ASML Announces 2008 Third Quarter Results

ASML Holding NV (ASML) today announces 2008 third quarter results according to US GAAP as follows:

• Q3 2008 net sales of EUR 696 million versus Q2 2008 net sales of EUR 844 million (Q3 2007 net sales of EUR 934 million).
• Q3 2008 net income of EUR 73 million or 10.5 percent of net sales versus Q2 2008 net income of EUR 192 million or 22.7 percent of net sales (Q3 2007 net income of EUR 166 million or 17.8 percent of net sales).
• Q3 2008 net bookings valued at EUR 498 million with 31 systems including 18 new and 13 used systems, leading to an order backlog valued at EUR 1,028 million as of September 28, 2008.

"Sales and profit in the third quarter were in line with our guidance thanks to our leading position in immersion lithography products where market demand has held up despite a weak global economy and credit turmoil,” said Eric Meurice, president and CEO of ASML. "Generating 75 percent of our net sales and 87 percent of our bookings in the quarter, our immersion systems enable customers to aggressively reduce their cost per function in a difficult semiconductor environment. Demand for capacity expansion systems remained weak and as guided we lowered our expenses significantly in response to a softening business environment,” Meurice said.

Operations Update

In Q3 2008, ASML’s net sales of EUR 696 million included 26 new and 11 used systems, totaling net system sales of EUR 591 million, and net service and field options sales of EUR 105 million. Net system sales for Q2 2008 included the shipment of 31 new and 8 used machines, totaling EUR 726 million, and net service and field options sales of EUR 118 million.

The Q3 2008 average selling price for a new system was stable at EUR 21.6 million, compared with the Q2 2008 average selling price for a new system of EUR 21.7 million, reflecting the focus on our most advanced technology. The Q3 2008 average selling price for all ASML systems sold was EUR 16.0 million, compared with the Q2 2008 ASP of EUR 18.6 million, as a result of a larger proportion of used systems.

Q3 2008 net bookings totaled 31 systems valued at EUR 498 million. The orders contained 18 new systems with an average selling price for new systems of EUR 22.1 million and 13 used systems with an average selling price of EUR 7.7 million. We received bookings for 16 immersion systems, four of which for used systems.

ASML’s order backlog as of September 28, 2008 was EUR 1,028 million, totaling 53 systems with an average selling price of EUR 19.4 million. For comparison, ASML’s backlog as of June 29, 2008 was valued at EUR 1,106 million, totaling 59 systems with an average selling price of EUR 18.8 million.

In Q3 2008, ASML generated a net income of EUR 73 million or EUR 0.17 per ordinary share as compared with a net income of EUR 192 million in Q2 2008 or EUR 0.45 per ordinary share including non-recurring tax income of approximately EUR 70 million.

The company’s Q3 2008 gross margin was 38.1 percent, compared with the Q2 2008 gross margin of 40.0 percent, consistent with a lower level of net sales.

Q3 2008 research and development (R&D) costs were EUR 130 million net of credits, stable compared with Q2 2008 R&D costs of EUR 130 million net of credits.

Selling, general and administrative (SG&A) costs were EUR 52 million in Q3 2008, compared with SG&A costs of EUR 56 million in Q2 2008.

Net cash from operations was EUR 21 million in Q3 2008, impacted by push-outs of planned systems into 2009. ASML ended Q3 2008 with EUR 1,313 million in cash and cash equivalents.

Outlook

"The current economic turmoil and the reassessment by some of our customers of their investments and strategic alliances make it difficult for us to guide on short term bookings or give a mid term sales forecast. However, we received orders for 16 immersion systems in the third quarter, which is a testimonial to the strength of our advanced product portfolio. Even during this downturn, continued immersion technology investments remain necessary for technology transitions and we expect to see quarterly sales at levels that should secure a positive operating profit margin. This will be supported by our ability to further adjust costs with our outsourced business flexibility model. ASML’s strong financial position will allow for sustained strategic investments in technology development and production facilities that will be required for success when the industry recovers. Indeed, we will be shipping in H1 2009 our latest TWINSCAN™ XT:1950i immersion system which offers a 25 percent performance improvement compared to our current leading architecture and takes single exposure imaging down to 38 nanometers. In addition to investing in a new double patterning lithography platform to address the 32 nanometer node and beyond, we are making significant investments in Extreme Ultraviolet (EUV) in order to lead the industry into the next generation technology. We just unveiled a production system roadmap that supports cost-effective chip manufacturing to 22 nanometers and beyond, and have orders for five production systems with delivery starting in 2010,” Meurice said.

In view of the wait-and-see attitude of the market, the company expects to ship 26 systems in Q4 2008 with an average selling price of EUR 20.6 million for new systems and an average selling price for all systems of EUR 16.5 million. As previously guided, ASML’s 2008 full year net sales will decline around 20 percent and the company will thereby outperform peers. ASML expects a gross margin in Q4 2008 of approximately 36 percent, R&D expenditures to be at EUR 124 million net of credits and SG&A costs to decrease to EUR 47 million. We have used and will use the flexibility in our organizational model to reduce costs without forced redundancies.

About ASML

ASML is the world's leading provider of lithography systems for the semiconductor industry, manufacturing complex machines that are critical to the production of integrated circuits or chips. Headquartered in Veldhoven, the Netherlands, ASML is traded on Euronext Amsterdam and NASDAQ under the symbol ASML. ASML has more than 6,900 employees, serving chip manufacturers in more than 60 locations in 16 countries. For more information, visit our website: www.asml.com

IFRS Financial Reporting

ASML's primary accounting standard for quarterly earnings releases and annual reports is US GAAP, the accounting standard generally accepted in the United States. Quarterly US GAAP statements of operations, statements of cash flows and balance sheets, and a reconciliation of net income and equity from US GAAP to IFRS are available on www.asml.com

In addition to reporting financial figures in accordance with US GAAP, ASML also reports financial figures in accordance with IFRS for statutory purposes. The most significant differences between US GAAP and IFRS that affect ASML concern the capitalization of certain product development costs, the accounting of stock option plans and the accounting of income taxes. Quarterly IFRS statements of operations, statements of cash flows, balance sheets and a reconciliation of net income and equity from US GAAP to IFRS are available on www.asml.com

The consolidated balance sheets of ASML Holding N.V. as of September 28, 2008, the related consolidated statements of operations and consolidated statements of cash flows for the quarter ended September 28, 2008 as presented in this press release are unaudited.

Investor and Media Call

A conference call for investors and media will be hosted by CEO Eric 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 5856 and the US +1 706 679 0473. To listen to the conference call, access is also available via www.asml.com

A presentation about 2008 third quarter results is available on www.asml.com

A video statement of CFO Peter Wennink is available on www.asml.com

A replay of the Investor and Media Call will be available on www.asml.com

Forward Looking Statements

"Safe Harbor" Statement under the US Private Securities Litigation Reform Act of 1995: the matters discussed in this document may include forward-looking statements, including statements made about our outlook, realization of backlog, IC unit demand, financial results, average sales price, gross margin and expenses. These forward looking statements are subject to risks and uncertainties including, but not limited to: economic conditions, credit market deterioration on consumer confidence which could affect our customers, product demand and semiconductor equipment industry capacity, worldwide demand and manufacturing capacity utilization for semiconductors (the principal product of our customer base), competitive products and pricing, manufacturing efficiencies, new product development and customer acceptance of new products, ability to enforce patents and protect intellectual property rights, the outcome of intellectual property litigation, availability of raw materials and critical manufacturing equipment, trade environment, changes in exchange rates and other risks indicated in the risk factors included in ASML’s Annual Report on Form 20-F and other filings with the US Securities and Exchange Commission.

ASML - Summary U.S. GAAP Consolidated Statements of Operations 1,4
	Three months ended,							Nine months ended,
		Sep 30, 2007			Sep 28, 2008			Sep 30, 2007			Sep 28, 2008
(in thousands EUR, except per share data)
Net system sales		843,232			590,723			2,516,425			2,136,296
Net service and field option sales		91,142			105,770			296,842			323,562
Total net sales		934,374			696,493			2,813,267			2,459,858
Cost of sales		549,411			431,062			1,653,220			1,483,334
Gross profit on sales		384,963			265,431			1,160,047			976,524
Research and development costs, net of credits		120,077			130,157			356,829			388,657
Amortization of in process R&D		-			-			23,148			-
Selling, general and administrative costs		56,045			51,933			168,771			165,628
Income from operations		208,841			83,341			611,299			422,239
Interest income		9,527			7,059			27,958			17,633
Income from operations before income taxes		218,368			90,400			639,257			439,872
Provision for income taxes		(52,089)			(17,106)			(160,797)			(29,478)
Net income		166,279			73,294			478,460			410,394
Basic net income per ordinary share		0.35			0.17			1.01			0.95
Diluted net income per ordinary share		0.35	2,3		0.17	3		1.00	2,3		0.94	3
Number of ordinary shares used in computing per share amounts (in thousands):
Basic		474,557			431,672			472,842			431,498
Diluted		481,724	2,3		434,491	3		479,881	2,3		434,859	3

ASML - Ratios and Other Data 1,4
	Three months ended,				Nine months ended,
	Sep 30, 2007		Sep 28, 2008		Sep 30, 2007		Sep 28, 2008
Gross profit as a % of net sales	41.2		38.1		41.2		39.7
Income from operations as a % of net sales	22.4		12.0		21.7		17.2
Net income as a % of net sales	17.8		10.5		17.0		16.7
Shareholders’ equity as a % of total assets	35.7		50.3		35.7		50.3
Income taxes as a % of income before income taxes	23.9		18.9		25.2		6.7
Sales of systems total (in units)	59		37		205		126
ASP of systems sales (EUR million)	14.3		16.0		12.3		17.0
Value of backlog systems total (EUR million)	1,769		1,028		1,769		1,028
Backlog systems total (in units)	90		53		90		53
ASP of backlog systems (EUR million)	19.7		19.4		19.7		19.4
Value of bookings systems total (EUR million)	857		498		2,167		1,443
Net bookings total (in units)	40		31		132		90
ASP of bookings systems (EUR million)	21.4		16.1		16.4		16.0
Number of employees	6,403		6,907		6,403		6,907

ASML - Summary U.S. GAAP Consolidated Balance Sheets 1,4
		Dec 31, 2007		Sep 28, 2008
(in thousands EUR)
ASSETS
Cash and cash equivalents		1,271,636		1,312,993
Accounts receivable, net		637,975		574,230
Inventories, net		1,102,210		1,134,039
Deferred tax assets short-term		73,019		82,767
Other current assets		234,529		261,341
Total current assets		3,319,369		3,365,370
Deferred tax assets long-term		141,032		139,351
Other assets		59,991		50,632
Goodwill		128,271		129,238
Other intangible assets, net		38,195		28,846
Property, plant and equipment, net		380,894		503,057
Total assets		4,067,752		4,216,494
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities		1,321,437		1,273,016
Deferred tax and other liabilities		245,415		215,182
Other deferred liabilities		7,936		8,749
Other long-term debt		602,016		596,699
Total liabilities		2,176,804		2,093,646
Shareholders’ equity		1,890,948		2,122,848
Total liabilities and shareholders’ equity		4,067,752		4,216,494

ASML - Summary U.S. GAAP Consolidated Statements of Cash Flows 1,4
		Three months ended,						Nine months ended,
		Sep 30, 2007			Sep 28, 2008			Sep 30, 2007			Sep 28, 2008
(in thousands EUR)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		166,279			73,294			478,460			410,394
Depreciation and amortization		28,008			29,177			105,527			86,298
Disposals of property, plant and equipment		1,698			1,413			12,572			3,828
Share-based payments		3,675			3,687			10,342			10,362
Change in tax assets and liabilities		(5,306	)		(5,970	)		24,274			(98,283	)
Change in assets and liabilities		(20,024	)		(80,747	)		(10,083	)		5,584
Net cash provided by operating activities		174,330			20,854			621,092			418,183
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(49,676	)		(68,237	)		(125,188	)		(188,711	)
Proceeds from sale of property, plant and equipment		-			-			3,355			-
Purchases of intangible assets		-			(35	)		-			(35	)
Acquisition of subsidiary (net of cash acquired)		-			-			(188,011	)		-
Net cash used in investing activities		(49,676	)		(68,272	)		(309,844	)		(188,746	)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of shares in conjunction with conversion rights
of bond holders and stock options		-			-			(156,253	)		(87,603	)
Dividend paid		-			(394	)		-			(107,841	)
Net proceeds from issuance of shares and stock options		19,464			1,439			40,505			4,967
Net proceeds from issuance of bonds		-			-			593,790			-
Excess tax benefits from stock options		6,226			(1,943	)		7,062			4,027
Redemption and/or repayment of debt		(1,530	)		(1,280	)		(1,875	)		(1,280	)
Net cash provided by (used in) financing activities		24,160			(2,178	)		483,229			(187,730	)
Net cash flows		148,814			(49,596	)		794,477			41,707
Effect of changes in exchange rates on cash		(2,846	)		1,691			(5,107	)		(350	)
Net increase (decrease) in cash & cash equivalents		145,968			(47,905	)		789,370			41,357

ASML - Quarterly Summary U.S. GAAP Consolidated Statements of Operations1,4
		Three months ended,
		Sep 30,			Dec 31,			Mar 30,			Jun 29,		Sep 28,
		2007			2007			2008			2008		2008
(in millions EUR, except per share data)
Net system sales		843.2			834.8			820.0			725.6		590.7
Net service and field option sales		91.2			120.1			99.2			118.6		105.8
Total net sales		934.4			954.9			919.2			844.2		696.5
Cost of sales		549.4			565.3			545.6			506.7		431.1
Gross profit on sales		385.0			389.6			373.6			337.5		265.4
Research and development costs, net of credits		120.1			129.3			128.3			130.2		130.2
Selling, general and administrative costs		56.0			56.9			57.3			56.4		51.9
Income from operations		208.9			203.4			188.0			150.9		83.3
Interest income		9.5			5.5			4.2			6.4		7.1
Income from operations before income taxes		218.4			208.9			192.2			157.3		90.4
Benefit from (provision for) income taxes		(52.1	)		(8.1	)		(47.1	)		34.7		(17.1	)
Net income		166.3			200.8			145.1			192.0		73.3
Basic net income per ordinary share		0.35			0.46			0.34			0.45		0.17
Diluted net income per ordinary share 2,3		0.35			0.45			0.33			0.44		0.17
Number of ordinary shares used in computing per share amounts (in thousands):
Basic		474,557			439,317			431,600			431,221		431,672
Diluted 2,3		481,724			444,569			434,959			434,585		434,491

ASML - Quarterly Summary Ratios and other data 1,4
		Three months ended,
		Sep 30,		Dec 31,		Mar 30,		Jun 29,			Sep 28,
		2007		2007		2008		2008			2008
Gross profit as a % of net sales		41.2		40.8		40.6		40.0			38.1
Income from operations as a % of net sales		22.4		21.3		20.5		17.9			12.0
Net income as a % of net sales		17.8		21.0		15.8		22.7			10.5
Shareholders' equity as a % of total assets		35.7		46.5		44.5		49.7			50.3
Income taxes as a % of income before income taxes		23.9		3.9		24.5		(22.1	)		18.9
Sales of systems total (in units)		59		55		50		39			37
ASP of system sales (EUR million)		14.3		15.2		16.4		18.6			16.0
Value of backlog systems total (EUR million)		1,769		1,697		1,167		1,106			1,028
Backlog systems total (in units)		90		89		65		59			53
ASP of backlog systems (EUR million)		19.7		19.1		18.0		18.8			19.4
Value of booking systems total (EUR million)		857		803		312		632			498
Net bookings total (in units)		40		54		26		33			31
ASP of bookings systems (EUR million)		21.4		14.9		12.0		19.2			16.1
Number of employees		6,403		6,582		6,765		6,821			6,907

ASML - Summary U.S. GAAP Consolidated Balance Sheets 1,4
		Sep 30,		Dec 31,		Mar 30,		Jun 29,		Sep 28,
		2007		2007		2008		2008		2008
(in millions EUR)
ASSETS
Cash and cash equivalents		2,445.2		1,271.6		1,397.1		1,360.9		1,313.0
Accounts receivable, net		611.7		638.0		741.5		516.9		574.2
Inventories, net		1,021.2		1,102.2		1,152.0		1,130.2		1,134.0
Deferred tax assets short-term		131.3		73.0		71.1		69.8		82.8
Other current assets		214.2		234.6		267.6		262.2		261.4
Total current assets		4,423.6		3,319.4		3,629.3		3,340.0		3,365.4
Deferred tax assets long-term		143.5		141.0		135.8		157.7		139.4
Other assets		39.9		60.0		85.7		39.3		50.6
Goodwill		133.4		128.3		119.7		119.8		129.2
Other intangible assets, net		44.2		38.2		32.5		30.1		28.8
Property, plant and equipment, net		343.3		380.9		401.4		458.1		503.1
Total assets		5,127.9		4,067.8		4,404.4		4,145.0		4,216.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities		2,391.5		1,321.4		1,562.3		1,247.3		1,273.0
Deferred tax and other liabilities		248.3		245.4		261.5		227.0		215.2
Other deferred liabilities		8.2		8.0		7.1		18.5		8.8
Convertible subordinated debt		44.5		-		-		-		-
Other long-term debt		604.0		602.0		615.3		591.6		596.7
Total liabilities		3,296.5		2,176.8		2,446.2		2,084.4		2,093.7
Shareholders’ equity		1,831.4		1,891.0		1,958.2		2,060.6		2,122.8
Total liabilities and shareholders’ equity		5,127.9		4,067.8		4,404.4		4,145.0		4,216.5

ASML - Summary U.S. GAAP Consolidated Statements of Cash Flows 1,4
		Three months ended,
		Sep 30,			Dec 31,			Mar 30,			Jun 29,			Sep 28,
		2007			2007			2008			2008			2008
(in millions EUR)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		166.3			200.8			145.1			192.0			73.3
Depreciation and amortization		28.0			29.8			30.6			26.5			29.2
Disposals of property, plant and equipment		1.7			1.6			1.1			1.3			1.4
Share-based payments		3.7			6.2			3.5			3.1			3.7
Change in tax assets and liabilities		(5.3	)		(0.6	)		21.8			(114.1	)		(6.0	)
Change in assets and liabilities		(20.1	)		(157.9	)		65.2			21.2			(80.7	)
Net cash provided by operating activities		174.3			79.9			267.3			130.0			20.9
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(49.7	)		(54.0	)		(55.0	)		(65.5	)		(68.3	)
Proceeds from sale of property, plant and equipment		-			1.7			-			-			-
Net cash used in investing activities		(49.7	)		(52.3	)		(55.0	)		(65.5	)		(68.3	)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital repayment		-			(1,011.9	)		-			-			-
Purchase of shares in conjunction with conversion rights of bond holders and stock options
		-			(203.6	)		(87.6	)		-			-
Dividend paid		-			-			-			(107.4	)		(0.4	)
Net proceeds from issuance of shares and stock options		19.5			22.8			3.0			0.5			1.4
Excess tax benefits from stock options		6.2			1.9			-			6.0			(1.9	)
Redemption and/or repayment of debt		(1.5	)		(7.8	)		-			-			(1.3	)
Net cash provided by (used in) financing activities		24.2			(1,198.6	)		(84.6	)		(100.9	)		(2.2	)
Net cash flows		148.8			(1,171.0	)		127.7			(36.4	)		(49.6	)
Effect of changes in exchange rates on cash		(2.8	)		(2.6	)		(2.2	)		0.2			1.7
Net increase (decrease) in cash & cash equivalents		146.0			(1,173.6	)		125.5			(36.2	)		(47.9	)

ASML - Notes to the Summary U.S. GAAP Consolidated Financial Statements

Basis of Presentation

ASML follows accounting principles generally accepted in the United States of America ("U.S. GAAP”). Further disclosures, as required under U.S. GAAP in annual reports, are not included in the summary consolidated financial statements. Unless stated otherwise, the accompanying consolidated financial statements are stated in thousands of euros (‘EUR’).

Principles of consolidation

The consolidated financial statements include the accounts of ASML Holding N.V. and all of its majority-owned subsidiaries. Subsidiaries are all entities over which ASML has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. All intercompany profits, balances and transactions have been eliminated in the consolidation.

Use of estimates

The preparation of ASML’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities on the balance sheet dates and the reported amounts of revenue and expense during the reported periods. Actual results could differ from those estimates.

Recognition of revenues

ASML recognizes revenue when all four revenue recognition criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; seller’s price to the buyer is fixed or determinable; and collectibility is reasonably assured. At ASML, this policy generally results in revenue recognition from the sale of a system upon shipment. The revenue from the installation of a system is generally recognized upon completion of that installation at the customer site. Each system undergoes, prior to shipment, a "Factory Acceptance Test" in ASML's clean room facilities, effectively replicating the operating conditions that will be present on the customer's site, in order to verify whether the system will meet its standard specifications and any additional technical and performance criteria agreed with the customer. A system is shipped, and revenue recognized, only after all specifications are met and customer sign-off is received or waived. Although each system's performance is re-tested upon installation at the customer's site, ASML has never failed to successfully complete installation of a system at a customer’s premises.

For arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred at estimated fair value until delivery of these elements. Revenue from installation services and service contracts provided to our customers is initially deferred and is recognized when the installation is completed and, in case of service contracts, over the life of those contracts. Revenue from extended and enhanced warranties is recognized in income on a straight-line basis over the contract period. The costs of providing services under extended and enhanced warranties are recognized when they occur.

ASML – Reconciliation U.S. GAAP – IFRS 1,4
Net income		Three months ended,						Nine months ended,
		Sep 30, 2007			Sep 28, 2008			Sep 30, 2007				Sep 28, 2008
(in thousands EUR)
Net income under U.S. GAAP		166,279			73,294			478,460				410,394
Share-based payments (see Note 1)		280			(2,492	)		293				(3,009	)
Capitalization of development costs (see Note 2)		9,594			14,867			29,575				55,197
Convertible subordinated notes (see Note 3)		(2,265	)		-			(6,661	)			-
Income taxes (see Note 4)		-			(3,119	)		(7,648	)			(3,081	)
Net income under IFRS		173,888			82,550			494,019				459,501
Shareholders’ equity		Sep 30,			Dec 31,			Mar 30,				Jun 29,			Sep 28,
		2007			2007			2008				2008			2008
(in thousands EUR)
Shareholders’ equity under U.S. GAAP		1,831,438			1,890,948			1,958,159				2,060,575			2,122,848
Share-based payments (see Note 1)		7,126			787			(3,420	)			(3,266	)		(7,904	)
Capitalization of development costs (see Note 2)		120,344			138,424			157,900				176,818			193,780
Convertible subordinated notes (see Note 3)		2,894			-			-				-			-
Income taxes (see Note 4)		-			8,852			9,186				8,478			5,969
Shareholders’ equity under IFRS		1,961,802			2,039,011			2,121,825				2,242,605			2,314,693

Notes to the reconciliation from U.S. GAAP to IFRS

Note 1 Share-based Payments

Under IFRS, ASML applies IFRS 2, "Share-based Payments” beginning from January 1, 2004. In accordance with IFRS 2, ASML records as an expense the fair value of its share-based payments with respect to stock options granted to its employees after November 7, 2002.

Under U.S. GAAP, ASML applies SFAS No. 123(R) "Share-Based Payment” which is a revision of SFAS No.123. SFAS 123(R) requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant-date fair value of those instruments.

Note 2 Capitalization of development costs

Under IFRS, ASML applies IAS 38, "Intangible Assets”. In accordance with IAS 38, capitalized development expenditures are amortized over the expected useful life of the related product generally ranging between 2 and 3 years. Amortization starts when the developed product is ready for volume production.

Under U.S. GAAP, ASML applies SFAS No. 2, "Accounting for Research and Development Costs”. In accordance with SFAS No. 2, ASML charges costs relating to research and development to operating expense as incurred.

Note 3 Convertible Subordinated Notes

Under IFRS, ASML applies IAS 32 "Financial instruments: Disclosure and presentation” and IAS 39 "Financial instruments: Recognition and measurement” beginning from January 1, 2005. In accordance with IAS 32 and IAS 39, ASML accounts separately for the equity and liability component of its convertible notes ("Split accounting”). The equity component relates to the grant of a conversion option to shares to the holder of the bond. Split accounting results in additional interest charges.

Under U.S. GAAP, ASML accounts for its convertible bonds as a liability at the principal amount outstanding. As of December 31, 2007 ASML has no Convertible Subordinated Notes outstanding.

Note 4 Income taxes

Under IFRS, ASML applies IAS 12, "Income Taxes” beginning from January 1, 2005. In accordance with IAS 12, unrealized net income resulting from intercompany transactions that is eliminated from the carrying amount of assets on consolidation gives rise to a temporary difference for which deferred taxes must be recognized on consolidation. The deferred taxes are calculated based on the tax rate applicable in the purchaser’s tax jurisdiction.

Under U.S. GAAP, the elimination of unrealized net income from intercompany transactions that are eliminated from the carrying amount of assets on consolidation, give rise to a temporary difference for which prepaid taxes must be recognized on consolidation. Contrary to IFRS, the prepaid taxes under U.S. GAAP are calculated based on the tax rate applicable in the seller’s tax jurisdiction.

"Safe Harbor" Statement under the US Private Securities Litigation Reform Act of 1995: the matters discussed in this document may include forward-looking statements, including statements made about our outlook, realization of backlog, IC unit demand, financial results, average sales price, gross margin and expenses. These forward looking statements are subject to risks and uncertainties including, but not limited to: economic conditions, credit market deterioration on consumer confidence which could affect our customers, product demand and semiconductor equipment industry capacity, worldwide demand and manufacturing capacity utilization for semiconductors (the principal product of our customer base), competitive products and pricing, manufacturing efficiencies, new product development and customer acceptance of new products, ability to enforce patents and protect intellectual property rights, the outcome of intellectual property litigation, availability of raw materials and critical manufacturing equipment, trade environment, changes in exchange rates and other risks indicated in the risk factors included in ASML’s Annual Report on Form 20-F and other filings with the US Securities and Exchange Commission.

¹ All quarterly information in this press release is unaudited.

² The calculation of diluted net income per ordinary share assumes conversion of our Subordinated Notes as such conversions would have a dilutive effect.

³ The calculation of diluted net income per ordinary share assumes the exercise of options issued under ASML stock option plans as such exercises would have a dilutive effect.

⁴ As of January 1, 2008 ASML accounts for award credits offered to its customers as part of a volume purchase agreement using the deferred revenue model. Until December 31, 2007 the cost accrual method was used. This change in accounting policy was made because the deferred revenue model better reflects the business rationale. In addition the International Financial Reporting Interpretation Committee concludes in interpretation 13 (IFRIC 13 "Customer Loyalty Programmes”) that the deferred revenue model is the appropriate accounting treatment. Comparative figures for 2007 were adjusted to reflect this change in accounting policy. The impact of this change on equity as per January 1, 2007 amounted to EUR 8.1 million (decrease) and on net income for the year 2007 and the first quarter of 2008 amounted to EUR 8.6 million (decrease) and EUR 0.1 million (increase) respectively.