<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, 1996 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
______________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1139 Karlstad Drive, California 94089
______________________________________________________________________________
(Address of principal executive offices) (Zip code)
(408) 747-7120
______________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
______________________________________________________________________________
(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 8, 1996: 16,605,755
<PAGE>
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, 1996 and 1995 3
Consolidated Balance Sheets -
September 30, 1996 and
December 31, 1995 4
Consolidated Statements of Cash Flows -
Nine months ended
September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to Exhibit 16
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>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $13,892 $27,241 $65,347 $74,824
Costs and expenses:
Cost of goods sold 10,493 16,743 43,334 44,938
Research and development 3,788 3,204 11,371 9,038
Selling, general & administrative 4,926 5,009 14,007 14,161
Special Charge 3,540 - 3,540 -
______ ______ _____ ______
Income loss from operations (8,855) 2,285 (6,905) 6,687
Other net (25) 254 38 452
______ ______ ______ ______
Income (loss) before provision
for income taxes (8,880) 2,539 (6,867) 7,139
Provision for (benefit from) income taxes (775) 178 - 500
_______ ______ _______ ______
Net income (loss) $(8,105) $2,361 $(6,867) $6,639
======= ====== ======= ======
Net income (loss) per share $ (.48) $ .14 $ (.41) $ .42
======= ===== ====== =====
Shares used in per share calculation 16,841 16,728 16,630 15,915
======= ====== ====== ======
</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,
1996 1995
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,961 $ 12,630
Accounts receivable (net of allowance
for doubtful accounts of $250
in 1996 and 1995) 16,206 26,796
Inventories, net 28,584 24,437
Other current assets 991 623
Current deferred taxes 4,427 4,427
______ ______
Total current assets 61,169 68,913
Property and equipment, net 16,322 14,627
Other assets, net 4,254 3,824
Non-current deferred taxes 7,883 7,883
_______ _______
$ 89,628 $ 95,247
======= =======
LIABILITIES
Current liabilities:
Accounts payable 5,558 7,129
Accrued expenses 11,540 11,042
Current portion of long-term debt 967 681
_______ _______
Total current liabilities 18,065 18,852
_______ _______
Long-term debt, less current portion 1,423 1,034
_______ _______
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 16,593,977 shares at
September 30, 1996 and 16,163,539 shares at
December 31, 1995 97,329 95,683
Accumulated deficit (27,189) (20,322)
_______ _______
Total shareholders' equity 70,140 75,361
_______ _______
$ 89,628 $ 95,247
======= =======
</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,
1996 1995
----- -----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,867) $ 6,639
Adjustments to reconcile to net cash
from operating activities:
Special charge 3,281 -
Depreciation and amortization 4,879 2,951
Changes in assets and liabilities:
Accounts receivable 10,590 (7,713)
Inventories (6,129) (8,051)
Other current assets (368) 31
Accounts payable (1,571) 3,095
Accrued expenses 247 3,567
Other, net (1,062) (682)
______ ______
Net cash provided by (used in)
operating activities 3,000 (163)
______ ______
Cash flows from investing activities:
Acquisition of property and equipment (5,228) (4,566)
Capitalization of software development costs (352) -
______ ______
Net cash used in investing activities (5,580) (4,566)
______ ______
Cash flows from financing activities:
Proceeds from issuance of common stock 1,646 17,782
Proceeds from short-term bank borrowings 1,500 -
Payments of short-term bank borrowings (1,500) (3,800)
Payments of long-term debt (735) (1,015)
______ ______
Net cash provided by financing activities 911 12,967
______ ______
Increase (decrease) in cash and cash equivalents (1,669) 8,238
Cash and cash equivalents, beginning of period 12,630 10,188
______ _______
Cash and cash equivalents, end of period $ 10,961 $ 18,426
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GENUS, INC.
Notes to Consolidated Financial Statements
September 30, 1996 (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 1995 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, 1995.
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 (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) 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,
1996 1995
---- ----
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 159 $ 172
Income taxes 105 177
Non cash investing activities:
Purchase of property and equipment
under long-term debt obligations $ 1,410 $ 1,263
</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 July 1997. 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, 1996, the Company had $2.8 million in
letters of credit and no borrowings outstanding under the line of credit.
Based on rates available to the Company for letters of credit with similar
terms, the estimated fair value of the letters of credit approximates the face
value of the letters of credit.
6
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GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)
(Amounts in thousands)
Inventories
Inventories comprise the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------ ------
<S> <C> <C>
Raw materials and parts $ 14,980 $ 12,922
Work in process 10,538 10,048
Finished goods 3,066 1,467
_______ _______
$ 28,584 $ 24,437
======= =======
</TABLE>
Property and Equipment
Property and equipment are stated at cost and comprise the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------ ------
<S> <C> <C>
Demonstration equipment $ 14,587 $ 12,877
Equipment 14,148 12,512
Furniture and fixtures 2,581 1,960
Leasehold improvements 6,610 6,366
Building 310 -
_______ _______
38,236 33,715
Less accumulated depreciation and amortization (23,891) (19,944)
_______ _______
14,345 13,771
Construction in progress 1,977 856
_______ _______
$ 16,322 $ 14,627
======= =======
</TABLE>
Accrued Expenses
Accrued expenses comprise the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------ ------
<S> <C> <C>
System installation and warranty $ 5,250 $ 4,318
Accrued commissions and incentives 1,874 3,227
Accrued payroll and related items 1,736 1,104
Other 2,680 2,393
_______ _______
$ 11,540 $ 11,042
======= =======
</TABLE>
7
<PAGE>
GENUS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the fiscal year
ended December 31, 1995.
The information in this discussion contains forward looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and is subject to the Safe Harbor provisions created by that statute. Such
statements are subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially from
those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
RESULTS OF OPERATIONS
The components of the Company's statements of income, expressed as percentage
of total revenue, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----- ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold 75.5 61.4 66.3 60.1
Research and development 27.3 11.7 17.4 12.1
Selling, general & administrative 35.4 18.4 21.5 18.9
Special charge 25.5 0.0 5.4 0.0
_____ _____ _____ _____
Income (loss) from operations (63.7) 8.5 (10.6) 8.9
Other income, net (0.2) 0.9 0.1 0.7
_____ _____ _____ _____
Income (loss) before provision
for income taxes (63.9) 9.4 (10.5) 9.6
Provision for (benefit) from
income taxes 5.6 0.7 0.0 0.7
_____ _____ _____ _____
Net income (loss) (58.3)% 8.7% (10.5)% 8.9%
===== ===== ===== =====
Net sales for the three and nine months ended September 30, 1996 were $13.9
million and $65.3 million, respectively, compared to net sales of $27.2 million
and $74.8 million, respectively, for the corresponding periods in 1995. The
decrease in net sales for the three months ended September 30, 1996 was due
primarily to lower tungsten Chemical Vapor Deposition (CVD) systems sales as
a result of the overall slowdown of the Dynamic Random Access Memory (DRAM)
market during the last nine months, and the push out of one high energy ion
implantation MeV system sale from the third quarter of 1996 to the fourth
quarter of 1996. The decrease during the nine months ended September 30, 1996
was primarily due to lower unit sales of Genus systems, offset by greater
non-system sales. The semiconductor industry is presently experiencing
volatility in terms of product demand and product pricing. As a result,
semiconductor manufacturers are exercising caution in making their capital
equipment decisions and have in certain cases rescheduled or canceled planned
capital purchases. As a result of the uncertainties of this current market
environment, the Company anticipates that its quarterly revenues and operating
results may fluctuate from quarter to quarter. The Company expects revenue and
8
<PAGE>
earnings for the next two to three quarters to be below first half results due
in part to the current soft business conditions, particularly in the DRAM-
sensitive tungsten CVD segment, retrenchment in the semiconductor industry, and
general conditions in the Company's industry sector.
Gross margin for the three and nine months ended September 30, 1996 was 24
percent and 34 percent, respectively, compared to 39 percent and 40 percent,
respectively, for the same periods in 1995. The decline in gross margin was
primarily due to lower system sales, lower absorption of manufacturing costs,
and higher service costs associated with the opening of Genus Korea, Ltd. in
January 1996. The Company's gross margins have historically been affected by
variations in ASP, changes in the mix of product sales, unit shipments levels,
the level of foreign sales, and competitive pricing pressures. The Company
anticipates that these conditions will continue for the foreseeable future in
light of current market conditions.
As a percentage of net sales, research and development (R&D) expenses for the
three and nine months ended September 30, 1996 were 27 percent and 17
percent, compared to 12 percent during the same periods in 1995. On an
absolute dollar basis, R&D expenses during the three and nine months ended
September 30, 1996, increased $0.6 million and $2.3 million when compared to
the same periods in 1995. The increases in absolute dollars were primarily due
to increased headcount, product development material costs, and investments in
equipment costs on engineering tools for new product development. The increase
as a percentage of net sales during the quarter ended September 30, 1996 was
due primarily to lower net sales volumes. The increase as a percentage of net
sales during the first nine months of 1996 was due primarily to increased R&D
investment and, secondarily, to lower net sales volumes. The Company serves
markets that are highly competitive and rapidly changing. For these reasons,
the Company believes that it must continue to maintain its investment in R&D to
develop competitive products. However, the Company will evaluate its R&D
investment in view of evolving competitive and market conditions.
Selling, general and administrative (S,G&A) expenses were 35 percent and 21
percent, respectively, of net sales for the three and nine months ended
September 30, 1996, compared to 18 percent and 19 percent of net sales for the
same periods in 1995. On an absolute dollar basis, S,G&A expenses for the
three and nine months ended September 30, 1996 were flat when compared to the
same period in 1995. During the third quarter of 1996, the Company incurred
one-time charges of $460 thousand related to deferred rent expense and property
taxes. Given the current market conditions, the Company anticipates S,G&A to
decrease in the next two to three quarters.
During the three months ended September 30, 1996, the Company had $25 thousand
in other expenses, compared to $0.3 million in other income for the comparable
period in 1995. For the nine months ended September 30, 1996, the Company had
other income of $38 thousand, compared to $0.5 million of other income for the
same period in 1995. The decrease in both periods was principally due to lower
interest income as a result of lower cash balances and higher interest expense
associated with lease financing. As a result of the losses incurred by the
Company during the quarter and nine months ended September 30, 1996, no taxes
were incurred. The effective tax rate for the third quarter and first nine
months of 1995 was 7 percent. During the quarter ended September 30, 1996,
the Company incurred a special charge of $3.5 million, relating primarily to
capacity cost reductions in association with the Company s reduction in force
in September 1996, increased inventory reserves and write-off of property and
equipment.
As a result of the current market conditions, the fluctuation in the Company's
order rates in the last twelve months, the Company's continued reliance on one
customer for a significant portion of its orders and that customer's recent
announcements to reduce or delay semiconductor equipment purchases, the slow
down in the Korean semiconductor market, the overall decline in the worldwide
DRAM market, the continued competitive market environment for the Company's
products and the historically cyclical nature of the semiconductor equipment
market, the Company remains cautious about the prospects for its business over
the next two to three quarters. The Company continues to make strategic
9
<PAGE>
investments in new product development and manufacturing improvements with a
view of improving 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, 1996, the Company's cash and cash
equivalents decreased $1.7 million principally due to the purchase of property
and equipment of $5.2 million and payments of long-term debt of $0.7 million,
offset by cash generated from operating activities of $3.0 million and the
proceeds from the issuance of common stock of $1.6 million. The positive
change in cash from operating activities primarily resulted from depreciation
and amortization of $4.9 million, and a decrease in accounts receivable of
$10.6 million as a result of improved collections. The increase in cash from
operating activities was offset by a net loss, less the non-cash portion of the
special charge which totals $3.3 million, an increase in inventory of $6.1
million due to purchases made late in the third quarter of 1996 to meet early
fourth quarter 1996 shipments and lower system orders, a $1.5 million decrease
in accounts payable related primarily to lower inventory purchases and overhead
expenses and an increase in non-current other assets of $1.1 million.
The Company's primary source of funds at September 30, 1996 consisted of $11.0
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 July 1997. At September 30, 1996,
the Company had no borrowings outstanding under the line of credit.
Capital expenditures during the first nine months of 1996 were $5.2 million and
related primarily to acquisition of machinery and equipment for the Company's
R&D and Applications Laboratories. In September 1995, the Company entered into
an agreement to lease a new facility in Newburyport, Massachusetts for its Ion
Technology Division. The Company expended approximately $3.0 million for
leasehold improvements and equipment associated with the new facility. The
Company financed these expenditures through new or existing lease lines.
Furthermore, the Company anticipates that additional capital expenditures, if
any, during 1996 will be funded through existing working capital or lease
financing.
The Company believes that 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.
CERTAIN BUSINESS CONSIDERATIONS
The Company's business is subject to the following risks and uncertainties.
Historical Performance. Although the Company had net income of $19.3 million
and $4.2 million in the years ended December 31, 1995 and 1994, the Company
experienced losses of $6.9 million, $17.1 million and $6.9 million for the
years ended December 31, 1993 and 1992 and nine months ended September 30, 1996,
respectively. In addition, although the Company has experienced improved sales
and operating results in recent quarters, there can be no assurance that the
Company will be able to sustain similar revenue growth on a quarterly or annual
basis, or that the Company will be able to maintain profitability on a
quarterly or annual basis.
10
<PAGE>
Competition. The semiconductor manufacturing capital equipment industry is
highly competitive. The Company faces substantial competition throughout the
world. The Company believes that to remain competitive, it will require
significant financial resources in order to offer a broader range of products,
to maintain customer service and support centers worldwide and to invest in
product and process research and development. Many of the Company's existing
and potential competitors have substantially greater financial resources, more
extensive engineering, manufacturing, marketing and customer service and
support capabilities, as well as greater name recognition than the Company. The
Company expects its competitors to continue to improve the design and
performance of their current products and processes and to introduce new
products and processes with improved price and performance characteristics. If
the Company's competitors enter into strategic relationships with leading
semiconductor manufacturers covering MeV or CVD products similar to those sold
by the Company, this could have a material adverse effect on the Company's
ability to sell its products to these manufacturers. No assurance can be given
that the Company will continue to compete successfully in the United States or
worldwide. The Company faces direct competition in CVD tungsten silicide from
Applied Materials, Inc. and Tokyo Electron, Ltd. In the MeV marketplace, the
Company's MeV ion implantation systems compete with MeV systems marketed by
Eaton Corporation. There can be no assurance that competitors will not succeed
in developing new technologies, in offering products that are offered at lower
prices than those of the Company or in obtaining market acceptance for products
more rapidly than the Company.
Dependence on New Products and Processes. The Company believes that its future
performance will depend in part upon its ability to continue to enhance its
existing products and their process capabilities and to develop and manufacture
new products with improved process capabilities. As a result, the Company
expects to continue to invest in research and development. The Company also
must manage product transitions successfully, as introductions of new products
could adversely affect sales of existing products. There can be no assurance
that the market will accept the Company's new products or that the Company will
be able to develop and introduce new products or enhancements to its existing
products and processes in a timely manner which satisfy customer needs or
achieve market acceptance. The failure to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.
Furthermore, if the Company is not successful in the development of advanced
processes or equipment for manufacturers with whom it has formed strategic
alliances, its ability to sell its products to those manufacturers would be
adversely affected.
Cyclical Nature of the Semiconductor Industry. The Company's business depends
upon the capital expenditures of semiconductor manufacturers, which in turn
depend on the current and anticipated market demand for integrated circuits and
products utilizing integrated circuits. The semiconductor industry is cyclical
and has historically experienced periodic downturns, which often have had an
adverse effect on the semiconductor industry's demand for semiconductor
manufacturing capital equipment. Prior semiconductor industry downturns have
adversely affected the Company's revenue, operating margins and results of
operations. No assurance can be given that the Company's revenue and operating
results will not be materially and adversely affected if a downturn in the
semiconductor industry occurs in the future. In addition, the need for
continued investment in research and development, substantial capital equipment
requirements and extensive ongoing worldwide customer service and support
capability may limit the Company's ability to reduce expenses or to maintain
them at current levels. Accordingly, there is no assurance that the Company
will be able to remain profitable in the future.
Reliance on International Sales. International sales accounted for
approximately 84%, 89%, 88% and 90%, respectively, of total net sales in fiscal
1993, 1994 and 1995 and the first nine months of 1996. In addition, net sales
to Korean customers accounted for approximately 32%, 50%, 63% and 62%
respectively, of total net sales during the same periods. The Company
anticipates that international sales, including sales to Korea, will continue
to account for a significant portion of net sales. As a result, a significant
11
<PAGE>
portion of the Company's sales will be subject to certain risks, including
unexpected changes in regulatory requirements, tariffs and other barriers,
political and economic instability, difficulties in accounts receivable
collection, difficulties in managing distributors or representatives,
difficulties in staffing and managing foreign subsidiary operations and
potentially adverse tax consequences. Although the Company's foreign sales are
denominated in U.S. dollars and the Company does not engage in hedging
transactions, the Company's foreign sales are subject to the risks associated
with unexpected changes in exchange rates, which could have the effect of
making the Company's products more or less expensive. There can be no
assurance that any of these factors will not have a material adverse effect on
the Company's business, financial condition and results of operations.
Reliance on a Small Number of Customers. Historically, the Company has relied
on a limited number of customers for a substantial portion of its net sales.
In fiscal 1993, net sales to Innotech, Samsung and SGS Thomson accounted for
26%, 23% and 14%, respectively, of total net sales, In fiscal 1994, net sales
to Samsung, Innotech and SGS Thomson accounted for 33%, 19% and 14%,
respectively, of total net sales. Net sales to Samsung accounted for 63% of
total net sales in 1995. In the first nine months of 1996 Samsung and Innotech
accounted for 56% and 18%, respectively, of the Company's net sales. Because
the semiconductor manufacturing industry is concentrated in a limited number of
generally larger companies, the Company expects that a significant portion of
its future product sales will be concentrated within a limited number of
customers. None of these customers has entered into a long-term agreement
requiring it to purchase the Company's products. Furthermore, sales to certain
of these customers may decrease in the future when those customers complete
their current semiconductor equipment purchasing requirements for new or
expanded fabrication facilities. Although the composition of the Company's
largest customer varies from year to year, the loss of a significant customer
or any reductions in orders from a significant customer, including reductions
due to customer departures from recent buying patterns, market, economic or
ompetitive conditions in the semiconductor industry or in the industries that
manufacture products utilizing integrated circuits, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Product Concentration; Rapid Technological Change. Semiconductor manufacturing
equipment and processes are subject to rapid technological change. The Company
derives its revenue primarily from the sale of its MeV ion implantation and
tungsten silicide CVD systems. The Company estimates that the life cycle for
these systems is generally from three to five years. The Company believes that
its future prospects will depend in part upon its ability to continue to
enhance its existing products and their process capabilities and to develop and
manufacture new products with improved process capabilities. As a result, the
Company expects to continue to make significant investments in research and
development. The Company also must manage product transitions successfully, as
introductions of new products could adversely affect sales of existing
products. There can be no assurance that future technologies, processes or
product developments will not render the Company's product offerings obsolete
or that the Company will be able to develop and introduce new products or
enhancements to its existing and future processes in a timely manner which
satisfies customer needs or achieves market acceptance. The failure to do so
could adversely affect the Company's business, financial condition and results
of operations. Furthermore, if the Company is not successful in the
development of advanced processes or equipment for manufacturers with whom it
currently does business, its ability to sell its products to those
manufacturers would be adversely affected.
Fluctuations in Quarterly Operating Results. The Company's revenue and
operating results may fluctuate significantly from quarter to quarter. The
Company derives its revenue primarily from the sale of a relatively small
number of high-priced systems, many of which may be ordered and shipped during
the same quarter. The Company's results of operations for a particular quarter
could be adversely affected if anticipated orders for even a small number of
systems were not received in time to enable shipment during the quarter, if
anticipated shipments were delayed or canceled by one or more customers or if
12
<PAGE>
shipments were delayed due to manufacturing difficulties. The Company's
revenue and operating results may also fluctuate due to the mix of products
sold and the channel of distribution.
Dependence on Key Suppliers. Certain of the components and sub-assemblies
included in the Company's products are obtained from a single supplier or a
limited group of suppliers. Disruption or termination of these sources could
have a temporary adverse effect on the Company's operations. The Company
believes that alternative sources could be obtained and qualified to supply
these products, if necessary. Nevertheless, a prolonged inability to obtain
certain components could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Independent Distributors. The Company currently sells and
supports its MeV ion implantation and CVD products through direct sales and
customer support organizations in the U.S., Western Europe and Korea and
through five exclusive sales representatives and distributors in the U.S.,
Japan, Korea, Taiwan and Hong Kong. Although the Company believes that
alternative sources of distribution are available, the disruption or
termination of its existing distributor relationships could have a temporary
adverse effect on the Company's business, financial condition and results of
operations.
Volatility of Stock Price. The Company's Common Stock has experienced
substantial price volatility, particularly as a result of quarter-to-quarter
variations in the actual or anticipated financial results of, or announcements
by, the Company, its competitors or its customers. Also, the stock market has
experienced extreme price and volume fluctuations which have affected the
market price of many technology companies, in particular, and which have often
been unrelated to the operating performance of these companies. These broad
market fluctuations, as well as general economic and political conditions in
the United States and the countries in which the Company does business, may
adversely affect the market price of the Company's Common Stock. In addition,
the occurrence of any of the events described in these "Risk Factors" could
have a material adverse effect on such market price. See "Price Range of
Common Stock" in the Company's 1995 Form 10-K.
13
<PAGE>
GENUS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Exhibit 11.1 - Computation of Net Income (Loss) Per Share
(b) Report on Form 8-K
No report on Form 8-K was filed during the period July 1, 1996 to
September 30, 1996.
14
<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 12, 1996 GENUS, INC.
James T. Healy
_________________________
James T. Healy, President
and Chief Executive Officer
Ernest P. Quinones
_________________________
Ernest P. Quinones
Acting Chief Financial Officer
15
<PAGE>
GENUS, INC.
Index to Exhibit
Exhibit Description Page
Exhibit 11.1 Computation of Net Income (Loss) per Share 17
16
<PAGE>
Exhibit 11.1
GENUS, INC.
Computation of Net Income (Loss) Per Share (Unaudited)
(Amounts in thousands, except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average common shares outstanding 16,572 15,950 16,315 15,095
Computation of incremental outstanding shares
Net effect of dilutive stock options
based on treasury stock method 269 778 315 820
______ ______ ______ ______
16,841 16,728 16,630 15,915
====== ====== ====== ======
Net income (Loss) $(8,105) $ 2,361 $(6,867) $ 6,639
====== ====== ====== ======
Net income (Loss) per share (a) $ (.48) $ .14 $ (.41) $ .42
====== ====== ====== ======
</TABLE>
Computation Notes:
(a) Presentation of fully diluted earnings per share for the three and nine
months ended September 30, 1996 and 1995 is omitted because such amounts
are materially the same as those presented above.
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000837913
<NAME> GENUS, INC.
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 10961
<SECURITIES> 0
<RECEIVABLES> 16456
<ALLOWANCES> 250
<INVENTORY> 28584
<CURRENT-ASSETS> 61169
<PP&E> 40213
<DEPRECIATION> 23891
<TOTAL-ASSETS> 89628
<CURRENT-LIABILITIES> 18065
<BONDS> 0
0
0
<COMMON> 97329
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 70140
<SALES> 65347
<TOTAL-REVENUES> 65347
<CGS> 43334
<TOTAL-COSTS> 72252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6905)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6867)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
