SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___ to ___
Commission file number 0-17139
GENUS, INC.
(Exact name of registrant as specified in its charter)
California 94-279080
________________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1139 Karlstad Drive, Sunnyvale, California 94089
________________________________________________________________________________
(Address of principal executive offices) (Zip code)
(408) 747-7120
________________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
_______________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No ________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common shares outstanding at August 9, 1995: 15,924,473
GENUS, INC.
Index
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations -
Three and six months ended
June 30, 1995 and 1994 3
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Index to exhibits 12
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENUS, INC.
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net sales $25,057 $14,966 $47,583 $28,739
Costs and expenses:
Cost of goods sold 14,889 8,949 28,195 17,405
Research and development 2,858 2,425 5,834 4,424
Selling, general & administrative 4,934 2,960 9,152 5,710
_____ _____ _____ _____
Income from operations 2,376 632 4,402 1,200
Other income, net 140 475 198 585
_____ _____ _____ _____
Income before provision
for income taxes 2,516 1,107 4,600 1,785
Provision for income taxes 176 56 322 82
_____ _____ _____ _____
Net income $2,340 $1,051 $4,278 $1,703
===== ===== ===== =====
Net income per share $0.14 $0.08 $0.28 $0.13
===== ===== ===== =====
Shares used in per share calculation 16,458 12,915 15,521 12,918
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
3
GENUS, INC.
Consolidated Balance Sheets (Unaudited)
(Amounts in thousands, except share data)
June 30, December 31,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $25,424 $10,188
Accounts receivable (net of allowance
for doubtful accounts of $250 in
1995 and 1994) 14,416 15,169
Inventories, net 21,184 14,677
Other current assets 606 655
______ ______
Total current assets 61,630 40,689
Property and equipment, net 13,393 11,492
Other assets, net 2,948 2,816
______ ______
$77,971 $54,997
======= =======
LIABILITIES
Current liabilities:
Short-term bank borrowings - 3,800
Accounts payable 8,410 5,858
Accrued expenses 9,301 6,625
Current portion of long-term debt 906 1,205
______ ______
Total current liabilities 18,617 17,488
______ ______
Long-term debt, less current portion 631 523
______ ______
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized, 2,000,000 shares;
Issued and outstanding, none
Common stock, no par value:
Authorized, 20,000,000 shares;
Issued and outstanding, 15,884,154 shares
at June 30, 1995 and 12,813,028 shares
at December 31, 1994 94,049 76,590
Accumulated deficit (35,326) (39,604)
________ _______
Total shareholders' equity 58,723 36,986
________ _______
$77,971 $54,997
======== =======
The accompanying notes are an integral part of these financial statements.
4
GENUS, INC.
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Six months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net income $4,278 $1,703
Adjustments to reconcile to net cash
from operating activities:
Depreciation and amortization 1,879 1,235
Gain on sale of property and equipment - (461)
Changes in assets and liabilities:
Accounts receivable 753 (1,823)
Inventories (6,507) (3,334)
Other current assets 49 74
Accounts payable 2,552 3,966
Accrued expenses 2,676 (1,526)
Other, net (419) (174)
______ ______
Net cash provided by (used in)
operating activities 5,261 (340)
______ ______
Cash flows from investing activities:
Acquisition of property and equipment (3,011) (773)
Proceeds from disposition of property
and equipment - 544
______ ______
cash used in investing activities (3,011) (229)
______ ______
Cash flows from financing activities:
Net proceeds from issuance of common stock 17,459 403
Payment of short-term bank borrowings (3,800) (461)
Payments of long-term debt (673) 700
_______ _____
Net cash provided by financing activities 12,986 642
_______ _____
Increase in cash and cash equivalents 15,236 73
Cash and cash equivalents, beginning of period 10,188 10,423
______ ______
Cash and cash equivalents, end of period $25,424 $10,496
====== ======
The accompanying notes are an integral part of these financial statements.
5
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1995
(Amounts in thousands)
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with SEC requirements for interim financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1994 Annual
Report to Shareholders which is incorporated by reference into the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
The information furnished reflects all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management,
necessary for the fair statement of financial position, results of operations
and cash flows for the interim periods. The results of operations for the
periods presented are not necessarily indicative of results to be expected
for the full year.
Net Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of common and common equivalent shares of common stock
outstanding during each period.
Statement of Cash Flows Information
Six Months Ended
June 30, December 31,
1995 1994
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $163 $92
Income taxes $136 $86
Non cash investing activities:
Purchase of property and equipment under
long-term debt obligations $480 $114
Line of Credit
In May 1994, the Company renewed its revolving line of credit agreement with
a bank that provides for maximum borrowings of $10 million and expires in May
1996. The borrowing base under the line of credit is limited to 80% of
eligible accounts receivable. Borrowings under the line of credit, which are
secured by substantially all of the assets of the Company, bear interest at
the bank's prime rate plus 0.75%. The agreement requires the Company to
comply with certain financial covenants and restricts the the payment of
dividends. At June 30, 1995, the Company had no borrowings outstanding under
the line of credit.
The Company has a Term Loan Agreement with the same bank which provides
$3 million to fund leasehold improvements to its facility. At June 30, 1995,
$461,000 under the Term Loan Agreement was outstanding. This agreement
requires the Company to comply with the same covenants and restrictions as
those under the line of credit.
6
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited) (continued)
(Amounts in thousands)
Inventories
Inventories comprise the following:
June 30, December 31,
1995 1994
Raw materials and parts $9,781 $8,156
Work in process 7,539 6,118
Finished goods 3,864 403
_____ _____
$21,184 $14,677
====== ======
Property and Equipment
Property and equipment are stated at cost and comprise the following:
June 30, December 31,
1995 1994
Building and improvements $273 $248
Demonstration equipment 12,678 11,909
Equipment 10,013 8,460
Furniture and fixtures 1,956 1,952
Leasehold improvements 5,939 5,653
______ ______
30,859 28,222
Less accumulated depreciation and amortization (19,854) (18,262)
______ ______
11,005 9,960
Construction in progress 2,388 1,532
______ _____
$13,393 $11,492
====== ======
Accrued Expenses
Accrued expenses comprise the following:
June 30, December 31,
1995 1994
System installation and warranty $3,094 $2,394
Accrued commissions and incentives 1,826 1,527
Customer advances and deferred revenue 1,809 502
Accrued payroll and related items 1,193 966
Other 1,379 1,236
_____ _____
$9,301 $6,625
===== =====
Sale of Common Stock
On February 17, 1995, the Company sold 2,539,018 shares of common stock
through a private placement offering, which generated gross proceeds of
approximately $17.5 million.
7
GENUS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net sales for the three and six months ended June 30, 1995 were $25.1 million
and $47.6 million, respectively, compared to net sales of $15.0 million and
$28.7 million, respectively, for the corresponding periods in 1994. On a
percentage basis, net sales for the three and six months ended June 30, 1995
increased 67 percent and 66 percent respectively, when compared to the same
periods in 1994. The increase during the three and six months ended
June 30, 1995 was due primarily to the introduction of the tunsten chemical
vapor deposition (CVD) 7000 product line with higher average selling prices
(ASP) and higher unit sales of ion implantation systems. The improvements
in net sales during these periods were achieved as a result of continued
strong market conditions in Korea.
Gross margin for the quarter and six months ended June 30, 1995 was 41
percent compared to 40 percent and 39 percent, respectively, for the same
periods in 1994. The improvements were due primarily to higher ASP on CVD
system sales, improved production cycle times, greater absorption of
manufacturing costs and other gross margin improvement programs. The Company's
cost of goods sold and gross margins have historically been affected by
variations in ASP, changes in the mix of product sales, unit shipments levels,
the level of foreign sales and competitive pricing pressures.
As a percentage of sales, research and development (R&D) expenses for the
three and six months ended June 30, 1995 were 11 percent and 12 percent of net
sales, respectively, compared to 16 percent and 15 percent, respectively during
the same periods in 1994. The percentage decrease for the quarter end and six
month periods was due primarily to higher net sales volumes. On an absolute
dollar basis, R&D expenses for the quarter and six months ended June 30, 1995
increased by $0.4 million and $1.4 million, respectively, when compaired to the
same periods in 1994. The increases were primarily related to additional
headcount and related payroll costs, higher material costs and depreciation
expense for new product development. The Company continually evaluates its R&D
investment in view of evolving competitive and market conditions.
Selling, general and administrative (S,G&A) expenses were 20 percent and 19
percent for the three and six months ended June 30, 1995, compared to 20 percent
for the same periods in 1994. On an absolute dollar basis, S,G&A expenses for
the three and six months ended June 30, 1995 increased $2.0 million and $3.4
million, respectively, when compared to the same periods in 1994. The dollar
increases were primarily due to headcount additions and related payroll costs,
higher sales commissions, and increased depreciation.
During the three months ended June 30, 1995, the Company had $0.1 million in
other income, compared to $0.5 million in other income for the comparable period
in 1994. For the six months ended June 30, 1995, the Company had other income
of $0.2 million, compared to $0.6 million of other income for the same period in
1994. The change during these periods was primarily a result of the gain on the
sale of property and equipment of approximately $0.5 million in the second
quarter of 1994. The effective tax for the three and six months of 1995 was
7 percent compared to an effective tax rate of 5 percent in 1994.
The Company has continued to experience positive financial performance and solid
order rates in recent quarters. These results have been primarily due to strong
market conditions for the Company's products in Korea as a result of increased
investments in DRAM manufacturing facilities in this region. However, due to
the Company's reliance on a limited number of customers for a significant
portion of its orders, the continued competitive market environment for the
8
Company's products and the historically cyclical nature of the semiconductor
equipment market, the Company remains cautiously optimistic about the future
prospects for its business. The Company continues to make strategic investments
in new product development and manufacturing improvements with a view to improve
future performance by enhancing product offerings; however, such investment may
adversely affect short-term operating performance. The Company is also
continuing its efforts to implement productivity improvements for future
operating performance. The Company believes that the future economic
environment could continue to lengthen the order and sales cycles for its
products, causing it to continue to simultaneously book and ship some orders
during the same quarter.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1995, the Company's cash and cash
equivalents increased $15.2 million principally due to the issuance of common
stock of $17.5 million and cash generated from operating activities of $5.3
million; offset by the repayment of short-term bank borrowings of $3.8 million
and the purchase of property and equipment of $3.0 million. The positive change
in cash from operating activities primarily resulted from a decrease of $0.8
million in accounts receivable due to improved account collection activity; an
increase in accounts payable of $2.6 million as a result of inventory pruchases
made late in the quarter for early third quarter shipments and the cash
management practices of the Company; an increase of $2.7 million in accrued
expenses due to cash received in advance for a system order and increased
warranty and commission accruals as a result of increased sales volumes;
depreciation and amortization of $1.9 million and net income of $4.3 million;
offset by an increase in inventories of $6.5 million as a result of inventory
purchases received late in the quarter to support shipments early in the third
quarter of 1995.
The Company's primary source of funds at June 30, 1995 consisted of $25.4
million in cash and cash equivalents, and funds available under a $10.0 million
revolving line of credit. The line of credit is secured by substantially all of
the assets of the Company and expires in May 1996. At June 30, 1995, the
Company had no borrowings outstanding under the line of credit.
Capital expenditures during the first half of 1995 were $3.0 million and related
primarily to acquisition of machinery and equipment for the Company's R&D and
Applications Laboratories. The Company anticipates that it will continue to
make capital expenditures during the remainder of 1995 and will be funded
through existing working capital or lease financing.
On February 17, 1995, the Company sold 2,539,018 shares of Common Stock through
a private placement offering, which generated net proceeds of approximately
$16.4 million.
The Company believes that cash generated from operations, if any, proceeds from
the private placement offering and existing credit facilities will be sufficient
to satisfy its cash needs in the near term and for the foreseeable future.
9
GENUS, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on May 23, 1995
in Santa Clara, California. Proxies for the meeting were solicited
pursuant to Regulation 14A. At the Company's Annual Meeting, the
shareholders approved the following resolutions:
(1) Amendment to the 1991 Incentive Stock Option Plan to
increase the number of shares reserved for issuance
thereunder by 500,000 shares.
For: 9,490,076 shares
Against: 2,110,300 shares
Abstaining: 147,957 shares
(2) Amendment to the 1989 Employee Stock Purchase Plan to
increase the number of shares reserved for issuance
thereunder by 250,000 shares.
For: 11,253,719 shares
Against: 337,177 shares
Abstaining: 157,437 shares
In addition, all management nominees for director were elected and the
re-appointment of Coopers & Lybrand as independent accountants was
approved.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11.1 - Computation of Net Income per Share.
(b) No Reports on Form 8-K were filed during the period from
April 1, 1995 to June 30, 1995.
10
GENUS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1995 GENUS, INC.
William W.R. Elder
_________________________
William W.R. Elder, Chairman
and Chief Executive Officer
Todd S. Myhre
_________________________
Todd S. Myhre
President and
Chief Operating Officer
11
GENUS, INC.
Index to Exhibits
Exhibits Description Page
Exhibit 11.1 Computation of Net Income per Share 13
12
GENUS, INC. Exhibit 11.1
Computation of Net Income Per Share (Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Average common shares outstanding 15,633 12,473 14,680 12,455
Computation of incremental outstanding shares
Net effect of dilutive stock options
based on treasury stock method 825 442 841 463
______ ______ ______ ______
16,458 12,915 15,521 12,918
====== ====== ====== ======
Net income $2,340 $1,051 $4,278 $1,703
====== ====== ====== ======
Net income per share (a) $ 0.14 $ 0.08 $ 0.28 $ 0.13
====== ====== ====== ======
Computation Notes:
(a) Presentation of fully diluted earnings per share for the three and six
months ended June 30, 1995 and 1994 is omitted because such amounts are
materially the same as those presented above.
13