<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1997
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996,
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-17139
------------------------
GENUS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2790804 1139 KARLSTAD DRIVE
(State or other (I.R.S. Employer SUNNYVALE, CA 94089
jurisdiction of Identification Number) (408) 747-7120
incorporation or (Address of principal
organization) executive offices)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 10,
1997, in the over-the-counter market as reported by the Nasdaq National Market,
was approximately $82,684,529. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding voting stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of March 10, 1997, Registrant had 16,737,759 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following document are incorporated by reference in Part III of
this Form 10-K Report: Proxy Statement for Registrant's 1997 Annual Meeting of
Shareholders--Items 10, 11, 12 and 13.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Item 1. Business
<S> <C> <C>
Products
Marketing, Sales and Service
Research and Development
Competition
Manufacturing and Suppliers
Intellectual Property
Employees
Environmental Regulation
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure
PART III Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports of Form 8-K:
(1) Financial Statements
(2) Financial Statement Schedule
(3) Exhibits
(4) Reports on Form 8-K
</TABLE>
2
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PART 1
ITEM 1.
BUSINESS
Genus, Inc. ("Genus" or "the Company") designs, manufactures and markets
capital equipment and processes for advanced semiconductor manufacturing. The
Company's products--high energy MeV (millions of electron volts) ion
implantation systems and chemical vapor deposition ("CVD") equipment--are used
worldwide to produce integrated circuits ("ICs") for the data processing,
communications, medical, military, transportation and consumer electronics
industries. Genus was the first to market high energy MeV ion implantation and
the chemical vapor deposition of tungsten silicide, which perform two critical
steps in the manufacture of semiconductors. These technologies enable chip
manufacturers to simplify their IC production process and lower their
cost-of-ownership.
The Company's global customer base consists of semiconductor manufacturers
in the United States, Europe and Asia/Pacific including Japan, Korea and Taiwan.
PRODUCTS
The primary products manufactured by Genus include two MeV ion implantation
systems and three CVD systems. Each of these products is available with a
variety of options and/or upgrades.
MEV ION IMPLANTATION
Ion implantation is the process by which a beam of electrically-charged
dopant atoms (ions) are accelerated and driven into the surface of a silicon
wafer. This process alters the electrical characteristics of the silicon and
forms the isolation regions composed of "wells" for placement of active devices.
Ion implantation has traditionally been used to create all of the active
devices, such as transistors, in an integrated circuit. The market for ion
implanters consists of three primary segments: high current, medium current and
high energy. Currently, high and medium current ion implanters make up
approximately 85 percent of the total ion implantation market. However, high
energy ion implantation is one of the fastest growing segments due to its use in
emerging advanced technology simplification applications and low cost-
of-ownership. High energy (MeV) ion implantation improves transistor performance
and reduces overall manufacturing costs by placing dopants deep into the silicon
to create regions that isolate transistors from one another.
CURRENT MEV ION IMPLANT PRODUCTS
TANDETRON-TM- 1520. In November 1995, Genus introduced the Tandetron 1520,
a third-generation MeV ion implanter that evolved from the Genus 1500 system,
introduced in 1988, and the Genus 1510 system, introduced in 1992. Although
specifically designed for high energy applications, the Tandetron uses a wide
range of energies from 10keV (thousands of electron volts) to 3 MeV for
implantation. This broad range allows the system to effectively meet high energy
applications and also serves as an alternative (back-up) for medium
current/medium energy application requirements. The system's accelerator, a DC
tandem-based design, simplifies both operation and maintenance while also
providing the lowest power consumption of any high energy system currently in
the market. Additionally, the DC tandem allows fast energy change times
resulting in a superior ability to chain multiple implants together without
unloading wafers. This enhances overall throughput as well as reducing
cost-of-ownership. The system's end station, where the ion beam meets the
wafers, is optimized for high energy applications. The large volume of the
process chamber and the design of the high vacuum pumping system minimize a
phenomenon known as photoresist outgassing that can hamper throughput and
process quality in implanters of poorer design. All-in-vacuum wafer handling
generates the fewest particles added per wafer pass of any high energy
implanter. This translates to higher yields and greater cost savings.
3
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The improvements of the Tandetron 1520 are based on an overall philosophy of
design simplicity. Modular construction improves manufacturing cycle times,
system installation times and ease of maintenance. The system's footprint has
been reduced by 20 percent, making the 1520 the smallest MeV implanter on the
market. In addition, improved features such as a more efficient, longer lasting
Bernas Ion Source, provide significant advantages in manufacturing environments.
OPTIONAL BILLI STRUCTURE FOR THE TANDETRON 1520
To further advance low-cost manufacturing processes, Genus developed,
through joint development programs with its customers, a special isolation
technology called the Buried Implanted Layer for Lateral Isolation or "BILLI"
structure. BILLI, an advanced, MeV retrograde well formation technology, can be
used for process simplification in the manufacture of DRAM, SRAM and flash
memory as well as logic. BILLI can eliminate one to two masking steps from
current standard MeV retrograde well processes and three to four masking steps
from conventional diffused well processes. An additional benefit BILLI brings to
logic IC design is that transistors can be placed closer together on a chip,
improving packing densities. Also, when the BILLI structure is used, latch up, a
parasitic effect that degrades CMOS IC performance, can be improved and delay
the introduction of complex oxide isolation schemes such as recessed LOCOS or
shallow trench isolation. In some cases use of the BILLI structure has
eliminated the need to use expensive silicon epi. Presently, more than ten of
the world's leading device makers are engaged with the Company in joint
development programs established to develop low-cost manufacturing processes.
GENUS 1510. The Company's 1510 MeV ion implantation system was designed to
meet low and medium dose requirements in the 40 keV to 3 MeV range. Introduced
in September 1992, the 1510 is Genus' second generation MeV ion implanter and
incorporates the basic design and field experience of its predecessor, the 1500.
It is a fully automated, highly reliable implanter with excellent beam purity at
throughput approaching 180 wafers per hour on 200mm wafers.
Genus' ion implant customers include: AMD, Fujitsu, Hyundai, LG Semicon,
Mitsubishi, Newport Wafer-Fab Ltd., Philips Semiconductor, Samsung, SGS-Thomson,
Sharp, Sony and Symbios Logic.
THIN FILM (CVD)
The manufacture of integrated circuits entails a series of steps in which
layers of conductive and non-conductive materials are deposited onto the surface
of wafers made of semiconducting material and are then imaged and etched
repeatedly to form device patterns. Deposited thin films include those used for
interconnect layers (conductors of electrical current) and those used for
dielectrics (insulating or non-conductive layers). The interconnect or metal
layer is deposited on the wafer surface to provide the electrical connection
between the various circuit elements, while the dielectric layer is deposited on
top of the interconnect layer to provide electrical insulation between
conductive layers. Tungsten silicide CVD process improves the conductivity of
local polysilicon interconnects, thereby producing faster DRAM, SRAM and flash
memory devices.
CURRENT THIN FILM PRODUCTS
Genus' CVD systems are designed for the deposition of tungsten silicide on
gate interconnects to increase speed. The Company offers the 7000 Series, a
single wafer, tungsten silicide cluster tool. Genus' two other hardware
architectures, the 8700 Series and the 6000 Series, also deposit tungsten
silicide.
GENUS 7000 SYSTEM. In December 1994, to meet the advanced technology
requirements of the 64M DRAM generation and beyond, the Company introduced the
Genus 7000, a single wafer, open architecture cluster tool which supports silane
and dichlorosilane (DCS) process chemistries. Semiconductor manufacturers
benefit by both the 7000's high throughput, resulting in higher productivity and
lower cost-of-ownership, as well as its low as-deposited stress that provides
higher process yield. By offering the lowest fluorine content, manufacturers
using DCS also gain more reliable gate oxides with the Genus 7000.
4
<PAGE>
This system is currently used in production by manufacturers of advanced
dynamic random access memory (DRAM) and flash memory devices to 0.25 micron. The
7000 features a MESC-compatible wafer handling platform from Brooks Automation
with a centrally located, dual end effector robot for high throughput operation
with up to four process modules. The cluster tool is controlled by an
easy-to-use Windows-TM- based graphic user interface. The modular design of the
7000 enables the addition of other process modules to the cluster tool. Other
manufacturing advantages offered by the Genus 7000 include a multi-zone
resistive heater for more uniform wafer heating, single or two-zone showerheads
for improved film composition uniformity and a state-of-the-art gas delivery
system that minimizes chamber-to-chamber variance.
LRS SILICIDE. LRS Silicide, a Low Resistivity, low Stress CVD tungsten
silicide, was introduced by Genus in December 1996. LRS silicide offers a 20%
reduction resistivity and extremely as-deposited low stress, while retaining the
advantages of conventional dichlorosilane (DCS) chemistry. Memory device
manufacturers using the production-proven DCS and tungsten hexafluoride
chemistries can easily insert LRS silicide into existing process flows,
providing increased yields and faster devices.
GENUS 8700 SERIES. A batch CVD tungsten silicide product, the 8700 Series
incorporates six heated chucks in the batch chamber and six gas injection ports,
which enable individual wafer process adjustments of gas flows and chuck
temperature for superior wafer-to-wafer repeatability. The dual cassette
load-lock system provides continuous wafer loading and unloading capability,
which results in high system throughput (wafers per hour).
The cold wall reaction chamber and robotic wafer handling system are
designed to ensure highly reliable operation with a minimum of foreign material
generation. The system's through-the-wall mounted main frame design is ideally
suited for use in Class 1 or above cleanrooms. All models of the 8700 can be
configured to process from 100 mm (4") to 200 mm (8") wafers.
GENUS 6000 SERIES. Similar in design to the 8700 Series, the 6000 Series is
a third-generation tool incorporating new designs to ensure reliability and ease
of maintenance. It was designed to meet the factory automation needs of the
industry. The 6000 Series consists of a closed architecture cluster system that
incorporates the 8700-style six-chuck batch CVD chamber. This system also offers
dual cassette load-lock architecture that enables continuous batch processing. A
new robotic handling system allows mechanical set-up through computer-controlled
recipes. The overall design features component upgrades that provide
production-worthy processing of 100mm (4") to 200mm (8") wafers.
Genus' thin film customers include: AMD, Fujitsu, Hitachi, Hyundai, IBM, LG
Semicon, Samsung, Sanyo, SGS-Thomson and Sharp.
MARKETING, SALES AND SERVICE
Genus sells and supports its ion implantation and CVD products through
direct sales and customer support organizations in the U.S., Western Europe and
Korea and through six exclusive sales representatives and distributors in the
U.S., Japan, Korea, Taiwan and Hong Kong. Yarbrough Southwest provides sales
distribution in the Southwestern region of the U.S. and SemiTorr in the
Northwest. Genus KK provides field service and support in Japan. Innotech
Corporation serves as the company's sales distributor and augments Genus KK's
support efforts. Genus Korea, Ltd., established in January 1996, provides in-
country field service and support as well as system sales. Sales in the Korean
and Taiwanese markets are served by the representative organizations of Aju-Exim
and Spirox, respectively. Hong Kong and the People's Republic of China are
served by Katech International, Ltd., based in Hong Kong. The Asia/Pacific
organizations provide sales and service, as well as distribution assistance for
spare parts. Genus distributes spare parts from several worldwide depots
including Sunnyvale, California; Tokyo, Japan; Seoul, Korea; Hsin-Chu City,
Taiwan; and Evry, France. To facilitate its marketing efforts, the Company has
cleanroom applications laboratories in Sunnyvale, California, and Newburyport,
Massachusetts.
5
<PAGE>
Genus' products are sold primarily to domestic and foreign device
manufacturers, including both foundries (companies producing semiconductors
principally for other semiconductor manufacturers) and companies producing
semiconductors mainly for outside sales.
The Company maintains sales, technical support and service personnel at its
principal executive offices located in Sunnyvale, California and Newburyport,
Massachusetts. Genus has also established several foreign subsidiaries to
facilitate its sales and service activities abroad: Genus Korea, Ltd. in Seoul,
Korea; Genus KK in Tokyo, Japan; Genus Europa SARL in Evry, France; Genus Europa
Ltd. in Melbourn, Herts, England; Genus Europa GmbH in Stuttgart, Germany; and
Genus Europa Srl. in Milan, Italy. These subsidiaries provide installation,
field service and maintenance, as well as additional technical support to assist
Genus' customers in effectively utilizing the Company's products. Such services
are also provided by the Company's distributors in Tokyo, Seoul, Taipei and Hong
Kong. The Company warrants its products against defects in material and
workmanship for 12 months.
While the Company has experienced no difficulty to date in complying with
U.S. export controls, these rules could change in the future and make it more
difficult or impossible for the Company to export its products to various
countries.
BACKLOG. The Company's backlog at December 31, 1996, was approximately
$19.8 million, compared with approximately $45.0 million at December 31, 1995.
Genus includes in its backlog only those orders for which a customer purchase
order has been received and a delivery date within 12 months has been specified.
The Company's backlog at December 31, 1996, consisted of product shipments
expected to be delivered during calendar year 1997. However, because of the
possibility of customer changes in delivery schedules or cancellations of
orders, the Company's backlog as of any particular date may not be
representative of actual sales for any succeeding period.
RESEARCH AND DEVELOPMENT
Constant technological change, fierce competition and a high rate of
technical obsolescence are key characteristics of the semiconductor equipment
industry. Genus' future prospects depend in part on the Company's ability to
broaden its market acceptance by differentiating its products on the basis of
production-worthiness, technical capability, productivity, particle control and
customer support. To maintain close relationships with its customers and remain
responsive to their requirements, continued investment is needed for research
and development. Research and development expenses may increase in the future.
As part of its research and development program, the Company has established
technical research relationships with certain major semiconductor manufacturers
and universities to further enhance its product development and knowledge for
advanced ULSI devices.
COMPETITION
The Company believes that the principal competitive factors in the
semiconductor equipment market are product performance, quality and reliability,
wafer throughput, customer support, equipment automation, price and
relationships.
Genus competes with a number of companies that historically have had wider
name recognition, broader product acceptance within the industry and
substantially greater resources. In addition, the rapid rate of technological
change in the industry creates opportunities for firms to enter this market and
apply new technologies to meet its needs. Accordingly, the Company anticipates
that it will face competition in the domestic as well as foreign marketplace
from both well-established and new competitors. There can be no assurance that
the Company can successfully compete with such companies.
In the ion implantation marketplace, the Company's MeV ion implantation
system competes primarily with one other MeV system. The Company believes that
its high energy MeV system currently has certain technological advantages over
the competing MeV system. Genus has new applications for MeV ion implantation
technology that it believes will see widespread use in the future since they
enable
6
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significant manufacturing cost reduction and improved integrated circuit
performance. The Company faces direct competition from Eaton Corporation. The
presence of Eaton in the MeV marketplace has continued to increase during 1996.
There can be no assurance that competition in the Company's particular MeV
product market will not intensify or that Genus' technical advantages may not be
reduced or lost as a result of technical advances made by competitors or changes
in semiconductor processing technology.
In the CVD market, Genus competes with other producers of CVD systems, as
well as alternative methods of deposition, such as sputtering, and thin films
other than tungsten silicide. The Company faces direct competition in tungsten
silicide from Applied Materials, Inc. and Tokyo Electron, Ltd. The impact of
their presence in the CVD tungsten silicide market continued to increase during
1996. There can be no assurance that levels of competition in the Company's
particular CVD product market will not intensify or that Genus' technical
advantages may not be reduced or lost as a result of technical advances made by
competitors or changes in semiconductor processing technology.
MANUFACTURING AND SUPPLIERS
Most of the components for the Company's CVD tungsten silicide systems are
produced in subassemblies by independent domestic suppliers according to the
Company's design and procurement specifications. Many components of the
Company's MeV ion implantation systems are also acquired as subassemblies from
outside domestic vendors. The Company anticipates that the use of such
subassemblies will continue to increase in order to achieve additional
manufacturing efficiencies. The Company has alternate sources of supply for the
components and parts purchased from outside suppliers, except for certain
components used in its CVD tungsten and MeV ion implantation products that are
presently available only from single sources. To date, the Company has been able
to obtain adequate supplies of such components in a timely manner from existing
sources. However, the inability to develop alternate sources or to obtain
sufficient source components as required in the future, could result in delays
of product shipments that would have a material adverse affect on the Company's
operating results.
The Company's thin film CVD operation is located in Sunnyvale, California,
while its MeV ion implantation technology manufacturing operation is located in
Newburyport, Massachusetts.
INTELLECTUAL PROPERTY
The Company believes that because of the rapid technological change in the
industry its future prospects will depend primarily upon the expertise and
creative skills of its personnel in process technology, new product development,
marketing, application engineering and product engineering, rather than on
patent protection. Nevertheless, the Company has a policy to actively pursue
domestic and foreign patent protection to cover technology developed by the
Company. The Company's current patents include technology relating to cold wall
CVD of tungsten silicide, ion beam formation, high energy ion acceleration, ion
implant angle control, wafer cleaning, and wafer heating and handling in vacuum.
In 1987, the Company's Ion Technology Division (formerly General Ionex) and
Eaton Corporation entered into a licensing agreement whereby the Company uses
certain ion implantation-related technology.
EMPLOYEES
As of December 31, 1996, the Company employed 325 people on a full-time
basis. As a result of the Company's 8% reduction in force in January 1997, the
number of employees as of March 10, 1997 was 300. The Company believes that its
relations with its employees are satisfactory. None of the employees are covered
by a collective bargaining agreement.
7
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ENVIRONMENTAL REGULATION
Federal, state and local regulations impose various environmental controls
on the discharge of chemicals and gases used in the manufacturing process. The
Company believes that its activities conform to present environmental
regulations. Increasing public attention has, however, been focused on the
environmental impact of semiconductor operations. While the Company has not
experienced any materially adverse effects on its operations from governmental
regulations, there can be no assurance that changes in such regulations will not
impose the need for additional capital equipment or other requirements. Any
failure by the Company to adequately restrict the discharge of hazardous
substances could subject it to future liabilities or could cause its
manufacturing operations to be suspended.
ITEM 2.
PROPERTIES
The Company's executive offices, thin film manufacturing and research and
development operations are presently located in one building in Sunnyvale,
California, totaling approximately 100,500 square feet. The California
facilities are occupied under a lease expiring in October 2002, with a current
annual rental expense of approximately $665,000. Genus' Ion Technology Division
is located in Newburyport, Massachusetts. This facility, totaling approximately
70,000 square feet, is occupied under a lease expiring in May 2017, with an
annual rental expense of approximately $845,000. The Company also leases sales
and support offices in Seoul, South Korea; Tokyo, Japan; Evry, France; and
Rockville Center, New York. The Company owns substantially all of the machinery
and equipment used in its facilities. See Notes 3 and 8 of Notes to Consolidated
Financial Statements. The Company believes that its existing facilities and
capital equipment are adequate to meet its current requirements and that
suitable additional or substitute space will be available as needed.
ITEM 3.
LEGAL PROCEEDINGS
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART 2
ITEM 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK INFORMATION
The common stock of Genus, Inc., is traded in the over-the-counter market
under the NASDAQ symbol GGNS. The high and low last sales prices for 1996 and
1995, set forth below are as reported by the NASDAQ National Market System. At
March 10, 1997, the Company has 499 shareholders.
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First Quarter.......................................... $ 9 $ 5 5/8 $11 1/4 $ 7 1/4
Second Quarter......................................... 12 5 3/4 14 1/8 9 1/2
Third Quarter.......................................... 9 1/2 5 3/4 16 3/4 11 15/16
Fourth Quarter......................................... 7 1/16 4 7/8 15 1/2 6 49/64
</TABLE>
The Company has not paid cash dividends on its common stock since inception,
and its Board of Directors presently intends to reinvest the Company's earnings,
if any, in its business. Accordingly, it is anticipated that no cash dividends
will be paid to holders of common stock in the foreseeable future.
ITEM 6.
SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE AND EMPLOYEE DATA)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............................................ $ 82,509 $ 100,350 $ 63,616 $ 44,236 $ 40,079
Gross profit......................................... 26,972 39,239 24,967 13,900 9,661
Gross profit as a percentage of sales................ 33% 39% 39% 31% 24%
Income (loss) from operations........................ $ (11,458) $ 7,976 $ 3,729 $ (6,974) $ (17,382)
Net income (loss).................................... (9,205) 19,282 4,177 (6,883) (17,095)
Net income (loss) per share.......................... $ (0.56) $ 1.20 $ 0.32 $ (0.57) $ (1.45)
Cash and cash equivalents............................ $ 11,827 $ 12,630 $ 10,188 $ 10,423 $ 9,684
Total assets......................................... 89,132 95,247 54,997 45,205 49,258
Long-term obligations, less current portion.......... 1,260 1,034 523 1,042 2,342
Working capital...................................... 39,290 50,061 23,201 22,162 29,455
Shareholders' equity................................. 68,251 75,361 36,986 31,751 37,771
Backlog.............................................. 19,846 44,996 44,011 18,945 7,783
Number of employees.................................. 325 319 264 212 246
</TABLE>
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ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
1996 COMPARED TO 1995
The components of the Company's statements of income, expressed as
percentage of total revenue, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net sales............................................................. 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold.................................................. 67.3 60.9 60.8
Research and development............................................ 17.7 12.2 14.1
Selling, general and administrative................................. 21.7 18.9 19.2
Special charge...................................................... 7.2 -- --
----- ----- -----
Income (loss) from operations..................................... (13.9) 8.0 5.9
Other income, net..................................................... 0.1 0.3 1.0
----- ----- -----
Income (loss) before provision for income taxes................... (13.8) 8.3 6.9
Provision for (benefit from) income taxes............................. (2.7) (10.9) 0.3
----- ----- -----
Net income (loss)................................................. (11.1)% 19.2% 6.6%
----- ----- -----
----- ----- -----
</TABLE>
Net sales for the year ended December 31, 1996 were $82.5 million, compared
to net sales of $100.4 million in 1995. The 18 percent decrease in net sales 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 12 months (particularly in Korea), offset by greater ion
implantation (MeV) system and non-system sales. Foreign sales accounted for 86
percent of the Company's net sales in 1996, compared to 88 percent in 1995. In
1996, non-system sales increased thirteen percent when compared to non-system
sales during same period in 1995.
Gross margin for the year ended December 31, 1996 was 33 percent, compared
to 39 percent in 1995. The decline in gross margin was primarily due to the
shift in product sales mix from CVD system sales, which have higher gross
margins, to MeV system sales, which have lower gross margins, lower absorption
of manufacturing costs as a result of lower sales volumes and higher service
costs associated primarily with the opening of Genus Korea, Ltd. The Company's
gross margins have historically been affected by variations in average selling
prices (ASP), changes in the mix of product sales, unit shipment 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 year ended December 31, 1996 were 18 percent, compared to 12 percent in
1995. On a dollar basis, R&D expenses during 1996 increased $2.4 million when
compared to the same period in 1995. This increase was primarily due to
investments in personnel, product development material costs and engineering
tools for new product development. The increase in R&D expenses as a percentage
of net sales was due to lower net sales in addition to the increased R&D
spending. The Company's R&D expenses in 1996 and 1995 are net of software
capitalization costs of $0.4 million and $0.9 million, respectively. The Company
serves markets that are highly competitive and rapidly changing, and believes
that it must continue to maintain its investment in R&D to develop competitive
products. Accordingly, the Company anticipates that R&D expenses may increase in
the future.
Selling, general and administrative (S,G&A) expenses were 22 percent of net
sales for the year ended December 31, 1996, compared to 19 percent of net sales
for 1995. The increase was primarily due to lower net sales. On an absolute
dollar basis, S,G&A expenses for the year ended December 31, 1996 decreased
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$1.1 million when compared to the same period in 1995. The decrease was due to
lower payroll-related costs associated with the reduction in force (RIF) during
the third and fourth quarters of 1996 and lower commission and incentive
expenses.
During the year ended December 31, 1996, the Company incurred special
charges of $5.9 million, relating primarily to capacity cost reductions in
association with the Company's reduction in personnel in the third and fourth
quarters of 1996, increased inventory reserves and the write-off of property and
equipment.
In 1996, the Company had $53,000 in other income, compared to $300,000 in
other income for the comparable 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 year
ended December 31, 1996 was 19% compared to an effective tax rate of 132% for
the same period in 1995. The significant change in the effective tax rate was
due primarily to the recognition of lower amounts of deferred tax assets in
accordance with Financial Accounting Standard No. 109, "Accounting for Income
Taxes," and net losses incurred by the Company in 1996. The Company anticipates
that, in the future, the effective tax rate will be approximately 38%.
Because of the current market conditions, the fluctuation in the Company's
order rates in the last 12 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 slowdown
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 12
months. 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
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. There can be no assurance that the Company's strategic efforts will be
successful.
1995 COMPARED TO 1994
Genus' net sales in 1995 increased 58 percent over net sales in 1994 to
$100.4 million. The increase in net sales was primarily due to the introduction
of the Genus 7000 tungsten CVD system with a higher ASP and, secondarily, to
greater unit sales of the Company's MeV systems. In addition, the increase was
driven by continued strong demand for capital equipment by semiconductor
manufacturers, particularly in Korea. Foreign sales accounted for 88 percent of
the Company's net sales in 1995, compared to 89 percent in 1994. Net sales from
the Company's customer support group increased five percent when compared to the
same period in 1994.
Gross margin for the years ended 1995 and 1994 was 39 percent of net sales.
While there was no change in the Company's consolidated gross profit percentage
between 1995 and 1994, gross margins on products sold by the Company's Thin Film
Division (TFD) and Ion Technology Division (ITD) in 1995 were significantly
different. During 1995, gross margins at TFD improved three percentage points
and eroded five percentage points at ITD. The improvement in gross margin at TFD
was the result of higher ASP on Genus 7000 system sales, improved production
cycle times and manufacturing efficiencies due to increased volumes. The erosion
in gross margins at ITD was due principally to increased service and warranty
costs, higher product transition costs associated with the introduction of the
division's new Tandetron 1520 MeV ion implantation system, manufacturing
inefficiencies related to volume and product transition, and lower ASP due to
competitive pressures.
In 1995, R&D expenses were $12.3 million compared to $9.0 million in 1994, a
36 percent increase. The $3.3 million increase in R&D was due to continued
investments made by the Company in additional personnel, higher new product
development material costs and greater depreciation expenses associated
11
<PAGE>
with equipment purchased for new product development. As a percentage of net
sales, R&D expenses in 1995 and 1994 were 12 percent and 14 percent,
respectively. The decrease in R&D expenses as a percentage of sales was due
principally to the increased net sales volume. The Company's R&D expenses in
1995 and 1994 are net of the capitalization of software costs of $0.9 million
and $0.8 million, respectively.
Selling, general and administrative expenses (S, G &A) as a percentage of
sales were 19 percent for both years ended December 31, 1995 and 1994. On an
absolute dollar basis, S,G&A expenses for the year ended December 31, 1995
increased $6.8 million when compared to the same period in 1994. The absolute
dollar increase was primarily due to personnel additions and related payroll
costs to support the Company's growth rate, higher sales commissions and
incentives and increased depreciation expense.
During the year ended December 31, 1995, the Company had $0.3 million in
other income, compared to $0.7 million in other income for the same period in
1994. The decrease in other income was due to the write-off of leasehold
improvements in connection with the relocation of the Company's ITD facility
scheduled for mid-1996 and the gain on the sale of property and equipment in
1994, but not in 1995, offset by higher interest income earned on higher cash
balances outstanding during 1995 when compared to the same period in 1994.
The effective tax rate for the year ended December 31, 1995 was (132)
percent compared to an effective tax rate of 5 percent for the same period in
1994. The significant change in the effective tax rate was due primarily to the
one-time recognition of deferred tax assets in accordance with Financial
Accounting Standard No. 109, "Accounting for Income Taxes."
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1996, the Company's cash and cash
equivalents decreased $800,000 due primarily to the purchase of property and
equipment of $6.6 million and payments of long-term debt of $1.0 million, offset
by cash generated from operating activities of $2.4 million, proceeds from the
issuance of common stock of $2.2 million, and net bank borrowings of $2.5
million. The positive change in cash from operating activities resulted
primarily from depreciation and amortization of $6.9 million and a decrease in
accounts receivable of $11.2 million as a result of lower net sales, offset by a
net loss of $9.2 million, less the non-cash portion of the special charge that
totaled $5.9 million, an increase in inventory of $4.5 million due to purchases
made in prior quarters to meet anticipated shipments, a $1.8 million decrease in
accounts payable related primarily to lower inventory purchases and overhead
expenses, a $1.1 million decrease in accrued expenses, primarily as a result of
lower incentive and commissions accruals, and an increase in non-current other
assets of $1.5 million primarily related to foreign value added taxes and
building deposits.
The Company's primary source of funds at December 31, 1996 consisted of
$11.8 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 December 31, 1996,
the Company had borrowings of $2.5 million outstanding under the line of credit.
Capital expenditures during 1996, either by cash or capital lease
obligations, were $8.2 million and related primarily to acquisition of machinery
and equipment for the Company's R&D and applications laboratories and leasehold
improvements and equipment for its new Ion Technology facility in Newburyport,
Massachusetts. During 1996, the Company expended approximately $4.2 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 1997 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 through
the end of fiscal 1997. 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.
12
<PAGE>
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, 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. 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 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. 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 competitors will not succeed in developing new technologies, in offering
products 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 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 on 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
13
<PAGE>
industry's demand for semiconductor manufacturing capital equipment. Prior and
current semiconductor industry downturns have adversely affected the Company's
revenues, operating margins and results of operations. There can be no assurance
that the Company's revenues 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 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 profitable in the future.
RELIANCE ON INTERNATIONAL SALES. International sales accounted for
approximately 86%, 88% and 89% of total net sales in the years ended 1996, 1995
and 1994, respectively. In addition, net sales to Korean customers accounted for
approximately 59%, 63% and 60% 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
primarily 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. Furthermore, while the Company
has experienced no difficulty to date in complying with U.S. export controls,
these rules could change in the future and make it more difficult or impossible
for the Company to export its products to various countries. 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 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. Furthermore, one
customer accounts for all of the sales of the Genus 7000 System, which accounts
for 23% of the Company's revenues. 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 this customer's or another
significant customer's departure from recent buying patterns, 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 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
14
<PAGE>
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 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, anticipated
shipments were delayed or canceled by one or more customers or 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.
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 that 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 Item 5, "Market for the
Registrant's Common Equity and Related Stockholder Matters."
15
<PAGE>
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................................. $ 11,827 $ 12,630
Accounts receivable (net of allowance for doubtful accounts of $250 in 1996 and 1995)..... 15,555 26,796
Inventories............................................................................... 26,464 24,437
Other current assets...................................................................... 638 623
Current deferred taxes.................................................................... 4,427 4,427
--------- ---------
Total current assets.................................................................... 58,911 68,913
Property and equipment, net............................................................... 15,345 14,627
Other assets, net......................................................................... 4,459 3,824
Noncurrent deferred taxes................................................................. 10,417 7,883
--------- ---------
$ 89,132 $ 95,247
--------- ---------
--------- ---------
LIABILITIES
Current Liabilities:
Short-term bank borrowings................................................................ $ 2,500 $ --
Accounts payable.......................................................................... 5,304 7,129
Accrued expenses.......................................................................... 10,808 11,042
Current portion of long-term debt and capital lease obligations........................... 1,009 681
--------- ---------
Total current liabilities............................................................... 19,621 18,852
--------- ---------
Long-term debt and capital lease obligations, less current portion.......................... 1,260 1,034
--------- ---------
Commitments (Note 8)
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, 16,723,927 shares (1996) and 16,163,539 shares (1995)........... 97,915 95,683
Accumulated deficit....................................................................... (29,527) (20,322)
Cumulative translation adjustment......................................................... (137) --
--------- ---------
Total shareholders' equity................................................................ 68,251 75,361
--------- ---------
$ 89,132 $ 95,247
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Net sales.................................................................... $ 82,509 $ 100,350 $ 63,616
Costs and expenses:
Cost of goods sold......................................................... 55,537 61,111 38,649
Research and development................................................... 14,639 12,259 8,999
Selling, general and administrative........................................ 17,901 19,004 12,239
Special charge............................................................. 5,890 -- --
---------- ---------- ---------
Income (loss) from operations............................................ (11,458) 7,976 3,729
Other income, net............................................................ 53 327 661
---------- ---------- ---------
Income (loss) before provision for (benefit from) income taxes............. (11,405) 8,303 4,390
Provision for (benefit from) income taxes.................................... (2,200) (10,979) 213
---------- ---------- ---------
Net income (loss)........................................................ $ (9,205) $ 19,282 $ 4,177
---------- ---------- ---------
---------- ---------- ---------
Net income (loss) per share.................................................. $ (0.56) $ 1.20 $ 0.32
---------- ---------- ---------
---------- ---------- ---------
Shares used in per share calculations........................................ 16,423 16,063 13,106
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON ACCUMULATED TRANSLATION
STOCK DEFICIT ADJUSTMENT TOTAL
--------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
Balances, January 1, 1994........................................ $ 75,532 $ (43,781) $ -- $ 31,751
Issuance of 214,024 shares of common stock under stock option
plan......................................................... 573 -- -- 573
Issuance of 195,274 shares of common stock under employee stock
purchase plan................................................ 485 -- -- 485
Net income..................................................... -- 4,177 -- 4,177
--------- ------------ ----- ---------
Balances, December 31, 1994...................................... 76,590 (39,604) -- 36,986
Issuance of 2,539,018 shares of common stock under private
placement offering........................................... 16,222 -- -- 16,222
Issuance of 542,450 shares of common stock under stock option
plan......................................................... 1,161 -- -- 1,161
Tax benefit on exercise of stock options....................... 750 -- -- 750
Issuance of 269,043 shares of common stock under employee stock
purchase plan................................................ 960 -- -- 960
Net income..................................................... -- 19,282 -- 19,282
--------- ------------ ----- ---------
Balances, December 31, 1995...................................... 95,683 (20,322) -- 75,361
Issuance of 310,471 shares of common stock under stock option
plan......................................................... 1,125 -- -- 1,125
Issuance of 249,917 shares of common stock under employee stock
purchase plan................................................ 1,107 -- -- 1,107
Net loss....................................................... -- (9,205) -- (9,205)
Translation adjustment......................................... -- -- (137) (137)
--------- ------------ ----- ---------
Balances, December 31, 1996...................................... $ 97,915 $ (29,527) $ (137) $ 68,251
--------- ------------ ----- ---------
--------- ------------ ----- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................. $ (9,205) $ 19,282 $ 4,177
Adjustments to reconcile to net cash from operating activities
Special charge.............................................................. 5,890 -- --
Gain (loss) on sale of property and equipment............................... -- 261 (461)
Depreciation and amortization............................................... 6,945 4,244 2,622
Deferred taxes.............................................................. (2,534) (11,560) --
Changes in assets and liabilities:
Accounts receivable....................................................... 11,191 (11,627) (2,442)
Inventories............................................................... (4,509) (9,760) (3,945)
Other current assets...................................................... (865) 32 37
Accounts payable.......................................................... (1,825) 1,271 3,632
Accrued expenses.......................................................... (1,094) 4,417 (558)
Other, net................................................................ (1,545) (701) (68)
--------- ---------- ---------
Net cash provided by (used in) operating activities..................... 2,449 (4,141) 2,994
--------- ---------- ---------
Cash flows from investing activities:
Acquisition of property and equipment......................................... (6,611) (5,594) (4,671)
Proceeds from disposition of property and equipment........................... -- -- 595
Capitalization of software development costs.................................. (360) (937) (831)
--------- ---------- ---------
Net cash used in investing activities................................... (6,971) (6,531) (4,907)
--------- ---------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock........................................ 2,232 18,343 1,058
Proceeds from short-term bank borrowings...................................... 4,000 -- 6,600
Payment of short-term bank borrowings......................................... (1,500) (3,800) (4,900)
Payments of long-term debt.................................................... (990) (1,429) (1,080)
--------- ---------- ---------
Net cash provided by financing activities............................... 3,742 13,114 1,678
--------- ---------- ---------
Effect of exchange rate changes on cash......................................... (23) -- --
Increase (decrease) in cash..................................................... (803) 2,442 (235)
Cash and cash equivalents, beginning of year.................................... 12,630 10,188 10,423
--------- ---------- ---------
Cash and cash equivalents, end of year.......................................... $ 11,827 $ 12,630 $ 10,188
--------- ---------- ---------
--------- ---------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest...................................................................... $ 210 $ 172 $ 180
Income taxes.................................................................. 105 209 154
Non-cash investing activities:
Purchase of property and equipment under long-term debt
obligations................................................................. 1,544 1,416 842
Tax benefit on exercise of stock options...................................... -- 750 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Genus, Inc. develops, manufactures, markets and services advanced thin film
deposition and high energy (MeV) ion implantation equipment used in the
fabrication of advanced semiconductor integrated circuits. The Company's
products are marketed worldwide either directly to end users or through
exclusive sales representative arrangements. In January 1996, the Company opened
a subsidiary in Korea to provide sales and service support to Korean customers.
The Company's customers include semiconductor manufacturers located throughout
the United States, Europe and in the Pacific Rim including Japan, Korea and
Taiwan. Genus conducts its business within one industry segment. The following
is a summary of Genus' significant accounting policies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Genus, Inc.
and its wholly-owned subsidiaries after elimination of intercompany accounts and
transactions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents and classifies such amounts
as cash.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximate estimated fair
value because of the short maturity of those financial instruments. Based on
rates currently available to the Company for debt with similar terms and
remaining maturities, the carrying values of debt approximate estimated fair
values.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and trade
receivables. The Company places its cash with high credit quality financial
institutions located in the United States. The Company does not require
collateral from its customers and maintains an allowance for credit losses,
which historically have not been material.
INVENTORIES
Inventories are stated at the lower of cost or market, using standard costs
that approximate actual costs, under the first-in, first-out method.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives, which range from three
to ten years. Leasehold improvements are amortized using the straight-line
method over their estimated useful lives or the remaining lease term, whichever
is less.
OTHER ASSETS
Other assets include goodwill and software development costs and are stated
at cost. Goodwill represents the cost in excess of an acquired business and is
amortized on a straight-line basis over 15 years.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Software development costs represent costs incurred subsequent to establishing
the technological feasibility of software products and are amortized over the
expected life of the products, estimated to be three years.
REVENUE RECOGNITION
Revenue related to systems is recognized upon shipment or, prior to
shipment, upon completion of customer source inspection and factory acceptance
of the system where risk of loss and title to the system passes to the customer.
A provision for the estimated future cost of system installation, warranty and
commissions is recorded when revenue is recognized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
The Company accounts for income taxes using a method that requires deferred
tax assets to be computed annually on an asset and liability method and adjusted
when new tax laws or rates are enacted. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. Income tax expense (benefit) is the tax payable (refundable) for the
period plus or minus the change in deferred tax assets and liabilities during
the period.
FOREIGN CURRENCY
The Company has foreign sales and service operations. With respect to all
foreign subsidiaries excluding Korea, the functional currency is the U.S. dollar
and transaction and translation gains and losses are included in net income
(loss) and have not been material in any year presented. The functional currency
of the Company's Korean subsidiary is the Korean Won. The translation from the
applicable foreign currency to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using the weighted average exchange rate during
the period. Adjustments resulting from such translation are reflected as a
separate component of stockholders' equity. Gains or losses resulting from
foreign currency transactions are included in the results of operations.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of common and common equivalent (when dilutive)
shares of common stock outstanding during each year.
EMPLOYEE STOCK PLANS
The Company accounts for its stock option plans and its employee stock
purchase plan in accordance with provisions of the Accounting Principles Board's
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." In 1995,
the Financial Accounting Standards Board released the Statement of
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Accounting Standard No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." SFAS 123 provides an alternative to APB 25 and is effective for
fiscal years beginning after December 15, 1995. The Company is continuing to
account for its employee stock plans in accordance with the provisions of APB
25.
RECLASSIFICATION
Certain amounts in prior years' financial statements have been reclassified
to conform to the current year's presentation. These reclassifications did not
change previously reported results.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share,"
which specifies the computation, presentation and disclosure requirements for
earnings per share. SFAS 128 supersedes Accounting Principles Board Opinion No.
15 and is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 128 requires restatement of all prior-period earnings
per share data presented after the effective date. SFAS 128 will not have a
material impact on the Company's financial position, results of operations or
cash flows.
NOTE 2. INVENTORIES
Inventories comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Raw materials and parts................................... $ 14,776 $ 12,922
Work in process........................................... 6,847 9,169
Finished goods............................................ 4,841 2,346
--------- ---------
$ 26,464 $ 24,437
--------- ---------
--------- ---------
</TABLE>
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Equipment............................................... $ 16,145 $ 12,512
Demonstration equipment................................. 14,047 12,877
Furniture and fixtures.................................. 2,631 1,960
Leasehold improvements.................................. 6,900 6,366
--------- ---------
39,723 33,715
Less accumulated depreciation and amortization.......... (24,669) (19,944)
--------- ---------
15,054 13,771
Construction in process................................. 291 856
--------- ---------
$ 15,345 $ 14,627
--------- ---------
--------- ---------
</TABLE>
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3. PROPERTY AND EQUIPMENT (CONTINUED)
Equipment includes $3,479 and $2,258 of assets under capital leases at
December 31, 1996 and 1995, respectively. Accumulated amortization on these
assets is $1,402 and $713 at December 31, 1996 and 1995, respectively.
NOTE 4. OTHER ASSETS
Other assets comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Goodwill.................................................. $ 3,802 $ 3,802
Software development costs................................ 1,347 1,768
--------- ---------
5,149 5,570
Accumulated amortization--goodwill........................ (2,421) (2,167)
Accumulated amortization--software development costs...... (579) (458)
--------- ---------
2,149 2,945
Other..................................................... 2,310 879
--------- ---------
$ 4,459 $ 3,824
--------- ---------
--------- ---------
</TABLE>
Amortization expense for software development costs was $507, $376 and $82
in 1996, 1995 and 1994, respectively.
NOTE 5. LINE OF CREDIT
The Company has a 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 collateralized by substantially
all of the assets of the Company, bear interest at the bank's prime rate (8 1/4%
at December 31, 1996). The agreement requires the Company to comply with certain
financial covenants and restricts the payment of dividends. At December 31,
1996, the Company had borrowings of $2.5 million outstanding under the line of
credit.
NOTE 6. ACCRUED EXPENSES
Accrued expenses comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
System installation and warranty.......................... $ 4,884 $ 4,318
Accrued commissions and incentives........................ 1,344 3,227
Accrued payroll and related items......................... 1,003 1,104
Other..................................................... 3,577 2,393
--------- ---------
$ 10,808 $ 11,042
--------- ---------
--------- ---------
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Term loan payable in monthly installments through January
1996 at 10 percent interest per annum and collateralized
by substantially all assets of the Company.............. $ -- $ 11
Capital lease obligations with interest rates ranging from
4.2-- 15.6 percent...................................... 2,153 1,581
Mortgage loan payable in monthly installments through
October 2000 at 9 1/4 percent interest per annum and
collateralized by a building............................ 116 123
--------- ---------
2,269 1,715
Less amounts due within one year.......................... (1,009) (681)
--------- ---------
$ 1,260 $ 1,034
--------- ---------
--------- ---------
</TABLE>
The future aggregate payments of long-term debt and capital lease
obligations are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 1,072
1998............................................................... 712
1999............................................................... 333
2000............................................................... 313
2001............................................................... 68
---------
2,498
Less amounts representing interest on long-term debt and capital
lease obligations................................................ (229)
---------
Principal payments and present value of minimum capital lease
obligations...................................................... $ 2,269
---------
---------
</TABLE>
Certain of the capital lease agreements require the Company to comply with
specific financial covenants and to pay stipulated amounts upon default or
termination prior to the expiration of the basic lease terms.
NOTE 8. LEASE COMMITMENTS
The Company leases certain of its facilities and various office equipment
under operating leases expiring through 2017. The Company is responsible for
property taxes, insurance and maintenance under the facility leases. Certain of
these leases contain renewal options.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 8. LEASE COMMITMENTS (CONTINUED)
At December 31, 1996, minimum lease payments required under these operating
leases are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 1,747
1998............................................................... 1,734
1999............................................................... 1,585
2000............................................................... 1,663
2001............................................................... 1,681
Thereafter......................................................... 11,799
---------
$ 20,209
---------
---------
</TABLE>
Rent expense for 1996, 1995 and 1994 was $2,218, $1,251 and $1,304,
respectively.
NOTE 9. CAPITAL STOCK
PRIVATE PLACEMENT OFFERING
On February 17, 1995, the Company sold 2,539,018 shares of common stock for
$16.2 million through a private placement offering.
STOCK OPTION PLAN
The Company has a 1991 Incentive Stock Option Plan (the "Plan") under which
the Board of Directors may issue incentive and nonstatutory stock options. The
Plan expires ten years after adoption and the Board of Directors has the
authority to determine to whom options will be granted, the number of shares,
the term and exercise price. The options are exercisable at times and increments
as specified by the Board of Directors, and expire five years from date of
grant. These options generally vest over a three year period. At December 31,
1996, the Company had reserved 2,853,006 shares of common stock for issuance
under the Plan and 20,884 shares remained available for future grants. At
December 31, 1994, 610,715 options were exercisable at a weighted average
exercise price of $2.17. At December 31, 1995, 351,866 options were exercisable
at a weighted average exercise price of $3.28. At December 31, 1996, 492,729
options were exercisable at a weighted average exercise price of $5.56.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9. CAPITAL STOCK (CONTINUED)
Activity under the Plan is set forth in the table below:
<TABLE>
<CAPTION>
WEIGHTED
OUTSTANDING AVERAGE
OPTIONS PRICE EXERCISE
SHARES PER SHARE TOTAL PRICE
------ --------------- ------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1994..................... 1,212 $ 1.25 to $4.38 $ 2,927 $ 2.42
Granted.................................... 383 3.63 to 6.88 1,631 4.26
Exercised.................................. (214) 1.25 to 4.38 (573) 2.68
Terminated................................. (102) 1.25 to 4.38 (303) 2.97
------ --------------- -------
Balance, December 31, 1994................... 1,279 1.25 to 6.88 3,682 2.88
Granted.................................... 1,277 7.75 to 15.63 12,084 9.46
Exercised.................................. (542) 1.25 to 6.88 (1,161) 2.14
Terminated................................. (428) 1.25 to 15.63 (4,658) 10.88
------ --------------- -------
Balance, December 31, 1995................... 1,586 1.75 to 15.63 9,947 6.27
Granted.................................... 1,027 5.94 to 8.38 6,705 6.53
Exercised.................................. (310) 1.75 to 8.63 (1,125) 3.63
Terminated................................. (213) 2.75 to 15.63 (1,776) 8.34
------ --------------- -------
Balance, December 31, 1996................... 2,090 $ 1.75 to $8.63 $13,751 $ 6.58
------ --------------- -------
------ --------------- -------
</TABLE>
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123, "Accounting for
Stock-Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income (loss) and net income (loss) per
share is required by SFAS 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1995 under the fair value method of this
Statement. The fair value of these options was estimated at the date of grant
using a Black-Scholes single option pricing model with the following weighted
average assumptions for 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Risk free interest rates.............................................. 6.070% 6.320%
Expected life......................................................... 3.5 years 3.5 years
Expected volatility................................................... 77.7% 77.7%
Expected dividend yield............................................... --% --%
</TABLE>
The weighted average fair value of options granted in 1996 and 1995 was
$10.34 and $14.04, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9. CAPITAL STOCK (CONTINUED)
because changes in the subjective assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
Under the 1989 Employee Stock Purchase Plan, the Company does not recognize
compensation cost related to employee purchase rights under the Plan. To comply
with the pro forma reporting requirements of SFAS 123, compensation cost is
estimated for the fair value of the employees' purchase rights using the
Black-Scholes model with the following assumptions for those rights granted in
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Risk free interest rates.............................................. 5.340% 6.250%
Expected life......................................................... 0.5 years 0.5 years
Expected volatility................................................... 77.7% 77.7%
Expected dividend yield............................................... --% --%
</TABLE>
The weighted average fair value of those purchase rights granted in 1996 and
1995 was $6.57 and $5.14, respectively.
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS 123, the Company's net income (loss)
and net income (loss) per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Pro forma net income (loss).............................. $ (12,053) $ 17,858
Pro forma net income (loss) per share.................... $ (0.73) $ 1.13
</TABLE>
The above pro forma effects on net income (loss) may not be representative
of the effects on future results as options granted typically vest over several
years and additional option grants are expected to be made in future years.
The options outstanding and currently exercisable by exercise price under
the option plan at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
RANGE OF WEIGHTED AVERAGE WEIGHTED WEIGHTED
EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ----------- ------------- ----------------- --------------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
$1.75-$5.94 677 3.03 $ 4.46 256 $ 3.15
$6.13-$7.75 698 3.97 6.74 84 7.63
$8.00-$8.38 352 3.93 8.23 57 8.16
$8.63-$8.63 363 3.95 8.63 96 8.63
----- ---
2,090 3.66 $ 6.58 493 $ 5.56
----- ---
----- ---
</TABLE>
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9. CAPITAL STOCK (CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
The Company has reserved a total of 1,600,000 shares of common stock for
issuance under a qualified stock purchase plan, which provides substantially all
Company employees with the right to acquire shares of the Company's common stock
through payroll deductions. Under the plan, the Company's employees, subject to
certain restrictions, may purchase shares of common stock at the lesser of 85%
of fair market value at either the beginning of each two-year offering period or
the end of each six-month purchase period within the two-year offering period.
At December 31, 1996, 1,352,584 shares have been issued under the plan.
COMMON STOCK PURCHASE RIGHTS
In July 1990, the Company distributed a dividend to shareholders comprised
of a right to purchase one share of common stock (a "Right") for each
outstanding share of common stock of the Company they hold. These rights do not
become exercisable or transferable apart from the common stock until the
Distribution Date which is either the tenth day after a person or group (a)
acquires beneficial ownership of 20 percent or more of the Company's common
stock or (b) announces a tender or exchange offer, the consummation of which
would result in ownership by a person or group of 30 percent or more the
Company's common stock. After the Distribution Date, each Right will entitle the
holder to purchase from the Company one share of common stock at a price of
$28.00 per share.
If the Company is acquired in a merger or other business combination
transaction, or if 50 percent or more of its consolidated assets or earnings
power is sold, each Right will entitle the holder to purchase at the exercise
price that number of shares of the acquiring company having a then current
market value of two times the exercise price of the Right. In the event that the
Company is the surviving corporation in a merger and the Company's common stock
remains outstanding, or in the event that an acquiring party engages in certain
self-dealing transactions, each Right not owned by the acquiring party will
entitle the holder to purchase at the exercise price that number of shares of
the Company's common stock having a then current market value of two times the
exercise price of the Right.
The Rights are redeemable at the Company's option for $.01 per Right prior
to becoming exercisable, may be amended at the Company's option on or prior to
the Distribution Date and expire on July 3, 2000.
NOTE 10. EMPLOYEE BENEFIT PLAN
During 1988, the Company adopted the Genus, Inc. 401(k) Plan (the "Plan") to
provide retirement and incidental benefits for eligible employees. The Plan
provides for Company contributions as determined by the Board of Directors which
may not exceed 6 percent of the annual aggregate salaries of those employees
eligible for participation. In 1996, 1995 and 1994, the Company made $87,000,
$61,000 and $34,000, respectively, in contributions to the Plan.
NOTE 11. SPECIAL CHARGE
During 1996, the Company incurred special charges of $5.9 million relating
primarily to payroll costs associated with the reduction in workforce and
inventory and demonstration equipment write downs.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 12. OTHER INCOME, NET
Other income, net, comprises the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income....................................................... $ 334 $ 790 $ 221
Interest expense...................................................... (210) (172) (180)
Disposal of leasehold improvements.................................... -- (261) --
Gain on sale of property and equipment................................ -- -- 461
Other, net............................................................ (71) (30) 159
--------- --------- ---------
$ 53 $ 327 $ 661
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 13. INCOME TAXES
Income tax expense (benefit) for the years ended December 31, consist of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Federal:
Current....................................................... -- $ 431 $ 165
Deferred...................................................... (2,343) $ (11,036) --
--------- ---------- ---------
(2,343) (10,605) 165
--------- ---------- ---------
State:
Current....................................................... -- 150 48
Deferred...................................................... (191) (524) --
--------- ---------- ---------
(191) (374) 48
--------- ---------- ---------
Foreign:
Current....................................................... 334 -- --
--------- ---------- ---------
$ (2,200) $ (10,979) $ 213
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The Company's effective tax rate for the years ended December 31, 1996, 1995
and 1994 differs from the U.S. federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ------ -----
<S> <C> <C> <C>
Federal income tax at statutory rate......... 34% 34% 34%
Benefit of net operating loss................ (34) (34) (34)
Recognition of deferred tax assets........... (22) (139) --
Alternative minimum tax...................... -- 5 --
State income taxes........................... -- 2 5
Foreign income taxes......................... 3 -- --
----- ------ -----
(19)% (132)% 5%
----- ------ -----
----- ------ -----
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 13. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset comprise the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................................... $ 9,447 $ 7,027
Tax credit carryforward............................................... 1,288 1,288
Inventory reserves.................................................... 1,835 1,274
Non-deductible accrued expenses....................................... 1,264 2,395
Other reserves........................................................ 1,245 580
--------- ---------
15,079 12,564
Deferred tax liabilities:
Depreciation and amortization......................................... (235) (254)
--------- ---------
Net deferred tax assets................................................. $ 14,844 $ 12,310
--------- ---------
--------- ---------
</TABLE>
Temporary differences represent the cumulative taxable or deductible amounts
recorded in the financial statements in different years than recognized in the
tax returns.
At December 31, 1996, the Company had the following income tax carryforwards
available:
<TABLE>
<CAPTION>
EXPIRATION
TAX REPORTING DATES
------------- ---------------
<S> <C> <C>
U.S. regular tax operating losses............................ $ 27,785 2005-2011
U.S. business tax credits.................................... $ 1,288 2002-2008
State net operating losses................................... $ 4,300 1997-2002
</TABLE>
Management has determined that no deferred tax asset valuation allowance is
required because, although realization is not assured, the Company anticipates
that its estimated future taxable income will allow the net deferred tax asset
to be fully realized in future years. The amount of the net deferred tax asset
that is realizable could be reduced in the near term if actual results differ
significantly from estimates of future taxable income.
NOTE 14. SEGMENT INFORMATION
The Company is engaged in the design, manufacture, marketing and servicing
of advanced thin film deposition systems and MeV ion implantation systems used
primarily in the semiconductor manufacturing industry. The Company's sales are
primarily generated from two products, CVD tungsten silicide and MeV ion
implantation systems. The Company's CVD system is designed for the deposition of
tungsten silicide to create multiple interconnect layers on integrated circuits.
The MeV ion implantation system drives electrically charged ions into the
surface of a silicon wafer to convert the electrical characteristics of the
wafer. Both products are primarily used in the manufacturing of DRAMs. Its
business serves the semiconductor manufacturing industry only. Net sales,
identifiable assets and the results of operations of subsidiaries in foreign
countries are not material.
INTERNATIONAL SALES
International sales (principally from sales to customers in the Far East and
Europe) for 1996, 1995 and 1994 represented 86 percent, 88 percent and 89
percent of net sales, respectively.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14. SEGMENT INFORMATION (CONTINUED)
MAJOR CUSTOMERS
In 1996, two customers accounted for 53 percent and 18 percent of net sales,
and in 1995 one customer accounted for 63 percent of net sales. In 1994, three
customers accounted for 33 percent, 19 percent and 14 percent of net sales.
NOTE 15. INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
Net sales............................................................. $26,360 $25,095 $13,892 $17,162
<S> <C> <C> <C> <C>
Gross profit.......................................................... 9,438 9,176 3,399 4,959
Net income (loss)..................................................... 593 645 (8,105) (2,338)
Net income (loss) per share........................................... 0.04 0.04 (0.48) (0.14)
</TABLE>
<TABLE>
<CAPTION>
1995 QUARTER ENDED
------------------------------------------------
SEPTEMBER
MARCH 31 JUNE 30 30 DECEMBER 31
----------- --------- ----------- -----------
Net sales......................... $ 22,526 $ 25,057 $ 27,241 $ 25,526
<S> <C> <C> <C> <C>
Gross profit...................... 9,220 10,168 10,498 9,353
Net income........................ 1,938 2,340 2,361 12,643
Net income per share.............. 0.13 0.14 0.14 0.77
</TABLE>
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Genus, Inc.
We have audited the accompanying consolidated balance sheets of Genus, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Genus, Inc. and
subsidiaries as of December 31, 1996 and 1995 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Jose, California
January 27, 1997
32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is omitted from this Report in that
the Registrant will file a definitive proxy statement pursuant to Regulation 14A
relating to the Registrant's 1997 Annual Meeting of Shareholders (the "Proxy
Statement") not later than 120 days after the end of the fiscal year covered by
this Report, and certain information included therein is incorporated herein by
reference.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors and nominees for directors of the
Company is incorporated by reference to the Company's Proxy Statement.
The executive officers of the Company, who are elected by and serve at the
discretion of the Board of Directors, and their ages at March 10, 1997, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
William W.R. Elder................... 58 Chairman of the Board
James T. Healy....................... 56 President, Chief Executive Officer
John E. Aldeborgh.................... 40 Executive Vice President, Chief Operating Officer
Thomas E. Seidel, Ph.D............... 61 Executive Vice President, Chief Technical Officer
Mary F. Bobel........................ 47 Executive Vice President, Chief Financial Officer
Frederick E. Heslet, Ed.D............ 57 Vice President, Human Resources, Chief Quality Officer
Mario M. Rosati...................... 50 Secretary
</TABLE>
Except as set forth below, all of the executive officers have been
associated with the Company in their present or other capacities for more than
the past five years. Officers are elected annually by the Board of Directors and
serve at the discretion of the Board. There are no family relationships among
executive officers of the Company.
Mr. Elder, a founder of the Company, is the Chairman of the Board. From
April 1990 to September 1996, he was Chairman of the Board, President and Chief
Executive Officer of the Company. From November 1981 to April 1990, he was
President and a director of the Company.
Mr. Healy joined the Company in September 1996 as President and Chief
Executive Officer of the Company. From December 1990 to September 1996, Mr.
Healy was associated with Credence Systems Corporation, a manufacturer of
semiconductor test equipment, in various senior executive management positions,
most recently as President and a director of the Company.
Mr. Aldeborgh joined the Company in June 1989 and serves as the Executive
Vice President and Chief Operating Officer. From January 1993 to January 1996,
he was Vice President and General Manager, Ion Technology Division of the
Company. From June 1989 to January 1993, he was the Director of Operations of
the Ion Technology Division. From May 1983 to May 1989, Mr. Aldeborgh was with
LTX Corporation, a manufacturer of semiconductor test equipment, in various
management positions, most recently as Director of Manufacturing for the Linear
Manufacturing Division.
Dr. Seidel joined the Company in January 1996 and is the Executive Vice
President and Chief Technical Officer of the Company. From July 1988 to January
1996, Dr. Seidel was associated with
33
<PAGE>
SEMATECH, a semiconductor-industry consortium, in various senior management
positions, most recently as Chief Technologist and Director of Strategic
Technology.
Ms. Bobel joined the Company in March 1997 as Executive Vice President and
Chief Financial Officer. From October 1994 to September 1996, Ms. Bobel served
as Vice President and Chief Financial Officer at Educational Publishing
Corporation, a publisher of supplementary educational materials. From March 1990
to September 1994, she was employed at Adobe Systems, a publicly held software
company, most recently as Vice President and Corporate Controller.
Dr. Heslet joined the Company in November 1996 as Chief Quality Officer and
Vice President, Human Resources. In addition, he also is employed by California
State University, Hayward, where he has been a professor of educational
psychology since 1968. From November 1990 to December 1996, he served as Vice
President of Quality and Development at Credence Systems Corporation, a
manufacturer of semiconductor test equipment.
Mr. Rosati has been a director of the Company since its inception in
November 1981, and has served as Secretary since June 1995. From July 1995 to
April 1996, Mr. Rosati was the Company's Assistant Secretary. He is a member of
Wilson, Sonsini, Goodrich & Rosati, P.C., general counsel to the Company.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets--December 31, 1996 and 1995
Consolidated Statements of Operations--Years Ended December 31, 1996, 1995
and 1994
Consolidated Statements of Shareholders' Equity--Years Ended December 31,
1996, 1995 and 1994
Consolidated Statements of Cash Flows--Years Ended December 31, 1996, 1995
and 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants
34
<PAGE>
2. FINANCIAL STATEMENT SCHEDULE. The following financial statement schedule of
Genus, Inc. for the years ended December 31, 1996, 1995 and 1994 is filed as
part of this Report and should be read in conjunction with the Consolidated
Financial Statements of Genus, Inc.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
Report of Independent Accountants..................................... 36
II-- Valuation and Qualifying Accounts..................................... 37
</TABLE>
Schedules not listed above have been omitted because they are not applicable
or are not required or the information required to be set forth therein is
included in the Consolidated Financial Statements or Notes thereto.
3. EXHIBITS. The Exhibits listed on the accompanying Index to Exhibits
immediately following the financial statement schedule are filed as part of,
or incorporated by reference into, this Report.
4. REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the Company during
the fiscal quarter ended December 31, 1996.
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Genus, Inc.
Our report on the consolidated financial statements of Genus, Inc. is
included on page 32 of this Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
San Jose, California
January 27, 1997
36
<PAGE>
SCHEDULE II
GENUS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
DESCRIPTION PERIOD EXPENSES DEDUCTIONS END OF PERIOD
- ------------------------------------------------------------ ------------- ----------- ----------- -------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------ ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1994
Allowance for doubtful accounts............................. $ 250 $ 0 $ 0 $ 250
Inventory reserves.......................................... 3,250 947 1,533 2,665
Product warranty and installation accruals.................. 2,042 2,094 1,742 2,394
1995
Allowance for doubtful accounts............................. 250 0 0 250
Inventory reserves.......................................... 2,665 995 389 3,271
Product warranty and installation accruals.................. 2,394 3,640 1,716 4,318
1996
Allowance for doubtful accounts............................. 250 -- -- 250
Inventory reserves.......................................... 3,271 4,603 1,338 6,536
Product warranty and installation accruals.................. 4,318 4,022 3,457 4,884
</TABLE>
37
<PAGE>
GENUS, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation of Registrant (2)
3.2 By-laws of Registrant, as amended (4)
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 (6)
10.3 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)
10.6 Lease dated June 15, 1988, for Registrant's facilities at 100 Merrick Road, West Building,
Rockville Center, New York (1)
10.7 Assignment of Lease dated April 1986 for Registrant's facilities at Unit 11A, Melbourn
Science Park, Melbourn, Hertz, England (1)
10.8 Registrant's 1981 Incentive Stock Option Plan, as amended (3)
10.10 Registrant's 1989 Employee Stock Purchase Plan, as amended (7)
10.11 International Distributor Agreement dated November 23, 1987, between General Ionex
Corporation and Innotech Corporation (1)
10.12 Distributor/Representative Agreement dated August 1, 1984, between Registrant and Aju Exim
(formerly Spirox Holding Co./You One Co. Ltd.) (1)
10.15 Exclusive Sales and Service Representative Agreement dated October 1, 1989, between
Registrant and AVBA Engineering Ltd. (5)
10.16 Exclusive Sales and Service Representative Agreement dated as of April 1, 1990, between
Registrant and Indosale PVT Ltd. (5)
10.18 License Agreement dated November 23, 1987, between Registrant and Eaton Corporation (1)
10.21 Exclusive Sales and Service Representative Agreement dated May 1, 1989, between Registrant
and Spirox Taiwan, Ltd. (4)
10.22 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 (8)
10.24 Term Loan Agreement dated April 17, 1992, between the Registrant and Silicon Valley Bank (8)
10.25 Asset Purchase Agreement, dated May 28, 1992, by and between the Registrant and Advantage
Production Technology, Inc. (9)
10.26 License and Distribution Agreement, dated September 8, 1992, between the Registrant and
Sumitomo Mutual Industries, Ltd. (10)
10.28 Mortgage dated February 1, 1993, with Bay Bank Middlesex for Registrant's facilities at One
Merrimack Landing, Unit 26, Newburyport, Massachusetts (11)
10.29 Revolving Loan Agreement between the Registrant and Silicon Valley Bank dated May 15, 1994
(12)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------
<S> <C> <C>
10.30 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/Loss Per Share
21.1 Subsidiaries of Registrant
23.1 Consent of Independent Accountants
24.1 Power of Attorney (included on page 40)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
(1) Incorporated by reference to the exhibit filed with 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 Annual
Report on Form 10-K for the year ended December 31, 1988.
(3) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-8 filed January 17, 1991.
(4) 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.
(5) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989.
(6) Incorporated by reference to the exhibit filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1990.
(7) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990.
(8) Incorporated by reference to the exhibit filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.
(9) Incorporated by reference to the exhibit filed with the Registrant's Report
on Form 8-K dated June 12, 1992.
(10) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 21, 1992.
(11) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
(12) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(13) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Sunnyvale, State of California, on the 28th day of March 1997.
GENUS, INC.
By: /s/ MARY F. BOBEL
-----------------------------------------
Mary F. Bobel
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James T. Healy and Mary F. Bobel, jointly and
severally, as his or her attorneys-in-fact, each with the power of substitution,
for him or her in any and all capacities, to sign any amendments to this Report
on Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ WILLIAM W. R. ELDER
- ------------------------------ Chairman of the Board March 28, 1997
William W. R. Elder
/s/ JAMES T. HEALY President, Chief Executive
- ------------------------------ Officer (Principal March 28, 1997
James T. Healy Executive Officer)
Executive Vice President,
/s/ MARY F. BOBEL Chief Financial Officer
- ------------------------------ (Principal Financial March 28, 1997
Mary F. Bobel Officer and Principal
Accounting Officer)
/s/ STEPHEN F. FISHER
- ------------------------------ Director March 28, 1997
Stephen F. Fisher
/s/ G. FREDERICK FORSYTH
- ------------------------------ Director March 28, 1997
G. Frederick Forsyth
/s/ TODD S. MYHRE
- ------------------------------ Director March 28, 1997
Todd S. Myhre
/s/ MARIO M. ROSATI
- ------------------------------ Director March 28, 1997
Mario M. Rosati
40
<PAGE>
EXHIBIT 11.1
GENUS, INC.
COMPUTATION OF NET INCOME/LOSS PER SHARE(a)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Weighted average common shares outstanding....................................... 16,423 15,334 12,545
Weighted average common equivalent shares outstanding............................ -- 729 561
--------- --------- ---------
Total shares used in computation............................................... 16,423 16,063 13,106
--------- --------- ---------
--------- --------- ---------
Net income (loss)................................................................ $ (9,205) $ 19,282 $ 4,177
Earnings (loss) per share(b)..................................................... $ (0.56) $ 1.20 $ 0.32
</TABLE>
- ------------------------
(a) See Note 1 of Notes to Consolidated Financial Statements.
(b) Primary and fully diluted earnings per share are materially the same for all
years presented.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Genus Europa GmbH, a German company.
Genus Europa SARL, a French company.
Genus Europa S.r.l., an Italian company.
Genus, KK, a Japanese company.
Genus Korea, Ltd., a Korean company.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Genus, Inc. and subsidiaries on Form S-8 (File Nos. 33-28394, 33-38657 and
33-56192) of our reports dated January 27, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Genus,
Inc. and subsidiaries as of December 31, 1996 and 1995, and for each of the
three years in the period ended December 31, 1996, which reports are included in
this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
San Jose, California
March 25, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE YEAR
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,827
<SECURITIES> 0
<RECEIVABLES> 15,805
<ALLOWANCES> 250
<INVENTORY> 25,464
<CURRENT-ASSETS> 58,911
<PP&E> 40,014
<DEPRECIATION> 24,669
<TOTAL-ASSETS> 89,132
<CURRENT-LIABILITIES> 19,621
<BONDS> 0
0
0
<COMMON> 97,915
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 89,132
<SALES> 82,509
<TOTAL-REVENUES> 82,509
<CGS> 55,537
<TOTAL-COSTS> 93,967
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,405)
<INCOME-TAX> (2,200)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,205)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
