<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 June 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, Sunnyvale, 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 August 9, 1996: 16,570,021
<PAGE>
GENUS, INC.
Index
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations -
Three and six months ended
June 30, 1996 and 1995 3
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 4
Consolidated Statements of Cash Flows -
Six months ended June 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 4. Submission of Matters to a Vote of
Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to exhibits 16
</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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 25,095 $25,057 $51,455 $ 47,583
Costs and expenses:
Cost of goods sold 15,919 14,889 32,841 28,195
Research and development 3,613 2,858 7,583 5,834
Selling, general & administrative 4,561 4,934 9,081 9,152
------ ------ ------ ------
Income from operations 1,002 2,376 1,950 4,402
Other income, net 46 140 63 198
------ ------ ------ ------
Income before provision
for income taxes 1,048 2,516 2,013 4,600
Provision for income taxes 403 176 775 322
------ ------ ----- -----
Net income $ 645 $ 2,340 $ 1,238 $ 4,278
====== ====== ===== =====
Net income per share $ 0.04 $ 0.14 $ 0.07 $ 0.28
====== ====== ===== =====
Shares used in per share calculation 16,639 16,458 16,587 15,521
====== ====== ====== ======
</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>
June 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,129 $ 12,630
Accounts receivable
(net of allowance for doubtful
accounts of $250 in 1996 and 1995) 26,785 26,796
Inventories, net 27,195 24,437
Other current assets 706 623
Current deferred taxes 4,427 4,427
------ ------
Total current assets 70,242 68,913
Property and equipment, net 16,923 14,627
Other assets, net 4,238 3,824
Noncurrent deferred taxes 7,178 7,883
------- ------
$ 98,581 $ 95,247
======= =======
LIABILITIES
Current liabilities:
Accounts payable 7,959 7,129
Accrued expenses 10,576 11,042
Current portion of long-term debt
and capital lease obligations 896 681
------ ------
Total current liabilities 19,431 18,852
Long-term debt and capital lease
obligations, less current portion 1,038 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, 16,548,711
shares at June 30, 1996 and 16,163,539 shares
at December 31, 1995 97,196 95,683
Accumulated deficit (19,084) (20,322)
------ ------
Total shareholders' equity 78,112 75,361
------ ------
$ 98,581 $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>
Six months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,238 $ 4,278
Adjustments to reconcile to net cash
from operating activities:
Depreciation and amortization 3,175 1,879
Deferred taxes 705 -
Changes in assets and liabilities:
Accounts receivable 11 753
Inventories (2,758) (6,507)
Other current assets (83) 49
Accounts payable 830 2,552
Accrued expenses (466) 2,676
Other, net (489) (1)
------- ------
Net cash provided by
operating activitie 2,163 5,679
------- ------
Cash flows from investing activities:
Acquisition of property and equipment (4,395) (3,011)
Capitalization of software development costs (352) (418)
------- ------
Net cash used in
investing activities (4,747) (3,429)
------- ------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,513 17,459
Payment of short-term bank borrowings- - (3,800)
Payments of long-term debt and
capital lease obligations (430) (673)
------ ------
Net cash provided by
financing activities 1,083 12,986
------ ------
Increase (decrease) in cash (1,501) 15,236
Cash and cash equivalents, beginning of period 12,630 10,188
------- ------
Cash and cash equivalents, end of period $11,129 $25,424
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1996
(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 Per Share
Net income per share is computed by dividing net income by the weighted average
number of common and common equivalent shares of common stock outstanding
during each period.
Statement of Cash Flows Information
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 111 $ 163
Income taxes $ 105 $ 136
Non cash investing activities:
Purchase of property and equipment under
long-term debt and capital lease obligations $ 649 $ 480
</TABLE>
Line of Credit
In July 1996, the Company renewed its revolving line of credit agreement with a
bank that provides for maximum borrowings of $10 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 June 30, 1996,
the Company had no borrowings outstanding under the line of credit.
6
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GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited) (continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
Inventories
Inventories comprise the following:
June 30, December 31,
1996 1995
<S> <C> <C>
Raw materials and parts $ 16,409 $ 12,922
Work in process 8,202 10,048
Finished goods 2,584 1,467
-------- --------
$ 27,195 $ 24,437
======== ========
</TABLE>
Property and Equipment
Property and equipment are stated at cost and comprise the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Demonstration equipment $ 15,142 $ 12,877
Equipment 14,390 12,512
Furniture and fixtures 1,962 1,960
Leasehold improvements 6,454 6,366
Building 270 -
-------- --------
38,218 33,715
Less accumulated depreciation and amortization (22,643) (19,944)
-------- --------
15,575 13,771
Construction in progress 1,348 856
-------- --------
$ 16,923 $ 14,627
======== ========
</TABLE>
Accrued Expenses
Accrued expenses comprise the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
System installation and warranty $ 5,403 $ 4,318
Accrued commissions and incentives 1,795 3,227
Accrued payroll and related items 1,464 1,104
Other 1,914 2,393
-------- --------
$ 10,576 $ 11,042
======== ========
</TABLE>
7
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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 Six Months Ended
June 30, June 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 63.4 59.4 63.8 59.3
Research and development 14.4 11.4 14.8 12.2
Selling, general & administrative 18.2 19.7 17.6 19.2
----- ----- ----- -----
Income from operations 4.0 9.5 3.8 9.3
Other income, net 0.2 0.5 0.1 0.4
----- ----- ----- -----
Income before provision
for income taxes 4.2 10.0 3.9 9.7
Provision for income taxes 1.6 0.7 1.5 0.7
----- ----- ----- -----
Net income 2.6% 9.3% 2.4% 9.0%
===== ===== ===== =====
</TABLE>
Net sales for the three and six months ended June 30, 1996 were $25.1 million
and $51.4 million, respectively, compared to net sales of $25.1 million and
$47.6 million, respectively, for the corresponding periods in 1995. The
increase during the six months ended June 30, 1996 was primarily due to higher
unit sales of high energy (MeV) ion implantation systems with higher average
selling prices (ASP), and greater spares revenue. While net sales for the
quarter ended June 30, 1996 were equal to net sales for the same period in
1995, the sales mix changed from a tungsten Chemical Vapor Deposition (CVD) to
a MeV system emphasis. 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 cancelled planned
capital purchases. As a result of the uncertainties of this current market
environment, the Company anticipates that its quarterly revenues and profits
8
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will not continue to grow as they have in the past several quarters and may
fluctuate from quarter to quarter. The Company expects revenue and earnings
for the second half of 1996 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 quarter and six months ended June 30, 1996 was 37 percent
and 36 percent, respectively, compared to 41 percent for each of the same
periods in 1995. The decline in gross margin was primarily due to higher costs
on the initial shipments of the Company's ion implantation (MeV) 1520 systems,
higher product costs on the Company's (CVD) system shipments as a result of a
change in product mix 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 six months ended June 30, 1996 were 14 percent and 15 percent,
respectively, compared to 11 percent and 12 percent, respectively during the
same periods in 1995. On an absolute dollar basis, R&D expenses during the
quarter and six months ended June 30, 1996, increased $0.8 million and $1.8
million when compared to the same period in 1995. The increases in absolute
dollars and as a percentage of net sales were primarily due to increased
headcount and associated payroll costs, higher product development material
costs and depreciation expenses on engineering tools for new product
development. 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 and anticipates that R&D will decrease
slightly in the next 2 to 3 quarters.
Selling, general and administrative (S,G&A) expenses were 18 percent for the
three and six months ended June 30, 1996, compared to 20 percent and 19
percent for the same periods in 1995. On an absolute dollar basis, S,G&A
expenses for the three months ended June 30, 1996 decreased $0.4 million when
compared to the same period in 1995. The change was primarily due to a
one-time reimbursement of commissions from the Company's Korean sales
representative in connection with the start-up of Genus Korea, Ltd. in January
1996. S,G&A during the six months ended June 30, 1996 was flat when compared
to the same period in 1995. Given the current market conditions, the Company
anticipates S,G&A to decrease in the next 2 to 3 quarters.
During the quarter ended June 30, 1996, the Company had $46 thousand in other
income, compared to $0.1 million in other income for the comparable period in
1995. For the six months ended June 30, 1996, the Company had other income of
$0.1 million, compared to $0.2 million of other income for the same period in
1995. The decrease was principally due to lower interest income as a result of
lower cash balances and higher interest expense associated with lease
financing. The effective tax rate for the second quarter and first six months
of 1996 was 38.5 percent compared with the effective tax rate of 7 percent
during the same periods in 1995. The significant increase was a result of the
one-time recognition of deferred tax assets during the fourth quarter of 1995
in accordance with Financial Accounting Standard No. 109, "Accounting for
Income Taxes".
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 2 to 3 quarters. The Company continues to make strategic 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
9
<PAGE>
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 six months ended June 30, 1996, the Company's cash and cash
equivalents decreased $1.5 million principally due to the purchase of property
and equipment of $4.4 million, offset by cash generated from operating
activities of $2.2 million and the proceeds from the issuance of common stock
of $1.5 million. The positive change in cash from operating activities
primarily resulted from depreciation and amortization of $3.2 million, net
income of $1.2 million, deferred taxes of $0.7 million and an increase in
accounts payable of $0.8 million as a result of inventory purchases made late
in the quarter. The increase in cash from operating activities was offset by
an increase in inventory of $2.8 million due to purchases made late in the
second quarter of 1996 to meet early third quarter 1996 shipments and a $0.5
million decrease in accrued expenses related primarily to the payment of year
ended 1995 incentives and commissions, offset by increased warranty accruals.
The Company's primary source of funds at June 30, 1996 consisted of $11.1
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 June 30, 1996, the
Company had no borrowings outstanding under the line of credit.
Capital expenditures during the first half of 1996 were $4.4 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 it will continue to make additional
capital expenditures during 1996 that 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 and $17.1 million for the years ended
December 31, 1993 and 1992. 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.
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,
10
<PAGE>
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 high energy (MeV) ion
implantation 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 88%, respectively, of total net sales in fiscal
1993, 1994 and 1995 and the first six months of 1996. In addition, net sales
to Korean customers accounted for approximately 32%, 50%, 63% and 70%
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
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.
11
<PAGE>
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 six months of 1996 Samsung and Innotech
accounted for 65% and 13%, 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
competitive 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 products and processes in a timely manner which
satisfy customer needs or achieve 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
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.
12
<PAGE>
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 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on April 30,
1996 in Santa Clara, California. Proxies for the meeting were
solicited pursuant to Regulation 14A. At the Company's Annual
Meeting, the shareholders approved the following resolutions:
(1) Amendment to the 1991 Incentive Stock Option Plan to increase
the number of shares reserved for issuance thereunder by 800,000
shares.
For: 5,725,439 shares
Against: 1,438,036 shares
Abstaining: 78,898 shares
(2) Amendment to the 1989 Employee Stock Purchase Plan to increase
the number of shares reserved for issuance thereunder by 300,000
shares.
For: 5,363,203 shares
Against: 523,750 shares
Abstaining: 1,355,420 shares
In addition, all management nominees for director were elected and
the re-appointment of Coopers & Lybrand L.L.P. as independent
accountants was approved.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11.1 - Computation of Net Income per Share.
(b) No Reports on Form 8-K were filed during the period from
April 1, 1996 to June 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: August 12, 1996 GENUS, INC.
William W. R. Elder
-------------------------------
William W. R. Elder, Chairman
and Chief Executive Officer
Ernest P. Quinones
------------------------------
Ernest P. Quinones
Acting Chief Financial Officer
15
<PAGE>
GENUS, INC.
Index to Exhibits
Exhibits Description Page
Exhibit 11.1 Computation of Net Income per Share 17
16
<PAGE>
Exhibit 11.1
GENUS, INC.
Computation of Net Income Per Share (a)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Average common shares outstanding 16,303 15,632 16,256 14,680
Computation of incremental outstanding shares
Net effect of dilutive stock options
based on treasury stock method 336 826 331 841
------ ------ ------ ------
16,639 16,458 16,587 15,521
====== ====== ====== ======
Net income $ 645 $2,340 $ 1,238 $ 4,278
======= ====== ======= =======
Net income per share (a) $ 0.04 $ 0.14 $ 0.07 $ 0.28
======= ====== ======= =======
</TABLE>
Computation Notes:
(a) Presentation of fully diluted earnings per share for the three and six
months ended June 30, 1996 and 1995 is omitted because such amounts are
materially the same as those presented above.
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000837913
<NAME> GENUS, INC.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 11129
<SECURITIES> 0
<RECEIVABLES> 27035
<ALLOWANCES> 250
<INVENTORY> 27195
<CURRENT-ASSETS> 70242
<PP&E> 39566
<DEPRECIATION> 22643
<TOTAL-ASSETS> 98581
<CURRENT-LIABILITIES> 19431
<BONDS> 0
<COMMON> 97196
0
0
<OTHER-SE> 19084
<TOTAL-LIABILITY-AND-EQUITY> 98581
<SALES> 51455
<TOTAL-REVENUES> 51455
<CGS> 32841
<TOTAL-COSTS> 49505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2013
<INCOME-TAX> 775
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1238
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
