ASML Holding N.V. (ASML) Customer Co-Investment Program Conference Call July 10, 2012 1:00 am ET Executives Craig DeYoung – Vice President, Investor Relations Peter Wennink – Executive Vice President and Chief Financial Officer Eric Meurice – Chairman, President and Chief Executive Officer Analysts Satya Kumar – Credit Suisse Securities LLC Marcel Achterberg – Petercam SA Cornelius Rahn – Bloomberg News Mahesh Sanganeria – RBC Capital Markets Mehdi Hosseini – Susquehanna International Group Jagadish Iyer – Piper Jaffray, Inc. Janardan Menon – Liberum Capital Didier Scemama – Bank of America Merrill Lynch Jerome A. Ramel – Exane BNP Paribas Presentation Operator
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At this time, I’d like to draw your attention to the Safe Harbor statement contained in today’s press release and in our online presentation both of which can be found on our website at www.asml.com. The Safe Harbor statement will apply to this call and all associated presentation materials. The length of this call will be 30 minutes.And now I’d like to turn the call over to Peter Wennink for a brief introduction. Peter? Peter Wennink Thank you. Good afternoon and good morning, everyone, and thank you for attending today’s conference call regarding our recently issued press release. Before we begin the Q&A session, I’d like to provide a brief overview of the key points of the announcement. Following the introduction, Eric and I would gladly take as many of your questions as time will allow. ASML announced today that we’ve established a program to enable minority equity investments in the company, by its largest customers in addition to commitments to partially fund ASML’s research and development spending for our future programs. The objective of the program is to accelerate our development of EUV beyond this current generation and our development of future 450 millimeter wafer technology, both due in the second half of this decade. The possession is focused on risk sharing through co-investments by customers and contains basically three elements: first, the first element is that it has customers contributing potentially up to €1.4 billion towards our research and development cost for what we call a non-recurring engineering cost over and above the five year period starting in 2013. The second element is that customers will have the ability to take a minority interest in the company, which in essence provides the cement for the strategic relationship between ASML and the industry. And the third element is that the money that we will receive for the issuance of the maximum of 25% additional shares will be returned in full to the adjusting shareholders through the use of a synthetic buyback program.
We see multiple benefits of this program to our customers, our shareholders, and our employees, as well as the electronics consumer at large by providing advanced lithography solutions sooner that will reduce our customer’s cost of IC manufacturing. Our customers will see an acceleration of delivery of lithography products through the middle of the next decade that will allow cost reductions, a few continued scaling, and larger wafer size migration. It’s important to point out that the products that result from this customer co-investment will be available without any restriction to every semiconductor manufacturer worldwide.As for the existing shareholders, all money is paid for every new share created in this program, which will be a minimum of 15% and a maximum of 25% of issued shares, will be repaid by way of a combination of a capital repayment and a reverse stock split such there is no earnings per share or EPS dilution as the result of this program. In addition, this program helps to spread the risks of the significant new development activities. However, not only does the additional funding and customer commitment de-risk the R&D program, the customer co-investment helps ASML in maintaining its consistent policy of return of capital, while at the same time, expanding the long-term growth of the business through increased sales and operating profit opportunities as we expect new commercial opportunities as a result of these additional R&D expenditures. As both the next generation EUV development and 450 millimeter wafer size, two developments will take place at the same time. We will be creating some challenges in resourcing these programs. We currently see a need to add about 25% more engineering manpower or approximately 1,000 to 1,200 additional engineers both flexed and fixed giving our current and future employees plenty of new opportunities and challenges. Read the rest of this transcript for free on seekingalpha.com