ASML Announces 2005 Annual and Fourth Quarter Earnings, Results and Bookings Project Strong Outlook

ASML Holding NV (ASML) today announced 2005 annual andfourth quarter results according to US GAAP as follows:
-- 2005 net sales of EUR 2,529 million and Q4 2005 net sales of
EUR 548 million

2004: Net sales of EUR 2,465 million
Q3 2005: Net sales of EUR 533 million

-- 2005 net profit of EUR 311 million or 12.3 percent of sales
and Q4 2005 net profit of EUR 52 million or 9.4 percent of
sales

2004: Net profit of EUR 235 million or 9.6 percent of sales
Q3 2005: Net profit of EUR 48 million or 9.0 percent of
sales

-- Q4 2005 net bookings of 55 systems including 43 new systems
and 12 refurbished systems

Q3 2005: Net bookings of 46 systems

-- Order backlog of 95 lithography systems valued at EUR 1,434
million as of December 31, 2005

Order backlog of 87 lithography systems valued at EUR 1,245
million as of September 25, 2005

"2005 was a year where our continued focus on execution paid off,"said Eric Meurice, president and CEO, ASML. "In spite of an overallsemiconductor equipment market which decreased by nine percent in2005, our sales increased by three percent year on year, while netprofit improved by 32 percent to EUR 311 million. Net cash fromoperations in 2005 nearly tripled to EUR 711 million versus 2004. Wereinforced our market position, as we gained 12 new customers in 2005,including our sixth customer in Japan. With 13 immersion systemsdelivered to date, 13 immersion orders already in our backlog, and 8pending orders, we are increasing our technology lead in the race tomeet customer needs for new generation semiconductor products."

Operations Update

2005 net sales increased by three percent to EUR 2,529 millionyear-on-year, as the company shipped 156 new and 40 refurbishedsystems and generated revenue from field and service options of EUR301 million.

In Q4 2005, ASML net sales of EUR 548 million increased by threepercent, compared with the previous quarter but the level of shipmentswas better than anticipated in the company's outlook of October 12,2005 due to year-end customer short-term demand. In Q4 2005, ASMLshipped 34 new and 13 refurbished systems, totaling sales of EUR 456million, and generated revenue from field and service options of EUR92 million. Net sales for Q3 2005 included the shipment of 28 new and11 refurbished machines, totaling EUR 459 million, and revenue fromfield and service options of EUR 74 million.

The Q4 2005 average selling price (ASP) for a new system was EUR12.5 million, compared with the Q3 2005 average selling price for anew system of EUR 15.0 million, due to a product mix that favored248-nanometer wavelength (KrF) technology in Q4 2005, signaling arestart of capacity additions by customers. The Q4 2005 averageselling price for all ASML systems sold was EUR 9.7 million, comparedwith the Q3 2005 average selling price of EUR 11.8 million.

Q4 2005 net bookings exceeded expectations with 55 systems valuedat EUR 651 million, including 43 new systems with an average sellingprice for new systems of EUR 14.5 million and reflecting sustainedstrong memory and integrated device manufacturer (IDM) demand, as wellas increased capacity demand from foundries and continued demand forimmersion systems. ASML's order backlog as of December 31, 2005 isvalued at EUR 1,434 million, totaling 95 systems with an averageselling price of EUR 15.1 million. For comparison, ASML's backlog asof September 25, 2005 was valued at EUR 1,245 million, totaling 87systems with an average selling price of EUR 14.3 million.

In 2005, ASML generated a net profit of EUR 311 million or EUR0.64 per ordinary share, compared with a net profit in 2004 of EUR 235million or EUR 0.49 per ordinary share. In Q4 2005, ASML generated anet profit of EUR 52 million or EUR 0.11 per ordinary share.

The company's Q4 2005 gross margin was 37.3 percent, compared withthe Q3 2005 gross margin of 37.0 percent. Net cash from operations wasEUR 210 million in Q4 2005 and EUR 711 million for the whole year.ASML ended 2005 with EUR 1,905 million in cash and equivalents.

The company's 2005 research and development (R&D) costs reachedEUR 324 million net of credit, compared with 2004 R&D costs of EUR 282million net of credit and excluding EUR 49 million for a one-timecross-license payment. Q4 2005 R&D costs were EUR 82 million net ofcredit, compared with Q3 2005 R&D costs of EUR 80 million net ofcredit.

The company's 2005 selling, general and administrative (SG&A)expenses were EUR 201 million, compared with 2004 SG&A expenses of EUR202 million. SG&A expenses were EUR 47 million in Q4 2005, comparedwith SG&A expenses of EUR 48 million in Q3 2005.

Outlook

"The significant 55 tool bookings in Q4 2005 confirm an overallsemiconductor cycle upswing," said Meurice. "We expect the trend to besustained in Q1 2006, with bookings at least at the same level as thatof Q4 2005 and Q1 2006 sales showing important growth versus theprevious quarter. Q1 2006 will also serve as a springboard to ourimmersion development. Volume production ramp of our newest tool, theTWINSCAN(TM) XT:1700i, the industry's only 1.2 numerical aperture (NA)immersion tool capable for the 45 nanometer node, will start in Q22006."

The company expects to ship 48 systems in Q1 2006 with an averageselling price of EUR 14.1 million for new systems and an averageselling price for all systems of EUR 12.0 million; however, givenmarket momentum, short-term demand for a few additional systemshipments in Q1 2006 may materialize. The company expects a grossmargin in Q1 2006 from 38 to 39 percent.

In view of current order demand for ASML immersion tools, thecompany is preparing for a number of shipments in 2006 which couldexceed the range of 20 to 25 immersion systems.

We expect Q1 2006 R&D expenditures will increase to EUR 85million, net of credit. When annualized, expected Q1 2006 R&D costsrepresent a spending level of EUR 340 million for 2006, net of credit,an increased R&D investment to strengthen ASML's technology leadershipand expand lithography growth.

SG&A expenses in Q1 2006 are expected to be EUR 51 million.

ASML expects to steadily improve its cash conversion cycle during2006, although cash generation will reduce in H1 2006 because thecompany intends to employ additional cash to finance expected growth,prepare the industry's first two Extreme Ultra Violet (EUV) tools fordelivery, and make payments for 2006 preliminary and prior year taxliabilities.

As of Q4 2005, ASML has achieved its strategic target level of EUR1 billion in net cash, which is comprised of total cash andequivalents minus convertible subordinated bonds. ASML will thereforeprepare for a potential share buy back program to be executed, subjectto whether the company decides during 2006 to make significantinvestments in acquisitions or additional activities. Furtherinformation will be disclosed in due course.

Proposal to Cancel Priority Shares

Currently, ASML has priority shares and ordinary sharesoutstanding. All outstanding priority shares are held by a foundationgoverned solely by members of the company's Supervisory Board andBoard of Management. ASML has decided to cancel its priority sharesand dissolve the foundation. To do so, the company intends to amendits Articles of Association. The proposal for such amendment will beput on the agenda for the annual general meeting of shareholders (AGM)scheduled on March 23, 2006. More information on this subject will besent to shareholders in due course.

About ASML

ASML is the world's leading provider of lithography systems forthe semiconductor industry, manufacturing complex machines that arecritical to the production of integrated circuits or chips.Headquartered in Veldhoven, the Netherlands, ASML is traded onEuronext Amsterdam and Nasdaq under the symbol ASML. For moreinformation, visit the Web site at ASML.com.

IFRS Financial Reporting

ASML's primary accounting standard for quarterly earnings releasesand annual reports is US GAAP, the accounting standard generallyaccepted in the United States. Quarterly US GAAP statements ofoperations, statements of cash flows and balance sheets, and areconciliation of net income and equity from US GAAP to IFRS areavailable on ASML.com.

In addition to reporting financial figures in US GAAP, ASML alsoreports financial figures in IFRS for statutory purposes. The mostsignificant differences between US GAAP and IFRS that affect ASMLconcern the capitalization of certain product development costs, theaccounting of stock option plans and the accounting of existingconvertible bonds. Quarterly IFRS statements of operations, statementsof cash flows, balance sheets and a reconciliation of net income andequity from US GAAP to IFRS are available on ASML.com.

Investor and Media Call

A conference call for investors and media will be hosted by CEOEric Meurice and CFO Peter Wennink at 15:00 PM Central European Time /09:00 AM Eastern U.S. time. Dial-in numbers are: in the Netherlands+31 20 531 5871 and the US +1 706 679 0473. Access is also viaASML.com to listen to the conference call.

A presentation about 2005 Annual and Q4 2005 results is availableon ASML.com.

A replay of the Investor and Media Call will be available onASML.com until February 20, 2006.

Forward Looking Statements

"Safe Harbor" Statement under the US Private Securities LitigationReform Act of 1995: the matters discussed in this document may includeforward-looking statements that are subject to risks and uncertaintiesincluding, but not limited to: economic conditions, product demand andsemiconductor equipment industry capacity, worldwide demand andmanufacturing capacity utilization for semiconductors (the principalproduct of our customer base), competitive products and pricing,manufacturing efficiencies, new product development, ability toenforce patents, the outcome of intellectual property litigation,availability of raw materials and critical manufacturing equipment,trade environment, and other risks indicated in the risk factorsincluded in ASML's Annual Report on Form 20-F and other filings withthe US Securities and Exchange Commission.