<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, 1997 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 11, 1997: 16,965,212
<PAGE>
GENUS, INC.
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations -
Three and six months ended
June 30, 1997 and 1996 3
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to exhibits 16
</TABLE>
2
<PAGE>
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 19,351 $ 25,095 $ 39,032 $ 51,455
Costs and expenses:
Cost of goods sold 11,540 15,919 23,853 32,841
Research and development 3,058 3,613 6,249 7,583
Selling, general & administrative 4,189 4,561 8,056 9,081
------ ------ ------ ------
Income from operations 564 1,002 874 1,950
Other income (expense), net (82) 46 (97) 63
------ ------ ------ ------
Income before provision for
income taxes 482 1,048 777 2,013
Provision for income taxes 186 403 300 775
------ ------ ------ -----
Net income $ 296 $ 645 $ 477 $ 1,238
======= ======= ====== ======
Net income per share $ 0.02 $ 0.04 $ 0.03 $ 0.07
======= ======= ====== ======
Shares used in per share calculation 16,854 16,639 16,855 16,587
======= ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GENUS, INC.
Consolidated Balance Sheets
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Unaudited Audited
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,480 $ 11,827
Accounts receivable (net of allowance for doubtful
accounts of $250 in 1997 and 1996) 25,528 15,555
Inventories, net 24,835 26,464
Other current assets 860 638
Current deferred taxes 4,427 4,427
------- -------
Total current assets 67,130 58,911
Property and equipment, net 14,386 15,345
Other assets, net 3,955 4,459
Noncurrent deferred taxes 10,417 10,417
_______ _______
$ 95,888 $ 89,132
======= =======
LIABILITIES
Current liabilities:
Short term bank borrowings $ 7,346 $ 2,500
Accounts payable 6,934 5,304
Accrued expenses 10,044 10,808
Current portion of long-term debt and
capital lease obligations 851 1,009
------ ------
Total current liabilities 25,175 19,621
------ ------
Long-term debt and capital lease obligations,
less current portion 1,357 1,260
------ ------
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized, 2,000,000 shares;
Issued and outstanding, none --- ---
Common stock, no par value:
Authorized, 50,000,000 shares;
Issued and outstanding, 16,873,311
shares at June 30, 1997
and 16,723,927 shares at December 31 1996 98,630 97,915
Accumulated deficit (29,050) (29,527)
Cumulative translation adjustment (224) (137)
------- -------
Total shareholders' equity 69,356 68,251
________ ________
$ 95,888 $ 89,132
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GENUS, INC
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months Ended
June 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 477 $ 1,238
Adjustments to reconcile net
income to net cash from operating activities:
Depreciation and amortization 2,420 3,175
Deferred taxes --- 705
Changes in assets and liabilities:
Accounts receivable (9,973) 11
Inventories 1,629 (2,758)
Other current assets (222) (83)
Accounts payable 1,630 830
Accrued expenses (764) (466)
Other, net 113 (489)
------ ------
Net cash provided by (used in)
operating activities (4,690) 2,163
------ ------
Cash flows from investing activities:
Acquisition of property and equipment (390) (4,395)
Capitalization of software development costs --- (352)
------ -----
Net cash used in investing activities (390) (4,747)
------ ------
Cash flows from financing activities:
Proceeds from issuance of common stock 715 1,513
Payment of short-term bank borrowings (5,500) ---
Proceeds from short-term bank borrowings 10,346 ---
Payments of long-term debt and capital
lease obligations (814) (430)
------ ------
Net cash provided by financing activities 4,747 1,083
------ ------
Effect of exchange rate changes on cash (14) ---
Increase (decrease) in cash and cash equivalents (347) (1,501)
Cash and cash equivalents, beginning of period 11,827 12,630
------- -------
Cash and cash equivalents, end of period $ 11,480 $ 11,129
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1997
(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 1996 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, 1996.
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.
<TABLE>
<CAPTION>
Statement of Cash Flows Information
Six Months Ended
June 30
1997 1996
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 188 $ 111
Income taxes $ 2 $ 105
Non cash investing activities:
Purchase of property and equipment under
long-term debt and capital lease obligations $ 753 $ 649
</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, 1997,
the Company had $7.3 million outstanding under the line of credit.
6
<PAGE>
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited) (continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
Inventories
Inventories comprise the following:
June 30, December 31,
1997 1996
<S> <C> <C>
Raw materials and parts $ 15,640 $ 14,776
Work in process 4,146 6,847
Finished goods 5,049 4,841
------- -------
$ 24,835 $ 26,464
======= =======
</TABLE>
<TABLE>
Property and Equipment
Property and equipment are stated at cost and comprise the following:
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Demonstration equipment $ 14,352 $ 14,047
Equipment 17,068 16,145
Furniture and fixtures 2,647 2,631
Leasehold improvements 6,901 6,900
------- -------
40,968 39,723
Less accumulated depreciation and amortization (26,771) (24,669)
------- -------
14,197 15,054
Construction in progress 189 291
------- -------
$14,386 $15,345
======= =======
</TABLE>
<TABLE>
Accrued Expenses
Accrued expenses comprise the following:
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
System installation and warranty $ 4,456 $ 4,884
Accrued commissions and incentive 1,447 1,344
Accrued payroll and related items 1,132 1,003
Other 3,009 3,577
------- -------
$ 10,044 $ 10,808
======= =======
</TABLE>
7
<PAGE>
GENUS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
act of 1934. These forward looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth under
"Risk Factors" in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in or incorporated with the
Company's Fianacial Statements and Notes thereto included elsewhere in this
report.
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold 59.6 63.4 61.1 63.8
Research and development 15.8 14.4 16.0 14.8
Selling, general & administrative 21.7 18.2 20.7 17.6
---- ---- ---- ----
Income from operations 2.9 4.0 2.2 3.8
Other income (expense), net (0.4) 0.2 (0.2) 0.1
---- ---- ---- ----
Income before provision for
income taxes 2.5 4.2 2.0 3.9
Provision for income taxes 1.0 1.6 0.8 1.5
---- ---- ---- ----
Net income 1.5% 2.6% 1.2% 2.4%
==== ==== ==== ====
</TABLE>
Net sales for the three and six months ended June 30, 1997 were $19.4 million
and $39.0 million, respectively, compared with net sales of $25.1 million and
$51.5 million, respectively, for the corresponding periods in 1996. The decline
was attributable to lower unit sales of systems as well as lower revenue from
spares and service. During the second half of 1996, the semiconductor
manufacturing equipment industry experienced a significant slowdown in sales as
a result of excess capacity within the semiconductor industry and the Company's
equipment sales levels have not recovered to previous levels. Net sales include
$3 million and $12.3 million related to ship-in-place transactions for the
three and six month periods ended June 30, 1997, respectively, as compared with
no ship-in-place transactions during the first six months of 1996. The
increase is primarily due to the Company's largest customer placing significant
ship-in-place orders during the first six months of 1997, pending completion of
construction of its wafer fabrication facility which was completed in July,
1997. When customers request that the Company manufacture and invoice systems
on a ship-in-place basis, revenue is recognized for systems prior to shipment
upon completion of customer source inspection and factory acceptance of the
system and where risk of loss and title to the system has passed to the
customer.
During the last two quarters of 1996, the Company incurred special charges of
$5.9 million, relating to capacity cost reductions including a reduction in
8
<PAGE>
force, increased inventory reserves and the write-off of property and
equipment. Accordingly, this restructuring has resulted in lower spending
within all of the expense categories as discussed below.
Gross margin for the quarter and six months ended June 30, 1997 was 40% and 39%,
respectively, compared to 37% and 36% for the same periods in 1996. Despite a
lower level of sales resulting in less absorption of fixed manufacturing costs,
and competitive pricing pressures, the Company was able to improve its gross
margins due to operating efficiencies and product mix. In the first quarter of
1996, the Company experienced higher service costs associated with the opening
of Genus, Korea, Ltd. The Company gross margins have historically been
affected by variations in average selling price (ASP), changes in the mix of
product sales, unit shipment levels, the percentage of foreign sales, and
competitive pricing pressures.
For the second quarter of 1997. research and development (R&D) expenses were
$3.1 million, or 16% of sales compared to $3.6 million, or 14% of sales for the
second quarter of 1996. R&D spending for the first half of 1997 of $6.2 million
declined from the $7.6 million for the comparable period in 1996. The decrease
in absolute dollars is primarily attributable to the restructuring of the
Company's operations and two reductions in force that occurred during the
second half of 1996. The Company continually evaluates in R&D investment in
view of evolving competition and market conditions and expects that R&D
spending may increase during the second half of 1997.
Selling, general and administrative expenses (S,G&A) were $4.2 million for the
second quarter of 1997, or 22% of sales, down from the $4.6 million or 18 %
sales of S,G &A for the second quarter of 1996. S,G &A for the six months of
$8.1 million decreased by $1.0 million from the first half of 1996. Similar to
R&D, the decrease in absolute dollars is attributable to restructuring and the
reduction in force. In addition, sales commissions were higher in 1996,
commensurate with the higher sales level.
For second quarter of 1997, other expense was $82,000 compared with other
income of $46,000 for the second quarter of 1996. Other expense for the first
six months of 1997 was $97,000 compared to other income of $63,000 for the same
period in 1996. The other expense is comprised primarily of interest expense
associated with capital leases and short term borrowings. During 1996, interest
income was earned on cash balances; during 1997, the Company increased its
short term borrowings resulting in net interest expense. The effective tax rate
for the quarter and six months was 38.5%, unchanged from the same periods a
year ago.
The Company experienced losses during the third and fourth quarter of 1996 as
a result of an overall industry downturn. As a result of the restructuring of
operations and a 15% increase in sales over the last quarter of 1996, the
Company was able to return to a break-even level of profitability in the first
quarter and slightly increase the profitability in the second quarter.
Nonetheless, due to 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, 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 short-term prospects for its business. The
Company continues to make strategic investments in new product development and
manufacturing improvements with a view to improving future performance by
enhancing product offerings; however, such investment may adversely affect
short-term operating performance. The Company is also continuing it 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
simultaneously book and ship some orders during the same quarter.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, the Company's cash and cash
equivalents declined by $.3 million to $11.5 million. Accounts receivable
9
<PAGE>
increased by $10 million receivable and the Company increased its net
borrowings by $4.8 million. Some of the increase in accounts receivable
resulted from extended payment terms to customers during this industry
downturn, and accounts receivable due to ship-in-place transactions which
increased from $3 million at December 31, 1996 to $15.3 million at June 30,
1997
The Company's primary source of funds at June 30, 1997 consisted of $11.5
million in cash 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 June 1997. At June 30, 1997, the Company had $7.3
million of borrowings outstanding under the line of credit.
Capital expenditures and property and equipment acquired under capital lease
obligations during the first six months of the year were $1.1 million
and were primarily leasehold improvements for the Ion Technology Products group
located in Newburyport, Massachusetts. The Company believes that cash on hand
and generated from operations, if any, and existing credit facilities will be
sufficient to satisfy its cash needs for the foreseeable future. There can be
no assurance that any required additional funding, if needed, will be available
on terms attractive to the Company, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Any
additional equity financing may be dilutive to shareholders, and debt
financing, if available, may involve restrictive covenants.
RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information presented in this report. This report contains forward
looking statements that involve risks and uncertainties. The Company's actual
results may differ significantly from the results discussed in the forward
looking statements. Factors that might cause such differences include, but are
not limited to, the following risk factors.
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, respectively,
the Company experienced losses of $9.2 million, $6.9 million, and $17.1 million
for the years ended December 31, 1996, 1993 and 1992, respectively. Although
the Company reported net income of $296,000 for the first half of 1997, as a
result of the Company's inconsistent sales and operating results in recent
years, there can be no assurance that the Company will be able to sustain
consistent future revenue growth on a quarterly or annual basis, or that the
Company will be able to maintain consistent 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 invest in
product and process research and development. Many of the Company's existing
and potential competitors have substantially greater finanical 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, it would materially adversely affect the Company's ability
to sell its products to these manufacturers. There can be no assurance 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 these or other cometitors
will not succeed in developing new technologies, offering products at lower
prices than those of the Company or obtaining market acceptance for product
more rapidly than the Company.
10
<PAGE>
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 to 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 is currently experiencing a downturn, which has had an adverse effect on
the semiconductor industry's demand for semiconductor manufacturing capital
equipment. Prior and current semiconductor industry downtruns have adversely
affected the Company's revenue, operating marging and results of operations.
There can be no assurance that the Company's revenue and operating results will
not continue to be materially and adversely affected if a downturn in the
semiconductor industry continues, or occurs in the future. In addition, the
need for continued investment in research and development, substantial
capital equipment requirements and extensive ongoin 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 profitable in the future.
Reliance on International Sales. International sales accounted for
approximately 86%, 88% and 89% of total net sales in years ended 1996, 1995,
and 1994 respectively, and were 85% for the first six months of 1997. In
addition, net sales to Korean customers accounted for approximately 59%, 63%,
60%, and 61% 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 account 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 primarily denominated in U.S. dollars and the Company does no 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 product 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.
For the first half of 1997, one customer accounted for 60% of its net sales.
In 1996, two customers accounted for 53% and 18%, respectively, of the
Company's net sales. Net sales to one customer accounted for 63% of total net
sales in 1995. In 1994, net sales to three customers accounted for 33%, 19%
and 14%, respectively, of total 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. 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. Futhermore
one customer accounts for all of the sales of the Genus 7000 system, which
accounted for 30% of the Company's revenues in the first half of 1997. The loss
of this customer or another significant customer or any reduction in orders
from this customer or another significant customer, including reductions due to
11
<PAGE>
this customer's or another sigificant customer's departure from recent buying
pattern, market, economic or competitive conditions in the semiconductor
industry or in the industries that manufacture products utilizing integrated
circuits, would 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 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. 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
introduction 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
theCompany will be able to develop and introduce new products or enhancements
to its existing and future processes in a timely manner to 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 manufactures 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,
anticipated shipments were delayed or canceled by one or more customers or
shipments were delayed 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.
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 this Risk Factors section
could have a material adverse effect on such market price. See "Common Stock
Information" in the Company's 1996 Annual Report on page 9.
12
<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 May 20, 1997 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) Election of the following persons as directors.
Director In Favor Withheld
William W.R. Elder 14,644,196 1,072,774
James T. Healy 14,641,638 1,075,332
Todd S. Myhre 14,629,333 1,087,637
Stephen F. Fisher 14,635,726 1,081,244
G. Frederick Forsyth 14,635,426 1,081,544
Mario M. Rosati 14,636,246 1,080,724
(2) Amendment to the 1991 Incentive Stock Option Plan to increase the number
of shares reserved for issuance thereunder by 650,000 shares.
For: 12,855,328 shares
Against: 1,783,256 shares
Abstaining: 107,927 shares
(3) Amendment to the 1989 Employee Stock Purchase Plan to increase the number
of shares reserved for issuance thereunder by 150,000 shares.
For: 13,002,827 shares
Against: 1,645,984 shares
Abstaining: 97,700 shares
(4) Amendment to the Articles of Incorporation to increase the number of
authorized shares of Common Stock to 50,000,000.
For: 12,481,520 shares
Against: 2,178,161 shares
Abstaining: 86,830 shares
(5) Ratification and appointment of Coopers & Lybrand LLP as independent
accountants.
For: 15,512,099
Against: 118,946
Abstaining: 85,925
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The Exhibits listed on the accompanying Index to Exhibits are filed as
part hereof, or incorporated by reference into, the Report.
(b) Reports of Form 8-K
No reports on Form 8-K were filed during the period from April 1, 1997
to June 30, 1997.
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 14, 1997 GENUS, INC.
/S/ James T. Healy
________________________
James T. Healy, President
and Chief Executive Officer
/S/ Mary F. Bobel
_________________________
Mary F. Bobel
Chief Financial Officer
15
<PAGE>
GENUS, INC.
Index to Exhibits
Exhibit Description
3.1 Amended and Restated Articles of Incorporation of Registrant as filed
June 6, 1997.
3.2 By-Laws of Registrant, as amended (3)
4.1 Common Shares Rights Agreement, dated as of April 27, 1990, between
Registrant and Bank of America, N.T. and S.A., as Rights Agent (5)
10.1 Lease dated December 6, 1985, for Registrant's facilities at 4
Mulliken Way, Newburyport, Massachusetts, and amendment and
extension of lease dated March 17, 1987 (1)
10.2 Lease dated June 15, 1988, for Registrant's facilities at 100 Merrick
Road, West Building, Rockville Center, New York (1)
10.3 Assignment of Lease dated April 1986 for Registrant's facilities at
Unit 11A, Melbourn Science Park, Melbourn, Hertz, England (1)
10.4 Registrant's 1981 Incentive Stock Option Plan, as amended (2)
10.5 Registrant's 1989 Employee Stock Purchase Plan, as amended (6)
10.6 Registrant's 1991 Incentive Stock Option Plan, as amended (13)
10.7 International Distributor Agreement dated November 23, 1987, between
General Ionex Corporation and Innotech Corporation (1)
10.8 Distributor/Representative Agreement dated August 1, 1984, between
Registrant and Aju Exim (formerly Spirox Holding Co./You One Co.
Ltd.) (1)
10.9 Exclusive Sales and Service Representative Agreement dated October 1,
1989, between Registrant and AVBA Engineering Ltd. (4)
10.10 Exclusive Sales and Service Representative Agreement dated April 1,
1990, between Registrant and Indosale PVT Ltd. (4)
10.11 License Agreement dated November 23, 1987, between Registrant and
Eaton Corporation (1)
10.12 Exclusive Sales and Service Representative Agreement dated May 1,
1989, between Registrant and Spirox Taiwan, Ltd. (3)
10.13 Lease dated April 7, 1992, between Registrant and The John A. and
Susan R. Sobrato 1979 Revocable Trust for property at 1139 Karlstad
Drive, Sunnyvale, California (7)
10.14 Term Loan Agreement dated April 17, 1992, between the Registrant and
Silicon Valley Bank (7)
10.15 Asset Purchase Agreement dated May 28, 1992, between Registrant and
Advantage Production Technology, Inc. (8)
10.16 License and Distribution Agreement dated September 8, 1992, between
Registrant and Sumitomo Mutual Industries, Ltd. (9)
10.17 Mortgage dated February 1, 1993, with Bay Bank Middlesex for
Registrant's facilities at One Merrimack Landing, Unit 26,
Newburyport, Massachusetts (10)
10.18 Revolving Loan Agreement dated May 15, 1994, between Registrant and
Silicon Valley Bank (1)
10.19 Lease Agreement dated October 1995 for Registrant's facilities at Lot
62, Four Stanley Tucker Drive, Newburyport, Massachusetts (13)
11.1 Computation of Net Income Per Share (2)
27.1 Financial Data Schedule
16
<PAGE>
(1) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-1 (No. 33-23861) filed August 18, 1988,
and amended on September 21, 1988, October 5, 1988, November 3, 1988,
November 10, 1988, and December 15, 1988, which Registration Statement
became effective November 10, 1988.
(2) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-8 filed January 17, 1991.
(3) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-1 (No. 33-28755) filed on May 17, 1989,
and amended May 24, 1989, which Registration Statement became effective
May 24, 1989.
(4) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989.
(5) Incorporated by reference to the exhibit filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1990.
(6) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990.
(7) Incorporated by reference to the exhibit filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.
(8) Incorporated by reference to the exhibit filed with the Registrant's Report
on Form 8-K dated June 12, 1992.
(9) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992.
(10) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.
(11) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994.
(12) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
(13) Incorporated by reference to the exhibit filed with the Registrant'
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
17
<PAGE>
Exhibit 3.1
State of California
Office of the Secretary of State
I, Bill Jones, Secretary of State of the State of California, hereby certify:
That the attached transcript has been compared with the record on file in this
office, of which it purports to be a copy, and that it is full, true and
correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the great
Seal of the State of California this
June 09, 1997
____________________________________
(STATE OF CALIFORNIA SEAL) /s/ Bill Jones
____________________________________
Bill Jones, Secretary of State
Authentication: A493124
Date: 06/09/97
18
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
GENUS, INC.
James T. Healy and Mario M Rosati certify that:
1. They are the duly elected President and Secretary of Genus, Inc., a
California corporation.
2. The Articles of Incorporation of this corporation, as amended to the date
of the filing of these Restated Articles of Incorporation, and with the
omissions required by Section 910 of the Corporations Code, are hereby
amended and restated to read as follows:
I.
The name of this corporation is: GENUS, INC.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The Corporation is authorized to issue two classes of shares, designated
"Common Stock" and "Preferred Stock." The total number of shares which this
corporation is authorized to issue is 52,000,000. The number of shares of
Preferred Stock which this corporation is authorized to issue is 2,000,000.
The number of shares of Common Stock which this corporation is authorized to
issue is 50,000,000.
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of this corporation is authorized to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, to increase or
decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequest to the issue of
shares of that series, to determine the designation and par value of any series
and to fix the number of shares of any series.
IV.
The liability of the directors of this corporation for monetary damages shall
be eliminated to the fullest extent permissible under California Law.
The corporation is authorized to provide indemnification of agents (as defined
in Section 317 of the California Corporations Code) through bylaw provisions,
19
<PAGE>
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject only to the applicable limits set
forth in Section 204 of the California Corporations Code with respect to
actions for breach of duty to the corporation and its shareholders.
Any repeal or modification of the foregoing provisions of this Article IV by
the shareholders of this corporation shall not adversely affect any right or
protection of a director of this corporations existing at the time of such
repeal or modification.
3. The foregoing Restated Articles of Incorporation have been duly approved by
the Board of Directors of said corporation.
4. The foregoing Restated Articles of Incorporation were approved by the
required vote of the shareholders of said corporation in accordance with
Sections 902 and 903 of the California General Corporations Code at the Annual
Meeting of shareholders, the record date for which was March 31, 1997. The
total number of outstanding shares of the corporation entitled to vote as of
the record date for said meeting was 16,738,092 shares of Common Stock. The
number of shares of Stock voting in favor of the foregoing Restated Articles
of Incorporation equaled or exceeded the vote required. The vote required
was a majority of the outstanding shares of Common Stock entitled to vote as of
the record date for said meeting.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in the foregoing Restated Articles of
Incorporation are true and correct of our own knowledge.
Executed at Sunnyvale, California, on May 28, 1997
/S/ James T. Healy
_____________________
James T. Healy
President and
Chief Executive Officer
/S/ Mario M. Rosati
_____________________
Mario M. Rosati
Secretary
20
<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
March 31 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Average common shares outstanding 16,782 16,303 16,760 16,256
Computation of incremental outstanding shares
Net effect of dilutive stock options
based on treasury stock method 72 336 95 331
______ ______ ______ ______
16,854 16,639 16,855 16,587
====== ====== ====== ======
Net income $ 296 $ 645 $ 477 $1,238
====== ====== ====== ======
Net income per share (a) $ 0.02 $ 0.04 $ 0.03 $ 0.07
====== ====== ====== ======
</TABLE>
Computation Notes:
(a) Presentation of fully diluted earnings per share for the three and six
months ended June 30, 1997 and 1996 is omitted because such amounts are
materially the same as those presented above.
21
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000837913
<NAME> GENUS, INC.
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 11480
<SECURITIES> 0
<RECEIVABLES> 25778
<ALLOWANCES> 250
<INVENTORY> 24835
<CURRENT-ASSETS> 67130
<PP&E> 41157
<DEPRECIATION> 26771
<TOTAL-ASSETS> 95888
<CURRENT-LIABILITIES> 25175
<BONDS> 0
0
0
<COMMON> 98630
<OTHER-SE> 29274
<TOTAL-LIABILITY-AND-EQUITY> 95888
<SALES> 39032
<TOTAL-REVENUES> 39032
<CGS> 23853
<TOTAL-COSTS> 38158
<OTHER-EXPENSES> 97
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 777
<INCOME-TAX> 300
<INCOME-CONTINUING> 477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 477
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
