<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___ to ___
Commission file number 0-17139
GENUS, INC.
(Exact name of registrant as specified in its charter)
California 94-279080
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1139 Karlstad Drive, Sunnyvale, California 94089
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(Address of principal executive offices) (Zip code)
(408) 747-7120
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes __X__ No ______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common shares outstanding at November 9, 1995: 16,013,253
1
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GENUS, INC.
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations -
Three and nine months ended
September 30, 1995 and 1994 3
Consolidated Balance Sheets -
September 30, 1995 and
December 31, 1994 4
Consolidated Statements of Cash Flows -
Nine months ended
September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Index to Exhibit 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENUS, INC.
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------- ------- ------ --------
<S> <C> <C> <C> <C>
Net sales $27,241 $18,246 $74,824 $46,985
Costs and expenses:
Cost of goods sold 16,743 11,276 44,938 28,681
Research and development 3,204 2,649 9,038 7,073
Selling, general & administrative 5,009 3,153 14,161 8,863
------ ------ ------ ------
Income from operations 2,285 1,168 6,687 2,368
Other income, net 254 24 452 609
------ ------ ------ ------
Income before provision
for income taxes 2,539 3,192 7,139 2,977
Provision for income taxes 178 60 500 142
------ ------ ------ ------
Net income $ 2,361 $ 1,132 $ 6,639 $ 2,835
======= ======= ======= =======
Net income per share $ .14 $ .09 $ .42 $ .22
======= ======= ======= =======
Shares used in per share calculation 16,728 13,086 15,915 12,966
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
3
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GENUS, INC.
Consolidated Balance Sheets (Unaudited)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,426 $ 10,188
Accounts receivable (net of allowance
for doubtful accounts of $250 in
1995 and 1994) 22,882 15,169
Inventories, net 22,728 14,677
Other current assets 624 655
-------- --------
Total current assets 64,660 40,689
Property and equipment, net 14,826 11,492
Other assets, net 3,041 2,816
--------- --------
$ 82,527 $ 54,997
========= ========
LIABILITIES
Current liabilities:
Short-term bank borrowings - 3,800
Accounts payable 8,953 5,858
Accrued expenses 10,192 6,625
Current portion of long-term debt 886 1,205
--------- --------
Total current liabilities 20,031 17,488
Long-term debt, less current portion 1,089 523
--------- --------
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized, 2,000,000 shares;
Issued and outstanding, none
Common stock, no par value:
Authorized, 20,000,000 shares;
Issued and outstanding, 16,010,534 shares
at September 30, 1995 and 12,813,028
shares at December 31, 1994 94,372 76,590
Accumulated deficit (32,965) (39,604)
--------- --------
Total shareholders' equity 61,407 36,986
--------- --------
$ 82,527 $ 54,997
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
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GENUS, INC
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,639 $ 2,835
Adjustments to reconcile to net cash
from operating activities:
Depreciation and amortization 2,951 1,875
Gain on sale of property and equipment - (461)
Changes in assets and liabilities:
Accounts receivable (7,713) 4,045
Inventories (8,051) (3,450)
Other current assets 31 (214)
Accounts payable 3,095 2,176
Accrued expenses 3,567 (1,045)
Other, net (682) (685)
-------- --------
Net cash provided by (used in)
operating activities (163) 5,076
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (4,566) (1,182)
Proceeds from disposition of property
and equipment - 595
-------- --------
Net cash used in investing activities (4,566) (587)
Cash flows from financing activities:
Proceeds from issuance of common stock 17,782 470
Proceeds from short-term bank borrowings - 2,800
Payments of short-term bank borrowings (3,800) (4,900)
Payments of long-term debt (1,015) (708)
-------- --------
Net cash provided by (used in)
financing activities 12,967 (2,338)
-------- --------
Increase in cash and cash equivalents 8,238 2,151
Cash and cash equivalents, beginning of period 10,188 10,423
-------- --------
Cash and cash equivalents, end of period $ 18,426 $ 12,574
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5
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GENUS, INC.
Notes to Consolidated Financial Statements
September 30, 1995 (Unaudited)
(Amounts in thousands)
Basis of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with SEC requirements for interim financial
statements. These financial statements should be read in conjunction
with the consolidated financial statements and notes thereto
included in the Company's 1994 Annual Report to Shareholders which is
incorporated by reference into the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
The information furnished reflects all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management,
necessary for the fair statement of financial position, results of operations
and cash flows for the interim periods. The results of operations
for the periods presented are not necessarily indicative of results to be
expected for the full year.
Net Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of common and common equivalent (when dilutive) shares of
common stock outstanding during each period.
Statement of Cash Flows Information (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
Supplemental Cash Flow Information:
<S> <C> <C>
Cash paid during the period for:
Interest $ 172 $ 125
Income taxes 177 106
Non cash investing activities:
Purchase of property and equipment
under long-term debt obligations $ 1,263 $ 114
</TABLE>
Line of Credit
The Company has a revolving line of credit agreement with a bank that
provides for maximum borrowings of $10.0 million and expires in May 1996.
Borrowings under the line of credit, which are secured by substantially all
of the assets of the Company, bear interest at the bank's prime rate. The
agreement requires the Company to comply with certain financial covenants
and restricts the payment of dividends. At September 30, 1995, the Company
had no borrowings outstanding under the line of credit.
The Company has a Term Loan Agreement with the same bank which provides
$3.0 million to fund leasehold improvements to its facility. At
September 30, 1995, $236,000 under the Term Loan Agreement was outstanding.
This agreement requires the Company to comply with the same covenants and
restrictions as those under the line of credit.
6
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GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Inventories
Inventories comprise the following:
September 30, December 31,
1995 1994
----------- ----------
<S> <C> <C>
Raw materials and parts $ 11,718 $ 8,156
Work in process 9,636 6,118
Finished goods 1,374 403
--------- --------
$ 22,728 $ 14,677
========= ========
</TABLE>
Property and Equipment
Property and equipment are stated at cost and comprise the following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- ----------
<S> <C> <C>
Building and improvements $ 343 $ 248
Demonstration equipment 14,027 11,909
Equipment 10,366 8,460
Furniture and fixtures 1,967 1,952
Leasehold improvements 5,926 5,653
-------- -------
32,629 28,222
Less accumulated depreciation
and amortization (20,757) (18,262)
-------- -------
11,872 9,960
Construction in progress 2,954 1,532
-------- -------
$ 14,826 $ 11,492
======== =======
</TABLE>
Accrued Expenses
Accrued expenses comprise the following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- ----------
<S> <C> <C>
System installation and warranty $ 3,463 $ 2,394
Accrued commissions and incentives 2,478 1,527
Accrued payroll and related items 1,629 966
Customer advances and deferred revenue 1,115 502
Other 1,507 1,236
----------- ----------
$ 10,192 $ 6,625
</TABLE>
Sale of Common Stock
On February 17, 1995, the Company sold 2,539,018 shares of common
stock through a private placement offering, which generated net proceeds
of approximately $16.4 million.
7
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GENUS, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Net sales for the three and nine months ended September 30, 1995
were $27.2 million and $74.8 million, respectively, compared to net sales of
$18.2 million and $47.0 million, respectively, for the corresponding periods
in 1994. On a percentage basis, net sales for the three and nine months
ended September 30, 1995 increased 49 percent and 59 percent, respectively,
when compared to the same periods in 1994. The increase in net sales during
the quarter ended September 30, 1995 was due principally to increased sales
of CVD systems with higher average selling prices (ASP), offset by lower unit
sales of ion implantation systems. The increase during the nine months ended
September 30, 1995 was due primarily to the introduction of the tungsten
chemical vapor deposition (CVD) 7000 product line with higher ASP and higher
unit sales of ion implantation systems. The improvements in net sales during
these periods were achieved as a result of continued strong market conditions
in Korea.
Gross margins for the three and nine months ended September 30, 1995 were
39 percent and 40 percent, respectively, compared to 38 percent and 39 percent,
respectively, for the same periods in 1994. The improvements were due
primarily to higher ASP on CVD system sales, improved production cycle times,
greater absorption of manufacturing costs and other gross margin improvement
programs, offset by $0.8 million of retrofit charges during the quarter for CVD
7000 systems sold during 1995. The Company's cost of goods sold and gross
margins have historically been affected by variations in ASP, changes in the
mix of product sales, product transitions, unit shipments levels, the level of
foreign sales and competitive pricing pressures.
As a percentage of net sales, research and development (R&D) expenses for the
three and nine months ended September 30, 1995 were 12 percent, compared to
15 percent during the same periods in 1994. The percentage decrease for the
three and nine month periods was due primarily to higher net sales volumes. On
an absolute dollar basis, R&D expenses for the three and nine months ended
September 30, 1995 increased by $0.6 million and $2.0 million, respectively,
when compared to the same periods in 1994. The increases were primarily
related to additional headcount and related payroll costs, higher material
costs and depreciation expense for new product development. The Company
continually evaluates its R&D investment in view of evolving competitive and
market conditions.
Selling, general and administrative (S,G&A) expenses were 18 percent and
19 percent, for the three and nine months ended September 30, 1995,
respectively, compared to 17 percent and 19 percent for the same periods in
1994. On an absolute dollar basis, S,G&A expenses for the three and nine
months ended September 30, 1995 increased $1.9 million and $5.3 million,
respectively, when compared to the same periods in 1994. The percentage of net
sales and absolute dollar increases were primarily due to headcount additions
and related payroll costs, higher sales commissions and incentives, and
increased depreciation expense.
During the three months ended September 30, 1995, the Company had $0.3 million
in other income, compared to $24 thousand in other income for the comparable
period in 1994. The increase in other income was due to interest income earned
on higher cash balances outstanding during the third quarter of 1995 when
compared to the same period in 1994. For the nine months ended September 30,
1995, the Company had other income of $0.5 million, compared to $0.6 million
of other income for the same period in 1994. The negative change during this
period was primarily a result of the gain on the sale of property and
equipment of approximately $0.5 million in the second quarter of 1994. The
effective tax rate for the three and nine months of 1995 was 7 percent compared
to an effective tax rate of 5 percent for the same periods in 1994.
8
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The Company has continued to experience positive financial performance in
recent quarters. These results have been primarily due to strong market
conditions for the Company's products in Korea, and one Korean customer in
particular, as a result of increased investments in DRAM manufacturing
facilities in this region. However, due to the softness in the Company's order
rate during the third quarter of 1995, the Company's reliance on a limited
number of customers for a significant portion of its orders, the continued
competitive market environment for the Company's products and the historically
cyclical nature of the semiconductor equipment market, the Company remains
somewhat cautious about the short-term prospects for its business. The Company
continues to make strategic investments in new product development and
manufacturing improvements with a view to improve future performance by
enhancing product offerings; however, such investment may adversely affect
short-term operating performance. The Company is also continuing its efforts
to implement productivity improvements for future operating performance. The
Company believes that the future economic environment could continue to
lengthen the order and sales cycles for its products, causing it to continue to
simultaneously book and ship some orders during the same quarter.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1995, the Company's cash and cash
equivalents increased $8.2 million principally due to issuance of common stock
of $17.8 million, offset by the repayment of short-term bank borrowings of
$3.8 million, repayments of long-term debt of $1.0 million, and the purchase of
property and equipment of $4.6 million. The $0.2 million decrease in cash from
operating activities primarily resulted from an increase of $7.7 million in
accounts receivable due to higher sales during the quarter and the inability to
collect the receivable from shipments made late in the quarter, and an increase
in inventories of $8.1 million as a result of inventory purchases received late
in the quarter to support shipments in the fourth quarter of 1995. The
decrease in cash from operations was primarily offset by an increase in accounts
payable of $3.1 million as a result of inventory purchases made late in the
quarter for fourth quarter shipments and the cash management practices of the
Company, and an increase of $3.6 million in accrued expenses due to retrofit
costs accrued on the CVD 7000 systems, increased warranty and commission
accruals as a result of higher sales volumes, and increased accruals for profit
sharing and incentives. In addition, the decrease in cash from operating
activities was offset by depreciation and amortization of $3.0 million and net
income of $6.6 million.
The Company's primary source of funds at September 30, 1995 consisted of
$18.4 million in cash and cash equivalents, and funds available under a
$10.0 million revolving line of credit. The line of credit is secured by
substantially all of the assets of the Company and expires in May 1996. At
September 30, 1995, the Company had no borrowings outstanding under the line of
credit.
Capital expenditures during the first nine months of 1995 were $4.6 million and
related primarily to acquisition of machinery and equipment for the Company's
R&D and Applications Laboratories. The Company anticipates that it will
continue to make capital expenditures during the remainder of 1995 and will be
funded through existing working capital or lease financing.
On February 17, 1995, the Company sold 2,539,018 shares of Common Stock through
a private placement offering, which generated net proceeds of approximately
$16.4 million.
The Company believes that existing cash and cash equivalents, cash generated
from operations, if any, and existing credit facilities will be sufficient to
satisfy its cash needs in the near term and for the foreseeable future.
9
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GENUS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Exhibit 11.1 - Computation of Net Income Per Share
(b) Report on Form 8-K
No report on Form 8-K was filed during the period
July 1, 1995 to September 30, 1995.
10
<PAGE>
GENUS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date November 10, 1995 GENUS, INC.
William W.R. Elder
----------------------------
William W.R. Elder, Chairman
and Chief Executive Officer
Kent L. Robertson
---------------------------
Kent L. Robertson
Executive Vice President,
Chief Financial Officer
11
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GENUS, INC.
Index to Exhibit
Exhibit Description Page
- ------- ----------- ----
Exhibit 11.1 Computation of Net Income per Share 13
12
<PAGE>
Exhibit 11.1
GENUS, INC.
Computation of Net Income Per Share (Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average common shares outstanding 15,950 12,594 15,095 12,493
Computation of incremental outstanding shares
Net effect of dilutive stock options
based on treasury stock method 778 492 820 473
------ ----- ------ ------
16,728 13,086 15,915 12,966
====== ====== ====== ======
Net income $ 2,361 $1,132 $ 6,639 $ 2,835
====== ====== ====== ======
Net income per share (a) $ .14 $ .09 $ .42 $ .22
======= ====== ======= =======
Computation Notes:
(a) Presentation of fully diluted earnings per share for the three and nine
months ended September 30, 1995 and 1994 is omitted because such amounts
are materially the same as those presented above.
13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 18426
<SECURITIES> 0
<RECEIVABLES> 23132
<ALLOWANCES> 250
<INVENTORY> 22728
<CURRENT-ASSETS> 64660
<PP&E> 35583
<DEPRECIATION> 20757
<TOTAL-ASSETS> 82527
<CURRENT-LIABILITIES> 20031
<BONDS> 0
<COMMON> 94372
0
0
<OTHER-SE> 32965
<TOTAL-LIABILITY-AND-EQUITY> 82527
<SALES> 74824
<TOTAL-REVENUES> 74824
<CGS> 44938
<TOTAL-COSTS> 68137
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7139
<INCOME-TAX> 500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6639
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
