obligations are generally not recognized as liabilities on the company's statement of financial position but are disclosed in the notes to the consolidated financial statements.
Cash flow statement
The cash flow statement has been prepared using the indirect method.
Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognizes revenue when it transfers control over a product or service to a customer. Depending on the contract, the company obtain normally a right to payment for our equipment upon shipment and on completion of installation. Right to payment for our spares and services occurs upon shipment or completion of the service unless described otherwise.
Revenue streams
The company generates revenue primarily from the sales of equipment and sales of spares & services. The products & services described below by nature, can be part of both revenue streams. The revenue streams are disclosed in Note 21 Revenue.
Nature of goods and services
The following is a description of principal activities from which the group generates its revenue.
Products and services | Nature, timing of satisfaction of performance obligation and significant payment terms | |
Equipment | Revenue from equipment is recognized at a point in time when the performance obligation is satisfied, when control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. The total consideration of the contract is allocated between all distinct performance obligations in the contract based on their stand-alone selling prices. The stand-alone selling prices are mostly determined based on other stand-alone sales that are directly observable or based on the expected cost plus a margin approach. Any customer discounts and credits, within volume purchase agreements or bundled agreements, are considered as a reduction of the transaction price, unless this is/can be considered as consideration for a distinct good or service. | |
Installation | The customer simultaneously consumes and receives the benefits provided by the performance of the installation. As such, transfer of control takes place over the period of installation from delivery through customer acceptance, measured on a straight-line basis, as our performance is satisfied evenly over this period of time. | |
Spares | Revenue from spares is recognized at a point in time when the performance obligation is satisfied, when the control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. Any customer discounts and credits, within a volume purchase agreements, are considered as a reduction of the transaction price, unless this is/can be considered as consideration for a distinct good or service. | |
Revenue on royalties and licenses for technology included in equipment and/or spares | The fixed price royalty is a right to use the licenses and revenue is recognized at a point in time that the license is transferred to the customer. For the sales-based royalty, the performance obligation is satisfied when the license is transferred to the customer. Given this is earlier than when the sales occur, revenue should be recognized when the sales occur. | |
Support services | The customer simultaneously consumes and receives the benefits provided by the performance of the support. For the majority of support services transfer of control takes place over the period of support. |
The company applied the practical expedient of IFRS 15.121 and therefore have not disclosed information on the remaining performance obligations of a contract (in aggregate) as the performance obligation is part of a contract that has an original expected duration of one year or less. Generally, the remaining performance obligations of a contract concern the tools to be shipped, unsatisfied promises as part of a bundled agreement or volume purchase agreement and installation and qualification services.
Cost of sales
Cost of sales comprises direct costs such as labor, materials, cost of warranty, depreciation, shipping and handling costs, and related overhead costs. Cost of sales also includes depreciation expenses of evaluation tools at customers, royalty payments, and costs relating to prototype and experimental products, which the company may subsequently sell to customers.
Warranty
The company provide maintenance on our systems during the warranty period, on average one year. Costs of warranty include the cost of labor and material necessary to repair a product during the warranty period. The company accrue for the estimated cost of the warranty on products shipped in a provision for warranty, upon recognition of the sale of the product. The costs are estimated based on historical expenses incurred and on estimated future expenses related to current revenue, and are updated periodically. Actual warranty costs are charged against the provision for warranty. The actual warranty costs may differ from estimated warranty costs, and adjusted our provision for warranty accordingly. Future warranty costs may exceed our estimates, which could result in an increase of our cost of sales.
Leases
The company leases many assets, including land, buildings, houses, motor vehicles, machinery and furniture. The company recognizes a right-of-use asset and a lease liability at the lease commencement date. At inception of a contract, ASM assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurement of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the company\u2019s incremental borrowing rate. The lease
liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from a change in a rate or changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The company has applied judgment to determine the lease term for some of the lease contracts in which it is a lessee that includes renewal options. The assessment of whether the company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.
The company has applied the exception not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases of low-value assets (up to the amount of\u00a0\u20ac5,000 new asset value, such as water purifiers and air cleaners). The company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Income tax
Income tax expense comprises current and deferred tax. It is recognized in the statement of profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax
The current corporate income tax charge recognized in the consolidated statement of profit or loss is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that the company expects to recover from or pay to the tax authorities. Current income tax related to items recognized directly in equity is recorded in equity and not in the consolidated statement of profit or loss. ASM\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which applicable tax regulations are subject to interpretation, and establishes provisions when deemed appropriate. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income tax, if any. Measurement of the tax payable or receivable for uncertain tax positions is based on management\u2019s best estimate of the amount of tax benefit that will be lost. Current tax also includes any tax arising from dividends and royalties. Current tax assets and liabilities are offset only if certain criteria are met (IAS 12).
Deferred tax
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values in ASM\u2019s consolidated statement of financial position.
Deferred tax assets are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized deferred tax assets are reassessed at each reporting date. Deferred tax assets are recorded for deductible temporary differences associated with investments in subsidiaries and are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences except when they affect neither the profit or loss reported in the consolidated statement of profit or loss nor the taxable profit or loss. Also, no deferred tax liabilities are recorded for taxable temporary differences associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates the company expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws and reflects uncertainty related to income tax, if any.
Deferred income tax assets and liabilities are netted if there is a legally enforceable right to set off current tax assets against current tax liabilities, deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority on the same taxable entity, and there is an intention to settle on a net basis.
Retirement benefit costs
The company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the company's operations in the Netherlands and Japan. The company's employees in the Netherlands participate in a multi-employer defined benefit plan. Payments to defined contribution plans and the multi-employer plan are recognized as an expense in the consolidated statement of profit or loss as they fall due. The company accounts for
the multi-employer plan as if it were a defined contribution plan, since the manager of the plan is not able to provide the company with the required company-specific information to enable the company to account for the plan as a defined benefit plan.
The company's employees in Japan participate in defined benefit plans. Pension costs in respect to this defined benefit plan are determined using the projected unit credit method. These costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect to employee service in previous years, net of the expected return on plan assets.
For the defined benefit plan, the company recognizes in its consolidated statement of financial position an asset or a liability for the plan's over funded status or underfunded status respectively. When the calculation results in a potential asset for the company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Actuarial gains and losses are recognized when incurred.
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
Share-based payments
The costs relating to employee shares (compensation expense) are recognized based upon the grant date fair value of the shares. The estimated fair value at grant date of shares is based on the share price of the ASM share at grant date minus the discounted value of expected dividends during the vesting period.
GENERAL INFORMATION
ASM International N.V. (ASM, or the company) is a Dutch public liability company domiciled in the Netherlands with its principal operations in Europe, the United States of America, and Asia. The company dedicates its resources to the research, development, manufacturing, marketing and servicing of equipment and materials used to produce mainly semiconductor devices. The company is registered at Versterkerstraat 8, 1322 AP Almere, the Netherlands.
The company's shares are listed for trading on the Euronext Amsterdam Stock Exchange (symbol ASM).
The accompanying consolidated financial statements include the financial statements of ASM International N.V. and its consolidated subsidiaries (together also referred to as ASM, or the company). ASM's subsidiaries are listed in Note 28 and investments in associates are listed in Note 7.
BASIS FOR ACCOUNTING
The consolidated financial statements for the year ended December 31, 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and also comply with the financial reporting requirements included in Section 362(9) of Part 9, Book 2 of the Dutch Civil Code.
The consolidated financial statements have been prepared by the Management Board of the company and authorized for issue on March 2, 2023, and will be submitted for adoption to the Annual General Meeting of Shareholders (AGM) on May 15, 2023.
The consolidated financial statements will be filed with the AFM and at the Trade Register of the Chamber of Commerce in Almere, the Netherlands within eight days of adoption by the 2023 AGM.
FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in Euros (\u20ac), which is the company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
BASIS OF PREPARATION
The consolidated financial statements have been prepared under the historical cost convention, unless otherwise indicated. The company applies the going concern basis in preparing its consolidated financial statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
A number of the company\u2019s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The company has an established approach with respect to the measurement of fair values. If third-party information, such as broker quotes or pricing services, is used to measure fair values, the company assesses and documents the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair-value hierarchy, in which such valuations should be classified.
Fair values are categorized into different levels in a fair-value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair-value hierarchy, then the fair-value measurement is categorized in its entirety in the same level of the fair-value hierarchy as the lowest level input that is significant to the entire measurement.
Further information about the assumptions made in measuring fair values is included in the following notes:
\u2022Note 1 - Acquisition of subsidiaries;
\u2022Note 7 - Investments in Associates
\u2022Note 13 - Employee benefits; and
\u2022Note 17 - Financial instruments and financial risk management.
USE OF ESTIMATES AND JUDGMENTS
In preparing these consolidated financial statements, management has made judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the year ended December 31, 2022 is included in the following notes:
\u2022Note 1 - Acquisition of subsidiaries, fair value of the consideration transferred (including contingent consideration) and fair value of the assets acquired and liabilities assumed, measured on a provisional basis.
\u2022Notes 3, 4, 5, 6 and 7 - Valuation of non-financial assets; and
\u2022Note 8 - Valuation of allowance for obsolescence inventories.
CRITICAL ACCOUNTING POLICIES
A critical accounting policy is defined as one that is both material to the presentation of ASM\u2019s consolidated financial statements and that requires management to make difficult, subjective or complex judgments that could have a material effect on ASM\u2019s financial condition or results of operations. Specifically, these policies have the following attributes: (1)\u00a0ASM is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2)\u00a0different
estimates ASM could reasonably have used, or changes in the estimate that are reasonably likely to occur, could have a material effect on ASM\u2019s financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. ASM bases its estimates on historical experience and various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, additional information is obtained, and as ASM\u2019s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that ASM\u2019s consolidated financial statements are fairly stated in accordance with IFRS, and provide a meaningful presentation of ASM\u2019s financial condition and results of operations. An analysis of specific sensitivity to changes of estimates and assumptions is included in the notes to the (consolidated) financial statements.
Management believes that the following accounting policies are critical:
\u2022business combinations;
\u2022revenue recognition;
\u2022inventories;
\u2022evaluation of long-lived assets for impairment;
\u2022evaluation of investments in associates for impairment; and
\u2022intangible assets for capitalization and for impairment.
CHANGES IN ACCOUNTING POLICIES
Application of new and revised International Financial Reporting Standards (IFRS).
New and amended IFRS Standards that are effective for the current year
The accounting policies applied in the financial statements are the same as those applied in the last annual financial statements, except for the IFRS standards and interpretations effective on January 1, 2022. These include among others amendments to IAS 16, IAS 37 and IFRS 3. These changes have been assessed for their potential impact and do not have a material effect on ASM\u2019s (consolidated) financial statements.
ACCOUNTING POLICIES
The company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.
Business combinations
The company accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the company. In determining whether a particular set of activities and assets is a business, the company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Goodwill is capitalized as the excess of the costs of an acquired subsidiary, net of the amounts assigned to identifiable assets acquired and liabilities incurred or assumed. Acquisition-related costs are expensed when incurred in the period they arise or the service is received.
Any contingent consideration payable is measured at fair value at the acquisition date. The contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Consolidation
The consolidated financial statements include the accounts of ASM and all of its subsidiaries where ASM holds a controlling interest. Non-controlling interest is disclosed separately, where appropriate, in the consolidated financial statements.
Control is achieved when ASM has:
\u2022the power over an investee;
\u2022exposure, or rights, to variable returns from its involvement with the investee; and
\u2022the ability to use its power over the investee to affect the amount of the investor's returns.
ASM reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
As from the date these criteria are met, financial data of the relevant subsidiary are included in the consolidation and deconsolidated from the date on which ASM's control ceases.
Loss of control
Upon loss of control, ASM derecognizes the assets and liabilities of the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If ASM retains any interest in this subsidiary, then such interest is measured at fair value at the date on which control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained.
Subsidiaries
Subsidiaries are entities controlled by the company. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Interests in equity-accounted investees
The company\u2019s interests in equity-accounted investees comprise investments in associates.
Associates are those entities in which the company has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Upon acquisition of the investment in an associate, any excess of the cost of the investment over the company\u2019s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included in the carrying amount of the investment.
Subsequent to initial recognition, the consolidated financial statements include the company's share of the profit or loss and other comprehensive income (OCI) of equity-accounted investees, until the date on which significant influence ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the company\u2019s interest
in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
Foreign currency translation
The individual financial statements of each group entity are presented in their local functional currency. For the purpose of the consolidated financial statements, the results and financial position of each entity is expressed in euros, which is ASM's functional currency and the presentation currency for the consolidated financial statements.
Foreign currency transactions
In preparing the financial statements of the individual entities, transactions in foreign currencies are recorded at the exchange rates on the date of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined.
Exchange rate differences arising on the settlement of monetary items, and on the translation of monetary items, are recognized in the consolidated statement of profit or loss in the period in which they arise. Exchange rate differences arising on the translation of non-monetary items carried at fair value are recognized in the consolidated statement of profit or loss for the period except for differences arising on the translation of non-monetary items in respect of which gains and losses are recognized directly in equity.
Foreign operations
For the purpose of presenting consolidated financial statements, assets and liabilities of foreign operations are translated into euros at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into euros at the exchange rates at the dates of the transactions.
Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interest.
When a foreign operation is disposed of in its entirety or partially such that control or significant influence is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the company disposes of
part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the company disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.
Segment reporting
ASM has one reportable segment, consistent with the internal reporting provided to the Chief Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM).
The company manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The operation is a product-driven organizational unit comprised of manufacturing, service, and sales operations in Asia, Europe and the United States. The performance of the individual product lines is reviewed by the CODM based on its revenues, gross margin and EBIT. The company operates under a uniform global operating strategy. The CODM alone makes operating decisions regarding strategic investments and resource allocation based on aggregated information of the overall company's operation. Therefore, the company's operation do not represent separate operating nor reportable segments.
Property, plant and equipment
Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:
Land | Infinite | |
Building and leasehold improvements | 1-25 years | |
Machinery equipment | 2-10 years | |
Furniture and fixtures and other equipment | 2-10 years |
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain on disposal of an item of property, plant and equipment is recognized in profit or loss and included in 'other income'. Any loss is recognized as part of impairment expenses.
Intangible assets
Goodwill
The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment.
Goodwill represents the excess of the costs of an acquisition over the fair value of the amounts assigned to assets acquired and liabilities incurred or assumed of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is allocated to cash generating units (CGUs) for the purpose of impairment testing. The allocation is made to those CGUs that are expected to benefit from the business combination in which the goodwill arose. Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is recognized. An impairment loss recognized for goodwill is not reversed in a subsequent period. Goodwill is stated at cost less accumulated impairment losses.
The company\u2019s goodwill arising on the acquisitions of subsidiaries in the current year is described in Note 1 'Acquisition of subsidiaries''.
The company\u2019s goodwill arising on the acquisition of an associate is described in Note 7 'Investments in Associates'.
Other intangible assets
Other intangible assets include capitalized development expenses, software, purchased technology, and remaining other intangible assets. Other intangible assets that are acquired by the company with finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.
Expenditure on research activities is recognized in profit or loss as incurred.
In determining the capitalization of development expenses, the company makes estimates and assumptions based on expected future economic benefits generated by products that are the result of these development expenses. Other important estimates and assumptions are the required internal rate of return, the distinction between research, development and high-volume manufacturing, and the estimated useful life.
Development expenses are capitalized when all of the following criteria are demonstrated by the entity:
\u2022the technical feasibility of completing the intangible asset so that it will be available for use or sale;
\u2022its intention to complete the intangible asset and use or sell it;
\u2022its ability to use or sell the intangible asset;
\u2022how the intangible asset will generate probable future economic benefits;
\u2022the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
\u2022its ability to reliably measure the expenditure attributable to the intangible asset during its development.
The company capitalizes development expenses that meet the above-mentioned criteria in its consolidated financial statements. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Amortization of capitalized development expenses is calculated using the straight-line method over the estimated useful lives of the developed product. Amortization starts when the developed
product is ready for its intended use. In the development cycle, this is when the product is transferred from the validation (beta) phase to high-volume manufacturing.
Amortization method, useful life, and residual value are reviewed at each reporting date with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives of other intangible assets for current and comparative periods are as follows:
Development cost | 5 years | |
Software | 3 years | |
Purchased technology | 5-15 years | |
Other intangibles | 1-17 years |
Investments in associates
Investments in associates are investments in entities in which ASM can exert significant influence but which ASM does not control, generally having between 20% and 50% of the voting rights. These entities are accounted for using the equity method and are initially recognized at cost. Dividend income from the company\u2019s associated companies is recognized when the right to receive payment is established. Their carrying value includes goodwill identified upon acquisition, net of any accumulated impairment.
When ASM\u2019s share of losses in an associate equals or exceeds its interest in the associate, including any other receivables for which settlement is neither planned nor likely to occur in the foreseeable future, ASM does not recognize further losses, unless ASM has obligations to or made payments on behalf of the associate.
At each reporting date, the company determines if there is any objective evidence that the associate is impaired. An impairment, being the difference between the recoverable amount of the associate and its carrying value, is recognized in the consolidated statement of profit or loss.
ASM does not separately test associates' underlying assets for impairment. However, ASM recognizes its share of any impairment charge recorded by an investee and considers the effect, if any, of the impairment on the basis difference in the assets giving rise to the investee\u2019s impairment charge. A loss in value of an investment which is significant or prolonged will be recognized.
Significant is defined as at least 20% on the reporting date. Prolonged is defined as measured below cost for more than nine months.
Equity method investments are tested for prolonged decline in value. If the fair value of an investment is less than its carrying value, the company determines whether the decline in value is temporary or prolonged. A prolonged decline in value is measured as of a balance sheet date. If after a prior recognized impairment the fair value is more than its carrying value, this impairment is reversed to the extent that the recoverable amount of the net investment subsequently increases. The determination of whether an investment is impaired is made at the individual security level in each reporting period.
Evaluation tools at customers
Evaluation tools at customers are systems generally delivered to customers under evaluation and include substantial customization by our engineers and R&D staff in the field. Evaluation tools are recorded at cost and depreciated using the straight-line method over their estimated useful life of five years, or their shorter economic life. The depreciation expenses are reported as cost of sales.
On final written technical acceptance and purchase order from the customer, the purchase consideration is recognized as revenue at a point in time and the carrying value of the evaluation system is recognized as cost of sales. In the circumstance that the system is returned, at the end of the evaluation period, a detailed impairment review takes place, and future sales opportunities and additional costs are identified. It is only when the fair value is below the carrying value of the evaluation tool that an additional depreciation is recognized. The remaining carrying value is recognized as finished goods in inventories.
Inventories
Inventories are stated at the lower of cost or net realizable value. The cost of inventories is based on the first-in, first-out principle. Costs include net prices paid for materials purchased, charges for freight and custom duties, production labor costs and factory overhead. Allowances are made for slow-moving, obsolete or unsellable inventory.
Allowances for obsolescence of inventory are determined based on the expected demand as well as the expected market value of the inventory. The company regularly evaluate the value of our inventory of components and raw materials, work in progress, and finished goods, based on a combination of factors including the following: forecasted sales, historical usage, product end
of lifecycle, estimated current and future market values, service inventory requirements, and new product introductions, as well as other factors. Purchasing requirements and alternative uses for the inventory are explored within these processes to mitigate inventory exposure. The company record write-downs for inventory based on the above factors and take into account worldwide quantities and demand into our analysis.
Financial instruments
The company classifies non-derivative financial assets into loans and receivables. The company classifies non-derivative financial liabilities into other financial liabilities.
Non-derivative financial assets and financial liabilities \u2013\u00a0 Recognition and derecognition
The company initially recognizes receivables on the date when they are originated. Receivables comprise account (trade) and other receivables and cash and cash equivalents. Receivables are measured at amortized cost using the effective interest method, less any impairment. Financial assets and financial liabilities are initially recognized on the trade date when the entity becomes a party to the contractual provisions of the instrument.
The company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognized financial asset that is created or retained by the company is recognized as a separate asset or liability.
The company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expired.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the company currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
Non-derivative financial assets \u2013 Measurement
Loans and receivables are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.
Accounts receivable
A significant percentage of our accounts receivable is derived from revenue to a limited number of large multinational semiconductor device manufacturers located throughout the world. In order to monitor potential credit losses, the company performs ongoing credit evaluations of our customers' financial condition. An allowance for doubtful accounts is maintained for potential credit losses based upon management's assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which the company are aware regarding a customer's inability to meet its financial obligations, aging of the accounts receivable, expected lifetime losses; and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the company's customers.
The expected credit loss allowance is based on historical experience, credit evaluations, specific customer-collection history, and any customer-specific issues ASM has identified. Changes in circumstances, such as an unexpected adverse material change in a major customer\u2019s ability to meet its financial obligation to ASM or its payment trends, may require us to further adjust our estimates of the recoverability of amounts due to ASM. This could have an adverse material effect on ASM\u2019s financial condition and results of operations.
Cash and cash equivalents
Cash and cash equivalents consist of bank deposits and investment in money market funds that invest in marketable debt obligations and securities of governments, corporates and financial institutions and other short-term highly liquid investments with original maturity of three months or less. Bank overdrafts are included in notes payable to banks in current liabilities.
Non-derivative financial liabilities \u2013 Measurement
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.
Preference share capital
Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the company\u2019s option, and any dividends are discretionary. Discretionary dividends thereon are recognized as distributions within equity upon approval by the company\u2019s shareholders.
Preference share capital is classified as a financial liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Non-discretionary dividends thereon are recognized as interest expense in profit or loss as accrued.
Repurchase and reissue of common shares (treasury shares)
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is accounted for at average cost and presented within capital in excess of par value.
Issuance of shares by an equity-accounted investee
The associate ASMPT yearly issues common shares pursuant to their employee share incentive scheme. The effect of these issuances is a dilution of the company's ownership in ASMPT. The company recognizes the impact of these issuances directly into equity.
Comprehensive income
Comprehensive income consists of net earnings (loss) and other comprehensive income. Other comprehensive income includes gains and losses that are not included in net earnings, but are recorded directly in equity.
Provisions
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Impairment
Non-derivative financial assets
Financial assets, other than those at fair value through profit or loss, are assessed using an 'expected credit loss' (ECL) model. In accordance with the model the company allocate a probability of loss to each financial asset, based on data that is determined to be predictive of the risk of loss and applying experienced credit judgment.
ASM measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:
\u2022debt securities that are determined to have low credit risk at the reporting date; and
\u2022other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, ASM considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on ASM's historical experience and informed credit assessment, that includes forward-looking information. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which ASM is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that ASM expects to receive). ECLs are discounted at the effective interest rate of the financial asset.
Equity-accounted investees
An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognized in profit or loss, and is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.
Non-financial assets
At each reporting date, the company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset\u2019s recoverable amount is estimated. Goodwill and assets not yet available for its intended use is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Commitments and contingencies
The company has various contractual obligations such as purchase commitments and commitments for capital expenditure. These obligations are generally not recognized as liabilities on the company's statement of financial position but are disclosed in the notes to the consolidated financial statements.
Cash flow statement
The cash flow statement has been prepared using the indirect method.
Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognizes revenue when it transfers control over a product or service to a customer. Depending on the contract, the company obtain normally a right to payment for our equipment upon shipment and on completion of installation. Right to payment for our spares and services occurs upon shipment or completion of the service unless described otherwise.
Revenue streams
The company generates revenue primarily from the sales of equipment and sales of spares & services. The products & services described below by nature, can be part of both revenue streams. The revenue streams are disclosed in Note 21 Revenue.
Nature of goods and services
The following is a description of principal activities from which the group generates its revenue.
Products and services | Nature, timing of satisfaction of performance obligation and significant payment terms | |
Equipment | Revenue from equipment is recognized at a point in time when the performance obligation is satisfied, when control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. The total consideration of the contract is allocated between all distinct performance obligations in the contract based on their stand-alone selling prices. The stand-alone selling prices are mostly determined based on other stand-alone sales that are directly observable or based on the expected cost plus a margin approach. Any customer discounts and credits, within volume purchase agreements or bundled agreements, are considered as a reduction of the transaction price, unless this is/can be considered as consideration for a distinct good or service. | |
Installation | The customer simultaneously consumes and receives the benefits provided by the performance of the installation. As such, transfer of control takes place over the period of installation from delivery through customer acceptance, measured on a straight-line basis, as our performance is satisfied evenly over this period of time. | |
Spares | Revenue from spares is recognized at a point in time when the performance obligation is satisfied, when the control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. Any customer discounts and credits, within a volume purchase agreements, are considered as a reduction of the transaction price, unless this is/can be considered as consideration for a distinct good or service. | |
Revenue on royalties and licenses for technology included in equipment and/or spares | The fixed price royalty is a right to use the licenses and revenue is recognized at a point in time that the license is transferred to the customer. For the sales-based royalty, the performance obligation is satisfied when the license is transferred to the customer. Given this is earlier than when the sales occur, revenue should be recognized when the sales occur. | |
Support services | The customer simultaneously consumes and receives the benefits provided by the performance of the support. For the majority of support services transfer of control takes place over the period of support. |
The company applied the practical expedient of IFRS 15.121 and therefore have not disclosed information on the remaining performance obligations of a contract (in aggregate) as the performance obligation is part of a contract that has an original expected duration of one year or less. Generally, the remaining performance obligations of a contract concern the tools to be shipped, unsatisfied promises as part of a bundled agreement or volume purchase agreement and installation and qualification services.
Cost of sales
Cost of sales comprises direct costs such as labor, materials, cost of warranty, depreciation, shipping and handling costs, and related overhead costs. Cost of sales also includes depreciation expenses of evaluation tools at customers, royalty payments, and costs relating to prototype and experimental products, which the company may subsequently sell to customers.
Warranty
The company provide maintenance on our systems during the warranty period, on average one year. Costs of warranty include the cost of labor and material necessary to repair a product during the warranty period. The company accrue for the estimated cost of the warranty on products shipped in a provision for warranty, upon recognition of the sale of the product. The costs are estimated based on historical expenses incurred and on estimated future expenses related to current revenue, and are updated periodically. Actual warranty costs are charged against the provision for warranty. The actual warranty costs may differ from estimated warranty costs, and adjusted our provision for warranty accordingly. Future warranty costs may exceed our estimates, which could result in an increase of our cost of sales.
Leases
The company leases many assets, including land, buildings, houses, motor vehicles, machinery and furniture. The company recognizes a right-of-use asset and a lease liability at the lease commencement date. At inception of a contract, ASM assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurement of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the company\u2019s incremental borrowing rate. The lease
liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from a change in a rate or changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The company has applied judgment to determine the lease term for some of the lease contracts in which it is a lessee that includes renewal options. The assessment of whether the company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.
The company has applied the exception not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases of low-value assets (up to the amount of\u00a0\u20ac5,000 new asset value, such as water purifiers and air cleaners). The company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Income tax
Income tax expense comprises current and deferred tax. It is recognized in the statement of profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax
The current corporate income tax charge recognized in the consolidated statement of profit or loss is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that the company expects to recover from or pay to the tax authorities. Current income tax related to items recognized directly in equity is recorded in equity and not in the consolidated statement of profit or loss. ASM\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which applicable tax regulations are subject to interpretation, and establishes provisions when deemed appropriate. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income tax, if any. Measurement of the tax payable or receivable for uncertain tax positions is based on management\u2019s best estimate of the amount of tax benefit that will be lost. Current tax also includes any tax arising from dividends and royalties. Current tax assets and liabilities are offset only if certain criteria are met (IAS 12).
Deferred tax
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values in ASM\u2019s consolidated statement of financial position.
Deferred tax assets are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized deferred tax assets are reassessed at each reporting date. Deferred tax assets are recorded for deductible temporary differences associated with investments in subsidiaries and are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences except when they affect neither the profit or loss reported in the consolidated statement of profit or loss nor the taxable profit or loss. Also, no deferred tax liabilities are recorded for taxable temporary differences associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates the company expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws and reflects uncertainty related to income tax, if any.
Deferred income tax assets and liabilities are netted if there is a legally enforceable right to set off current tax assets against current tax liabilities, deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority on the same taxable entity, and there is an intention to settle on a net basis.
Retirement benefit costs
The company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the company's operations in the Netherlands and Japan. The company's employees in the Netherlands participate in a multi-employer defined benefit plan. Payments to defined contribution plans and the multi-employer plan are recognized as an expense in the consolidated statement of profit or loss as they fall due. The company accounts for
the multi-employer plan as if it were a defined contribution plan, since the manager of the plan is not able to provide the company with the required company-specific information to enable the company to account for the plan as a defined benefit plan.
The company's employees in Japan participate in defined benefit plans. Pension costs in respect to this defined benefit plan are determined using the projected unit credit method. These costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect to employee service in previous years, net of the expected return on plan assets.
For the defined benefit plan, the company recognizes in its consolidated statement of financial position an asset or a liability for the plan's over funded status or underfunded status respectively. When the calculation results in a potential asset for the company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Actuarial gains and losses are recognized when incurred.
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
Share-based payments
The costs relating to employee shares (compensation expense) are recognized based upon the grant date fair value of the shares. The estimated fair value at grant date of shares is based on the share price of the ASM share at grant date minus the discounted value of expected dividends during the vesting period.
ACQUISITION OF RENO SUB-SYSTEMS
On March 11, 2022, ASM acquired 100% of the share capital of Reno Sub-Systems Inc. (Reno), a supplier of RF matching sub-systems for semiconductor manufacturing equipment.
Reno designs and sells innovative RF matching sub-systems and is based in New Jersey, the US. Reno\u2019s high-performance RF matching networks and RF generators will enhance ASM\u2019s plasma products and solutions.
ASM has paid an amount of \u20ac41.5 million, of which an amount of \u20ac21.0 million has been allocated to identified intangible assets and an amount of \u20ac17.8 million to goodwill.
Due to its limited size, the acquisition does not have a material impact on 2022 earnings.
ACQUISITION OF LPE
On October 3, 2022, ASM acquired 100% of the issued share capital of LPE S.p.A. ('LPE'), a manufacturer of epitaxial reactors for silicon carbide (SiC) and silicon (SI), based in Italy.
Since its incorporation in 1972, LPE has exclusively focused on designing, manufacturing, and selling advanced epitaxy tools for power applications. LPE is a recognized leader in SiC and Si epitaxy, and has published many patents to date. LPE has a sizeable worldwide installed base of SiC and Si epitaxy tools.
The acquisition provides ASM with access to the SiC market. For certain applications, SiC is a superior technology to Si, with applications such as EVs providing significant revenue-growth potential. LPE\u2019s revenue is projected to grow to more than \u20ac100 million in 2023, mainly driven by its SiC epitaxy equipment business. Based on ASM internal estimates, demand for SiC epitaxy equipment is forecasted to grow at a CAGR in excess of 25% from 2021 to 2025, driven by the rapidly expanding market for electric vehicles. LPE is profitable with margins in line with ASM\u2019s 2021-2025 target model. The acquisition of LPE qualifies as a business as defined in IFRS 3 Business Combinations.
LPE contributed \u20ac11 million to the Group\u2019s revenues and a loss of \u20ac6 million to the Group\u2019s net earnings for the period between the date of acquisition and the reporting date. These amounts have been calculated using the subsidiary\u2019s results and adjusting them for amortization of purchased
technology (\u20ac3 million), other intangibles (\u20ac2 million) and other fair value step ups (\u20ac3 million), that has been charged considering the fair value adjustments to intangible assets and inventories, together with the consequential tax effects.
If the acquisition of LPE had been completed on the first day of the financial year 2022, Group revenues for the year would have been \u20ac\u00a02,464 million and group net earnings would have been \u20ac 377 million.
These amounts have been calculated using the subsidiary\u2019s results and adjusting them for differences in the accounting policies between the group and the subsidiary, and the additional depreciation and amortization that would have been charged assuming the fair value adjustments to intangible assets, inventories and deferred revenues had applied from 1 January 2022, together with the consequential tax effects.
Consideration transferred
The following table summarizes the acquisition-date fair value of each class of consideration transferred.
\u20ac (thousand) | notes | October 3, 2022 | |
Cash consideration | 324,175 | ||
Equity instruments (631,154 common shares) | 144,756 | ||
Contingent consideration | 76,143 | ||
Total consideration transferred 1) | 545,074 |
1 As of reporting date, the final cash settlement of the acquisition has not been finalized between management and the former shareholders of LPE. According to the signed sale and purchase agreement, the final settlement should be concluded in Q1 2023.
Equity instruments issued
The fair value of the common shares issued (a combination of 580,000 treasury shares and 51,154 newly issued shares) was based on the listed share price of the Company at 3 October, 2022 of \u20ac229.35 per share. The fair value of the 631,154 common shares issued as part of the consideration paid for the LPE acquisition (\u20ac145 million) was determined on the basis of on the published share price on 3 October, 2022 of \u20ac229.35 per share. Issue costs directly attributable to the issuance of the shares are immaterial and have been expensed as incurred.
Contingent consideration
In the event that certain predetermined sales targets (including specific targets for certain markets) are achieved by LPE over the period 2023-2024, an additional consideration of up to \u20ac100 million (\"LPE earn out\") may be payable in cash in Q2 2025.
The combined projected revenues over the performance period exceed the upper threshold of the predetermined sales targets. The fair value of the contingent consideration of \u20ac76 million represents the discounted value of the expected related \u20ac100 million cash payment. At 31 December, 2022, the contingent consideration had increased to \u20ac79 million.
Acquisition-related costs
Acquisition-related costs of \u20ac3 million that were not directly attributable to the issue of shares are included in administrative expenses (SG&A) in the statement of profit or loss and in operating cash flows in the statement of cash flows.
Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the acquisition date.
\u20ac (thousand) | October 3, 2022 | |
Intangible assets, net | 278,504 | |
Of which: | ||
Purchased technology | 189,105 | |
Other intangibles | 89,399 | |
Right of use assets | 3,426 | |
Property, plant & equipment, net | 409 | |
Cash & cash equivalents | 53,988 | |
Accounts receivable, net | 18,671 | |
Inventories, net | 38,969 | |
Other assets | 10,118 | |
Total assets | 404,085 | |
\u20ac (thousand) | October 3, 2022 | |
Deferred and other tax liabilities | 83,014 | |
Accrued and other liabilities | 52,103 | |
Trade payables | 7,779 | |
Other liabilities assumed | 4,581 | |
Liabilities assumed | 147,477 | |
Total net identifiable assets | 256,608 | |
Total consideration transferred | 545,074 | |
Goodwill on acquisition | 288,466 |
Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows.
Assets Acquired | Valuation technique | |
Technology | Multi-period excess earnings method and Relief-from-royalty method | |
Trade name | Relief-from-royalty method | |
Customer relationships | Multi-period excess earnings method | |
Order backlog | Multi-period excess earnings method | |
Inventory | Net realisable value method | |
Minority investments | Market approach |
The fair value of acquired trade receivables is \u20ac18.7 million. The gross contractual amount for trade receivables due is \u20ac18.9 million, with a loss allowance of \u20ac0.2 million recognized on acquisition.
The goodwill is attributable to the workforce, expected entity specific synergies in relation to leveraging on ASM\u2019s worldwide network and production capacity, and the high profitability of the acquired business. None of the goodwill is expected to be deductible for income-tax purposes.
Estimated amortization and earn-out expenses
The estimated PPA amortization and earn-out expenses relating to the acquisitions of Reno and LPE are as follows:
(\u20ac million) | 2023 | 2024 | 2025 | Years thereafter | ||||
Cost of sales | (26.9) | \u2014 | \u2014 | \u2014 | ||||
Research and development | (14.2) | (14.2) | (14.2) | (164.4) | ||||
Selling, general and administrative | (4.8) | (4.8) | (4.8) | (55.7) | ||||
Total Impact on operating results | (45.8) | (18.9) | (18.9) | (220.1) | ||||
Finance expense | (9.7) | (8.7) | (2.8) | \u2014 | ||||
Income taxes (realization of temporary differences) | 12.7 | 5.2 | 5.2 | 60.3 | ||||
Total impact on net earnings | (42.8) | (22.5) | (16.6) | (159.8) |
The amortization of the fair value adjustments to the order backlog, and the realization of the fair value adjustments to inventories and deferred revenues are included under costs of sales.
Amortization of purchased technology is allocated to research and development expenses. Amortization related to the trade name and customer relationship is recognized under selling, general and administrative expenses.
The company leases many assets, including land, buildings, houses, motor vehicles, machinery and equipment. Leases typically run up to a period of five years, some with an option to renew the lease after the end of the non-cancellable period. Lease payments are renegotiated on a periodic basis; timing is dependent on the region and type of lease. The company has not entered into any sublease arrangements.
Right-of-use assets
(\u20ac thousand) | Land and buildings | Motor vehicles | Other machinery and equipment | Total | ||||
Balance January 1, 2021 | 21,078 | 2,148 | 161 | 23,387 | ||||
Additions | 2,060 | 879 | 323 | 3,262 | ||||
Modifications and reassessments | 6,812 | (101) | 619 | 7,330 | ||||
Depreciation for the year | (6,563) | (1,210) | (416) | (8,189) | ||||
Foreign currency translation effect | 1,065 | 53 | 30 | 1,148 | ||||
Balance December 31, 2021 | 24,452 | 1,769 | 717 | 26,938 | ||||
Additions through business combinations | 3,426 | \u2014 | \u2014 | 3,426 | ||||
Additions | 4,512 | 664 | 44 | 5,220 | ||||
Modifications and reassessments | 4,614 | 117 | 466 | 5,197 | ||||
Depreciation for the year | (8,273) | (1,102) | (505) | (9,880) | ||||
Foreign currency translation effect | 745 | (31) | 48 | 762 | ||||
Balance December 31, 2022 | 29,476 | 1,417 | 770 | 31,663 |
Amounts recognized in profit or loss
(\u20ac thousand) | 2021 | 2022 | ||
Leases under IFRS 16 | ||||
Interest on lease liabilities | 523 | 603 | ||
Depreciation expenses | 8,189 | 9,880 | ||
Expenses relating to short-term leases | 48 | 251 | ||
Expenses relating to low-value leases | 16 | \u2014 | ||
Total | 8,776 | 10,734 |
Amounts recognized in statement of cash flows
(\u20ac thousand) | 2021 | 2022 | ||
Total cash outflow for leases | 7,854 | 10,290 |
Extension options
The changes in the amount of property, plant and equipment are as follows:
Land, buildings and | Machinery and | Furniture and fixtures and other equipment | Assets under construction | Total | ||||||
At cost | ||||||||||
Balance January 1, 2021 | 134,678 | 235,135 | 33,591 | 25,872 | 429,276 | |||||
Additions 1) | 7,129 | 13,381 | 1,287 | 57,525 | 79,322 | |||||
Disposals | (9,230) | (6,598) | (3,612) | \u2014 | (19,440) | |||||
Transfer from assets under construction | 669 | 40,444 | 3,994 | (45,107) | \u2014 | |||||
Transfer to intangible assets | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Foreign currency translation effect | 3,587 | 10,948 | 677 | 1,280 | 16,492 | |||||
Balance December 31, 2021 | 136,833 | 293,310 | 35,937 | 39,570 | 505,650 | |||||
Additions through business combinations | 275 | 38 | 717 | \u2014 | 1,030 | |||||
Additions | \u2014 | 2,456 | 107 | 98,621 | 101,184 | |||||
Disposals | (8) | (7,616) | (3,177) | \u2014 | (10,801) | |||||
Transfer from assets under construction | 30,844 | 54,549 | 10,754 | (96,147) | \u2014 | |||||
Foreign currency translation effect | 3,506 | 7,241 | 17 | 1,052 | 11,816 | |||||
Balance December 31, 2022 | 171,450 | 349,978 | 44,355 | 43,096 | 608,879 | |||||
Accumulated depreciation and impairment | ||||||||||
Balance January 1, 2021 | 36,098 | 158,249 | 20,962 | \u2014 | 215,309 | |||||
Depreciation for the year | 6,559 | 31,530 | 3,849 | \u2014 | 41,938 | |||||
Impairment charges | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Disposals | (7,989) | (6,070) | (3,312) | \u2014 | (17,371) | |||||
Foreign currency translation effect | 1,167 | 7,339 | 251 | \u2014 | 8,757 | |||||
Balance December 31, 2021 | 35,835 | 191,048 | 21,750 | \u2014 | 248,633 | |||||
Depreciation for the year | 7,267 | 38,893 | 5,930 | \u2014 | 52,090 | |||||
Impairment charges | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Disposals | (8) | (7,034) | (2,858) | \u2014 | (9,900) | |||||
Foreign currency translation effect | 1,328 | 4,800 | (125) | \u2014 | 6,003 | |||||
Balance December 31, 2022 | 44,422 | 227,707 | 24,697 | \u2014 | 296,826 | |||||
Carrying amounts | ||||||||||
December 31, 2021 | 100,998 | 102,262 | 14,187 | 39,570 | 257,017 | |||||
December 31, 2022 | 127,028 | 122,271 | 19,658 | 43,096 | 312,053 | |||||
Useful\u00a0lives\u00a0in\u00a0years | 1-25 | 2-10 | 2-10 |
The changes in the amount of evaluation tools are as follows:
December 31, | ||||
2021 | 2022 | |||
At cost | ||||
Balance at beginning of year | 100,774 | 98,352 | ||
Evaluation tools shipped | 35,409 | 41,538 | ||
Evaluation tools sold and returns | (41,708) | (41,049) | ||
Foreign currency translation effect | 3,877 | 2,232 | ||
Balance at end of year | 98,352 | 101,073 | ||
Accumulated depreciation | ||||
Balance at beginning of year | 31,300 | 34,635 | ||
Depreciation for the year | 16,868 | 17,719 | ||
Evaluation tools sold and returns | (14,279) | (20,027) | ||
Foreign currency translation effect | 746 | 70 | ||
Balance at end of year | 34,635 | 32,397 | ||
Carrying amount at beginning of year | 69,474 | 63,717 | ||
Carrying amount at end of year | 63,717 | 68,676 |
Useful\u00a0lives\u00a0in\u00a0years: | 5 |
The carrying amount of the goodwill is related to acquisitions in the following cash-generating units:
ALD | PEALD | SiC EPI | Total | |||||
Balance January 1, 2021 | 2,611 | 8,659 | \u2014 | 11,270 | ||||
Foreign currency translation effect | \u2014 | \u2014 | \u2014 | \u2014 | ||||
Balance December 31, 2021 | 2,611 | 8,659 | \u2014 | 11,270 | ||||
Acquisitions through business combinations | \u2014 | 17,838 | 288,466 | 306,304 | ||||
Foreign currency translation effect | \u2014 | 891 | \u2014 | 891 | ||||
Balance December 31, 2022 | 2,611 | 27,388 | 288,466 | 318,465 |
Reference is made to note 1 in relation to acquisitions through business combinations.
We perform an annual impairment test at the same moment of each year (fourth quarter)\u00a0 or if events or changes in circumstances indicate that the carrying amount of the assets at risk (goodwill, other non-current assets and liabilities, capitalized development, working capital) exceeds its recoverable amount. For our impairment test and the determination of the recoverable amount, a discounted future cash flow approach is used which makes use of our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates.
The material assumptions used for the discounted future cash flows of the cash-generating units (CGUs) are:
\u2022an average discount rate of 10.7% (2021: 7.6%) representing the pre-tax weighted average cost of capital. The increase in discount rate is mainly driven by a higher risk free rate (+2.3%);
\u2022external market segment data, historical data and strategic plans to estimate cash flow growth per product line; and
\u2022cash flow calculations are limited to four years of cash flow; after these four years, perpetuity growth rates are set based on the market maturity of the products. For a maturing product, the perpetuity growth rates used are 1% or less, and for enabling technology products the rate used is 3% or less.
Other intangible assets include capitalized development expenditure, software developed or purchased (including licenses) for internal use, and purchased technology from third parties. The changes in the amount of other intangible assets are as follows:
Development costs | Software | Purchased technology | Other intangibles | Total | ||||||
At cost | ||||||||||
Balance January 1, 2021 | 341,685 | 32,864 | 8,821 | \u2014 | 383,370 | |||||
Additions | 81,973 | 2,680 | \u2014 | \u2014 | 84,653 | |||||
Transfer from property, plant and equipment | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Disposals | \u2014 | (22) | \u2014 | \u2014 | (22) | |||||
Foreign currency translation effect | 12,867 | 458 | (32) | 13,293 | ||||||
Balance December 31, 2021 | 436,525 | 35,980 | 8,789 | \u2014 | 481,294 | |||||
Acquisitions through business combinations | \u2014 | \u2014 | 211,817 | 89,400 | 301,217 | |||||
Additions | 102,627 | 4,532 | 130 | \u2014 | 107,289 | |||||
Reclassification | \u2014 | (74) | \u2014 | \u2014 | (74) | |||||
Disposals | \u2014 | (322) | \u2014 | \u2014 | (322) | |||||
Foreign currency translation effect | 6,013 | 512 | 126 | \u2014 | 6,651 | |||||
Balance December 31, 2022 | 545,165 | 40,628 | 220,862 | 89,400 | 896,055 | |||||
Accumulated amortization and impairment losses | ||||||||||
Balance January 1, 2021 | 137,366 | 27,279 | 8,801 | \u2014 | 173,446 | |||||
Amortization for the year | 25,184 | 1,424 | 10 | \u2014 | 26,618 | |||||
Impairments | 1,967 | \u2014 | \u2014 | \u2014 | 1,967 | |||||
Disposals | \u2014 | (22) | \u2014 | \u2014 | (22) | |||||
Foreign currency translation effect | 4,332 | 152 | (32) | \u2014 | 4,452 | |||||
Balance December 31, 2021 | 168,849 | 28,833 | 8,779 | \u2014 | 206,461 | |||||
Amortization for the year | 34,869 | 1,820 | 4,483 | 1,568 | 42,740 | |||||
Impairments | 6 | \u2014 | \u2014 | \u2014 | 6 | |||||
Disposals | \u2014 | (322) | \u2014 | \u2014 | (322) | |||||
Foreign currency translation effect | 1,011 | 121 | (66) | \u2014 | 1,066 | |||||
Balance December 31, 2022 | 204,735 | 30,452 | 13,196 | 1,568 | 249,951 | |||||
Carrying amounts | ||||||||||
December 31, 2021 | 267,676 | 7,147 | 10 | \u2014 | 274,833 | |||||
December 31, 2022 | 340,430 | 10,176 | 207,666 | 87,832 | 646,104 |
ASM completed the acquisition of Reno Sub-Systems and LPE, resulting in a total increase of \u20ac301.2 million of other intangible assets, of which \u20ac22.7 million related to the acquisition of Reno Sub-Systems and \u20ac278.5 relates to the acquisition of LPE.
As a result of the acquisition, ASM disaggregated the group 'Purchased technology and other intangibles' into two groups. Reference is made to note 1 for further disclosure on these acquisitions during 2022.
The carrying amount of other intangibles consists of customer relationships (\u20ac66.9 million), order backlog (\u20ac17.4 million),\u00a0 trade name (\u20ac3.1 million) and other (\u20ac0.4 million).
We perform an annual impairment test in the fourth quarter of each year or if events or changes in circumstances indicate that the carrying amount of development costs exceeds its recoverable amount. A discounted future cash flow approach is used which makes use of our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. For the impairment test, reference is made to Note 5.
Impairment charges on capitalized development costs are included in operating expenses under research and development. Impairment of capitalized development expenses primarily related to development of new hardware for which customer demand has shifted out in time, new process technologies that were not successful, and purchased technology which became obsolete. The impairment charges for 2021 and 2022 related to customer-specific projects.
Capitalized development costs are amortized over their estimated useful lives of five years. Amortization starts when the developed asset is ready for its intended use. For the company, this occurs when the application is transferred to high-volume manufacturing.
The company estimated a useful life of purchased technology of 15 years, other intangibles assets are amortized over their estimated useful lives of respectively one year (order backlog), four years (trade name) and 17 years (customer\u00a0 relationships).
The amortization of development costs and purchased technology is included in R&D; the amortization of the order backlog in cost of sales upon realization of respective sales; the amortization of customer relationships is included in SG&A.
Estimated amortization expenses relating to other intangible assets are as follows:
Development costs | Software | Purchased technology | Other intangibles | Total | ||||||
2023 | 40,256 | 4,106 | 14,156 | 21,258 | 79,776 | |||||
2024 | 35,116 | 3,412 | 14,156 | 5,007 | 57,691 | |||||
2025 | 26,651 | 2,655 | 14,156 | 5,007 | 48,469 | |||||
2026 | 17,244 | 3 | 14,156 | 4,807 | 36,210 | |||||
2027 | 8,040 | \u2014 | 14,033 | 4,007 | 26,080 | |||||
Years thereafter | \u2014 | \u2014 | 137,009 | 47,746 | 184,755 | |||||
Amortization estimated | 127,307 | 10,176 | 207,666 | 87,832 | 432,981 | |||||
Amortization not yet started | 213,123 | \u2014 | \u2014 | \u2014 | 213,123 | |||||
Total carrying amounts | 340,430 | 10,176 | 207,666 | 87,832 | 646,104 |
The location included below is the principal place of business of the specified associates. The principal place of business and country for ASMPT deviates from the place of incorporation (Cayman Islands).
% Ownership December\u00a031, | |||||
2021 | 2022 | ||||
Name | Location | ||||
Associates | |||||
Levitech BV | Almere,\u00a0the\u00a0Netherlands | 26.64% | 26.64% | ||
SiC systems AB | Lunds Kommun, Sweden | \u2014% | 50.00% | ||
ASMPT Ltd | Singapore | 24.96% | 24.95% |
Levitech BV is valued at nil (2021: nil).
The changes in the investment in associates are as follows:
Other | ASMPT | Total | ||||||||||||||
Net equity share | Net equity share | Other (in)tangible assets | Goodwill | Total ASMPT (before impairment) | Impairment, net | Total ASMPT (after impairment) | ||||||||||
Balance January 1, 2021 | \u2014 | 347,088 | 30,016 | 365,610 | 742,714 | \u2014 | 742,714 | 742,714 | ||||||||
Share in net earnings of investments in associates | \u2014 | 86,595 | \u2014 | \u2014 | 86,595 | \u2014 | 86,595 | 86,595 | ||||||||
Other comprehensive income of investments in associates | \u2014 | 11,833 | \u2014 | \u2014 | 11,833 | \u2014 | 11,833 | 11,833 | ||||||||
Amortization recognized (in)tangible assets | \u2014 | \u2014 | (12,213) | \u2014 | (12,213) | \u2014 | (12,213) | (12,213) | ||||||||
Dividends | \u2014 | (36,297) | \u2014 | \u2014 | (36,297) | \u2014 | (36,297) | (36,297) | ||||||||
Dilution ASMPT share to 25.07% | \u2014 | 3,205 | \u2014 | \u2014 | 3,205 | \u2014 | 3,205 | 3,205 | ||||||||
Foreign currency translation effect | \u2014 | 23,034 | 1,766 | 28,175 | 52,975 | \u2014 | 52,975 | 52,975 | ||||||||
Balance December 31, 2021 | \u2014 | 435,458 | 19,569 | 393,785 | 848,812 | \u2014 | 848,812 | 848,812 | ||||||||
Additions through business combinations | 500 | 500 | ||||||||||||||
Impairments of investments in associates, net | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | (215,389) | (215,389) | (215,389) | ||||||||
Share in net earnings of investments in associates | \u2014 | 78,413 | \u2014 | \u2014 | 78,413 | \u2014 | 78,413 | 78,413 | ||||||||
Other comprehensive income of investments in associates | \u2014 | 2,950 | \u2014 | \u2014 | 2,950 | \u2014 | 2,950 | 2,950 | ||||||||
Amortization recognized intangible assets | \u2014 | \u2014 | (13,642) | \u2014 | (13,642) | \u2014 | (13,642) | (13,642) | ||||||||
Dividends | \u2014 | (48,919) | \u2014 | \u2014 | (48,919) | \u2014 | (48,919) | (48,919) | ||||||||
Dilution ASMPT share to 24.95% | \u2014 | 60 | \u2014 | \u2014 | 60 | \u2014 | 60 | 60 | ||||||||
Foreign currency translation effect | \u2014 | 7,763 | 1,306 | 24,487 | 33,556 | \u2014 | 33,556 | 33,556 | ||||||||
Balance December 31, 2022 | 500 | 475,725 | 7,233 | 418,272 | 901,230 | (215,389) | 685,841 | 686,341 |
On March\u00a015, 2013, the company divested a controlling stake in its subsidiary ASMPT Ltd (ASMPT). After the initial accounting of the sale transaction and related gains, future income from ASMPT was adjusted for the fair value adjustments arising from the basis differences as if a business combination had occurred under IFRS 3R, Business Combinations, i.e. a purchase price allocation (PPA).
The purchase of the associate has been recognized at fair value, being the value of the ASMPT shares on the day of closing of the purchase transaction. The composition of this fair value was determined through a PPA. The PPA resulted in the recognition of intangible assets for customer relationship, technology, trade name, product names, and goodwill. For inventories and property, plant & equipment, a fair value adjustment was recognized.
The ASMPT investment is accounted for under the equity method on a go-forward basis. Equity method investments are tested for prolonged impairment. An investment is considered impaired if the fair value of the investment is less than its carrying value.
If the fair value of an investment is less than its carrying value at the balance sheet date, the company determines whether the impairment is temporary or prolonged. Management concluded that there is objective evidence for impairment, both prolonged and significant. Following our accounting policy, ASM calculated the recoverable amount based on the fair value less cost of disposal. The company has impaired its investment in associates (ASMPT) as disclosed in the third quarter 2022 results press release to account for the reduced market valuation of the stake in ASMPT.
The impairment charge of \u20ac321 million is party recovered (\u20ac106 million) in the fourth quarter as a result of an increase in the recoverable amount. The fair value is determined based on the share price per December 31, 2022 (HK$ 55.65) multiplied by the number of shares in ASMPT, less estimated cost of disposal (0.5%).
The net impairment of investments in associates concerns a non-cash impairment charge of \u20ac215 million, deducted from the asset as a whole. The impairment charge will be subsequently reversed only to the extent that the recoverable amount of the investment increases.
The amount per share recognized as per December 31, 2022, under equity accounting excluding impairment amounts to HK$72.76, whereas the level 1 fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was HK$55.65 as per December 31, 2022.
ASMPT announced on 21 July a Share Buy-back Plan ('SBP') pursuant to which the ASMPT will buy back the on-market shares of the company up to a maximum value of HK$420 million. As part of the SBP 2,466,100 shares were repurchased. In December 2022, 2,633,700 common shares of ASMPT were issued, for cash at par value of HK$0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT. The shares issued under the plan in 2022 have diluted ASM's ownership in ASMPT to 24.95% as of December 31, 2022.
Per December 31, 2022, the book value of our equity method investment in ASMPT was \u20ac901.2 million. The historical cost basis of our 24.95% share of net assets on the books of ASMPT under IFRS was \u20ac475.7 million as of December 31, 2022, resulting in a basis difference of \u20ac425.5 million. \u20ac7.2 million of this basis difference has been allocated to intangible assets. The remaining amount was allocated to equity method goodwill. Each individual, identifiable asset will periodically be reviewed for any indicators of potential impairment. We amortize the basis differences allocated to the assets on a straight-line basis, and include the impact within the results of our equity method
investments. Amortization and depreciation are adjusted for related deferred tax impacts. Included in net income attributable to ASM for 2022 was an after-tax expense of \u20ac13.6 million, representing the depreciation and amortization of the basis differences.
Summarized 100% earnings information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate average 2022: 1 HK$: \u20ac0.12118, for December 31, 2021: 1 HK$: \u20ac0.10863).
(HK$ million) | 2021 | 2022 | ||
Revenues | 21,948 | 19,363 | ||
Income before income tax | 4,092 | 3,413 | ||
Net earnings from continuing operations | 3,175 | 2,618 | ||
Other comprehensive income | (171) | (574) | ||
Total comprehensive income | 3,004 | 2,044 |
Summarized 100% statement of financial position information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate per December 31, 2022, was 1 HK$: \u20ac0.12025 for December 31, 2021: 1 HK$: \u20ac0.11321).
December 31, | ||||
(HK$ million) | 2021 | 2022 | ||
Current assets | 18,251 | 16,515 | ||
Non-current assets | 8,250 | 8,261 | ||
Current liabilities | 6,889 | 5,246 | ||
Non-current liabilities | 4,200 | 3,672 | ||
Total equity | 15,412 | 15,858 |
Shareholder's equity of ASMPT per December 31, 2022, translated into euros at a rate of 0.12025 was \u20ac1,907 million (our 24.95% share: \u20ac476 million).
The ASMPT Board is responsible for ongoing monitoring of the performance of ASMPT. The actual results of ASMPT are discussed with the ASMPT Audit Committee, which includes the representative of ASM. The ASM representative reports to the ASM Management Board and the Audit Committee of ASM on a quarterly basis.
The companies interests in Levitech and SIC systems AB are, individually and in aggregate, immaterial to the consolidated financial statements.
Inventories consist of the following:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Components and raw materials | 175,317 | 356,353 | ||
Work in progress | 31,631 | 113,631 | ||
Finished goods | 18,497 | 84,827 | ||
Total inventories, gross | 225,445 | 554,811 | ||
Allowance for obsolescence | (13,604) | (16,386) | ||
Total inventories, net | 211,841 | 538,425 |
The changes in the allowance for obsolescence are as follows:
December 31, | ||||
2021 | 2022 | |||
Balance at beginning of year | (14,477) | (13,604) | ||
Acquisitions through business combinations | \u2014 | \u2014 | ||
Charged to cost of sales | (5,728) | (8,173) | ||
Reversals | 2,013 | 4,028 | ||
Utilization of the provision | 5,383 | 2,302 | ||
Foreign currency translation effect | (795) | (939) | ||
Balance at end of year | (13,604) | (16,386) |
On December 31, 2022, our allowance for inventory obsolescence amounted to \u20ac16.4 million, which is 3.0% of total inventory. The major part of the allowance is related to components and raw materials. The additions for 2021 and 2022 mainly relate to inventory items which ceased to be used due to technological developments and design changes resulting in obsolescence of certain parts.
A significant percentage of our accounts receivable is derived from sales to a limited number of large multinational semiconductor device manufacturers located throughout the world. In order to monitor potential expected credit losses, we perform ongoing credit evaluations of our customers\u2019 financial condition.
The carrying amount of accounts receivable is as follows:
December 31, | ||||
2021 | 2022 | |||
Current | 418,195 | 466,502 | ||
Overdue <30 days | 18,089 | 58,370 | ||
Overdue 31-60 days | 2,166 | 21,941 | ||
Overdue 61-120 days | 7,244 | 19,789 | ||
Overdue >120 days | 1,030 | 14,221 | ||
Total | 446,724 | 580,823 |
An allowance for doubtful accounts receivable is maintained for potential expected credit losses based upon management\u2019s assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which we are aware regarding a customer\u2019s inability to meet its financial obligations, and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the company\u2019s customers.
The changes in the allowance for doubtful accounts receivable are as follows:
December 31, | ||||
2021 | 2022 | |||
Balance at beginning of year | (361) | (444) | ||
Charged to selling, general and administrative expenses | (83) | (198) | ||
Utilization of the provision | \u2014 | \u2014 | ||
Foreign currency translation effect | \u2014 | \u2014 | ||
Balance at end of year | (444) | (642) |
Other current assets consist of the following:
December 31, | ||||
2021 | 2022 | |||
Prepayments | 8,449 | 17,977 | ||
VAT receivable | 12,114 | 20,648 | ||
Amounts to be invoiced | 21,915 | 59,928 | ||
Others | 8,494 | 15,971 | ||
Total | 50,972 | 114,524 |
Cash and cash equivalents at December 31, 2022 include bank deposits and investments in money market funds that invest in marketable debt obligations and securities of governments, corporates and financial institutions. The amount invested in deposits and money market funds at the end of 2022 was \u20ac11 million (2021: \u20ac83 million) and interest-bearing bank accounts of \u20ac408 million (2021: \u20ac409 million). Our cash and cash equivalents are predominantly denominated in US dollars, and partly in euros, Singapore dollars, Korean won, and Japanese yen.
Bank guarantees exist for an amount of \u20ac1.8 million at December 31, 2022 (\u20ac1.0 million as per December 31, 2021). These guarantees mainly relate to lease and tax payments.
such an issue. The authorization by the AGM can only be granted for a certain period. In the case that the AGM has not authorized the Management Board to issue shares, the AGM shall have the power to issue shares.
Capital management
The Board\u2019s policy is to maintain a strong capital base in order to retain investor, creditor and market confidence and to sustain future development of the business. Management strives to increase the cash balance to EUR 600 million to reflect the increased size of the company, while maintain a balance between investing in growth of the business and redistributing cash to shareholders by paying a sustainable dividend and through share buybacks. The Company\u2019s objective is to achieve a sound return on shareholders\u2019 equity. The Company is monitoring its capital ratio of net debt to total Shareholders\u2019 equity which should not exceed 1.5. There were no changes to the Board\u2019s approach to capital management during the year.
Common shares, preferred and financing preferred shares
Following the amendment of the articles of association on August 3, 2018, the authorized capital of the company amounts to 82,500,000 common shares of \u20ac0.04 par value, 88,500 preferred shares of \u20ac40 par value and 6,000 financing preferred shares of \u20ac40 par value.
As per December 31, 2022, 49,348,548 common shares with a nominal value of \u20ac0.04 each were issued and fully paid up, of which 22,229 common shares are held by us in treasury. All shares have one vote per \u20ac0.04 par value. Treasury shares held by the company cannot be voted on. Of our 49,326,319 outstanding common shares at December 31, 2022, 47,752,219 are registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and 1,574,100 are registered with our transfer agent in the United States, Citibank, NA, New York.
Financing preferred shares are designed to allow ASM to finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares.
Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a preferred or financing preferred shareholder must obtain the approval of the company's Supervisory Board to transfer shares. If approval is denied, the Supervisory Board will provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller
within two months after the approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, at which time the approval expires.
Preferred shares are entitled to a cumulative preferred dividend based on the amount paid up on such shares. Financing preferred shares are entitled to a cumulative dividend based on the par value and share premium paid on such shares.
As per December 31, 2022, no preferred shares and no financing preferred shares are issued.
PURCHASES OF COMMON SHARES BY THE ISSUER AND AFFILIATED PURCHASERS
On May 16, 2022, the AGM authorized the company, for an 18-month period, to be calculated from the date of the AGM, to repurchase its own shares up to 10% of the issued capital, at a price at least equal to the shares\u2019 nominal value and at most a price equal to 110% of the shares' average closing price according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the purchase date.
On February 25, 2020, ASM announced a share buyback program to purchase up to an amount of \u20ac100 million of its own shares within the 2020-2021 time frame. The 2020-2021 program started on June 2, 2020, and was completed on March 2, 2021.
Period | Total number of shares purchased | Average price paid per share (\u20ac) | Cumulative number of shares purchased | |||
Share buyback program 2020-2021: | ||||||
June, 2020 | 57,700 | \u20ac119.16 | 57,700 | |||
July, 2020 | 21,648 | \u20ac144.31 | 79,348 | |||
August, 2020 | 66,086 | \u20ac127.15 | 145,434 | |||
September, 2020 | 140,736 | \u20ac121.74 | 286,170 | |||
October, 2020 | 34,118 | \u20ac130.83 | 320,288 | |||
November, 2020 | 102,020 | \u20ac135.72 | 422,308 | |||
December, 2020 | 58,500 | \u20ac169.64 | 480,808 | |||
January, 2021 | 78,389 | \u20ac207.04 | 559,197 | |||
February, 2021 | 73,587 | \u20ac231.18 | 632,784 | |||
March, 2021 | 13,396 | \u20ac223.07 | 646,180 | |||
Total | 646,180 | \u20ac154.76 |
On April 20, 2021, ASM announced a share buyback program to purchase up to an amount of \u20ac100 million of its own shares within the 2021 time frame. The 2021 program started on July 28, 2021, and was completed on December 17, 2021.
Period | Total number of shares purchased | Average price paid per share (\u20ac) | Cumulative number of shares purchased | |||
Share buyback program 2021: | ||||||
July, 2021 | 10,093 | \u20ac295.48 | 10,093 | |||
August, 2021 | 74,680 | \u20ac314.22 | 84,773 | |||
September, 2021 | 87,223 | \u20ac343.70 | 171,996 | |||
October, 2021 | 43,292 | \u20ac318.51 | 215,288 | |||
November, 2021 | 33,531 | \u20ac404.89 | 248,819 | |||
December, 2021 | 43,297 | \u20ac374.34 | 292,116 | |||
Total | 292,116 | \u20ac342.33 |
On February 22, 2022, ASM announced a share buyback program to purchase up to an amount of \u20ac100 million of its own shares within the 2022/2023 time frame. This share buyback program has not started in 2022.
The following table shows the change in number of treasury shares and outstanding shares:
Number of shares | Treasury shares | Outstanding shares | ||
Balance at beginning of year | 728,717 | 48,568,677 | ||
Purchase common shares | \u2014 | \u2014 | ||
Issue of common shares related to the acquisition of business combinations | \u2014 | 51,154 | ||
Treasury shares transferred related to the acquisition of business combinations | (580,000) | 580,000 | ||
Exercise stock options out of treasury shares | \u2014 | \u2014 | ||
Vesting restricted shares out of treasury shares | (126,488) | 126,488 | ||
Cancellation treasury shares | \u2014 | \u2014 | ||
Balance at end of year | 22,229 | 49,326,319 |
ASM intends to use part of the shares for commitments under the employee share-based compensation schemes and the performance shares and option program for the Management Board.
The share buyback programs were executed by intermediaries through on-exchange purchases or through off-exchange trades. ASM updated the markets on the progress of the share buyback programs on a weekly basis.
The repurchase programs are part of ASM's commitment to use excess cash for the benefit of its shareholders.
TREASURY SHARES
On December 31, 2022, we had 49,326,319 outstanding common shares excluding 22,229 treasury shares. This compared to 48,568,677 outstanding common shares and 728,717 treasury shares at December 31, 2021. Besides the transfer of 580,000 treasury shares for the acquisition of LPE on October 3, 2022 (note 1. Acquisition of subsidiaries), the change in the number of treasury shares in 2022 was the result of\u00a0 126,488 treasury shares that were used as part of share-based payments.
2021 | 2022 | |||
As per January 1: | ||||
Issued shares | 49,797,394 | 49,297,394 | ||
Treasury shares | 1,082,712 | 728,717 | ||
Outstanding shares | 48,714,682 | 48,568,677 | ||
Changes during the year: | ||||
Issue of common shares related to the acquisition of business combinations | \u2014 | 51,154 | ||
Treasury shares transferred related to the acquisition of business combinations | \u2014 | 580,000 | ||
Cancellation of treasury shares | 500,000 | \u2014 | ||
Share buybacks | 462,988 | \u2014 | ||
Treasury shares used for share-based performance programs | 316,983 | 126,488 | ||
As per December 31: | ||||
Issued shares | 49,297,394 | 49,348,548 | ||
Treasury shares | 728,717 | 22,229 | ||
Outstanding shares | 48,568,677 | 49,326,319 |
RETAINED EARNINGS
Distributions to common shareholders are limited to\u00a0the extent the total amount of shareholders\u2019 equity exceeds the amounts of nominal paid-in share capital (exclusive any share premium) and any reserves to be formed pursuant to law or the company\u2019s Articles of Association.\u00a0The amounts are derived from the company financial statements of ASM.
ASM aims to pay a sustainable annual dividend. The Supervisory Board, upon proposal of the Management Board, will annually assess the amount of dividend that will be proposed to the AGM. The decision that a dividend be proposed to the AGM will be subject to the availability of distributable profits as well as retained earnings and may be affected by our potential future funding requirements. Accordingly, dividend payments may fluctuate and could decline or be omitted in any year.
Over 2021, we paid in total a dividend of \u20ac2.50 per common share as regular dividend, and was paid after the 2022 AGM in May 2022. We will propose to the forthcoming 2023 AGM to declare a regular dividend of \u20ac2.50 per share over 2022.
Results on dilution of investments in associates are accounted for directly in equity. For 2022 and 2021, these dilution results were \u20ac60 and \u20ac3,205, respectively.
OTHER RESERVES
The changes in the amounts of other reserves are as follows:
Proportionate share in other comprehensive income of investments in associates | Remeasurement on net defined benefit | Foreign currency translation reserve | Total other reserves | |||||
Balance January 1, 2021 | (12,504) | 261 | 38,428 | 26,185 | ||||
Proportionate share in other comprehensive income of investments in associates | 11,833 | \u2014 | \u2014 | 11,833 | ||||
Remeasurement on net defined benefit | \u2014 | 181 | \u2014 | 181 | ||||
Foreign currency translation effect on foreign operations | \u2014 | \u2014 | 91,273 | 91,273 | ||||
Balance December 31, 2021 | (671) | 442 | 129,701 | 129,472 | ||||
Proportionate share in other comprehensive income of investments in associates | 2,950 | \u2014 | \u2014 | 2,950 | ||||
Remeasurement on net defined benefit | \u2014 | 615 | \u2014 | 615 | ||||
Foreign currency translation effect on foreign operations | \u2014 | \u2014 | 61,845 | 61,845 | ||||
Balance December 31, 2022 | 2,279 | 1,057 | 191,546 | 194,882 |
The company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the company\u2019s operations in the Netherlands and Japan.
Multi-employer plan
There are 209 eligible employees in the Netherlands. These employees participate in a multi-employer union plan (pension fund Metalektro PME) determined in accordance with the collective bargaining agreements effective for the industry in which we operate. This multi-employer union plan, accounted for as a defined contribution plan, covers approximately 1,466 companies and approximately 168,600 contributing members. Our contribution to the multi-employer union plan was less than 5% of the total contribution to the plan. The plan monitors its risks on a global basis, not by participating company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan\u2019s assets to its obligations. As of January 1, 2015, new pension legislation has been enacted. This legislation results in, amongst others, an increase of legally required coverage levels. The coverage percentage is calculated by dividing the funds capital by the total sum of pension liabilities and is based on actual market interest
rates. The coverage ratio as per December 31, 2022, of 110.4% (December 31, 2021: 107.9%) is calculated giving consideration to the pension legislation. We have no obligation to pay off any deficits the pension fund may incur, nor do we have any claim to any potential surpluses.
Every company participating in the PME contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same contribution rate. The premium can fluctuate yearly based on the coverage ratio of the multi-employer union plan. For 2022, the contribution percentage was 27.98%. The pension rights of each employee are based upon the employee\u2019s average salary during employment.
Our net periodic pension cost for this multi-employer union plan for any period is the amount of the required employer contribution for that period minus the employee contribution.
Defined benefit plan
The company\u2019s employees in Japan participate in a defined benefit plan. The company makes contributions to defined benefit plans in Japan that provide pension benefits for employees upon retirement. These are average-pay plans, based on the employees' years of service and compensation near retirement.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out on December 31, 2022. The present value of the defined benefit obligation and the related current service cost and past service cost were measured using the projected unit credit method. Significant actuarial assumptions for the determination of the defined obligation are discount rate, future general salary increases, and future pension increases.
The net liability (asset) of the plan developed as follows:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Defined benefit obligations | 11,925 | 10,227 | ||
Fair value of plan assets | 13,907 | 12,783 | ||
Net liability (asset) for defined benefit plans | (1,982) | (2,556) |
The changes in defined benefit obligations and fair value of plan assets are as follows:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Defined benefit obligations | ||||
Balance January 1 | 11,083 | 11,925 | ||
Current service cost | 842 | 980 | ||
Interest on obligation | 53 | 54 | ||
Remeasurement result | 463 | (891) | ||
Benefits paid | (181) | (989) | ||
Foreign currency translation effect | (335) | (852) | ||
Balance December 31 | 11,925 | 10,227 | ||
Fair value of plan assets | ||||
Balance January 1 | 12,514 | 13,907 | ||
Interest income | 63 | 65 | ||
Return on plan assets | 720 | 41 | ||
Company contribution | 1,170 | 773 | ||
Benefits paid | (181) | (989) | ||
Foreign currency translation effect | (379) | (1,014) | ||
Balance December 31 | 13,907 | 12,783 |
The defined benefit cost consists of the following:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Current service cost | 842 | 980 | ||
Net interest cost | (10) | (11) | ||
Net defined benefit cost | 832 | 969 | ||
Remeasurement on net defined benefit for the year | (257) | (932) | ||
Remeasurement on net defined benefit | (257) | (932) | ||
Total defined benefit cost | 575 | 37 |
The assumptions in calculating the actuarial present value of benefit obligations and net periodic benefit cost are as follows:
\u00a0 | 2021 | 2022 | ||
Discount rate for defined benefit obligations | 0.50% | 1.20% | ||
Discount rate for defined benefit cost | 0.50% | 0.50% |
Assumptions regarding life expectancy are based on mortality tables published in 2020 by the Ministry of Health, Labour and Welfare of Japan.
The main risk concerning the pension plan relates to the discount rate. The defined benefit obligation is sensitive to a change in discount rates. A relative change of the discount rate of 25 basis points would have resulted in a change in the defined benefit obligation of -2.5% to 2.6%.
The allocation of plan assets is as follows:
\u00a0 | December 31, | |||||||
\u00a0 | 2021 | 2022 | ||||||
Cash and cash equivalent | 265 | 2% | 173 | 1% | ||||
Equity instruments | 2,482 | 18% | 2,318 | 18% | ||||
Debt instruments | 1,346 | 10% | 1,125 | 9% | ||||
Assets held by insurance company | 9,814 | 70% | 9,167 | 72% | ||||
Total | 13,907 | 100% | 12,783 | 100% |
The investment strategy is determined based on an asset-liability study in consultation with investment advisors and within the boundaries given by the regulatory bodies for pension funds.
Equity instruments consist primarily of publicly traded Japanese companies and common collective funds. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded (level 1). Common collective funds are valued at the published price (level 1) per share multiplied by the number of shares held as of the measurement date. Debt instruments consist of government bonds and are valued at the closing prices in the active markets for identical assets (level 1). Assets held by the insurance company consist of bonds and loans, government securities and common collective funds. Corporate and government securities are valued by third-party pricing sources (level 2). Common collective funds are valued at the net asset value per share (level 2) multiplied by the number of shares held as of the measurement date.
The plan assets do not include any of the company\u2019s shares.
Retirement plan costs
ASM contributed \u20ac773 to the defined benefit plan in 2022 (\u20ac1,170 in 2021). The company expects to pay benefits for years subsequent to December 31, 2022 as follows:
Expected contribution defined benefit plan | ||
2023 | 1,139 | |
2024 | 341 | |
2025 | 196 | |
2026 | 540 | |
2027 | 796 | |
Aggregate for the years 2028-2032 | 4,890 | |
Total | 7,902 |
The company has adopted various share plans (e.g. a restricted share plan, and a performance share plan) and has entered into share agreements with the Management Board and various employees. Under the stock option plans, the Management Board and employees may purchase per the vesting date a specific number of shares of the company\u2019s common stock at a certain price. Options are priced at market value in euros on the date of grant. Under the restricted share plan, employees receive per the vesting date a specific number of shares of the company\u2019s common stock. Under the performance share plan, the Management Board receives per the vesting date, and provided the performance criteria have been met, a specific number of shares of the company\u2019s common stock.
Authority to issue options and shares
By resolution of the Annual General Meeting of Shareholders (AGM) of May 16, 2022, the formal authority to issue options and shares was allocated to the Management Board subject to the approval of the Supervisory Board. This authority is valid for 18 months and needs to be refreshed by the 2023 AGM to allow the continued application of the long-term incentive (LTI) plans beyond November 17, 2022. The company hasn't granted new options since its last grant date per April 2017.
The ASM 2014 long-term incentive plan for employees (ELTI) is principally administered by the Management Board and the ASM 2014 long-term incentive plan for members of the Management Board (MLTI) is principally administered by the Supervisory Board. This complies with applicable corporate governance standards. However, the Supervisory Board has no power to represent the company. For external purposes, the Management Board remains the competent body under both LTI plans. The LTI plans envisage that the Supervisory Board, or in the case of the ELTI the Management Board with the approval of the Supervisory Board, will determine the number of options and shares to be granted to the Management Board members and to employees.
2014 long-term incentive plan
In 2014, a new long-term incentive plan was adopted. In the new plan to limit potential dilution, the amount of outstanding (vested and non-vested) options and shares granted to the Management Board and to other employees will not exceed 5% of the issued ordinary share capital of ASM. The new long-term incentive plan 2014 consists of two sub-plans: the ELTI and the MLTI.
Options and performance shares are issued to Management Board members and restricted shares are issued to employees once per annum on the date following the publication of the first-quarter results of the relevant year. Possible grant to newly hired employees can be issued once a quarter, on the date following the publication of the financial results of the relevant quarter. The number of options and shares outstanding under the long-term incentive plans or under any other plan or arrangement in aggregate may never exceed 5% of ASM\u2019s share capital.
Performance and restricted shares outstanding
The following table is a summary of changes in performance shares and restricted shares outstanding under the 2014 long-term incentive plan.
Number of performance shares | Number of restricted shares | Status | Fair value at grant date (weighted average) | |||||
Balance January 1, 2021 | 29,997 | 325,811 | ||||||
Shares granted, employees | \u2014 | 86,357 | Unconditional | \u20ac260.77 | ||||
Shares granted, Management Board | 6,343 | \u2014 | Conditional | \u20ac261.25 | ||||
Shares granted, Management Board | 4,504 | \u2014 | Unconditional | \u20ac49.78 | ||||
Shares vested | (26,414) | (167,048) | ||||||
Shares forfeited | \u2014 | (10,708) | ||||||
Balance December 31, 2021 | 14,430 | 234,412 | ||||||
Shares granted, employees | \u2014 | 167,836 | Unconditional | \u20ac297.27 | ||||
Shares granted, Management Board | 9,726 | \u2014 | Conditional | \u20ac313.72 | ||||
Shares granted, Management Board | \u2014 | \u2014 | Unconditional | \u20ac0.00 | ||||
Shares vested | \u2014 | (126,488) | ||||||
Shares forfeited | (1,087) | (36,050) | ||||||
Balance December 31, 2022 | 23,069 | 239,710 |
In 2022, treasury shares were sold for the vesting of 126,488 restricted shares.
Options outstanding
The following table is a summary of changes in options outstanding under the 2014 long-term incentive plan.
Number\u00a0of | Exercise | Fair value at grant date | ||||
Balance January 1, 2015 | \u2014 | |||||
Options granted, April 24, 2015 | 42,659 | 44.24 | \u20ac17.33 | |||
Balance December 31, 2015 | 42,659 | |||||
Options granted, April 22, 2016 | 62,555 | 37.09 | \u20ac12.64 | |||
Balance December 31, 2016 | 105,214 | |||||
Options granted, April 21, 2017 | 24,963 | 51.55 | \u20ac14.57 | |||
Balance December 31, 2017 | 130,177 | |||||
Adjustment following capital repayment | 11,593 | \u2014 | \u2014 | |||
Balance December 31, 2018 | 141,770 | |||||
Options exercised, 2021 | (123,521) | \u2014 | \u2014 | |||
Balance December 31, 2021 | 18,249 | |||||
Options exercised, 2022 | \u2014 | \u2014 | \u2014 | |||
Balance December 31, 2022 | 18,249 |
In 2022, no options were granted.
At December\u00a031, 2022, the aggregate intrinsic value of all options outstanding under the 2014 long-term incentive plan is \u20ac4,300 (2021: \u20ac7,093).
Share-based payments expenses
The changes in the amount of provision for warranty are as follows:
December 31, | ||||
2021 | 2022 | |||
Balance January 1 | 18,987 | 27,181 | ||
Acquisitions through business combinations | \u2014 | 1,300 | ||
Charged to cost of sales | 24,911 | 33,738 | ||
Deductions | (11,660) | (14,797) | ||
Releases of expired warranty | (6,112) | (13,843) | ||
Foreign currency translation effect | 1,055 | 640 | ||
Balance December 31 | 27,181 | 34,219 |
Accrued expenses and other payables consist of the following:
\u00a0 | December\u00a031, | |||
\u00a0 | 2021 | 2022 | ||
Personnel-related items | 72,252 | 100,717 | ||
Deferred revenue | 68,723 | 197,617 | ||
Current portion lease liabilities | 7,574 | 9,520 | ||
Advanced payments from customers | 14,837 | 97,563 | ||
Supplier-related items | 9,627 | 20,232 | ||
Marketing-related items | 1,575 | 1,634 | ||
R&D projects | \u2014 | 5,570 | ||
Other | 15,976 | 26,058 | ||
Total accrued expenses and other payables | 190,564 | 458,911 |
As per December 31, 2022, ASM was debt-free. ASM may borrow under separate short-term lines of credit with banks under an unsecured \u20ac150 million standby credit facility with a consortium of banks.
The amount outstanding as at December\u00a031, 2022 was nil, so the undrawn portion totaled \u20ac150 million. The undrawn portion represents the company\u2019s standby revolving credit facility of \u20ac150 million with a consortium of banks. The company has a new RCF as per end of May 2022 and the new facility has a tenor of five years with an option to extend up to two years. The facility amount is \u20ac150 million with an accordion option increase the facility amount by \u20ac100 million.
The credit facility of \u20ac150 million includes one financial covenant:
\u2022Consolidated total net debt/total shareholders\u2019 equity ratio.\u00a0
This financial covenant is measured twice each year: on June\u00a030 and December\u00a031.
The net debt/total shareholders\u2019 equity ratio should not exceed 1.5. For the year ended December\u00a031, 2022, the company has no net debt, cash and cash equivalents amount to \u20ac419 million, and total equity equals the amount of consolidated tangible net worth.
The company is in compliance with these financial covenants as of December 31, 2022.
FINANCIAL INSTRUMENTS
Financial instruments include:
\u00a0 | December\u00a031, | |||
2021 | 2022 | |||
Financial assets: | ||||
Cash and cash equivalents | 491,507 | 419,315 | ||
Accounts receivable | 446,724 | 580,823 | ||
Financial liabilities: | ||||
Lease liabilities | 15,886 | 18,604 | ||
Contingent consideration payable | \u2014 | 78,649 | ||
Accounts payable | 175,436 | 243,499 |
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable equal their fair values because of the short-term nature of these instruments.
Gains or losses related to financial instruments are as follows:
\u00a0 | 2021 | 2022 | ||
Interest income | 23 | 2,246 | ||
Interest expense | (2,012) | (1,523) | ||
Change in fair value of contingent consideration | \u2014 | (2,575) | ||
Result from foreign currency exchange | 33,473 | 25,011 | ||
Addition to allowance for doubtful accounts receivable | (83) | (198) |
FINANCIAL RISK FACTORS
ASM is exposed to a number of risk factors: market risks, credit risk, liquidity risk, and equity price risk. The company may use forward exchange contracts to hedge its foreign exchange risk. The company does not enter into financial instrument transactions for trading or speculative purposes.
Market risk
Market risk includes changes in market prices, foreign exchange rates and interest rates, which will affect the group\u2019s income or the value of its holdings of financial instruments. The objective of market-risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
Foreign exchange risk
ASM and its subsidiaries conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of the company (euro) or one of its subsidiaries conducting the business. The purpose of the company's foreign currency management is to manage the effect of exchange-rate fluctuations on income, expenses, cash flows, and assets and liabilities denominated in selected foreign currencies, in particular denominated in US dollars.
We may use forward exchange contracts to hedge our foreign exchange risk of anticipated sales or purchase transactions in the normal course of business which occur within the next twelve months, for which we have a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions being hedged. There is no hedge accounting applied on the hedges therefore change in fair value (gain or loss) on the hedges will be recognized in profit or loss.
Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. We record all derivatives, including forward exchange contracts, on the statement of financial position at fair value in accrued expenses and payables. Should contracts extend beyond one year, these are classified as long-term.
Furthermore, we may manage the currency exposure of certain receivables and payables using derivative instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the consolidated statement of profit or loss. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date, and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) in the consolidated statement of profit or loss.
We do not use forward exchange contracts for trading or speculative purposes. Financial assets and financial liabilities are recognized on the company's consolidated statement of financial position when the company becomes a party to the contractual provisions of the instrument.
To the extent that exchange rate fluctuations impact the value of the company\u2019s investments in its foreign subsidiaries, they are not hedged. The cumulative effect of these fluctuations is separately reported in consolidated equity. Reference is made to Note 12.
Per December 31, 2021 one FX option was outstanding with a fair value of \u20ac37,000. Per December 31, 2022, there were no forward exchange contracts outstanding.
The foreign currency exchange results in 2022 related only to translation gain of \u20ac25.0 million, compared to translation gain of \u20ac33.5 million in 2021. A substantial part of ASM's cash position is denominated in US dollar, which is the key driver of the exchange gain in 2021 and 2022.
The following table analyzes the company\u2019s exposure to currency risk in our major currencies.
\u00a0 | December 31, | |||||||||||||||
\u00a0 | 2021 | 2022 | ||||||||||||||
(thousand) | USD | JPY | KRW | SGD | USD | JPY | KRW | SGD | ||||||||
Accounts receivable | 394,915 | 6,890,314 | 9,091,916 | 395 | 490,051 | 5,836,919 | 14,503,184 | 458 | ||||||||
Cash and cash equivalents | 417,704 | 1,864,776 | 29,215,789 | 27,003 | 308,977 | 2,209,145 | 16,405,166 | 32,370 | ||||||||
Accounts payable | (97,705) | (4,057,736) | (23,626,477) | (41,541) | (117,040) | (3,429,196) | (31,297,765) | (78,164) | ||||||||
Total | 714,914 | 4,697,354 | 14,681,228 | (14,143) | 681,988 | 4,616,868 | (389,415) | (45,336) |
The following table analyzes the company\u2019s sensitivity to a hypothetical 10% strengthening and 10% weakening of the US dollar, Singapore dollar, Korean won and Japanese yen against the euro as of December\u00a031, 2021, and December\u00a031, 2022. This analysis includes foreign currency-denominated monetary items and adjusts their translation at year-end for a 10% increase and 10% decrease against the euro.
Impact on financial instruments | ||||
(\u20ac thousand) | 2021 | 2022 | ||
10% increase of US dollar versus euro | 63,121 | 63,940 | ||
10% decrease of US dollar versus euro | (63,121) | (63,940) | ||
10% increase of Singapore dollar versus euro | (926) | (3,170) | ||
10% decrease of Singapore dollar versus euro | 926 | 3,170 | ||
10% increase of Korean won versus euro | 1,086 | (29) | ||
10% decrease of Korean won versus euro | (1,086) | 29 | ||
10% increase of Japanese yen versus euro | 3,603 | 3,283 | ||
10% decrease of Japanese yen versus euro | (3,603) | (3,283) |
A hypothetical 10% strengthening or 10% weakening of any other currency against the euro as of December\u00a031, 2021, and December\u00a031, 2022, could have a material impact on net earnings for certain currencies.
Interest risk
We are exposed to interest rate risk through our cash deposits. The company does not enter into financial instrument transactions for trading or speculative purposes, or to manage interest-rate exposure. As per December 31, 2022, the company had no debt and was not exposed to interest rate risk on borrowings.
Credit risk
Financial instruments that potentially subject the company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and derivative instruments. These instruments contain a risk of counterparties failing to discharge their obligations. We monitor credit risk and manage credit risk exposure by type of financial instrument by assessing the creditworthiness of counterparties. We do not anticipate non-performance by counterparties, given their high creditworthiness.
Our customers are semiconductor device manufacturers located throughout the world. We perform ongoing credit evaluations of our customers' financial condition. We take additional measures to mitigate credit risk when considered appropriate by means of down payments or letters of credit. We generally do not require collateral or other security to support financial instruments with credit risk.
Concentrations of credit risk (whether on- or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.
We derive a significant percentage of our revenue from a small number of large customers. The 10 largest customers accounted for approximately 77.8% of revenue in 2022 (2021: 78.9%). The three largest customers accounted for approximately 57.6% of revenue in 2022 (2021: 59.4%). In 2022, we had two customers (2021: three customers) who contributed more than 10% of total revenue. Revenue to these large customers may also fluctuate significantly from time to time, depending on the timing and level of purchases by these customers. Significant orders from such customers may expose the company to a concentration of credit risk, and difficulties in collecting amounts due, which could harm the company\u2019s financial results. However, given the creditworthiness of our customers and historical experience, we have not accounted for an expected credit loss over the outstanding balances in general, for further details we refer to Note 9.
We invest our cash and cash equivalents in short-term deposits, money-market funds, and derivative instruments with high-rated financial institutions. We only enter into transactions with a limited number of major financial institutions that have high credit ratings, and we closely monitor the creditworthiness of our counterparties. Concentration risk is mitigated by not limiting the exposure to a single counterparty.
The maximum credit exposure is equal to the carrying values of cash and cash equivalents and accounts receivable.
Liquidity risk
Our policy is to maintain a strong capital base so as to maintain investor-, creditor-, and market confidence, and to sustain future development of the business.
Our liquidity needs are affected by many factors, some of which are based on the normal ongoing operations of the business, and others that relate to the uncertainties of the global economy and the semiconductor industry. Although our cash requirements fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with our principal sources of liquidity, are sufficient to satisfy our current requirements, including our expected capital expenditures in 2022.
We intend to return cash to our shareholders on a regular basis in the form of dividend payments and, subject to our actual and anticipated liquidity requirements and other relevant factors, share buybacks.
The following table summarizes the company\u2019s contractual and other obligations as at December 31, 2022.
Total | Less\u00a0than | 1-5 | More\u00a0than | |||||
Accounts payable | 243,499 | 243,499 | \u2014 | \u2014 | ||||
Income tax payable | 43,785 | 43,785 | \u2014 | \u2014 | ||||
Accrued expenses and other payables | 458,911 | 458,911 | \u2014 | \u2014 | ||||
Non-current lease liabilities | 18,604 | \u2014 | 16,530 | 2,074 | ||||
Pension liabilities | 7,902 | 1,139 | 1,873 | 4,890 | ||||
Purchase obligations: | ||||||||
Purchase commitments to suppliers | 1,075,376 | 1,046,024 | 29,352 | \u2014 | ||||
Capital expenditure and other commitments | 30,754 | 30,754 | \u2014 | \u2014 | ||||
Total contractual obligations | 1,878,831 | 1,824,112 | 47,755 | 6,964 |
Total short-term lines of credit amounted to \u20ac150 million at December 31, 2022. The amount outstanding at December\u00a031, 2022 was nil and the undrawn portion totaled \u20ac150 million. The standby revolving credit facility of \u20ac150 million with a consortium of banks will be available through May 31, 2027.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM).
The accounting policies used to measure the net earnings and total assets in each segment are consistent with those used in the consolidated financial statements. The measurement methods used to determine reported segment earnings are consistently applied for all periods presented. There were no asymmetrical allocations to segments.
Geographical information is summarized as follows:
\u00a0 | Year ended December 31, | |||||||
2021 | 2022 | |||||||
(\u20ac thousand) | Revenue | Non-current assets 1) | Revenue | Non-current assets 1) | ||||
United States | 454,148 | 276,414 | 561,848 | 383,846 | ||||
Europe | 172,442 | 74,377 | 264,324 | 653,152 | ||||
Asia | 1,103,321 | 289,776 | 1,584,755 | 346,451 | ||||
Total | 1,729,911 | 640,567 | 2,410,927 | 1,383,449 | ||||
1 Other than financial instruments, deferred tax assets and post-employment benefit assets |
Geographical information is summarized as follows:
\u00a0 | Year ended December 31, | |||
2021 | 2022 | |||
(\u20ac thousand) | Revenue | Revenue | ||
United States | 454,148 | 561,848 | ||
Europe | 172,442 | 264,324 | ||
Asia | 1,103,321 | 1,584,755 | ||
Total | 1,729,911 | 2,410,927 |
For geographical reporting, the revenue is attributed to the geographical location in which the customer's facilities are located.
Revenue stream
The company generates revenue primarily from the sales of equipment and spares and services. The products and services are described by nature in the summary of significant accounting policies, and are recognized within these revenue streams as follows:
\u2022Equipment revenue: This revenue stream captures the sale of equipment and installation services. Revenues from royalties and licenses are included to the extent that these licenses relate to equipment.
\u2022Spares and services revenue: The revenues included under this line relate to the sale of spares and support services. Revenues from royalties and licenses are included to the extent that these licenses relate to spares.
\u00a0 | Year ended December 31, | |||
(\u20ac thousand) | 2021 | 2022 | ||
Equipment revenue | 1,408,102 | 2,033,669 | ||
Spares & services revenue | 321,809 | 377,258 | ||
Total | 1,729,911 | 2,410,927 |
Total revenue increased by 39%, driven by solid increases in our ALD business
Contract balances
\u00a0 | 2021 | 2022 | ||
Accrued revenue | 21,915 | 59,928 | ||
Deferred revenue | 68,723 | 197,617 | ||
Advanced payments from customers | 14,837 | 97,563 |
The increase in the contract balances is the result of the higher activity level of the company, the additions as a result of the acquisitions and because we are still experiencing certain supply chain challenges, leading to an increased number of incomplete tool shipments for which revenues are deferred. The impact of the acquisitions are mainly on deferred revenues (\u20ac20 million) and advance payments from customers (\u20ac39 million).
The accrued revenue included in the 'Amounts to be invoiced' primarily relate to the company\u2019s right to consideration for work completed and revenue recognized but not billed at the reporting date. The accrued revenue is transferred to accounts receivables when the rights become unconditional. This usually occurs when the company issues an invoice to the customer.
Amounts recognized in profit or loss
The components of the result before income taxes consist of:
\u00a0 | Year ended December 31, | |||
\u00a0 | 2021 | 2022 | ||
The Netherlands | 358,039 | 157,738 | ||
Other countries | 239,285 | 347,238 | ||
Result before income taxes | 597,324 | 504,976 |
The income tax expense consists of:
\u00a0 | Year ended December 31, | |||
\u00a0 | 2021 | 2022 | ||
Current: | ||||
The Netherlands | (72,032) | (78,738) | ||
Other countries | (7,718) | (36,430) | ||
(79,750) | (115,168) | |||
Deferred: | ||||
The Netherlands | (5,948) | (1,875) | ||
Other countries | (16,917) | 1,180 | ||
Income tax expense | (102,615) | (115,863) |
Reconciliation of effective tax rate
The provisions for income taxes as shown in the consolidated statements of profit or loss differ from the amounts computed by applying the Dutch statutory income tax rate to earnings before taxes. A reconciliation of the provisions for income taxes and the amounts that would be computed using the Dutch statutory income tax rate is set forth as follows:
\u00a0 | Year ended December 31, | |||||||
\u00a0 | 2021 | 2022 | ||||||
Result before income taxes from continuing operations | 597,324 | 100.0% | 504,976 | 100.0% | ||||
Income tax provision based on Dutch statutory income tax rate | (149,331) | 25.0% | (130,284) | 25.8% | ||||
Non-deductible expenses | (2,098) | 0.4% | (1,639) | 0.3% | ||||
Foreign taxes at a rate other than the Dutch statutory rate | 8,484 | (1.4)% | 18,182 | (3.6)% | ||||
Tax incentives 1) and non-taxable income 2) | 37,708 | (6.3)% | 54,942 | (10.9)% | ||||
Adjustments in respect of prior years' current taxes | 3,818 | (0.6)% | (49) | \u2014% | ||||
Non-deductible impairment charge on investments in associates 2) | \u2014 | \u2014% | (55,570) | 11.0% | ||||
Other 3) | (1,196) | 0.2% | (1,445) | 0.3% | ||||
Tax income (expense) | (102,615) | 17.2% | (115,863) | 22.9% |
1 Tax incentives relate to the Netherlands (Innovation Box), Singapore (Pioneer Certificate) and South Korea (FIZ).
2 Non-taxable income consists of revenues deriving from the share in income of investments in associates which are exempted under the Dutch participation exemption. The participation exemption also applies to the impairment charge on investments in associates.
3 Other mainly consists of tax credits, withholding taxes, changes in (enacted) tax laws and revaluation of certain assets.
The consolidated group effective tax rate for 2022 is higher compared to previous years due to an incidental non-deductible impairment charge on ASMPT. The effective tax rate, excluding the impairment on, and net income of our investment in ASMPT, for 2022 is 17.7% (2021: 19.6%).
The Dutch statutory tax rate is 25.8%. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. During 2022, there was no significant change in the statutory tax rates of the relevant jurisdictions. The company\u2019s deferred tax assets and liabilities have been\u00a0determined in accordance with these statutory\u00a0income tax rates.
Movement in deferred tax balances
\u00a0 | Net balance at January 1, 2021 | Changes through business combinations | Consolidated statement of profit and loss | Equity | Exchange differences | Net balance at December 31, 2021 | Deferred tax assets at December 31, 2021 | Deferred tax liabilities at December 31, 2021 | ||||||||
Right-of-use assets & lease liabilities | 91 | \u2014 | 109 | \u2014 | 12 | 212 | \u2014 | 212 | ||||||||
Property plant and equipment | 553 | \u2014 | (3,370) | \u2014 | (11) | (2,828) | \u2014 | (2,828) | ||||||||
Other intangible assets | (42,627) | \u2014 | (16,471) | \u2014 | (1,687) | (60,785) | \u2014 | (60,785) | ||||||||
Evaluation tools | 5,200 | \u2014 | (1,097) | \u2014 | (154) | 3,949 | \u2014 | 3,949 | ||||||||
Employee benefits | (549) | \u2014 | (69) | (79) | 17 | (680) | \u2014 | (680) | ||||||||
Inventories | 1,001 | \u2014 | 203 | \u2014 | 74 | 1,278 | \u2014 | 1,278 | ||||||||
Provision for warranty | 3,834 | \u2014 | 1,593 | \u2014 | 224 | 5,651 | \u2014 | 5,651 | ||||||||
Accrued expenses | 3,248 | \u2014 | 2,845 | \u2014 | 204 | 6,297 | 69 | 6,228 | ||||||||
Tax losses carried forward | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||||
R&D tax credits | 7,553 | \u2014 | (6,608) | \u2014 | 282 | 1,227 | \u2014 | 1,227 | ||||||||
Total deferred tax | (21,696) | \u2014 | (22,865) | (79) | (1,039) | (45,679) | 69 | (45,748) |
\u00a0 | Net balance at January 1, 2022 | Changes through business combinations | Consolidated statement of profit and loss | Equity | Exchange differences | Net balance at December 31, 2022 | Deferred tax assets at December 31, 2022 | Deferred tax liabilities at December 31, 2022 | ||||||||
Right-of-use assets & lease liabilities | 212 | \u2014 | 40 | \u2014 | 10 | 262 | \u2014 | 262 | ||||||||
Property plant and equipment | (2,828) | \u2014 | 662 | \u2014 | (37) | (2,203) | \u2014 | (2,203) | ||||||||
Other intangible assets | (60,785) | (82,429) | (3,213) | \u2014 | (1,236) | (147,663) | \u2014 | (147,663) | ||||||||
Evaluation tools | 3,949 | \u2014 | (1,719) | \u2014 | (296) | 1,934 | \u2014 | 1,934 | ||||||||
Employee benefits | (680) | \u2014 | (152) | (277) | 48 | (1,061) | \u2014 | (1,061) | ||||||||
Inventories | 1,278 | 451 | 1,800 | \u2014 | 40 | 3,569 | 140 | 3,429 | ||||||||
Provision for warranty | 5,651 | 191 | 994 | \u2014 | 105 | 6,941 | \u2014 | 6,941 | ||||||||
Accrued expenses | 6,297 | (257) | 4,088 | \u2014 | 182 | 10,310 | 41 | 10,269 | ||||||||
Tax losses carried forward | \u2014 | 6,816 | (2,049) | \u2014 | (115) | 4,652 | \u2014 | 4,652 | ||||||||
R&D tax credits | 1,227 | (567) | (1,146) | \u2014 | 123 | (363) | \u2014 | (363) | ||||||||
Total deferred tax | (45,679) | (75,795) | (695) | (277) | (1,176) | (123,622) | 181 | (123,803) |
Deferred tax assets and/or liabilities for temporary differences are mainly recognized in the Netherlands, United States, Japan, South Korea and Singapore.
Income tax receivable and income tax payable
During 2022, the company paid income taxes of \u20ac90.5 million (2021: \u20ac151.6 million) for tax assessments relating to 2022. The amount in 2021 included paid income taxes for the years 2019, 2020 and 2021.
Unrecognized deferred tax assets
The credits concern R&D credits generated in the US, in the state of Arizona. However, ASM does not recognize these credits stemming from prior years due to the fact that utilization of prior-year credits is only possible if and when the credits generated in the current year are fully utilized. Given the level of R&D activity in the US, the company does not expect it could fully utilize the credits generated in the current year and, hence, does not expect to benefit from the available credits generated in prior years.
\u00a0 | 2022 | |||
\u00a0 | Gross amount | Tax effect | ||
Credits | 21,622,199 | 21,622,199 | ||
Unrecognized deferred tax assets | 21,622,199 | 21,622,199 |
Summary of open tax years
A summary of open tax years by major jurisdiction is as follows:
Jurisdiction | \u00a0 |
Japan | 2017-2022 |
The Netherlands | 2020-2022 |
Singapore | 2018-2022 |
United States of America | 2018-2022 |
South Korea | 2022 |
The calculation of the company\u2019s tax liabilities involves dealing with uncertainties in the application of complex tax laws. The company\u2019s estimate for the potential outcome of any unrecognized tax benefits is highly judgmental.\u00a0Settlement of unrecognized tax benefits in a manner inconsistent with the company\u2019s expectations could have a material impact on the company\u2019s financial position, net earnings and cash flows. The company is subject to tax audits in its major tax jurisdictions, and local tax authorities may challenge the positions taken by the company.
Expenses by nature were as follows:
\u00a0 | Year ended December 31, | |||
2021 | 2022 | |||
Materials and supplies | 727,910 | 1,014,196 | ||
Personnel expenses | 322,226 | 471,464 | ||
Depreciation and amortization | 93,614 | 122,434 | ||
Impairments | 1,967 | 6 | ||
Other personnel-related expenses | 63,938 | 103,754 | ||
Professional fees | 27,520 | 44,718 | ||
Other 1) | 5,349 | 21,960 | ||
Total cost of sales, selling, general and administrative and research and development expenses | 1,242,524 | 1,778,532 |
1 Other relates to facility expenses, IT expenses and other expenses minus capitalized expenses
Research and development consists of the following:
\u00a0 | Year ended December 31, | |||
\u00a0 | 2021 | 2022 | ||
Gross research and development expenses | 206,019 | 301,618 | ||
Capitalization of development expenses | (81,973) | (102,627) | ||
Amortization of capitalized development expenses | 25,184 | 34,869 | ||
Research and development grants and credits | \u2014 | \u2014 | ||
Total research and development expenses | 149,230 | 233,860 | ||
Impairment of capitalized development expenses | 1,967 | 6 | ||
Net research and development expenses | 151,197 | 233,866 |
The impairment expenses in 2021 and 2022 are related to customer-specific projects.
Personnel expenses for employees were as follows:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Wages and salaries | 273,394 | 396,164 | ||
Social security | 20,333 | 26,961 | ||
Pension expenses | 11,257 | 18,528 | ||
Share-based payment expenses | 17,242 | 29,811 | ||
Total | 322,226 | 471,464 |
Personnel expenses are included in cost of sales and in operating expenses in the consolidated statement of profit or loss.
The number of employees, exclusive of temporary workers, by geographical area at year-end was as follows:
\u00a0 | December\u00a031, | |||
Geographical location | 2021 | 2022 | ||
Europe: | ||||
- the Netherlands | 161 | 211 | ||
- EMEA | 240 | 364 | ||
United States | 814 | 1,034 | ||
Japan | 295 | 350 | ||
South Korea | 392 | 462 | ||
Singapore | 854 | 1,091 | ||
Asia, other | 556 | 746 | ||
Total | 3,312 | 4,258 |
The number of employees, exclusive of temporary workers, by function at year-end was as follows:
December\u00a031, | ||||
Per function | 2021 | 2022 | ||
Research and development | 649 | 965 | ||
Manufacturing | 879 | 1,197 | ||
Marketing and sales | 396 | 445 | ||
Customer service | 1,090 | 1,271 | ||
Corporate and support functions | 298 | 380 | ||
Total | 3,312 | 4,258 |
Basic net earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding for that period. The dilutive effect is calculated using the treasury stock method. The calculation of diluted net income per share assumes the exercise of options issued under our stock option plans (and the issuance of shares under our share plans) for periods in which exercises (or issuances) would have a dilutive effect.
The calculation of basic and diluted net income per share attributable to common shareholders is based on the following data:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Net earnings used for purposes of calculating net income per common share | ||||
Net earnings from operations | 494,709 | 389,113 | ||
Basic weighted average number of shares outstanding during the year | 48,645 | 48,820 | ||
Effect of dilutive potential common shares from stock options and restricted shares | 264 | 278 | ||
Dilutive weighted average number of shares outstanding | 48,909 | 49,097 | ||
Basic net earnings per share: | ||||
from operations | 10.17 | 7.97 | ||
Diluted net earnings per share: | ||||
from operations | 10.11 | 7.93 |
During 2022, the company considered the members of the Management Board, the Executive Committee (as from effective date of February 1, 2022) and the Supervisory Board to be the key management personnel. Total remuneration for key management personnel in 2022 amounts to \u20ac11,431 (2021: \u20ac4,800). ASM does not provide any loans, deposits or related guarantees to the members of the Management Board, the Executive Committee or the Supervisory Board.
MANAGEMENT BOARD
The remuneration of members of the Management Board has been determined by the Supervisory Board according to the following table that sets out information concerning all remuneration from the company (including its subsidiaries) for services in all capacities to all current members of the Management Board of the company. The remuneration of the Management Board consists of the remuneration of current and former managing directors. In addition to the CEO and CFO a third Management Board member was appointed on May 16, 2022
December 31, | ||||
2021 | 2022 2) | |||
Short-term employee benefits | 2,856 | 3,645 | ||
Post-employment benefits | 190 | 214 | ||
Other long-term benefits | \u2014 | \u2014 | ||
Termination benefits | \u2014 | \u2014 | ||
Share-based payment 1) | 1,391 | 1,570 | ||
Total Management Board remuneration | 4,437 | 5,429 |
1 The remuneration reported as part of the LTI (share awards) is based on costs incurred under accounting values EU-IFRS. The costs of share awards are charged to the consolidated statement of profit & loss over the three-year vesting period based on the number of awards expected to vest. For the first year we account at target, subsequently we apply the estimated number of share awards, and in the final performance year of the awards we update this estimate to the best estimated number of awards which are anticipated to vest.
2 Mr. H. M'Saad has been appointed as CTO in 2022. His remuneration has been reported in the overview above as from AGM (May 16, 2022). Prior to his appointment he was member of the Executive Committee.
EXECUTIVE COMMITTEE (excluding management board)
The remuneration of members of the Executive Committee has been determined by the Management Board according to the following table that sets out information concerning all remuneration from the company as of February 1, 2022 (including its subsidiaries) for services in all capacities to all current members of the Executive Committee of the company. The remuneration of the Executive Committee consists of the remuneration of current and former members.
December 31, | ||||
2021 | 2022 | |||
Short-term employee benefits | \u2014 | 3,449 | ||
Post-employment benefits | \u2014 | 83 | ||
Other long-term benefits | \u2014 | \u2014 | ||
Termination benefits | \u2014 | \u2014 | ||
Share-based payment 1) | \u2014 | 1,840 | ||
Total Executive Committee remuneration 2) | \u2014 | 5,372 |
1 The amounts included for share-based payment in the total remuneration represent the vesting expenses related to the financial year.
2 Effective per February 1, 2022, the Executive Committee was installed. And therefore remuneration is only included in the above table as from this effective date. During 2021 the Executive Committee was not in place, and therefore comparable figures are not included in this overview.
SUPERVISORY BOARD
The ownership or controlling interest of outstanding common shares of ASM by members of the Management Board and Supervisory Board or members of their immediate family are as follows:
\u00a0 | December 31, 2021 | December 31, 2022 | ||||||
\u00a0 | Shares owned | Percentage\u00a0of common\u00a0shares outstanding | Shares owned | Percentage\u00a0of common\u00a0shares outstanding | ||||
P.F.M. van der Meer Mohr (member of the Supervisory Board) | 200 | 0.00% | 200 | 0.00% | ||||
D. Lamouche (member of the Supervisory Board) | 390 | 0.00% | 390 | 0.00% | ||||
M.J.C. de Jong (member of the Supervisory Board) | 4,050 | 0.01% | 4,050 | 0.01% |
KPMG Accountants N.V. has served as our external auditor for the years 2022 and 2021. The table sets out the aggregate fees for professional audit services and other services rendered by the external auditors and its member firms and/or affiliates in 2022 and 2021. The fees mentioned in the table for the audit of the financial statements 2022 (2021) relate to the total fees for the audit of the financial statements 2022 (2021), irrespective of whether the activities were performed during the financial year 2022 (2021). Other audit-related fees are related to assurance services on non-financial information. The following fees were charged by KPMG Accountants N.V. to the company, its subsidiaries and other consolidated companies, as referred to in Section 2:382a(1) and (2) of the Dutch Civil Code.
\u00a0 | 2021 | 2022 | ||||||||||
\u00a0 | KPMG Accountants NV | KPMG network | KPMG Total | KPMG Accountants NV | KPMG network | KPMG Total | ||||||
Audit fees | 676 | 264 | 940 | 1,035 | 278 | 1,313 | ||||||
Audit-related fees | 50 | \u2014 | 50 | 75 | \u2014 | 75 | ||||||
Tax fees | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||
Other fees | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||
Total | 726 | 264 | 990 | 1,110 | 278 | 1,388 |
AUDIT COMMITTEE PREAPPROVAL POLICIES
The Audit Committee has determined that the provision of services by KPMG described in the preceding paragraphs is compatible with maintaining KPMG\u2019s independence. All audit and permitted non-audit services provided by KPMG during 2022 were preapproved by the Audit Committee.
The Audit Committee has adopted the following policies and procedures for preapproval of all audit and permitted non-audit services provided by our external auditor:
Audit services
Management submits to the Audit Committee for preapproval the scope and estimated fees for specific services directly related to performing the independent audit of our consolidated financial statements for the current year.
Audit-related services
The Audit Committee may preapprove expenditures up to a specified amount for services included in identified service categories that are related extensions of audit services and are logically performed by the auditors. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval.
Tax services
The Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total for identified services related to tax matters. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval.
Other services
% Ownership December\u00a031, | ||||||
2021 | 2022 | |||||
Name | Location | |||||
Subsidiaries (consolidated) | ||||||
ASM Europe BV 1) | Almere,\u00a0the\u00a0Netherlands | 100% | 100% | |||
ASM IP Holding BV 1) | Almere,\u00a0the\u00a0Netherlands | 100% | 100% | |||
ASM Pacific Holding BV 1)\u00a02) | Almere, the Netherlands | 100% | 100% | |||
ASM Netherlands Holding BV 1) | Almere,\u00a0the\u00a0Netherlands | 100% | 100% | |||
ASM United Kingdom Sales BV 1) | Almere, the Netherlands | 100% | 100% | |||
ASM Germany Sales BV 1) | Almere, the Netherlands | 100% | 100% | |||
LPE S.p.A 3) | Baranzate, Italy | n/a | 100% | |||
Pilegrowth Tech S.r.l. | Cernobbio, Italy | n/a | 100% | |||
LPE Shanghai Int. Trading Co. | Shanghai, China | n/a | 100% | |||
ASM France SARL | Crolles, France | 100% | 100% | |||
ASM Italia Srl | Milano, Italy | 100% | 100% | |||
ASM Belgium NV | Leuven, Belgium | 100% | 100% | |||
ASM Services and Support Ireland Ltd | Dublin, Ireland | 100% | 100% | |||
ASM Services and Support Israel Ltd | Kiryat Gat, Israel | 100% | 100% | |||
ASM Microchemistry Oy | Helsinki, Finland | 100% | 100% | |||
ASM America Inc | Phoenix, Arizona, United States of America | 100% | 100% | |||
ASM NuTool Inc | Phoenix, Arizona, United States of America | 100% | 100% | |||
Reno Sub-Systems, Inc | New Jersey, Delaware, United States of America | n/a | 100% | |||
Reno Technologies, Inc. | New Jersey, Delaware, United States of America | n/a | 100% | |||
ASM Japan KK | Tokyo, Japan | 100% | 100% | |||
ASM Wafer Process Equipment Singapore Pte\u00a0Ltd | Singapore | 100% | 100% | |||
ASM Front-End Manufacturing Singapore Pte\u00a0Ltd | Singapore | 100% | 100% | |||
ASM Services & Support Malaysia SDN BHD | Kulim, Malaysia | 100% | 100% | |||
ASM Korea Ltd | Dongtan, South Korea | 100% | 100% | |||
ASM Front-End Sales\u00a0& Services Taiwan Co\u00a0Ltd | Hsin-Chu, Taiwan | 100% | 100% | |||
ASM Semiconductor Equipment India Private Limited | Bangalore, India | n/a | 100% | |||
ASM China Ltd | Shanghai, People\u2019s Republic of China | 100% | 100% |
1 For these subsidiaries, ASM International N.V. has filed statements at the Dutch Chamber of Commerce assuming joint and several liability in accordance with Article 403, Part 9 of Book 2 of the Dutch Civil Code.
2 ASM Pacific Holding BV holds 24.95% of the shares in ASMPT Ltd.
GENERAL INFORMATION
ASM International N.V. (ASM, or the company) is a Dutch public liability company domiciled in the Netherlands with its principal operations in Europe, the United States of America, and Asia. The company dedicates its resources to the research, development, manufacturing, marketing and servicing of equipment and materials used to produce mainly semiconductor devices. The company is registered at Versterkerstraat 8, 1322 AP Almere, the Netherlands.
The company's shares are listed for trading on the Euronext Amsterdam Stock Exchange (symbol ASM).
The accompanying consolidated financial statements include the financial statements of ASM International N.V. and its consolidated subsidiaries (together also referred to as ASM, or the company). ASM's subsidiaries are listed in Note 28 and investments in associates are listed in Note 7.
BASIS FOR ACCOUNTING
The consolidated financial statements for the year ended December 31, 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and also comply with the financial reporting requirements included in Section 362(9) of Part 9, Book 2 of the Dutch Civil Code.
The consolidated financial statements have been prepared by the Management Board of the company and authorized for issue on March 2, 2023, and will be submitted for adoption to the Annual General Meeting of Shareholders (AGM) on May 15, 2023.
The consolidated financial statements will be filed with the AFM and at the Trade Register of the Chamber of Commerce in Almere, the Netherlands within eight days of adoption by the 2023 AGM.
BASIS FOR ACCOUNTING
The consolidated financial statements for the year ended December 31, 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and also comply with the financial reporting requirements included in Section 362(9) of Part 9, Book 2 of the Dutch Civil Code.
The consolidated financial statements have been prepared by the Management Board of the company and authorized for issue on March 2, 2023, and will be submitted for adoption to the Annual General Meeting of Shareholders (AGM) on May 15, 2023.
The consolidated financial statements will be filed with the AFM and at the Trade Register of the Chamber of Commerce in Almere, the Netherlands within eight days of adoption by the 2023 AGM.
BASIS OF PREPARATION
The consolidated financial statements have been prepared under the historical cost convention, unless otherwise indicated. The company applies the going concern basis in preparing its consolidated financial statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
A number of the company\u2019s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in Euros (\u20ac), which is the company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The company has an established approach with respect to the measurement of fair values. If third-party information, such as broker quotes or pricing services, is used to measure fair values, the company assesses and documents the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair-value hierarchy, in which such valuations should be classified.
Fair values are categorized into different levels in a fair-value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair-value hierarchy, then the fair-value measurement is categorized in its entirety in the same level of the fair-value hierarchy as the lowest level input that is significant to the entire measurement.
Further information about the assumptions made in measuring fair values is included in the following notes:
\u2022Note 1 - Acquisition of subsidiaries;
\u2022Note 7 - Investments in Associates
\u2022Note 13 - Employee benefits; and
\u2022Note 17 - Financial instruments and financial risk management.
USE OF ESTIMATES AND JUDGMENTS
In preparing these consolidated financial statements, management has made judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the year ended December 31, 2022 is included in the following notes:
\u2022Note 1 - Acquisition of subsidiaries, fair value of the consideration transferred (including contingent consideration) and fair value of the assets acquired and liabilities assumed, measured on a provisional basis.
\u2022Notes 3, 4, 5, 6 and 7 - Valuation of non-financial assets; and
\u2022Note 8 - Valuation of allowance for obsolescence inventories.
CHANGES IN ACCOUNTING POLICIES
Application of new and revised International Financial Reporting Standards (IFRS).
New and amended IFRS Standards that are effective for the current year
Business combinations
The company accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the company. In determining whether a particular set of activities and assets is a business, the company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Goodwill is capitalized as the excess of the costs of an acquired subsidiary, net of the amounts assigned to identifiable assets acquired and liabilities incurred or assumed. Acquisition-related costs are expensed when incurred in the period they arise or the service is received.
Any contingent consideration payable is measured at fair value at the acquisition date. The contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Consolidation
The consolidated financial statements include the accounts of ASM and all of its subsidiaries where ASM holds a controlling interest. Non-controlling interest is disclosed separately, where appropriate, in the consolidated financial statements.
Control is achieved when ASM has:
\u2022the power over an investee;
\u2022exposure, or rights, to variable returns from its involvement with the investee; and
\u2022the ability to use its power over the investee to affect the amount of the investor's returns.
ASM reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
As from the date these criteria are met, financial data of the relevant subsidiary are included in the consolidation and deconsolidated from the date on which ASM's control ceases.
Loss of control
Upon loss of control, ASM derecognizes the assets and liabilities of the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss. If ASM retains any interest in this subsidiary, then such interest is measured at fair value at the date on which control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained.
Subsidiaries
Subsidiaries are entities controlled by the company. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Interests in equity-accounted investees
The company\u2019s interests in equity-accounted investees comprise investments in associates.
Associates are those entities in which the company has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Upon acquisition of the investment in an associate, any excess of the cost of the investment over the company\u2019s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included in the carrying amount of the investment.
Subsequent to initial recognition, the consolidated financial statements include the company's share of the profit or loss and other comprehensive income (OCI) of equity-accounted investees, until the date on which significant influence ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the company\u2019s interest
in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:7245001I22ND6ZFHX623", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "id3VybDovL2RvY3MudjEvZG9jOmI2MDhjNWUyNzdjZjQzZTBiYjY4ZGVmNmU1ZDQ0ZjA0L3NlYzpiNjA4YzVlMjc3Y2Y0M2UwYmI2OGRlZjZlNWQ0NGYwNF8xMTUvZnJhZzpkZTA3MDMwOTAwZjA0OTM0ODkyM2I5OWEwNDk1ZTZmZS90ZXh0cmVnaW9uOmRlMDcwMzA5MDBmMDQ5MzQ4OTIzYjk5YTA0OTVlNmZlXzY1OTcwNjk4MTc1MjY_8efb2b42-4d82-4fee-b0ba-bc48dcd39a06": { "value": "Foreign currency translation
The individual financial statements of each group entity are presented in their local functional currency. For the purpose of the consolidated financial statements, the results and financial position of each entity is expressed in euros, which is ASM's functional currency and the presentation currency for the consolidated financial statements.
Foreign currency transactions
In preparing the financial statements of the individual entities, transactions in foreign currencies are recorded at the exchange rates on the date of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined.
Exchange rate differences arising on the settlement of monetary items, and on the translation of monetary items, are recognized in the consolidated statement of profit or loss in the period in which they arise. Exchange rate differences arising on the translation of non-monetary items carried at fair value are recognized in the consolidated statement of profit or loss for the period except for differences arising on the translation of non-monetary items in respect of which gains and losses are recognized directly in equity.
Foreign operations
For the purpose of presenting consolidated financial statements, assets and liabilities of foreign operations are translated into euros at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into euros at the exchange rates at the dates of the transactions.
Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interest.
When a foreign operation is disposed of in its entirety or partially such that control or significant influence is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the company disposes of
part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the company disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:7245001I22ND6ZFHX623", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "id3VybDovL2RvY3MudjEvZG9jOmI2MDhjNWUyNzdjZjQzZTBiYjY4ZGVmNmU1ZDQ0ZjA0L3NlYzpiNjA4YzVlMjc3Y2Y0M2UwYmI2OGRlZjZlNWQ0NGYwNF8xMTUvZnJhZzpkZTA3MDMwOTAwZjA0OTM0ODkyM2I5OWEwNDk1ZTZmZS90ZXh0cmVnaW9uOmRlMDcwMzA5MDBmMDQ5MzQ4OTIzYjk5YTA0OTVlNmZlXzY1OTcwNjk4MTc1Mjc_77294db4-422f-4c85-a217-f9bc0447a7e1": { "value": "Segment reporting
ASM has one reportable segment, consistent with the internal reporting provided to the Chief Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM).
The company manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The operation is a product-driven organizational unit comprised of manufacturing, service, and sales operations in Asia, Europe and the United States. The performance of the individual product lines is reviewed by the CODM based on its revenues, gross margin and EBIT. The company operates under a uniform global operating strategy. The CODM alone makes operating decisions regarding strategic investments and resource allocation based on aggregated information of the overall company's operation. Therefore, the company's operation do not represent separate operating nor reportable segments.
Property, plant and equipment
Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:
Land | Infinite | |
Building and leasehold improvements | 1-25 years | |
Machinery equipment | 2-10 years | |
Furniture and fixtures and other equipment | 2-10 years |
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain on disposal of an item of property, plant and equipment is recognized in profit or loss and included in 'other income'. Any loss is recognized as part of impairment expenses.
Intangible assets
Goodwill
The company accounts for business combinations using the acquisition method when control is transferred to the company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment.
Goodwill represents the excess of the costs of an acquisition over the fair value of the amounts assigned to assets acquired and liabilities incurred or assumed of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is allocated to cash generating units (CGUs) for the purpose of impairment testing. The allocation is made to those CGUs that are expected to benefit from the business combination in which the goodwill arose. Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is recognized. An impairment loss recognized for goodwill is not reversed in a subsequent period. Goodwill is stated at cost less accumulated impairment losses.
The company\u2019s goodwill arising on the acquisitions of subsidiaries in the current year is described in Note 1 'Acquisition of subsidiaries''.
The company\u2019s goodwill arising on the acquisition of an associate is described in Note 7 'Investments in Associates'.
Other intangible assets
Other intangible assets include capitalized development expenses, software, purchased technology, and remaining other intangible assets. Other intangible assets that are acquired by the company with finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.
Expenditure on research activities is recognized in profit or loss as incurred.
In determining the capitalization of development expenses, the company makes estimates and assumptions based on expected future economic benefits generated by products that are the result of these development expenses. Other important estimates and assumptions are the required internal rate of return, the distinction between research, development and high-volume manufacturing, and the estimated useful life.
Development expenses are capitalized when all of the following criteria are demonstrated by the entity:
\u2022the technical feasibility of completing the intangible asset so that it will be available for use or sale;
\u2022its intention to complete the intangible asset and use or sell it;
\u2022its ability to use or sell the intangible asset;
\u2022how the intangible asset will generate probable future economic benefits;
\u2022the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
\u2022its ability to reliably measure the expenditure attributable to the intangible asset during its development.
The company capitalizes development expenses that meet the above-mentioned criteria in its consolidated financial statements. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Amortization of capitalized development expenses is calculated using the straight-line method over the estimated useful lives of the developed product. Amortization starts when the developed
product is ready for its intended use. In the development cycle, this is when the product is transferred from the validation (beta) phase to high-volume manufacturing.
Amortization method, useful life, and residual value are reviewed at each reporting date with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives of other intangible assets for current and comparative periods are as follows:
Development cost | 5 years | |
Software | 3 years | |
Purchased technology | 5-15 years | |
Other intangibles | 1-17 years |
Investments in associates
Investments in associates are investments in entities in which ASM can exert significant influence but which ASM does not control, generally having between 20% and 50% of the voting rights. These entities are accounted for using the equity method and are initially recognized at cost. Dividend income from the company\u2019s associated companies is recognized when the right to receive payment is established. Their carrying value includes goodwill identified upon acquisition, net of any accumulated impairment.
When ASM\u2019s share of losses in an associate equals or exceeds its interest in the associate, including any other receivables for which settlement is neither planned nor likely to occur in the foreseeable future, ASM does not recognize further losses, unless ASM has obligations to or made payments on behalf of the associate.
At each reporting date, the company determines if there is any objective evidence that the associate is impaired. An impairment, being the difference between the recoverable amount of the associate and its carrying value, is recognized in the consolidated statement of profit or loss.
ASM does not separately test associates' underlying assets for impairment. However, ASM recognizes its share of any impairment charge recorded by an investee and considers the effect, if any, of the impairment on the basis difference in the assets giving rise to the investee\u2019s impairment charge. A loss in value of an investment which is significant or prolonged will be recognized.
Significant is defined as at least 20% on the reporting date. Prolonged is defined as measured below cost for more than nine months.
Equity method investments are tested for prolonged decline in value. If the fair value of an investment is less than its carrying value, the company determines whether the decline in value is temporary or prolonged. A prolonged decline in value is measured as of a balance sheet date. If after a prior recognized impairment the fair value is more than its carrying value, this impairment is reversed to the extent that the recoverable amount of the net investment subsequently increases. The determination of whether an investment is impaired is made at the individual security level in each reporting period.
Evaluation tools at customers
Evaluation tools at customers are systems generally delivered to customers under evaluation and include substantial customization by our engineers and R&D staff in the field. Evaluation tools are recorded at cost and depreciated using the straight-line method over their estimated useful life of five years, or their shorter economic life. The depreciation expenses are reported as cost of sales.
On final written technical acceptance and purchase order from the customer, the purchase consideration is recognized as revenue at a point in time and the carrying value of the evaluation system is recognized as cost of sales. In the circumstance that the system is returned, at the end of the evaluation period, a detailed impairment review takes place, and future sales opportunities and additional costs are identified. It is only when the fair value is below the carrying value of the evaluation tool that an additional depreciation is recognized. The remaining carrying value is recognized as finished goods in inventories.
Inventories
Inventories are stated at the lower of cost or net realizable value. The cost of inventories is based on the first-in, first-out principle. Costs include net prices paid for materials purchased, charges for freight and custom duties, production labor costs and factory overhead. Allowances are made for slow-moving, obsolete or unsellable inventory.
Allowances for obsolescence of inventory are determined based on the expected demand as well as the expected market value of the inventory. The company regularly evaluate the value of our inventory of components and raw materials, work in progress, and finished goods, based on a combination of factors including the following: forecasted sales, historical usage, product end
of lifecycle, estimated current and future market values, service inventory requirements, and new product introductions, as well as other factors. Purchasing requirements and alternative uses for the inventory are explored within these processes to mitigate inventory exposure. The company record write-downs for inventory based on the above factors and take into account worldwide quantities and demand into our analysis.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:7245001I22ND6ZFHX623", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "id3VybDovL2RvY3MudjEvZG9jOmI2MDhjNWUyNzdjZjQzZTBiYjY4ZGVmNmU1ZDQ0ZjA0L3NlYzpiNjA4YzVlMjc3Y2Y0M2UwYmI2OGRlZjZlNWQ0NGYwNF8xMTUvZnJhZzpkZTA3MDMwOTAwZjA0OTM0ODkyM2I5OWEwNDk1ZTZmZS90ZXh0cmVnaW9uOmRlMDcwMzA5MDBmMDQ5MzQ4OTIzYjk5YTA0OTVlNmZlXzY1OTcwNjk4MTc1MzI_6b729301-dd91-4c41-81ac-de55d278797c": { "value": "Financial instruments
The company classifies non-derivative financial assets into loans and receivables. The company classifies non-derivative financial liabilities into other financial liabilities.
Non-derivative financial assets and financial liabilities \u2013\u00a0 Recognition and derecognition
The company initially recognizes receivables on the date when they are originated. Receivables comprise account (trade) and other receivables and cash and cash equivalents. Receivables are measured at amortized cost using the effective interest method, less any impairment. Financial assets and financial liabilities are initially recognized on the trade date when the entity becomes a party to the contractual provisions of the instrument.
The company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognized financial asset that is created or retained by the company is recognized as a separate asset or liability.
The company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expired.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the company currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
Non-derivative financial assets \u2013 Measurement
Loans and receivables are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.
Accounts receivable
A significant percentage of our accounts receivable is derived from revenue to a limited number of large multinational semiconductor device manufacturers located throughout the world. In order to monitor potential credit losses, the company performs ongoing credit evaluations of our customers' financial condition. An allowance for doubtful accounts is maintained for potential credit losses based upon management's assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which the company are aware regarding a customer's inability to meet its financial obligations, aging of the accounts receivable, expected lifetime losses; and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the company's customers.
The expected credit loss allowance is based on historical experience, credit evaluations, specific customer-collection history, and any customer-specific issues ASM has identified. Changes in circumstances, such as an unexpected adverse material change in a major customer\u2019s ability to meet its financial obligation to ASM or its payment trends, may require us to further adjust our estimates of the recoverability of amounts due to ASM. This could have an adverse material effect on ASM\u2019s financial condition and results of operations.
Cash and cash equivalents
Cash and cash equivalents consist of bank deposits and investment in money market funds that invest in marketable debt obligations and securities of governments, corporates and financial institutions and other short-term highly liquid investments with original maturity of three months or less. Bank overdrafts are included in notes payable to banks in current liabilities.
Non-derivative financial liabilities \u2013 Measurement
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.
Preference share capital
Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the company\u2019s option, and any dividends are discretionary. Discretionary dividends thereon are recognized as distributions within equity upon approval by the company\u2019s shareholders.
Preference share capital is classified as a financial liability if it is redeemable on a specific date or at the option of the shareholders, or if dividend payments are not discretionary. Non-discretionary dividends thereon are recognized as interest expense in profit or loss as accrued.
Issuance of shares by an equity-accounted investee
The associate ASMPT yearly issues common shares pursuant to their employee share incentive scheme. The effect of these issuances is a dilution of the company's ownership in ASMPT. The company recognizes the impact of these issuances directly into equity.
Repurchase and reissue of common shares (treasury shares)
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is accounted for at average cost and presented within capital in excess of par value.
Provisions
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Impairment
Non-derivative financial assets
Financial assets, other than those at fair value through profit or loss, are assessed using an 'expected credit loss' (ECL) model. In accordance with the model the company allocate a probability of loss to each financial asset, based on data that is determined to be predictive of the risk of loss and applying experienced credit judgment.
ASM measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:
\u2022debt securities that are determined to have low credit risk at the reporting date; and
\u2022other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, ASM considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on ASM's historical experience and informed credit assessment, that includes forward-looking information. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which ASM is exposed to credit risk.
Equity-accounted investees
An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognized in profit or loss, and is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.
Non-financial assets
At each reporting date, the company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset\u2019s recoverable amount is estimated. Goodwill and assets not yet available for its intended use is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
Cash flow statement
The cash flow statement has been prepared using the indirect method.
Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognizes revenue when it transfers control over a product or service to a customer. Depending on the contract, the company obtain normally a right to payment for our equipment upon shipment and on completion of installation. Right to payment for our spares and services occurs upon shipment or completion of the service unless described otherwise.
Revenue streams
The company generates revenue primarily from the sales of equipment and sales of spares & services. The products & services described below by nature, can be part of both revenue streams. The revenue streams are disclosed in Note 21 Revenue.
Nature of goods and services
The following is a description of principal activities from which the group generates its revenue.
Products and services | Nature, timing of satisfaction of performance obligation and significant payment terms | |
Equipment | Revenue from equipment is recognized at a point in time when the performance obligation is satisfied, when control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. The total consideration of the contract is allocated between all distinct performance obligations in the contract based on their stand-alone selling prices. The stand-alone selling prices are mostly determined based on other stand-alone sales that are directly observable or based on the expected cost plus a margin approach. Any customer discounts and credits, within volume purchase agreements or bundled agreements, are considered as a reduction of the transaction price, unless this is/can be considered as consideration for a distinct good or service. | |
Installation | The customer simultaneously consumes and receives the benefits provided by the performance of the installation. As such, transfer of control takes place over the period of installation from delivery through customer acceptance, measured on a straight-line basis, as our performance is satisfied evenly over this period of time. | |
Spares | Revenue from spares is recognized at a point in time when the performance obligation is satisfied, when the control transfers. This is usually upon shipment depending on incoterms. The amount of revenue recognized is based on the amount of the transaction price that is allocated to the performance obligation. Any customer discounts and credits, within a volume purchase agreements, are considered as a reduction of the transaction price, unless this is/can be considered as consideration for a distinct good or service. | |
Revenue on royalties and licenses for technology included in equipment and/or spares | The fixed price royalty is a right to use the licenses and revenue is recognized at a point in time that the license is transferred to the customer. For the sales-based royalty, the performance obligation is satisfied when the license is transferred to the customer. Given this is earlier than when the sales occur, revenue should be recognized when the sales occur. | |
Support services | The customer simultaneously consumes and receives the benefits provided by the performance of the support. For the majority of support services transfer of control takes place over the period of support. |
Cost of sales
Cost of sales comprises direct costs such as labor, materials, cost of warranty, depreciation, shipping and handling costs, and related overhead costs. Cost of sales also includes depreciation expenses of evaluation tools at customers, royalty payments, and costs relating to prototype and experimental products, which the company may subsequently sell to customers.
Leases
The company leases many assets, including land, buildings, houses, motor vehicles, machinery and furniture. The company recognizes a right-of-use asset and a lease liability at the lease commencement date. At inception of a contract, ASM assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurement of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the company\u2019s incremental borrowing rate. The lease
liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from a change in a rate or changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The company has applied judgment to determine the lease term for some of the lease contracts in which it is a lessee that includes renewal options. The assessment of whether the company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.
The company has applied the exception not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases of low-value assets (up to the amount of\u00a0\u20ac5,000 new asset value, such as water purifiers and air cleaners). The company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Income tax
Income tax expense comprises current and deferred tax. It is recognized in the statement of profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax
The current corporate income tax charge recognized in the consolidated statement of profit or loss is calculated in accordance with the prevailing tax regulations and rates, taking into account non-taxable income and non-deductible expenses. The current income tax expense reflects the amount for the current reporting period that the company expects to recover from or pay to the tax authorities. Current income tax related to items recognized directly in equity is recorded in equity and not in the consolidated statement of profit or loss. ASM\u2019s management periodically evaluates positions taken in the tax returns regarding situations in which applicable tax regulations are subject to interpretation, and establishes provisions when deemed appropriate. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income tax, if any. Measurement of the tax payable or receivable for uncertain tax positions is based on management\u2019s best estimate of the amount of tax benefit that will be lost. Current tax also includes any tax arising from dividends and royalties. Current tax assets and liabilities are offset only if certain criteria are met (IAS 12).
Deferred tax
Deferred income tax positions are recognized for temporary differences between the tax basis of assets and liabilities and their carrying values in ASM\u2019s consolidated statement of financial position.
Deferred tax assets are recognized for deductible temporary differences, the carry forward of unused tax credits, and any unused tax losses. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Both the recognized and unrecognized deferred tax assets are reassessed at each reporting date. Deferred tax assets are recorded for deductible temporary differences associated with investments in subsidiaries and are recorded only to the extent that it is probable that the temporary differences will reverse in the foreseeable future, and taxable profit will be available against which the temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences except when they affect neither the profit or loss reported in the consolidated statement of profit or loss nor the taxable profit or loss. Also, no deferred tax liabilities are recorded for taxable temporary differences associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax positions are stated at nominal value and are measured at the corporate income tax rates the company expects to be applicable in the year when the asset is realized or liability is settled based on enacted or substantially enacted tax laws and reflects uncertainty related to income tax, if any.
Deferred income tax assets and liabilities are netted if there is a legally enforceable right to set off current tax assets against current tax liabilities, deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority on the same taxable entity, and there is an intention to settle on a net basis.
Retirement benefit costs
The company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the company's operations in the Netherlands and Japan. The company's employees in the Netherlands participate in a multi-employer defined benefit plan. Payments to defined contribution plans and the multi-employer plan are recognized as an expense in the consolidated statement of profit or loss as they fall due. The company accounts for
the multi-employer plan as if it were a defined contribution plan, since the manager of the plan is not able to provide the company with the required company-specific information to enable the company to account for the plan as a defined benefit plan.
The company's employees in Japan participate in defined benefit plans. Pension costs in respect to this defined benefit plan are determined using the projected unit credit method. These costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect to employee service in previous years, net of the expected return on plan assets.
For the defined benefit plan, the company recognizes in its consolidated statement of financial position an asset or a liability for the plan's over funded status or underfunded status respectively. When the calculation results in a potential asset for the company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Actuarial gains and losses are recognized when incurred.
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
Share-based payments
The costs relating to employee shares (compensation expense) are recognized based upon the grant date fair value of the shares. The estimated fair value at grant date of shares is based on the share price of the ASM share at grant date minus the discounted value of expected dividends during the vesting period.
ACQUISITION OF RENO SUB-SYSTEMS
On March 11, 2022, ASM acquired 100% of the share capital of Reno Sub-Systems Inc. (Reno), a supplier of RF matching sub-systems for semiconductor manufacturing equipment.
Reno designs and sells innovative RF matching sub-systems and is based in New Jersey, the US. Reno\u2019s high-performance RF matching networks and RF generators will enhance ASM\u2019s plasma products and solutions.
ASM has paid an amount of \u20ac41.5 million, of which an amount of \u20ac21.0 million has been allocated to identified intangible assets and an amount of \u20ac17.8 million to goodwill.
Due to its limited size, the acquisition does not have a material impact on 2022 earnings.
ACQUISITION OF LPE
On October 3, 2022, ASM acquired 100% of the issued share capital of LPE S.p.A. ('LPE'), a manufacturer of epitaxial reactors for silicon carbide (SiC) and silicon (SI), based in Italy.
Since its incorporation in 1972, LPE has exclusively focused on designing, manufacturing, and selling advanced epitaxy tools for power applications. LPE is a recognized leader in SiC and Si epitaxy, and has published many patents to date. LPE has a sizeable worldwide installed base of SiC and Si epitaxy tools.
The acquisition provides ASM with access to the SiC market. For certain applications, SiC is a superior technology to Si, with applications such as EVs providing significant revenue-growth potential. LPE\u2019s revenue is projected to grow to more than \u20ac100 million in 2023, mainly driven by its SiC epitaxy equipment business. Based on ASM internal estimates, demand for SiC epitaxy equipment is forecasted to grow at a CAGR in excess of 25% from 2021 to 2025, driven by the rapidly expanding market for electric vehicles. LPE is profitable with margins in line with ASM\u2019s 2021-2025 target model. The acquisition of LPE qualifies as a business as defined in IFRS 3 Business Combinations.
LPE contributed \u20ac11 million to the Group\u2019s revenues and a loss of \u20ac6 million to the Group\u2019s net earnings for the period between the date of acquisition and the reporting date. These amounts have been calculated using the subsidiary\u2019s results and adjusting them for amortization of purchased
technology (\u20ac3 million), other intangibles (\u20ac2 million) and other fair value step ups (\u20ac3 million), that has been charged considering the fair value adjustments to intangible assets and inventories, together with the consequential tax effects.
If the acquisition of LPE had been completed on the first day of the financial year 2022, Group revenues for the year would have been \u20ac\u00a02,464 million and group net earnings would have been \u20ac 377 million.
These amounts have been calculated using the subsidiary\u2019s results and adjusting them for differences in the accounting policies between the group and the subsidiary, and the additional depreciation and amortization that would have been charged assuming the fair value adjustments to intangible assets, inventories and deferred revenues had applied from 1 January 2022, together with the consequential tax effects.
Consideration transferred
The following table summarizes the acquisition-date fair value of each class of consideration transferred.
\u20ac (thousand) | notes | October 3, 2022 | |
Cash consideration | 324,175 | ||
Equity instruments (631,154 common shares) | 144,756 | ||
Contingent consideration | 76,143 | ||
Total consideration transferred 1) | 545,074 |
1 As of reporting date, the final cash settlement of the acquisition has not been finalized between management and the former shareholders of LPE. According to the signed sale and purchase agreement, the final settlement should be concluded in Q1 2023.
Equity instruments issued
The fair value of the common shares issued (a combination of 580,000 treasury shares and 51,154 newly issued shares) was based on the listed share price of the Company at 3 October, 2022 of \u20ac229.35 per share. The fair value of the 631,154 common shares issued as part of the consideration paid for the LPE acquisition (\u20ac145 million) was determined on the basis of on the published share price on 3 October, 2022 of \u20ac229.35 per share. Issue costs directly attributable to the issuance of the shares are immaterial and have been expensed as incurred.
Contingent consideration
In the event that certain predetermined sales targets (including specific targets for certain markets) are achieved by LPE over the period 2023-2024, an additional consideration of up to \u20ac100 million (\"LPE earn out\") may be payable in cash in Q2 2025.
The combined projected revenues over the performance period exceed the upper threshold of the predetermined sales targets. The fair value of the contingent consideration of \u20ac76 million represents the discounted value of the expected related \u20ac100 million cash payment. At 31 December, 2022, the contingent consideration had increased to \u20ac79 million.
Acquisition-related costs
Acquisition-related costs of \u20ac3 million that were not directly attributable to the issue of shares are included in administrative expenses (SG&A) in the statement of profit or loss and in operating cash flows in the statement of cash flows.
Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the acquisition date.
\u20ac (thousand) | October 3, 2022 | |
Intangible assets, net | 278,504 | |
Of which: | ||
Purchased technology | 189,105 | |
Other intangibles | 89,399 | |
Right of use assets | 3,426 | |
Property, plant & equipment, net | 409 | |
Cash & cash equivalents | 53,988 | |
Accounts receivable, net | 18,671 | |
Inventories, net | 38,969 | |
Other assets | 10,118 | |
Total assets | 404,085 | |
\u20ac (thousand) | October 3, 2022 | |
Deferred and other tax liabilities | 83,014 | |
Accrued and other liabilities | 52,103 | |
Trade payables | 7,779 | |
Other liabilities assumed | 4,581 | |
Liabilities assumed | 147,477 | |
Total net identifiable assets | 256,608 | |
Total consideration transferred | 545,074 | |
Goodwill on acquisition | 288,466 |
Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows.
Assets Acquired | Valuation technique | |
Technology | Multi-period excess earnings method and Relief-from-royalty method | |
Trade name | Relief-from-royalty method | |
Customer relationships | Multi-period excess earnings method | |
Order backlog | Multi-period excess earnings method | |
Inventory | Net realisable value method | |
Minority investments | Market approach |
The fair value of acquired trade receivables is \u20ac18.7 million. The gross contractual amount for trade receivables due is \u20ac18.9 million, with a loss allowance of \u20ac0.2 million recognized on acquisition.
The goodwill is attributable to the workforce, expected entity specific synergies in relation to leveraging on ASM\u2019s worldwide network and production capacity, and the high profitability of the acquired business. None of the goodwill is expected to be deductible for income-tax purposes.
Estimated amortization and earn-out expenses
The estimated PPA amortization and earn-out expenses relating to the acquisitions of Reno and LPE are as follows:
(\u20ac million) | 2023 | 2024 | 2025 | Years thereafter | ||||
Cost of sales | (26.9) | \u2014 | \u2014 | \u2014 | ||||
Research and development | (14.2) | (14.2) | (14.2) | (164.4) | ||||
Selling, general and administrative | (4.8) | (4.8) | (4.8) | (55.7) | ||||
Total Impact on operating results | (45.8) | (18.9) | (18.9) | (220.1) | ||||
Finance expense | (9.7) | (8.7) | (2.8) | \u2014 | ||||
Income taxes (realization of temporary differences) | 12.7 | 5.2 | 5.2 | 60.3 | ||||
Total impact on net earnings | (42.8) | (22.5) | (16.6) | (159.8) |
The amortization of the fair value adjustments to the order backlog, and the realization of the fair value adjustments to inventories and deferred revenues are included under costs of sales.
Amortization of purchased technology is allocated to research and development expenses. Amortization related to the trade name and customer relationship is recognized under selling, general and administrative expenses.
The company leases many assets, including land, buildings, houses, motor vehicles, machinery and equipment. Leases typically run up to a period of five years, some with an option to renew the lease after the end of the non-cancellable period. Lease payments are renegotiated on a periodic basis; timing is dependent on the region and type of lease. The company has not entered into any sublease arrangements.
Right-of-use assets
(\u20ac thousand) | Land and buildings | Motor vehicles | Other machinery and equipment | Total | ||||
Balance January 1, 2021 | 21,078 | 2,148 | 161 | 23,387 | ||||
Additions | 2,060 | 879 | 323 | 3,262 | ||||
Modifications and reassessments | 6,812 | (101) | 619 | 7,330 | ||||
Depreciation for the year | (6,563) | (1,210) | (416) | (8,189) | ||||
Foreign currency translation effect | 1,065 | 53 | 30 | 1,148 | ||||
Balance December 31, 2021 | 24,452 | 1,769 | 717 | 26,938 | ||||
Additions through business combinations | 3,426 | \u2014 | \u2014 | 3,426 | ||||
Additions | 4,512 | 664 | 44 | 5,220 | ||||
Modifications and reassessments | 4,614 | 117 | 466 | 5,197 | ||||
Depreciation for the year | (8,273) | (1,102) | (505) | (9,880) | ||||
Foreign currency translation effect | 745 | (31) | 48 | 762 | ||||
Balance December 31, 2022 | 29,476 | 1,417 | 770 | 31,663 |
Amounts recognized in profit or loss
(\u20ac thousand) | 2021 | 2022 | ||
Leases under IFRS 16 | ||||
Interest on lease liabilities | 523 | 603 | ||
Depreciation expenses | 8,189 | 9,880 | ||
Expenses relating to short-term leases | 48 | 251 | ||
Expenses relating to low-value leases | 16 | \u2014 | ||
Total | 8,776 | 10,734 |
Amounts recognized in statement of cash flows
(\u20ac thousand) | 2021 | 2022 | ||
Total cash outflow for leases | 7,854 | 10,290 |
Extension options
The changes in the amount of property, plant and equipment are as follows:
Land, buildings and | Machinery and | Furniture and fixtures and other equipment | Assets under construction | Total | ||||||
At cost | ||||||||||
Balance January 1, 2021 | 134,678 | 235,135 | 33,591 | 25,872 | 429,276 | |||||
Additions 1) | 7,129 | 13,381 | 1,287 | 57,525 | 79,322 | |||||
Disposals | (9,230) | (6,598) | (3,612) | \u2014 | (19,440) | |||||
Transfer from assets under construction | 669 | 40,444 | 3,994 | (45,107) | \u2014 | |||||
Transfer to intangible assets | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Foreign currency translation effect | 3,587 | 10,948 | 677 | 1,280 | 16,492 | |||||
Balance December 31, 2021 | 136,833 | 293,310 | 35,937 | 39,570 | 505,650 | |||||
Additions through business combinations | 275 | 38 | 717 | \u2014 | 1,030 | |||||
Additions | \u2014 | 2,456 | 107 | 98,621 | 101,184 | |||||
Disposals | (8) | (7,616) | (3,177) | \u2014 | (10,801) | |||||
Transfer from assets under construction | 30,844 | 54,549 | 10,754 | (96,147) | \u2014 | |||||
Foreign currency translation effect | 3,506 | 7,241 | 17 | 1,052 | 11,816 | |||||
Balance December 31, 2022 | 171,450 | 349,978 | 44,355 | 43,096 | 608,879 | |||||
Accumulated depreciation and impairment | ||||||||||
Balance January 1, 2021 | 36,098 | 158,249 | 20,962 | \u2014 | 215,309 | |||||
Depreciation for the year | 6,559 | 31,530 | 3,849 | \u2014 | 41,938 | |||||
Impairment charges | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Disposals | (7,989) | (6,070) | (3,312) | \u2014 | (17,371) | |||||
Foreign currency translation effect | 1,167 | 7,339 | 251 | \u2014 | 8,757 | |||||
Balance December 31, 2021 | 35,835 | 191,048 | 21,750 | \u2014 | 248,633 | |||||
Depreciation for the year | 7,267 | 38,893 | 5,930 | \u2014 | 52,090 | |||||
Impairment charges | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Disposals | (8) | (7,034) | (2,858) | \u2014 | (9,900) | |||||
Foreign currency translation effect | 1,328 | 4,800 | (125) | \u2014 | 6,003 | |||||
Balance December 31, 2022 | 44,422 | 227,707 | 24,697 | \u2014 | 296,826 | |||||
Carrying amounts | ||||||||||
December 31, 2021 | 100,998 | 102,262 | 14,187 | 39,570 | 257,017 | |||||
December 31, 2022 | 127,028 | 122,271 | 19,658 | 43,096 | 312,053 | |||||
Useful\u00a0lives\u00a0in\u00a0years | 1-25 | 2-10 | 2-10 |
The changes in the amount of evaluation tools are as follows:
December 31, | ||||
2021 | 2022 | |||
At cost | ||||
Balance at beginning of year | 100,774 | 98,352 | ||
Evaluation tools shipped | 35,409 | 41,538 | ||
Evaluation tools sold and returns | (41,708) | (41,049) | ||
Foreign currency translation effect | 3,877 | 2,232 | ||
Balance at end of year | 98,352 | 101,073 | ||
Accumulated depreciation | ||||
Balance at beginning of year | 31,300 | 34,635 | ||
Depreciation for the year | 16,868 | 17,719 | ||
Evaluation tools sold and returns | (14,279) | (20,027) | ||
Foreign currency translation effect | 746 | 70 | ||
Balance at end of year | 34,635 | 32,397 | ||
Carrying amount at beginning of year | 69,474 | 63,717 | ||
Carrying amount at end of year | 63,717 | 68,676 |
Useful\u00a0lives\u00a0in\u00a0years: | 5 |
The carrying amount of the goodwill is related to acquisitions in the following cash-generating units:
ALD | PEALD | SiC EPI | Total | |||||
Balance January 1, 2021 | 2,611 | 8,659 | \u2014 | 11,270 | ||||
Foreign currency translation effect | \u2014 | \u2014 | \u2014 | \u2014 | ||||
Balance December 31, 2021 | 2,611 | 8,659 | \u2014 | 11,270 | ||||
Acquisitions through business combinations | \u2014 | 17,838 | 288,466 | 306,304 | ||||
Foreign currency translation effect | \u2014 | 891 | \u2014 | 891 | ||||
Balance December 31, 2022 | 2,611 | 27,388 | 288,466 | 318,465 |
Reference is made to note 1 in relation to acquisitions through business combinations.
We perform an annual impairment test at the same moment of each year (fourth quarter)\u00a0 or if events or changes in circumstances indicate that the carrying amount of the assets at risk (goodwill, other non-current assets and liabilities, capitalized development, working capital) exceeds its recoverable amount. For our impairment test and the determination of the recoverable amount, a discounted future cash flow approach is used which makes use of our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates.
The material assumptions used for the discounted future cash flows of the cash-generating units (CGUs) are:
\u2022an average discount rate of 10.7% (2021: 7.6%) representing the pre-tax weighted average cost of capital. The increase in discount rate is mainly driven by a higher risk free rate (+2.3%);
\u2022external market segment data, historical data and strategic plans to estimate cash flow growth per product line; and
\u2022cash flow calculations are limited to four years of cash flow; after these four years, perpetuity growth rates are set based on the market maturity of the products. For a maturing product, the perpetuity growth rates used are 1% or less, and for enabling technology products the rate used is 3% or less.
Other intangible assets include capitalized development expenditure, software developed or purchased (including licenses) for internal use, and purchased technology from third parties. The changes in the amount of other intangible assets are as follows:
Development costs | Software | Purchased technology | Other intangibles | Total | ||||||
At cost | ||||||||||
Balance January 1, 2021 | 341,685 | 32,864 | 8,821 | \u2014 | 383,370 | |||||
Additions | 81,973 | 2,680 | \u2014 | \u2014 | 84,653 | |||||
Transfer from property, plant and equipment | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | |||||
Disposals | \u2014 | (22) | \u2014 | \u2014 | (22) | |||||
Foreign currency translation effect | 12,867 | 458 | (32) | 13,293 | ||||||
Balance December 31, 2021 | 436,525 | 35,980 | 8,789 | \u2014 | 481,294 | |||||
Acquisitions through business combinations | \u2014 | \u2014 | 211,817 | 89,400 | 301,217 | |||||
Additions | 102,627 | 4,532 | 130 | \u2014 | 107,289 | |||||
Reclassification | \u2014 | (74) | \u2014 | \u2014 | (74) | |||||
Disposals | \u2014 | (322) | \u2014 | \u2014 | (322) | |||||
Foreign currency translation effect | 6,013 | 512 | 126 | \u2014 | 6,651 | |||||
Balance December 31, 2022 | 545,165 | 40,628 | 220,862 | 89,400 | 896,055 | |||||
Accumulated amortization and impairment losses | ||||||||||
Balance January 1, 2021 | 137,366 | 27,279 | 8,801 | \u2014 | 173,446 | |||||
Amortization for the year | 25,184 | 1,424 | 10 | \u2014 | 26,618 | |||||
Impairments | 1,967 | \u2014 | \u2014 | \u2014 | 1,967 | |||||
Disposals | \u2014 | (22) | \u2014 | \u2014 | (22) | |||||
Foreign currency translation effect | 4,332 | 152 | (32) | \u2014 | 4,452 | |||||
Balance December 31, 2021 | 168,849 | 28,833 | 8,779 | \u2014 | 206,461 | |||||
Amortization for the year | 34,869 | 1,820 | 4,483 | 1,568 | 42,740 | |||||
Impairments | 6 | \u2014 | \u2014 | \u2014 | 6 | |||||
Disposals | \u2014 | (322) | \u2014 | \u2014 | (322) | |||||
Foreign currency translation effect | 1,011 | 121 | (66) | \u2014 | 1,066 | |||||
Balance December 31, 2022 | 204,735 | 30,452 | 13,196 | 1,568 | 249,951 | |||||
Carrying amounts | ||||||||||
December 31, 2021 | 267,676 | 7,147 | 10 | \u2014 | 274,833 | |||||
December 31, 2022 | 340,430 | 10,176 | 207,666 | 87,832 | 646,104 |
ASM completed the acquisition of Reno Sub-Systems and LPE, resulting in a total increase of \u20ac301.2 million of other intangible assets, of which \u20ac22.7 million related to the acquisition of Reno Sub-Systems and \u20ac278.5 relates to the acquisition of LPE.
As a result of the acquisition, ASM disaggregated the group 'Purchased technology and other intangibles' into two groups. Reference is made to note 1 for further disclosure on these acquisitions during 2022.
The carrying amount of other intangibles consists of customer relationships (\u20ac66.9 million), order backlog (\u20ac17.4 million),\u00a0 trade name (\u20ac3.1 million) and other (\u20ac0.4 million).
We perform an annual impairment test in the fourth quarter of each year or if events or changes in circumstances indicate that the carrying amount of development costs exceeds its recoverable amount. A discounted future cash flow approach is used which makes use of our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. For the impairment test, reference is made to Note 5.
Impairment charges on capitalized development costs are included in operating expenses under research and development. Impairment of capitalized development expenses primarily related to development of new hardware for which customer demand has shifted out in time, new process technologies that were not successful, and purchased technology which became obsolete. The impairment charges for 2021 and 2022 related to customer-specific projects.
Capitalized development costs are amortized over their estimated useful lives of five years. Amortization starts when the developed asset is ready for its intended use. For the company, this occurs when the application is transferred to high-volume manufacturing.
The company estimated a useful life of purchased technology of 15 years, other intangibles assets are amortized over their estimated useful lives of respectively one year (order backlog), four years (trade name) and 17 years (customer\u00a0 relationships).
The amortization of development costs and purchased technology is included in R&D; the amortization of the order backlog in cost of sales upon realization of respective sales; the amortization of customer relationships is included in SG&A.
Estimated amortization expenses relating to other intangible assets are as follows:
Development costs | Software | Purchased technology | Other intangibles | Total | ||||||
2023 | 40,256 | 4,106 | 14,156 | 21,258 | 79,776 | |||||
2024 | 35,116 | 3,412 | 14,156 | 5,007 | 57,691 | |||||
2025 | 26,651 | 2,655 | 14,156 | 5,007 | 48,469 | |||||
2026 | 17,244 | 3 | 14,156 | 4,807 | 36,210 | |||||
2027 | 8,040 | \u2014 | 14,033 | 4,007 | 26,080 | |||||
Years thereafter | \u2014 | \u2014 | 137,009 | 47,746 | 184,755 | |||||
Amortization estimated | 127,307 | 10,176 | 207,666 | 87,832 | 432,981 | |||||
Amortization not yet started | 213,123 | \u2014 | \u2014 | \u2014 | 213,123 | |||||
Total carrying amounts | 340,430 | 10,176 | 207,666 | 87,832 | 646,104 |
The location included below is the principal place of business of the specified associates. The principal place of business and country for ASMPT deviates from the place of incorporation (Cayman Islands).
% Ownership December\u00a031, | |||||
2021 | 2022 | ||||
Name | Location | ||||
Associates | |||||
Levitech BV | Almere,\u00a0the\u00a0Netherlands | 26.64% | 26.64% | ||
SiC systems AB | Lunds Kommun, Sweden | \u2014% | 50.00% | ||
ASMPT Ltd | Singapore | 24.96% | 24.95% |
Levitech BV is valued at nil (2021: nil).
The changes in the investment in associates are as follows:
Other | ASMPT | Total | ||||||||||||||
Net equity share | Net equity share | Other (in)tangible assets | Goodwill | Total ASMPT (before impairment) | Impairment, net | Total ASMPT (after impairment) | ||||||||||
Balance January 1, 2021 | \u2014 | 347,088 | 30,016 | 365,610 | 742,714 | \u2014 | 742,714 | 742,714 | ||||||||
Share in net earnings of investments in associates | \u2014 | 86,595 | \u2014 | \u2014 | 86,595 | \u2014 | 86,595 | 86,595 | ||||||||
Other comprehensive income of investments in associates | \u2014 | 11,833 | \u2014 | \u2014 | 11,833 | \u2014 | 11,833 | 11,833 | ||||||||
Amortization recognized (in)tangible assets | \u2014 | \u2014 | (12,213) | \u2014 | (12,213) | \u2014 | (12,213) | (12,213) | ||||||||
Dividends | \u2014 | (36,297) | \u2014 | \u2014 | (36,297) | \u2014 | (36,297) | (36,297) | ||||||||
Dilution ASMPT share to 25.07% | \u2014 | 3,205 | \u2014 | \u2014 | 3,205 | \u2014 | 3,205 | 3,205 | ||||||||
Foreign currency translation effect | \u2014 | 23,034 | 1,766 | 28,175 | 52,975 | \u2014 | 52,975 | 52,975 | ||||||||
Balance December 31, 2021 | \u2014 | 435,458 | 19,569 | 393,785 | 848,812 | \u2014 | 848,812 | 848,812 | ||||||||
Additions through business combinations | 500 | 500 | ||||||||||||||
Impairments of investments in associates, net | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | (215,389) | (215,389) | (215,389) | ||||||||
Share in net earnings of investments in associates | \u2014 | 78,413 | \u2014 | \u2014 | 78,413 | \u2014 | 78,413 | 78,413 | ||||||||
Other comprehensive income of investments in associates | \u2014 | 2,950 | \u2014 | \u2014 | 2,950 | \u2014 | 2,950 | 2,950 | ||||||||
Amortization recognized intangible assets | \u2014 | \u2014 | (13,642) | \u2014 | (13,642) | \u2014 | (13,642) | (13,642) | ||||||||
Dividends | \u2014 | (48,919) | \u2014 | \u2014 | (48,919) | \u2014 | (48,919) | (48,919) | ||||||||
Dilution ASMPT share to 24.95% | \u2014 | 60 | \u2014 | \u2014 | 60 | \u2014 | 60 | 60 | ||||||||
Foreign currency translation effect | \u2014 | 7,763 | 1,306 | 24,487 | 33,556 | \u2014 | 33,556 | 33,556 | ||||||||
Balance December 31, 2022 | 500 | 475,725 | 7,233 | 418,272 | 901,230 | (215,389) | 685,841 | 686,341 |
On March\u00a015, 2013, the company divested a controlling stake in its subsidiary ASMPT Ltd (ASMPT). After the initial accounting of the sale transaction and related gains, future income from ASMPT was adjusted for the fair value adjustments arising from the basis differences as if a business combination had occurred under IFRS 3R, Business Combinations, i.e. a purchase price allocation (PPA).
The purchase of the associate has been recognized at fair value, being the value of the ASMPT shares on the day of closing of the purchase transaction. The composition of this fair value was determined through a PPA. The PPA resulted in the recognition of intangible assets for customer relationship, technology, trade name, product names, and goodwill. For inventories and property, plant & equipment, a fair value adjustment was recognized.
The ASMPT investment is accounted for under the equity method on a go-forward basis. Equity method investments are tested for prolonged impairment. An investment is considered impaired if the fair value of the investment is less than its carrying value.
If the fair value of an investment is less than its carrying value at the balance sheet date, the company determines whether the impairment is temporary or prolonged. Management concluded that there is objective evidence for impairment, both prolonged and significant. Following our accounting policy, ASM calculated the recoverable amount based on the fair value less cost of disposal. The company has impaired its investment in associates (ASMPT) as disclosed in the third quarter 2022 results press release to account for the reduced market valuation of the stake in ASMPT.
The impairment charge of \u20ac321 million is party recovered (\u20ac106 million) in the fourth quarter as a result of an increase in the recoverable amount. The fair value is determined based on the share price per December 31, 2022 (HK$ 55.65) multiplied by the number of shares in ASMPT, less estimated cost of disposal (0.5%).
The net impairment of investments in associates concerns a non-cash impairment charge of \u20ac215 million, deducted from the asset as a whole. The impairment charge will be subsequently reversed only to the extent that the recoverable amount of the investment increases.
The amount per share recognized as per December 31, 2022, under equity accounting excluding impairment amounts to HK$72.76, whereas the level 1 fair value per share (being the market price of a share on the Hong Kong Stock Exchange) was HK$55.65 as per December 31, 2022.
ASMPT announced on 21 July a Share Buy-back Plan ('SBP') pursuant to which the ASMPT will buy back the on-market shares of the company up to a maximum value of HK$420 million. As part of the SBP 2,466,100 shares were repurchased. In December 2022, 2,633,700 common shares of ASMPT were issued, for cash at par value of HK$0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT. The shares issued under the plan in 2022 have diluted ASM's ownership in ASMPT to 24.95% as of December 31, 2022.
Per December 31, 2022, the book value of our equity method investment in ASMPT was \u20ac901.2 million. The historical cost basis of our 24.95% share of net assets on the books of ASMPT under IFRS was \u20ac475.7 million as of December 31, 2022, resulting in a basis difference of \u20ac425.5 million. \u20ac7.2 million of this basis difference has been allocated to intangible assets. The remaining amount was allocated to equity method goodwill. Each individual, identifiable asset will periodically be reviewed for any indicators of potential impairment. We amortize the basis differences allocated to the assets on a straight-line basis, and include the impact within the results of our equity method
investments. Amortization and depreciation are adjusted for related deferred tax impacts. Included in net income attributable to ASM for 2022 was an after-tax expense of \u20ac13.6 million, representing the depreciation and amortization of the basis differences.
Summarized 100% earnings information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate average 2022: 1 HK$: \u20ac0.12118, for December 31, 2021: 1 HK$: \u20ac0.10863).
(HK$ million) | 2021 | 2022 | ||
Revenues | 21,948 | 19,363 | ||
Income before income tax | 4,092 | 3,413 | ||
Net earnings from continuing operations | 3,175 | 2,618 | ||
Other comprehensive income | (171) | (574) | ||
Total comprehensive income | 3,004 | 2,044 |
Summarized 100% statement of financial position information for ASMPT equity method investment excluding basis adjustments (foreign currency exchange rate per December 31, 2022, was 1 HK$: \u20ac0.12025 for December 31, 2021: 1 HK$: \u20ac0.11321).
December 31, | ||||
(HK$ million) | 2021 | 2022 | ||
Current assets | 18,251 | 16,515 | ||
Non-current assets | 8,250 | 8,261 | ||
Current liabilities | 6,889 | 5,246 | ||
Non-current liabilities | 4,200 | 3,672 | ||
Total equity | 15,412 | 15,858 |
Shareholder's equity of ASMPT per December 31, 2022, translated into euros at a rate of 0.12025 was \u20ac1,907 million (our 24.95% share: \u20ac476 million).
The ASMPT Board is responsible for ongoing monitoring of the performance of ASMPT. The actual results of ASMPT are discussed with the ASMPT Audit Committee, which includes the representative of ASM. The ASM representative reports to the ASM Management Board and the Audit Committee of ASM on a quarterly basis.
The companies interests in Levitech and SIC systems AB are, individually and in aggregate, immaterial to the consolidated financial statements.
Inventories consist of the following:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Components and raw materials | 175,317 | 356,353 | ||
Work in progress | 31,631 | 113,631 | ||
Finished goods | 18,497 | 84,827 | ||
Total inventories, gross | 225,445 | 554,811 | ||
Allowance for obsolescence | (13,604) | (16,386) | ||
Total inventories, net | 211,841 | 538,425 |
The changes in the allowance for obsolescence are as follows:
December 31, | ||||
2021 | 2022 | |||
Balance at beginning of year | (14,477) | (13,604) | ||
Acquisitions through business combinations | \u2014 | \u2014 | ||
Charged to cost of sales | (5,728) | (8,173) | ||
Reversals | 2,013 | 4,028 | ||
Utilization of the provision | 5,383 | 2,302 | ||
Foreign currency translation effect | (795) | (939) | ||
Balance at end of year | (13,604) | (16,386) |
On December 31, 2022, our allowance for inventory obsolescence amounted to \u20ac16.4 million, which is 3.0% of total inventory. The major part of the allowance is related to components and raw materials. The additions for 2021 and 2022 mainly relate to inventory items which ceased to be used due to technological developments and design changes resulting in obsolescence of certain parts.
A significant percentage of our accounts receivable is derived from sales to a limited number of large multinational semiconductor device manufacturers located throughout the world. In order to monitor potential expected credit losses, we perform ongoing credit evaluations of our customers\u2019 financial condition.
The carrying amount of accounts receivable is as follows:
December 31, | ||||
2021 | 2022 | |||
Current | 418,195 | 466,502 | ||
Overdue <30 days | 18,089 | 58,370 | ||
Overdue 31-60 days | 2,166 | 21,941 | ||
Overdue 61-120 days | 7,244 | 19,789 | ||
Overdue >120 days | 1,030 | 14,221 | ||
Total | 446,724 | 580,823 |
An allowance for doubtful accounts receivable is maintained for potential expected credit losses based upon management\u2019s assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which we are aware regarding a customer\u2019s inability to meet its financial obligations, and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the company\u2019s customers.
The changes in the allowance for doubtful accounts receivable are as follows:
December 31, | ||||
2021 | 2022 | |||
Balance at beginning of year | (361) | (444) | ||
Charged to selling, general and administrative expenses | (83) | (198) | ||
Utilization of the provision | \u2014 | \u2014 | ||
Foreign currency translation effect | \u2014 | \u2014 | ||
Balance at end of year | (444) | (642) |
Other current assets consist of the following:
December 31, | ||||
2021 | 2022 | |||
Prepayments | 8,449 | 17,977 | ||
VAT receivable | 12,114 | 20,648 | ||
Amounts to be invoiced | 21,915 | 59,928 | ||
Others | 8,494 | 15,971 | ||
Total | 50,972 | 114,524 |
Cash and cash equivalents at December 31, 2022 include bank deposits and investments in money market funds that invest in marketable debt obligations and securities of governments, corporates and financial institutions. The amount invested in deposits and money market funds at the end of 2022 was \u20ac11 million (2021: \u20ac83 million) and interest-bearing bank accounts of \u20ac408 million (2021: \u20ac409 million). Our cash and cash equivalents are predominantly denominated in US dollars, and partly in euros, Singapore dollars, Korean won, and Japanese yen.
Bank guarantees exist for an amount of \u20ac1.8 million at December 31, 2022 (\u20ac1.0 million as per December 31, 2021). These guarantees mainly relate to lease and tax payments.
such an issue. The authorization by the AGM can only be granted for a certain period. In the case that the AGM has not authorized the Management Board to issue shares, the AGM shall have the power to issue shares.
Capital management
The Board\u2019s policy is to maintain a strong capital base in order to retain investor, creditor and market confidence and to sustain future development of the business. Management strives to increase the cash balance to EUR 600 million to reflect the increased size of the company, while maintain a balance between investing in growth of the business and redistributing cash to shareholders by paying a sustainable dividend and through share buybacks. The Company\u2019s objective is to achieve a sound return on shareholders\u2019 equity. The Company is monitoring its capital ratio of net debt to total Shareholders\u2019 equity which should not exceed 1.5. There were no changes to the Board\u2019s approach to capital management during the year.
Common shares, preferred and financing preferred shares
Following the amendment of the articles of association on August 3, 2018, the authorized capital of the company amounts to 82,500,000 common shares of \u20ac0.04 par value, 88,500 preferred shares of \u20ac40 par value and 6,000 financing preferred shares of \u20ac40 par value.
As per December 31, 2022, 49,348,548 common shares with a nominal value of \u20ac0.04 each were issued and fully paid up, of which 22,229 common shares are held by us in treasury. All shares have one vote per \u20ac0.04 par value. Treasury shares held by the company cannot be voted on. Of our 49,326,319 outstanding common shares at December 31, 2022, 47,752,219 are registered with our transfer agent in the Netherlands, ABN AMRO Bank N.V., and 1,574,100 are registered with our transfer agent in the United States, Citibank, NA, New York.
Financing preferred shares are designed to allow ASM to finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares.
Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a preferred or financing preferred shareholder must obtain the approval of the company's Supervisory Board to transfer shares. If approval is denied, the Supervisory Board will provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller
within two months after the approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, at which time the approval expires.
Preferred shares are entitled to a cumulative preferred dividend based on the amount paid up on such shares. Financing preferred shares are entitled to a cumulative dividend based on the par value and share premium paid on such shares.
As per December 31, 2022, no preferred shares and no financing preferred shares are issued.
PURCHASES OF COMMON SHARES BY THE ISSUER AND AFFILIATED PURCHASERS
On May 16, 2022, the AGM authorized the company, for an 18-month period, to be calculated from the date of the AGM, to repurchase its own shares up to 10% of the issued capital, at a price at least equal to the shares\u2019 nominal value and at most a price equal to 110% of the shares' average closing price according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the purchase date.
On February 25, 2020, ASM announced a share buyback program to purchase up to an amount of \u20ac100 million of its own shares within the 2020-2021 time frame. The 2020-2021 program started on June 2, 2020, and was completed on March 2, 2021.
Period | Total number of shares purchased | Average price paid per share (\u20ac) | Cumulative number of shares purchased | |||
Share buyback program 2020-2021: | ||||||
June, 2020 | 57,700 | \u20ac119.16 | 57,700 | |||
July, 2020 | 21,648 | \u20ac144.31 | 79,348 | |||
August, 2020 | 66,086 | \u20ac127.15 | 145,434 | |||
September, 2020 | 140,736 | \u20ac121.74 | 286,170 | |||
October, 2020 | 34,118 | \u20ac130.83 | 320,288 | |||
November, 2020 | 102,020 | \u20ac135.72 | 422,308 | |||
December, 2020 | 58,500 | \u20ac169.64 | 480,808 | |||
January, 2021 | 78,389 | \u20ac207.04 | 559,197 | |||
February, 2021 | 73,587 | \u20ac231.18 | 632,784 | |||
March, 2021 | 13,396 | \u20ac223.07 | 646,180 | |||
Total | 646,180 | \u20ac154.76 |
On April 20, 2021, ASM announced a share buyback program to purchase up to an amount of \u20ac100 million of its own shares within the 2021 time frame. The 2021 program started on July 28, 2021, and was completed on December 17, 2021.
Period | Total number of shares purchased | Average price paid per share (\u20ac) | Cumulative number of shares purchased | |||
Share buyback program 2021: | ||||||
July, 2021 | 10,093 | \u20ac295.48 | 10,093 | |||
August, 2021 | 74,680 | \u20ac314.22 | 84,773 | |||
September, 2021 | 87,223 | \u20ac343.70 | 171,996 | |||
October, 2021 | 43,292 | \u20ac318.51 | 215,288 | |||
November, 2021 | 33,531 | \u20ac404.89 | 248,819 | |||
December, 2021 | 43,297 | \u20ac374.34 | 292,116 | |||
Total | 292,116 | \u20ac342.33 |
On February 22, 2022, ASM announced a share buyback program to purchase up to an amount of \u20ac100 million of its own shares within the 2022/2023 time frame. This share buyback program has not started in 2022.
The following table shows the change in number of treasury shares and outstanding shares:
Number of shares | Treasury shares | Outstanding shares | ||
Balance at beginning of year | 728,717 | 48,568,677 | ||
Purchase common shares | \u2014 | \u2014 | ||
Issue of common shares related to the acquisition of business combinations | \u2014 | 51,154 | ||
Treasury shares transferred related to the acquisition of business combinations | (580,000) | 580,000 | ||
Exercise stock options out of treasury shares | \u2014 | \u2014 | ||
Vesting restricted shares out of treasury shares | (126,488) | 126,488 | ||
Cancellation treasury shares | \u2014 | \u2014 | ||
Balance at end of year | 22,229 | 49,326,319 |
ASM intends to use part of the shares for commitments under the employee share-based compensation schemes and the performance shares and option program for the Management Board.
The share buyback programs were executed by intermediaries through on-exchange purchases or through off-exchange trades. ASM updated the markets on the progress of the share buyback programs on a weekly basis.
The repurchase programs are part of ASM's commitment to use excess cash for the benefit of its shareholders.
TREASURY SHARES
On December 31, 2022, we had 49,326,319 outstanding common shares excluding 22,229 treasury shares. This compared to 48,568,677 outstanding common shares and 728,717 treasury shares at December 31, 2021. Besides the transfer of 580,000 treasury shares for the acquisition of LPE on October 3, 2022 (note 1. Acquisition of subsidiaries), the change in the number of treasury shares in 2022 was the result of\u00a0 126,488 treasury shares that were used as part of share-based payments.
2021 | 2022 | |||
As per January 1: | ||||
Issued shares | 49,797,394 | 49,297,394 | ||
Treasury shares | 1,082,712 | 728,717 | ||
Outstanding shares | 48,714,682 | 48,568,677 | ||
Changes during the year: | ||||
Issue of common shares related to the acquisition of business combinations | \u2014 | 51,154 | ||
Treasury shares transferred related to the acquisition of business combinations | \u2014 | 580,000 | ||
Cancellation of treasury shares | 500,000 | \u2014 | ||
Share buybacks | 462,988 | \u2014 | ||
Treasury shares used for share-based performance programs | 316,983 | 126,488 | ||
As per December 31: | ||||
Issued shares | 49,297,394 | 49,348,548 | ||
Treasury shares | 728,717 | 22,229 | ||
Outstanding shares | 48,568,677 | 49,326,319 |
RETAINED EARNINGS
Distributions to common shareholders are limited to\u00a0the extent the total amount of shareholders\u2019 equity exceeds the amounts of nominal paid-in share capital (exclusive any share premium) and any reserves to be formed pursuant to law or the company\u2019s Articles of Association.\u00a0The amounts are derived from the company financial statements of ASM.
ASM aims to pay a sustainable annual dividend. The Supervisory Board, upon proposal of the Management Board, will annually assess the amount of dividend that will be proposed to the AGM. The decision that a dividend be proposed to the AGM will be subject to the availability of distributable profits as well as retained earnings and may be affected by our potential future funding requirements. Accordingly, dividend payments may fluctuate and could decline or be omitted in any year.
Over 2021, we paid in total a dividend of \u20ac2.50 per common share as regular dividend, and was paid after the 2022 AGM in May 2022. We will propose to the forthcoming 2023 AGM to declare a regular dividend of \u20ac2.50 per share over 2022.
Results on dilution of investments in associates are accounted for directly in equity. For 2022 and 2021, these dilution results were \u20ac60 and \u20ac3,205, respectively.
OTHER RESERVES
The changes in the amounts of other reserves are as follows:
Proportionate share in other comprehensive income of investments in associates | Remeasurement on net defined benefit | Foreign currency translation reserve | Total other reserves | |||||
Balance January 1, 2021 | (12,504) | 261 | 38,428 | 26,185 | ||||
Proportionate share in other comprehensive income of investments in associates | 11,833 | \u2014 | \u2014 | 11,833 | ||||
Remeasurement on net defined benefit | \u2014 | 181 | \u2014 | 181 | ||||
Foreign currency translation effect on foreign operations | \u2014 | \u2014 | 91,273 | 91,273 | ||||
Balance December 31, 2021 | (671) | 442 | 129,701 | 129,472 | ||||
Proportionate share in other comprehensive income of investments in associates | 2,950 | \u2014 | \u2014 | 2,950 | ||||
Remeasurement on net defined benefit | \u2014 | 615 | \u2014 | 615 | ||||
Foreign currency translation effect on foreign operations | \u2014 | \u2014 | 61,845 | 61,845 | ||||
Balance December 31, 2022 | 2,279 | 1,057 | 191,546 | 194,882 |
The company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the company\u2019s operations in the Netherlands and Japan.
Multi-employer plan
There are 209 eligible employees in the Netherlands. These employees participate in a multi-employer union plan (pension fund Metalektro PME) determined in accordance with the collective bargaining agreements effective for the industry in which we operate. This multi-employer union plan, accounted for as a defined contribution plan, covers approximately 1,466 companies and approximately 168,600 contributing members. Our contribution to the multi-employer union plan was less than 5% of the total contribution to the plan. The plan monitors its risks on a global basis, not by participating company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan\u2019s assets to its obligations. As of January 1, 2015, new pension legislation has been enacted. This legislation results in, amongst others, an increase of legally required coverage levels. The coverage percentage is calculated by dividing the funds capital by the total sum of pension liabilities and is based on actual market interest
rates. The coverage ratio as per December 31, 2022, of 110.4% (December 31, 2021: 107.9%) is calculated giving consideration to the pension legislation. We have no obligation to pay off any deficits the pension fund may incur, nor do we have any claim to any potential surpluses.
Every company participating in the PME contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same contribution rate. The premium can fluctuate yearly based on the coverage ratio of the multi-employer union plan. For 2022, the contribution percentage was 27.98%. The pension rights of each employee are based upon the employee\u2019s average salary during employment.
Our net periodic pension cost for this multi-employer union plan for any period is the amount of the required employer contribution for that period minus the employee contribution.
Defined benefit plan
The company\u2019s employees in Japan participate in a defined benefit plan. The company makes contributions to defined benefit plans in Japan that provide pension benefits for employees upon retirement. These are average-pay plans, based on the employees' years of service and compensation near retirement.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out on December 31, 2022. The present value of the defined benefit obligation and the related current service cost and past service cost were measured using the projected unit credit method. Significant actuarial assumptions for the determination of the defined obligation are discount rate, future general salary increases, and future pension increases.
The net liability (asset) of the plan developed as follows:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Defined benefit obligations | 11,925 | 10,227 | ||
Fair value of plan assets | 13,907 | 12,783 | ||
Net liability (asset) for defined benefit plans | (1,982) | (2,556) |
The changes in defined benefit obligations and fair value of plan assets are as follows:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Defined benefit obligations | ||||
Balance January 1 | 11,083 | 11,925 | ||
Current service cost | 842 | 980 | ||
Interest on obligation | 53 | 54 | ||
Remeasurement result | 463 | (891) | ||
Benefits paid | (181) | (989) | ||
Foreign currency translation effect | (335) | (852) | ||
Balance December 31 | 11,925 | 10,227 | ||
Fair value of plan assets | ||||
Balance January 1 | 12,514 | 13,907 | ||
Interest income | 63 | 65 | ||
Return on plan assets | 720 | 41 | ||
Company contribution | 1,170 | 773 | ||
Benefits paid | (181) | (989) | ||
Foreign currency translation effect | (379) | (1,014) | ||
Balance December 31 | 13,907 | 12,783 |
The defined benefit cost consists of the following:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Current service cost | 842 | 980 | ||
Net interest cost | (10) | (11) | ||
Net defined benefit cost | 832 | 969 | ||
Remeasurement on net defined benefit for the year | (257) | (932) | ||
Remeasurement on net defined benefit | (257) | (932) | ||
Total defined benefit cost | 575 | 37 |
The assumptions in calculating the actuarial present value of benefit obligations and net periodic benefit cost are as follows:
\u00a0 | 2021 | 2022 | ||
Discount rate for defined benefit obligations | 0.50% | 1.20% | ||
Discount rate for defined benefit cost | 0.50% | 0.50% |
Assumptions regarding life expectancy are based on mortality tables published in 2020 by the Ministry of Health, Labour and Welfare of Japan.
The main risk concerning the pension plan relates to the discount rate. The defined benefit obligation is sensitive to a change in discount rates. A relative change of the discount rate of 25 basis points would have resulted in a change in the defined benefit obligation of -2.5% to 2.6%.
The allocation of plan assets is as follows:
\u00a0 | December 31, | |||||||
\u00a0 | 2021 | 2022 | ||||||
Cash and cash equivalent | 265 | 2% | 173 | 1% | ||||
Equity instruments | 2,482 | 18% | 2,318 | 18% | ||||
Debt instruments | 1,346 | 10% | 1,125 | 9% | ||||
Assets held by insurance company | 9,814 | 70% | 9,167 | 72% | ||||
Total | 13,907 | 100% | 12,783 | 100% |
The investment strategy is determined based on an asset-liability study in consultation with investment advisors and within the boundaries given by the regulatory bodies for pension funds.
Equity instruments consist primarily of publicly traded Japanese companies and common collective funds. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded (level 1). Common collective funds are valued at the published price (level 1) per share multiplied by the number of shares held as of the measurement date. Debt instruments consist of government bonds and are valued at the closing prices in the active markets for identical assets (level 1). Assets held by the insurance company consist of bonds and loans, government securities and common collective funds. Corporate and government securities are valued by third-party pricing sources (level 2). Common collective funds are valued at the net asset value per share (level 2) multiplied by the number of shares held as of the measurement date.
The plan assets do not include any of the company\u2019s shares.
Retirement plan costs
ASM contributed \u20ac773 to the defined benefit plan in 2022 (\u20ac1,170 in 2021). The company expects to pay benefits for years subsequent to December 31, 2022 as follows:
Expected contribution defined benefit plan | ||
2023 | 1,139 | |
2024 | 341 | |
2025 | 196 | |
2026 | 540 | |
2027 | 796 | |
Aggregate for the years 2028-2032 | 4,890 | |
Total | 7,902 |
The company has adopted various share plans (e.g. a restricted share plan, and a performance share plan) and has entered into share agreements with the Management Board and various employees. Under the stock option plans, the Management Board and employees may purchase per the vesting date a specific number of shares of the company\u2019s common stock at a certain price. Options are priced at market value in euros on the date of grant. Under the restricted share plan, employees receive per the vesting date a specific number of shares of the company\u2019s common stock. Under the performance share plan, the Management Board receives per the vesting date, and provided the performance criteria have been met, a specific number of shares of the company\u2019s common stock.
Authority to issue options and shares
By resolution of the Annual General Meeting of Shareholders (AGM) of May 16, 2022, the formal authority to issue options and shares was allocated to the Management Board subject to the approval of the Supervisory Board. This authority is valid for 18 months and needs to be refreshed by the 2023 AGM to allow the continued application of the long-term incentive (LTI) plans beyond November 17, 2022. The company hasn't granted new options since its last grant date per April 2017.
The ASM 2014 long-term incentive plan for employees (ELTI) is principally administered by the Management Board and the ASM 2014 long-term incentive plan for members of the Management Board (MLTI) is principally administered by the Supervisory Board. This complies with applicable corporate governance standards. However, the Supervisory Board has no power to represent the company. For external purposes, the Management Board remains the competent body under both LTI plans. The LTI plans envisage that the Supervisory Board, or in the case of the ELTI the Management Board with the approval of the Supervisory Board, will determine the number of options and shares to be granted to the Management Board members and to employees.
2014 long-term incentive plan
In 2014, a new long-term incentive plan was adopted. In the new plan to limit potential dilution, the amount of outstanding (vested and non-vested) options and shares granted to the Management Board and to other employees will not exceed 5% of the issued ordinary share capital of ASM. The new long-term incentive plan 2014 consists of two sub-plans: the ELTI and the MLTI.
Options and performance shares are issued to Management Board members and restricted shares are issued to employees once per annum on the date following the publication of the first-quarter results of the relevant year. Possible grant to newly hired employees can be issued once a quarter, on the date following the publication of the financial results of the relevant quarter. The number of options and shares outstanding under the long-term incentive plans or under any other plan or arrangement in aggregate may never exceed 5% of ASM\u2019s share capital.
Performance and restricted shares outstanding
The following table is a summary of changes in performance shares and restricted shares outstanding under the 2014 long-term incentive plan.
Number of performance shares | Number of restricted shares | Status | Fair value at grant date (weighted average) | |||||
Balance January 1, 2021 | 29,997 | 325,811 | ||||||
Shares granted, employees | \u2014 | 86,357 | Unconditional | \u20ac260.77 | ||||
Shares granted, Management Board | 6,343 | \u2014 | Conditional | \u20ac261.25 | ||||
Shares granted, Management Board | 4,504 | \u2014 | Unconditional | \u20ac49.78 | ||||
Shares vested | (26,414) | (167,048) | ||||||
Shares forfeited | \u2014 | (10,708) | ||||||
Balance December 31, 2021 | 14,430 | 234,412 | ||||||
Shares granted, employees | \u2014 | 167,836 | Unconditional | \u20ac297.27 | ||||
Shares granted, Management Board | 9,726 | \u2014 | Conditional | \u20ac313.72 | ||||
Shares granted, Management Board | \u2014 | \u2014 | Unconditional | \u20ac0.00 | ||||
Shares vested | \u2014 | (126,488) | ||||||
Shares forfeited | (1,087) | (36,050) | ||||||
Balance December 31, 2022 | 23,069 | 239,710 |
In 2022, treasury shares were sold for the vesting of 126,488 restricted shares.
Options outstanding
The following table is a summary of changes in options outstanding under the 2014 long-term incentive plan.
Number\u00a0of | Exercise | Fair value at grant date | ||||
Balance January 1, 2015 | \u2014 | |||||
Options granted, April 24, 2015 | 42,659 | 44.24 | \u20ac17.33 | |||
Balance December 31, 2015 | 42,659 | |||||
Options granted, April 22, 2016 | 62,555 | 37.09 | \u20ac12.64 | |||
Balance December 31, 2016 | 105,214 | |||||
Options granted, April 21, 2017 | 24,963 | 51.55 | \u20ac14.57 | |||
Balance December 31, 2017 | 130,177 | |||||
Adjustment following capital repayment | 11,593 | \u2014 | \u2014 | |||
Balance December 31, 2018 | 141,770 | |||||
Options exercised, 2021 | (123,521) | \u2014 | \u2014 | |||
Balance December 31, 2021 | 18,249 | |||||
Options exercised, 2022 | \u2014 | \u2014 | \u2014 | |||
Balance December 31, 2022 | 18,249 |
In 2022, no options were granted.
At December\u00a031, 2022, the aggregate intrinsic value of all options outstanding under the 2014 long-term incentive plan is \u20ac4,300 (2021: \u20ac7,093).
Share-based payments expenses
The company has adopted various share plans (e.g. a restricted share plan, and a performance share plan) and has entered into share agreements with the Management Board and various employees. Under the stock option plans, the Management Board and employees may purchase per the vesting date a specific number of shares of the company\u2019s common stock at a certain price. Options are priced at market value in euros on the date of grant. Under the restricted share plan, employees receive per the vesting date a specific number of shares of the company\u2019s common stock. Under the performance share plan, the Management Board receives per the vesting date, and provided the performance criteria have been met, a specific number of shares of the company\u2019s common stock.
Authority to issue options and shares
By resolution of the Annual General Meeting of Shareholders (AGM) of May 16, 2022, the formal authority to issue options and shares was allocated to the Management Board subject to the approval of the Supervisory Board. This authority is valid for 18 months and needs to be refreshed by the 2023 AGM to allow the continued application of the long-term incentive (LTI) plans beyond November 17, 2022. The company hasn't granted new options since its last grant date per April 2017.
The ASM 2014 long-term incentive plan for employees (ELTI) is principally administered by the Management Board and the ASM 2014 long-term incentive plan for members of the Management Board (MLTI) is principally administered by the Supervisory Board. This complies with applicable corporate governance standards. However, the Supervisory Board has no power to represent the company. For external purposes, the Management Board remains the competent body under both LTI plans. The LTI plans envisage that the Supervisory Board, or in the case of the ELTI the Management Board with the approval of the Supervisory Board, will determine the number of options and shares to be granted to the Management Board members and to employees.
2014 long-term incentive plan
In 2014, a new long-term incentive plan was adopted. In the new plan to limit potential dilution, the amount of outstanding (vested and non-vested) options and shares granted to the Management Board and to other employees will not exceed 5% of the issued ordinary share capital of ASM. The new long-term incentive plan 2014 consists of two sub-plans: the ELTI and the MLTI.
Options and performance shares are issued to Management Board members and restricted shares are issued to employees once per annum on the date following the publication of the first-quarter results of the relevant year. Possible grant to newly hired employees can be issued once a quarter, on the date following the publication of the financial results of the relevant quarter. The number of options and shares outstanding under the long-term incentive plans or under any other plan or arrangement in aggregate may never exceed 5% of ASM\u2019s share capital.
Performance and restricted shares outstanding
The following table is a summary of changes in performance shares and restricted shares outstanding under the 2014 long-term incentive plan.
Number of performance shares | Number of restricted shares | Status | Fair value at grant date (weighted average) | |||||
Balance January 1, 2021 | 29,997 | 325,811 | ||||||
Shares granted, employees | \u2014 | 86,357 | Unconditional | \u20ac260.77 | ||||
Shares granted, Management Board | 6,343 | \u2014 | Conditional | \u20ac261.25 | ||||
Shares granted, Management Board | 4,504 | \u2014 | Unconditional | \u20ac49.78 | ||||
Shares vested | (26,414) | (167,048) | ||||||
Shares forfeited | \u2014 | (10,708) | ||||||
Balance December 31, 2021 | 14,430 | 234,412 | ||||||
Shares granted, employees | \u2014 | 167,836 | Unconditional | \u20ac297.27 | ||||
Shares granted, Management Board | 9,726 | \u2014 | Conditional | \u20ac313.72 | ||||
Shares granted, Management Board | \u2014 | \u2014 | Unconditional | \u20ac0.00 | ||||
Shares vested | \u2014 | (126,488) | ||||||
Shares forfeited | (1,087) | (36,050) | ||||||
Balance December 31, 2022 | 23,069 | 239,710 |
In 2022, treasury shares were sold for the vesting of 126,488 restricted shares.
Options outstanding
The following table is a summary of changes in options outstanding under the 2014 long-term incentive plan.
Number\u00a0of | Exercise | Fair value at grant date | ||||
Balance January 1, 2015 | \u2014 | |||||
Options granted, April 24, 2015 | 42,659 | 44.24 | \u20ac17.33 | |||
Balance December 31, 2015 | 42,659 | |||||
Options granted, April 22, 2016 | 62,555 | 37.09 | \u20ac12.64 | |||
Balance December 31, 2016 | 105,214 | |||||
Options granted, April 21, 2017 | 24,963 | 51.55 | \u20ac14.57 | |||
Balance December 31, 2017 | 130,177 | |||||
Adjustment following capital repayment | 11,593 | \u2014 | \u2014 | |||
Balance December 31, 2018 | 141,770 | |||||
Options exercised, 2021 | (123,521) | \u2014 | \u2014 | |||
Balance December 31, 2021 | 18,249 | |||||
Options exercised, 2022 | \u2014 | \u2014 | \u2014 | |||
Balance December 31, 2022 | 18,249 |
In 2022, no options were granted.
At December\u00a031, 2022, the aggregate intrinsic value of all options outstanding under the 2014 long-term incentive plan is \u20ac4,300 (2021: \u20ac7,093).
Share-based payments expenses
Accrued expenses and other payables consist of the following:
\u00a0 | December\u00a031, | |||
\u00a0 | 2021 | 2022 | ||
Personnel-related items | 72,252 | 100,717 | ||
Deferred revenue | 68,723 | 197,617 | ||
Current portion lease liabilities | 7,574 | 9,520 | ||
Advanced payments from customers | 14,837 | 97,563 | ||
Supplier-related items | 9,627 | 20,232 | ||
Marketing-related items | 1,575 | 1,634 | ||
R&D projects | \u2014 | 5,570 | ||
Other | 15,976 | 26,058 | ||
Total accrued expenses and other payables | 190,564 | 458,911 |
As per December 31, 2022, ASM was debt-free. ASM may borrow under separate short-term lines of credit with banks under an unsecured \u20ac150 million standby credit facility with a consortium of banks.
The amount outstanding as at December\u00a031, 2022 was nil, so the undrawn portion totaled \u20ac150 million. The undrawn portion represents the company\u2019s standby revolving credit facility of \u20ac150 million with a consortium of banks. The company has a new RCF as per end of May 2022 and the new facility has a tenor of five years with an option to extend up to two years. The facility amount is \u20ac150 million with an accordion option increase the facility amount by \u20ac100 million.
The credit facility of \u20ac150 million includes one financial covenant:
\u2022Consolidated total net debt/total shareholders\u2019 equity ratio.\u00a0
This financial covenant is measured twice each year: on June\u00a030 and December\u00a031.
The net debt/total shareholders\u2019 equity ratio should not exceed 1.5. For the year ended December\u00a031, 2022, the company has no net debt, cash and cash equivalents amount to \u20ac419 million, and total equity equals the amount of consolidated tangible net worth.
The company is in compliance with these financial covenants as of December 31, 2022.
FINANCIAL INSTRUMENTS
Financial instruments include:
\u00a0 | December\u00a031, | |||
2021 | 2022 | |||
Financial assets: | ||||
Cash and cash equivalents | 491,507 | 419,315 | ||
Accounts receivable | 446,724 | 580,823 | ||
Financial liabilities: | ||||
Lease liabilities | 15,886 | 18,604 | ||
Contingent consideration payable | \u2014 | 78,649 | ||
Accounts payable | 175,436 | 243,499 |
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable equal their fair values because of the short-term nature of these instruments.
Gains or losses related to financial instruments are as follows:
\u00a0 | 2021 | 2022 | ||
Interest income | 23 | 2,246 | ||
Interest expense | (2,012) | (1,523) | ||
Change in fair value of contingent consideration | \u2014 | (2,575) | ||
Result from foreign currency exchange | 33,473 | 25,011 | ||
Addition to allowance for doubtful accounts receivable | (83) | (198) |
FINANCIAL RISK FACTORS
ASM is exposed to a number of risk factors: market risks, credit risk, liquidity risk, and equity price risk. The company may use forward exchange contracts to hedge its foreign exchange risk. The company does not enter into financial instrument transactions for trading or speculative purposes.
Market risk
Market risk includes changes in market prices, foreign exchange rates and interest rates, which will affect the group\u2019s income or the value of its holdings of financial instruments. The objective of market-risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
Foreign exchange risk
ASM and its subsidiaries conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of the company (euro) or one of its subsidiaries conducting the business. The purpose of the company's foreign currency management is to manage the effect of exchange-rate fluctuations on income, expenses, cash flows, and assets and liabilities denominated in selected foreign currencies, in particular denominated in US dollars.
We may use forward exchange contracts to hedge our foreign exchange risk of anticipated sales or purchase transactions in the normal course of business which occur within the next twelve months, for which we have a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions being hedged. There is no hedge accounting applied on the hedges therefore change in fair value (gain or loss) on the hedges will be recognized in profit or loss.
Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. We record all derivatives, including forward exchange contracts, on the statement of financial position at fair value in accrued expenses and payables. Should contracts extend beyond one year, these are classified as long-term.
Furthermore, we may manage the currency exposure of certain receivables and payables using derivative instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the consolidated statement of profit or loss. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date, and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) in the consolidated statement of profit or loss.
We do not use forward exchange contracts for trading or speculative purposes. Financial assets and financial liabilities are recognized on the company's consolidated statement of financial position when the company becomes a party to the contractual provisions of the instrument.
To the extent that exchange rate fluctuations impact the value of the company\u2019s investments in its foreign subsidiaries, they are not hedged. The cumulative effect of these fluctuations is separately reported in consolidated equity. Reference is made to Note 12.
Per December 31, 2021 one FX option was outstanding with a fair value of \u20ac37,000. Per December 31, 2022, there were no forward exchange contracts outstanding.
The foreign currency exchange results in 2022 related only to translation gain of \u20ac25.0 million, compared to translation gain of \u20ac33.5 million in 2021. A substantial part of ASM's cash position is denominated in US dollar, which is the key driver of the exchange gain in 2021 and 2022.
The following table analyzes the company\u2019s exposure to currency risk in our major currencies.
\u00a0 | December 31, | |||||||||||||||
\u00a0 | 2021 | 2022 | ||||||||||||||
(thousand) | USD | JPY | KRW | SGD | USD | JPY | KRW | SGD | ||||||||
Accounts receivable | 394,915 | 6,890,314 | 9,091,916 | 395 | 490,051 | 5,836,919 | 14,503,184 | 458 | ||||||||
Cash and cash equivalents | 417,704 | 1,864,776 | 29,215,789 | 27,003 | 308,977 | 2,209,145 | 16,405,166 | 32,370 | ||||||||
Accounts payable | (97,705) | (4,057,736) | (23,626,477) | (41,541) | (117,040) | (3,429,196) | (31,297,765) | (78,164) | ||||||||
Total | 714,914 | 4,697,354 | 14,681,228 | (14,143) | 681,988 | 4,616,868 | (389,415) | (45,336) |
The following table analyzes the company\u2019s sensitivity to a hypothetical 10% strengthening and 10% weakening of the US dollar, Singapore dollar, Korean won and Japanese yen against the euro as of December\u00a031, 2021, and December\u00a031, 2022. This analysis includes foreign currency-denominated monetary items and adjusts their translation at year-end for a 10% increase and 10% decrease against the euro.
Impact on financial instruments | ||||
(\u20ac thousand) | 2021 | 2022 | ||
10% increase of US dollar versus euro | 63,121 | 63,940 | ||
10% decrease of US dollar versus euro | (63,121) | (63,940) | ||
10% increase of Singapore dollar versus euro | (926) | (3,170) | ||
10% decrease of Singapore dollar versus euro | 926 | 3,170 | ||
10% increase of Korean won versus euro | 1,086 | (29) | ||
10% decrease of Korean won versus euro | (1,086) | 29 | ||
10% increase of Japanese yen versus euro | 3,603 | 3,283 | ||
10% decrease of Japanese yen versus euro | (3,603) | (3,283) |
A hypothetical 10% strengthening or 10% weakening of any other currency against the euro as of December\u00a031, 2021, and December\u00a031, 2022, could have a material impact on net earnings for certain currencies.
Interest risk
We are exposed to interest rate risk through our cash deposits. The company does not enter into financial instrument transactions for trading or speculative purposes, or to manage interest-rate exposure. As per December 31, 2022, the company had no debt and was not exposed to interest rate risk on borrowings.
Credit risk
Financial instruments that potentially subject the company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and derivative instruments. These instruments contain a risk of counterparties failing to discharge their obligations. We monitor credit risk and manage credit risk exposure by type of financial instrument by assessing the creditworthiness of counterparties. We do not anticipate non-performance by counterparties, given their high creditworthiness.
Our customers are semiconductor device manufacturers located throughout the world. We perform ongoing credit evaluations of our customers' financial condition. We take additional measures to mitigate credit risk when considered appropriate by means of down payments or letters of credit. We generally do not require collateral or other security to support financial instruments with credit risk.
Concentrations of credit risk (whether on- or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.
We derive a significant percentage of our revenue from a small number of large customers. The 10 largest customers accounted for approximately 77.8% of revenue in 2022 (2021: 78.9%). The three largest customers accounted for approximately 57.6% of revenue in 2022 (2021: 59.4%). In 2022, we had two customers (2021: three customers) who contributed more than 10% of total revenue. Revenue to these large customers may also fluctuate significantly from time to time, depending on the timing and level of purchases by these customers. Significant orders from such customers may expose the company to a concentration of credit risk, and difficulties in collecting amounts due, which could harm the company\u2019s financial results. However, given the creditworthiness of our customers and historical experience, we have not accounted for an expected credit loss over the outstanding balances in general, for further details we refer to Note 9.
We invest our cash and cash equivalents in short-term deposits, money-market funds, and derivative instruments with high-rated financial institutions. We only enter into transactions with a limited number of major financial institutions that have high credit ratings, and we closely monitor the creditworthiness of our counterparties. Concentration risk is mitigated by not limiting the exposure to a single counterparty.
The maximum credit exposure is equal to the carrying values of cash and cash equivalents and accounts receivable.
Liquidity risk
Our policy is to maintain a strong capital base so as to maintain investor-, creditor-, and market confidence, and to sustain future development of the business.
Our liquidity needs are affected by many factors, some of which are based on the normal ongoing operations of the business, and others that relate to the uncertainties of the global economy and the semiconductor industry. Although our cash requirements fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with our principal sources of liquidity, are sufficient to satisfy our current requirements, including our expected capital expenditures in 2022.
We intend to return cash to our shareholders on a regular basis in the form of dividend payments and, subject to our actual and anticipated liquidity requirements and other relevant factors, share buybacks.
The following table summarizes the company\u2019s contractual and other obligations as at December 31, 2022.
Total | Less\u00a0than | 1-5 | More\u00a0than | |||||
Accounts payable | 243,499 | 243,499 | \u2014 | \u2014 | ||||
Income tax payable | 43,785 | 43,785 | \u2014 | \u2014 | ||||
Accrued expenses and other payables | 458,911 | 458,911 | \u2014 | \u2014 | ||||
Non-current lease liabilities | 18,604 | \u2014 | 16,530 | 2,074 | ||||
Pension liabilities | 7,902 | 1,139 | 1,873 | 4,890 | ||||
Purchase obligations: | ||||||||
Purchase commitments to suppliers | 1,075,376 | 1,046,024 | 29,352 | \u2014 | ||||
Capital expenditure and other commitments | 30,754 | 30,754 | \u2014 | \u2014 | ||||
Total contractual obligations | 1,878,831 | 1,824,112 | 47,755 | 6,964 |
Total short-term lines of credit amounted to \u20ac150 million at December 31, 2022. The amount outstanding at December\u00a031, 2022 was nil and the undrawn portion totaled \u20ac150 million. The standby revolving credit facility of \u20ac150 million with a consortium of banks will be available through May 31, 2027.
Credit risk
Financial instruments that potentially subject the company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and derivative instruments. These instruments contain a risk of counterparties failing to discharge their obligations. We monitor credit risk and manage credit risk exposure by type of financial instrument by assessing the creditworthiness of counterparties. We do not anticipate non-performance by counterparties, given their high creditworthiness.
Our customers are semiconductor device manufacturers located throughout the world. We perform ongoing credit evaluations of our customers' financial condition. We take additional measures to mitigate credit risk when considered appropriate by means of down payments or letters of credit. We generally do not require collateral or other security to support financial instruments with credit risk.
Concentrations of credit risk (whether on- or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.
We derive a significant percentage of our revenue from a small number of large customers. The 10 largest customers accounted for approximately 77.8% of revenue in 2022 (2021: 78.9%). The three largest customers accounted for approximately 57.6% of revenue in 2022 (2021: 59.4%). In 2022, we had two customers (2021: three customers) who contributed more than 10% of total revenue. Revenue to these large customers may also fluctuate significantly from time to time, depending on the timing and level of purchases by these customers. Significant orders from such customers may expose the company to a concentration of credit risk, and difficulties in collecting amounts due, which could harm the company\u2019s financial results. However, given the creditworthiness of our customers and historical experience, we have not accounted for an expected credit loss over the outstanding balances in general, for further details we refer to Note 9.
We invest our cash and cash equivalents in short-term deposits, money-market funds, and derivative instruments with high-rated financial institutions. We only enter into transactions with a limited number of major financial institutions that have high credit ratings, and we closely monitor the creditworthiness of our counterparties. Concentration risk is mitigated by not limiting the exposure to a single counterparty.
The maximum credit exposure is equal to the carrying values of cash and cash equivalents and accounts receivable.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM).
The accounting policies used to measure the net earnings and total assets in each segment are consistent with those used in the consolidated financial statements. The measurement methods used to determine reported segment earnings are consistently applied for all periods presented. There were no asymmetrical allocations to segments.
Geographical information is summarized as follows:
\u00a0 | Year ended December 31, | |||||||
2021 | 2022 | |||||||
(\u20ac thousand) | Revenue | Non-current assets 1) | Revenue | Non-current assets 1) | ||||
United States | 454,148 | 276,414 | 561,848 | 383,846 | ||||
Europe | 172,442 | 74,377 | 264,324 | 653,152 | ||||
Asia | 1,103,321 | 289,776 | 1,584,755 | 346,451 | ||||
Total | 1,729,911 | 640,567 | 2,410,927 | 1,383,449 | ||||
1 Other than financial instruments, deferred tax assets and post-employment benefit assets |
Geographical information is summarized as follows:
\u00a0 | Year ended December 31, | |||
2021 | 2022 | |||
(\u20ac thousand) | Revenue | Revenue | ||
United States | 454,148 | 561,848 | ||
Europe | 172,442 | 264,324 | ||
Asia | 1,103,321 | 1,584,755 | ||
Total | 1,729,911 | 2,410,927 |
For geographical reporting, the revenue is attributed to the geographical location in which the customer's facilities are located.
Revenue stream
The company generates revenue primarily from the sales of equipment and spares and services. The products and services are described by nature in the summary of significant accounting policies, and are recognized within these revenue streams as follows:
\u2022Equipment revenue: This revenue stream captures the sale of equipment and installation services. Revenues from royalties and licenses are included to the extent that these licenses relate to equipment.
\u2022Spares and services revenue: The revenues included under this line relate to the sale of spares and support services. Revenues from royalties and licenses are included to the extent that these licenses relate to spares.
\u00a0 | Year ended December 31, | |||
(\u20ac thousand) | 2021 | 2022 | ||
Equipment revenue | 1,408,102 | 2,033,669 | ||
Spares & services revenue | 321,809 | 377,258 | ||
Total | 1,729,911 | 2,410,927 |
Total revenue increased by 39%, driven by solid increases in our ALD business
Contract balances
\u00a0 | 2021 | 2022 | ||
Accrued revenue | 21,915 | 59,928 | ||
Deferred revenue | 68,723 | 197,617 | ||
Advanced payments from customers | 14,837 | 97,563 |
The increase in the contract balances is the result of the higher activity level of the company, the additions as a result of the acquisitions and because we are still experiencing certain supply chain challenges, leading to an increased number of incomplete tool shipments for which revenues are deferred. The impact of the acquisitions are mainly on deferred revenues (\u20ac20 million) and advance payments from customers (\u20ac39 million).
The accrued revenue included in the 'Amounts to be invoiced' primarily relate to the company\u2019s right to consideration for work completed and revenue recognized but not billed at the reporting date. The accrued revenue is transferred to accounts receivables when the rights become unconditional. This usually occurs when the company issues an invoice to the customer.
Amounts recognized in profit or loss
The components of the result before income taxes consist of:
\u00a0 | Year ended December 31, | |||
\u00a0 | 2021 | 2022 | ||
The Netherlands | 358,039 | 157,738 | ||
Other countries | 239,285 | 347,238 | ||
Result before income taxes | 597,324 | 504,976 |
The income tax expense consists of:
\u00a0 | Year ended December 31, | |||
\u00a0 | 2021 | 2022 | ||
Current: | ||||
The Netherlands | (72,032) | (78,738) | ||
Other countries | (7,718) | (36,430) | ||
(79,750) | (115,168) | |||
Deferred: | ||||
The Netherlands | (5,948) | (1,875) | ||
Other countries | (16,917) | 1,180 | ||
Income tax expense | (102,615) | (115,863) |
Reconciliation of effective tax rate
The provisions for income taxes as shown in the consolidated statements of profit or loss differ from the amounts computed by applying the Dutch statutory income tax rate to earnings before taxes. A reconciliation of the provisions for income taxes and the amounts that would be computed using the Dutch statutory income tax rate is set forth as follows:
\u00a0 | Year ended December 31, | |||||||
\u00a0 | 2021 | 2022 | ||||||
Result before income taxes from continuing operations | 597,324 | 100.0% | 504,976 | 100.0% | ||||
Income tax provision based on Dutch statutory income tax rate | (149,331) | 25.0% | (130,284) | 25.8% | ||||
Non-deductible expenses | (2,098) | 0.4% | (1,639) | 0.3% | ||||
Foreign taxes at a rate other than the Dutch statutory rate | 8,484 | (1.4)% | 18,182 | (3.6)% | ||||
Tax incentives 1) and non-taxable income 2) | 37,708 | (6.3)% | 54,942 | (10.9)% | ||||
Adjustments in respect of prior years' current taxes | 3,818 | (0.6)% | (49) | \u2014% | ||||
Non-deductible impairment charge on investments in associates 2) | \u2014 | \u2014% | (55,570) | 11.0% | ||||
Other 3) | (1,196) | 0.2% | (1,445) | 0.3% | ||||
Tax income (expense) | (102,615) | 17.2% | (115,863) | 22.9% |
1 Tax incentives relate to the Netherlands (Innovation Box), Singapore (Pioneer Certificate) and South Korea (FIZ).
2 Non-taxable income consists of revenues deriving from the share in income of investments in associates which are exempted under the Dutch participation exemption. The participation exemption also applies to the impairment charge on investments in associates.
3 Other mainly consists of tax credits, withholding taxes, changes in (enacted) tax laws and revaluation of certain assets.
The consolidated group effective tax rate for 2022 is higher compared to previous years due to an incidental non-deductible impairment charge on ASMPT. The effective tax rate, excluding the impairment on, and net income of our investment in ASMPT, for 2022 is 17.7% (2021: 19.6%).
The Dutch statutory tax rate is 25.8%. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. During 2022, there was no significant change in the statutory tax rates of the relevant jurisdictions. The company\u2019s deferred tax assets and liabilities have been\u00a0determined in accordance with these statutory\u00a0income tax rates.
Movement in deferred tax balances
\u00a0 | Net balance at January 1, 2021 | Changes through business combinations | Consolidated statement of profit and loss | Equity | Exchange differences | Net balance at December 31, 2021 | Deferred tax assets at December 31, 2021 | Deferred tax liabilities at December 31, 2021 | ||||||||
Right-of-use assets & lease liabilities | 91 | \u2014 | 109 | \u2014 | 12 | 212 | \u2014 | 212 | ||||||||
Property plant and equipment | 553 | \u2014 | (3,370) | \u2014 | (11) | (2,828) | \u2014 | (2,828) | ||||||||
Other intangible assets | (42,627) | \u2014 | (16,471) | \u2014 | (1,687) | (60,785) | \u2014 | (60,785) | ||||||||
Evaluation tools | 5,200 | \u2014 | (1,097) | \u2014 | (154) | 3,949 | \u2014 | 3,949 | ||||||||
Employee benefits | (549) | \u2014 | (69) | (79) | 17 | (680) | \u2014 | (680) | ||||||||
Inventories | 1,001 | \u2014 | 203 | \u2014 | 74 | 1,278 | \u2014 | 1,278 | ||||||||
Provision for warranty | 3,834 | \u2014 | 1,593 | \u2014 | 224 | 5,651 | \u2014 | 5,651 | ||||||||
Accrued expenses | 3,248 | \u2014 | 2,845 | \u2014 | 204 | 6,297 | 69 | 6,228 | ||||||||
Tax losses carried forward | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||||
R&D tax credits | 7,553 | \u2014 | (6,608) | \u2014 | 282 | 1,227 | \u2014 | 1,227 | ||||||||
Total deferred tax | (21,696) | \u2014 | (22,865) | (79) | (1,039) | (45,679) | 69 | (45,748) |
\u00a0 | Net balance at January 1, 2022 | Changes through business combinations | Consolidated statement of profit and loss | Equity | Exchange differences | Net balance at December 31, 2022 | Deferred tax assets at December 31, 2022 | Deferred tax liabilities at December 31, 2022 | ||||||||
Right-of-use assets & lease liabilities | 212 | \u2014 | 40 | \u2014 | 10 | 262 | \u2014 | 262 | ||||||||
Property plant and equipment | (2,828) | \u2014 | 662 | \u2014 | (37) | (2,203) | \u2014 | (2,203) | ||||||||
Other intangible assets | (60,785) | (82,429) | (3,213) | \u2014 | (1,236) | (147,663) | \u2014 | (147,663) | ||||||||
Evaluation tools | 3,949 | \u2014 | (1,719) | \u2014 | (296) | 1,934 | \u2014 | 1,934 | ||||||||
Employee benefits | (680) | \u2014 | (152) | (277) | 48 | (1,061) | \u2014 | (1,061) | ||||||||
Inventories | 1,278 | 451 | 1,800 | \u2014 | 40 | 3,569 | 140 | 3,429 | ||||||||
Provision for warranty | 5,651 | 191 | 994 | \u2014 | 105 | 6,941 | \u2014 | 6,941 | ||||||||
Accrued expenses | 6,297 | (257) | 4,088 | \u2014 | 182 | 10,310 | 41 | 10,269 | ||||||||
Tax losses carried forward | \u2014 | 6,816 | (2,049) | \u2014 | (115) | 4,652 | \u2014 | 4,652 | ||||||||
R&D tax credits | 1,227 | (567) | (1,146) | \u2014 | 123 | (363) | \u2014 | (363) | ||||||||
Total deferred tax | (45,679) | (75,795) | (695) | (277) | (1,176) | (123,622) | 181 | (123,803) |
Deferred tax assets and/or liabilities for temporary differences are mainly recognized in the Netherlands, United States, Japan, South Korea and Singapore.
Income tax receivable and income tax payable
During 2022, the company paid income taxes of \u20ac90.5 million (2021: \u20ac151.6 million) for tax assessments relating to 2022. The amount in 2021 included paid income taxes for the years 2019, 2020 and 2021.
Unrecognized deferred tax assets
The credits concern R&D credits generated in the US, in the state of Arizona. However, ASM does not recognize these credits stemming from prior years due to the fact that utilization of prior-year credits is only possible if and when the credits generated in the current year are fully utilized. Given the level of R&D activity in the US, the company does not expect it could fully utilize the credits generated in the current year and, hence, does not expect to benefit from the available credits generated in prior years.
\u00a0 | 2022 | |||
\u00a0 | Gross amount | Tax effect | ||
Credits | 21,622,199 | 21,622,199 | ||
Unrecognized deferred tax assets | 21,622,199 | 21,622,199 |
Summary of open tax years
A summary of open tax years by major jurisdiction is as follows:
Jurisdiction | \u00a0 |
Japan | 2017-2022 |
The Netherlands | 2020-2022 |
Singapore | 2018-2022 |
United States of America | 2018-2022 |
South Korea | 2022 |
The calculation of the company\u2019s tax liabilities involves dealing with uncertainties in the application of complex tax laws. The company\u2019s estimate for the potential outcome of any unrecognized tax benefits is highly judgmental.\u00a0Settlement of unrecognized tax benefits in a manner inconsistent with the company\u2019s expectations could have a material impact on the company\u2019s financial position, net earnings and cash flows. The company is subject to tax audits in its major tax jurisdictions, and local tax authorities may challenge the positions taken by the company.
Movement in deferred tax balances
\u00a0 | Net balance at January 1, 2021 | Changes through business combinations | Consolidated statement of profit and loss | Equity | Exchange differences | Net balance at December 31, 2021 | Deferred tax assets at December 31, 2021 | Deferred tax liabilities at December 31, 2021 | ||||||||
Right-of-use assets & lease liabilities | 91 | \u2014 | 109 | \u2014 | 12 | 212 | \u2014 | 212 | ||||||||
Property plant and equipment | 553 | \u2014 | (3,370) | \u2014 | (11) | (2,828) | \u2014 | (2,828) | ||||||||
Other intangible assets | (42,627) | \u2014 | (16,471) | \u2014 | (1,687) | (60,785) | \u2014 | (60,785) | ||||||||
Evaluation tools | 5,200 | \u2014 | (1,097) | \u2014 | (154) | 3,949 | \u2014 | 3,949 | ||||||||
Employee benefits | (549) | \u2014 | (69) | (79) | 17 | (680) | \u2014 | (680) | ||||||||
Inventories | 1,001 | \u2014 | 203 | \u2014 | 74 | 1,278 | \u2014 | 1,278 | ||||||||
Provision for warranty | 3,834 | \u2014 | 1,593 | \u2014 | 224 | 5,651 | \u2014 | 5,651 | ||||||||
Accrued expenses | 3,248 | \u2014 | 2,845 | \u2014 | 204 | 6,297 | 69 | 6,228 | ||||||||
Tax losses carried forward | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||||
R&D tax credits | 7,553 | \u2014 | (6,608) | \u2014 | 282 | 1,227 | \u2014 | 1,227 | ||||||||
Total deferred tax | (21,696) | \u2014 | (22,865) | (79) | (1,039) | (45,679) | 69 | (45,748) |
\u00a0 | Net balance at January 1, 2022 | Changes through business combinations | Consolidated statement of profit and loss | Equity | Exchange differences | Net balance at December 31, 2022 | Deferred tax assets at December 31, 2022 | Deferred tax liabilities at December 31, 2022 | ||||||||
Right-of-use assets & lease liabilities | 212 | \u2014 | 40 | \u2014 | 10 | 262 | \u2014 | 262 | ||||||||
Property plant and equipment | (2,828) | \u2014 | 662 | \u2014 | (37) | (2,203) | \u2014 | (2,203) | ||||||||
Other intangible assets | (60,785) | (82,429) | (3,213) | \u2014 | (1,236) | (147,663) | \u2014 | (147,663) | ||||||||
Evaluation tools | 3,949 | \u2014 | (1,719) | \u2014 | (296) | 1,934 | \u2014 | 1,934 | ||||||||
Employee benefits | (680) | \u2014 | (152) | (277) | 48 | (1,061) | \u2014 | (1,061) | ||||||||
Inventories | 1,278 | 451 | 1,800 | \u2014 | 40 | 3,569 | 140 | 3,429 | ||||||||
Provision for warranty | 5,651 | 191 | 994 | \u2014 | 105 | 6,941 | \u2014 | 6,941 | ||||||||
Accrued expenses | 6,297 | (257) | 4,088 | \u2014 | 182 | 10,310 | 41 | 10,269 | ||||||||
Tax losses carried forward | \u2014 | 6,816 | (2,049) | \u2014 | (115) | 4,652 | \u2014 | 4,652 | ||||||||
R&D tax credits | 1,227 | (567) | (1,146) | \u2014 | 123 | (363) | \u2014 | (363) | ||||||||
Total deferred tax | (45,679) | (75,795) | (695) | (277) | (1,176) | (123,622) | 181 | (123,803) |
Deferred tax assets and/or liabilities for temporary differences are mainly recognized in the Netherlands, United States, Japan, South Korea and Singapore.
Unrecognized deferred tax assets
The credits concern R&D credits generated in the US, in the state of Arizona. However, ASM does not recognize these credits stemming from prior years due to the fact that utilization of prior-year credits is only possible if and when the credits generated in the current year are fully utilized. Given the level of R&D activity in the US, the company does not expect it could fully utilize the credits generated in the current year and, hence, does not expect to benefit from the available credits generated in prior years.
\u00a0 | 2022 | |||
\u00a0 | Gross amount | Tax effect | ||
Credits | 21,622,199 | 21,622,199 | ||
Unrecognized deferred tax assets | 21,622,199 | 21,622,199 |
Expenses by nature were as follows:
\u00a0 | Year ended December 31, | |||
2021 | 2022 | |||
Materials and supplies | 727,910 | 1,014,196 | ||
Personnel expenses | 322,226 | 471,464 | ||
Depreciation and amortization | 93,614 | 122,434 | ||
Impairments | 1,967 | 6 | ||
Other personnel-related expenses | 63,938 | 103,754 | ||
Professional fees | 27,520 | 44,718 | ||
Other 1) | 5,349 | 21,960 | ||
Total cost of sales, selling, general and administrative and research and development expenses | 1,242,524 | 1,778,532 |
1 Other relates to facility expenses, IT expenses and other expenses minus capitalized expenses
Research and development consists of the following:
\u00a0 | Year ended December 31, | |||
\u00a0 | 2021 | 2022 | ||
Gross research and development expenses | 206,019 | 301,618 | ||
Capitalization of development expenses | (81,973) | (102,627) | ||
Amortization of capitalized development expenses | 25,184 | 34,869 | ||
Research and development grants and credits | \u2014 | \u2014 | ||
Total research and development expenses | 149,230 | 233,860 | ||
Impairment of capitalized development expenses | 1,967 | 6 | ||
Net research and development expenses | 151,197 | 233,866 |
The impairment expenses in 2021 and 2022 are related to customer-specific projects.
Personnel expenses for employees were as follows:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Wages and salaries | 273,394 | 396,164 | ||
Social security | 20,333 | 26,961 | ||
Pension expenses | 11,257 | 18,528 | ||
Share-based payment expenses | 17,242 | 29,811 | ||
Total | 322,226 | 471,464 |
Personnel expenses are included in cost of sales and in operating expenses in the consolidated statement of profit or loss.
The number of employees, exclusive of temporary workers, by geographical area at year-end was as follows:
\u00a0 | December\u00a031, | |||
Geographical location | 2021 | 2022 | ||
Europe: | ||||
- the Netherlands | 161 | 211 | ||
- EMEA | 240 | 364 | ||
United States | 814 | 1,034 | ||
Japan | 295 | 350 | ||
South Korea | 392 | 462 | ||
Singapore | 854 | 1,091 | ||
Asia, other | 556 | 746 | ||
Total | 3,312 | 4,258 |
The number of employees, exclusive of temporary workers, by function at year-end was as follows:
December\u00a031, | ||||
Per function | 2021 | 2022 | ||
Research and development | 649 | 965 | ||
Manufacturing | 879 | 1,197 | ||
Marketing and sales | 396 | 445 | ||
Customer service | 1,090 | 1,271 | ||
Corporate and support functions | 298 | 380 | ||
Total | 3,312 | 4,258 |
Basic net earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding for that period. The dilutive effect is calculated using the treasury stock method. The calculation of diluted net income per share assumes the exercise of options issued under our stock option plans (and the issuance of shares under our share plans) for periods in which exercises (or issuances) would have a dilutive effect.
The calculation of basic and diluted net income per share attributable to common shareholders is based on the following data:
\u00a0 | December 31, | |||
\u00a0 | 2021 | 2022 | ||
Net earnings used for purposes of calculating net income per common share | ||||
Net earnings from operations | 494,709 | 389,113 | ||
Basic weighted average number of shares outstanding during the year | 48,645 | 48,820 | ||
Effect of dilutive potential common shares from stock options and restricted shares | 264 | 278 | ||
Dilutive weighted average number of shares outstanding | 48,909 | 49,097 | ||
Basic net earnings per share: | ||||
from operations | 10.17 | 7.97 | ||
Diluted net earnings per share: | ||||
from operations | 10.11 | 7.93 |
During 2022, the company considered the members of the Management Board, the Executive Committee (as from effective date of February 1, 2022) and the Supervisory Board to be the key management personnel. Total remuneration for key management personnel in 2022 amounts to \u20ac11,431 (2021: \u20ac4,800). ASM does not provide any loans, deposits or related guarantees to the members of the Management Board, the Executive Committee or the Supervisory Board.
MANAGEMENT BOARD
The remuneration of members of the Management Board has been determined by the Supervisory Board according to the following table that sets out information concerning all remuneration from the company (including its subsidiaries) for services in all capacities to all current members of the Management Board of the company. The remuneration of the Management Board consists of the remuneration of current and former managing directors. In addition to the CEO and CFO a third Management Board member was appointed on May 16, 2022
December 31, | ||||
2021 | 2022 2) | |||
Short-term employee benefits | 2,856 | 3,645 | ||
Post-employment benefits | 190 | 214 | ||
Other long-term benefits | \u2014 | \u2014 | ||
Termination benefits | \u2014 | \u2014 | ||
Share-based payment 1) | 1,391 | 1,570 | ||
Total Management Board remuneration | 4,437 | 5,429 |
1 The remuneration reported as part of the LTI (share awards) is based on costs incurred under accounting values EU-IFRS. The costs of share awards are charged to the consolidated statement of profit & loss over the three-year vesting period based on the number of awards expected to vest. For the first year we account at target, subsequently we apply the estimated number of share awards, and in the final performance year of the awards we update this estimate to the best estimated number of awards which are anticipated to vest.
2 Mr. H. M'Saad has been appointed as CTO in 2022. His remuneration has been reported in the overview above as from AGM (May 16, 2022). Prior to his appointment he was member of the Executive Committee.
EXECUTIVE COMMITTEE (excluding management board)
The remuneration of members of the Executive Committee has been determined by the Management Board according to the following table that sets out information concerning all remuneration from the company as of February 1, 2022 (including its subsidiaries) for services in all capacities to all current members of the Executive Committee of the company. The remuneration of the Executive Committee consists of the remuneration of current and former members.
December 31, | ||||
2021 | 2022 | |||
Short-term employee benefits | \u2014 | 3,449 | ||
Post-employment benefits | \u2014 | 83 | ||
Other long-term benefits | \u2014 | \u2014 | ||
Termination benefits | \u2014 | \u2014 | ||
Share-based payment 1) | \u2014 | 1,840 | ||
Total Executive Committee remuneration 2) | \u2014 | 5,372 |
1 The amounts included for share-based payment in the total remuneration represent the vesting expenses related to the financial year.
2 Effective per February 1, 2022, the Executive Committee was installed. And therefore remuneration is only included in the above table as from this effective date. During 2021 the Executive Committee was not in place, and therefore comparable figures are not included in this overview.
SUPERVISORY BOARD
The ownership or controlling interest of outstanding common shares of ASM by members of the Management Board and Supervisory Board or members of their immediate family are as follows:
\u00a0 | December 31, 2021 | December 31, 2022 | ||||||
\u00a0 | Shares owned | Percentage\u00a0of common\u00a0shares outstanding | Shares owned | Percentage\u00a0of common\u00a0shares outstanding | ||||
P.F.M. van der Meer Mohr (member of the Supervisory Board) | 200 | 0.00% | 200 | 0.00% | ||||
D. Lamouche (member of the Supervisory Board) | 390 | 0.00% | 390 | 0.00% | ||||
M.J.C. de Jong (member of the Supervisory Board) | 4,050 | 0.01% | 4,050 | 0.01% |
KPMG Accountants N.V. has served as our external auditor for the years 2022 and 2021. The table sets out the aggregate fees for professional audit services and other services rendered by the external auditors and its member firms and/or affiliates in 2022 and 2021. The fees mentioned in the table for the audit of the financial statements 2022 (2021) relate to the total fees for the audit of the financial statements 2022 (2021), irrespective of whether the activities were performed during the financial year 2022 (2021). Other audit-related fees are related to assurance services on non-financial information. The following fees were charged by KPMG Accountants N.V. to the company, its subsidiaries and other consolidated companies, as referred to in Section 2:382a(1) and (2) of the Dutch Civil Code.
\u00a0 | 2021 | 2022 | ||||||||||
\u00a0 | KPMG Accountants NV | KPMG network | KPMG Total | KPMG Accountants NV | KPMG network | KPMG Total | ||||||
Audit fees | 676 | 264 | 940 | 1,035 | 278 | 1,313 | ||||||
Audit-related fees | 50 | \u2014 | 50 | 75 | \u2014 | 75 | ||||||
Tax fees | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||
Other fees | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | \u2014 | ||||||
Total | 726 | 264 | 990 | 1,110 | 278 | 1,388 |
AUDIT COMMITTEE PREAPPROVAL POLICIES
The Audit Committee has determined that the provision of services by KPMG described in the preceding paragraphs is compatible with maintaining KPMG\u2019s independence. All audit and permitted non-audit services provided by KPMG during 2022 were preapproved by the Audit Committee.
The Audit Committee has adopted the following policies and procedures for preapproval of all audit and permitted non-audit services provided by our external auditor:
Audit services
Management submits to the Audit Committee for preapproval the scope and estimated fees for specific services directly related to performing the independent audit of our consolidated financial statements for the current year.
Audit-related services
The Audit Committee may preapprove expenditures up to a specified amount for services included in identified service categories that are related extensions of audit services and are logically performed by the auditors. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval.
Tax services
The Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total for identified services related to tax matters. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval.
Other services
% Ownership December\u00a031, | ||||||
2021 | 2022 | |||||
Name | Location | |||||
Subsidiaries (consolidated) | ||||||
ASM Europe BV 1) | Almere,\u00a0the\u00a0Netherlands | 100% | 100% | |||
ASM IP Holding BV 1) | Almere,\u00a0the\u00a0Netherlands | 100% | 100% | |||
ASM Pacific Holding BV 1)\u00a02) | Almere, the Netherlands | 100% | 100% | |||
ASM Netherlands Holding BV 1) | Almere,\u00a0the\u00a0Netherlands | 100% | 100% | |||
ASM United Kingdom Sales BV 1) | Almere, the Netherlands | 100% | 100% | |||
ASM Germany Sales BV 1) | Almere, the Netherlands | 100% | 100% | |||
LPE S.p.A 3) | Baranzate, Italy | n/a | 100% | |||
Pilegrowth Tech S.r.l. | Cernobbio, Italy | n/a | 100% | |||
LPE Shanghai Int. Trading Co. | Shanghai, China | n/a | 100% | |||
ASM France SARL | Crolles, France | 100% | 100% | |||
ASM Italia Srl | Milano, Italy | 100% | 100% | |||
ASM Belgium NV | Leuven, Belgium | 100% | 100% | |||
ASM Services and Support Ireland Ltd | Dublin, Ireland | 100% | 100% | |||
ASM Services and Support Israel Ltd | Kiryat Gat, Israel | 100% | 100% | |||
ASM Microchemistry Oy | Helsinki, Finland | 100% | 100% | |||
ASM America Inc | Phoenix, Arizona, United States of America | 100% | 100% | |||
ASM NuTool Inc | Phoenix, Arizona, United States of America | 100% | 100% | |||
Reno Sub-Systems, Inc | New Jersey, Delaware, United States of America | n/a | 100% | |||
Reno Technologies, Inc. | New Jersey, Delaware, United States of America | n/a | 100% | |||
ASM Japan KK | Tokyo, Japan | 100% | 100% | |||
ASM Wafer Process Equipment Singapore Pte\u00a0Ltd | Singapore | 100% | 100% | |||
ASM Front-End Manufacturing Singapore Pte\u00a0Ltd | Singapore | 100% | 100% | |||
ASM Services & Support Malaysia SDN BHD | Kulim, Malaysia | 100% | 100% | |||
ASM Korea Ltd | Dongtan, South Korea | 100% | 100% | |||
ASM Front-End Sales\u00a0& Services Taiwan Co\u00a0Ltd | Hsin-Chu, Taiwan | 100% | 100% | |||
ASM Semiconductor Equipment India Private Limited | Bangalore, India | n/a | 100% | |||
ASM China Ltd | Shanghai, People\u2019s Republic of China | 100% | 100% |
1 For these subsidiaries, ASM International N.V. has filed statements at the Dutch Chamber of Commerce assuming joint and several liability in accordance with Article 403, Part 9 of Book 2 of the Dutch Civil Code.
2 ASM Pacific Holding BV holds 24.95% of the shares in ASMPT Ltd.