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 March 31, 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
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(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
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(Registrant's telephone number, including area code)
Not Applicable
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(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 May 10, 1995: 15,674,329
GENUS, INC.
Index
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Consolidated Statements of Operations -
Three months ended March 31, 1995
and March 31, 1994 3
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1995
and March 31, 1994 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
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
March 31,
1995 1994
Net sales $22,526 $13,773
Costs and expenses:
Cost of goods sold 13,306 8,456
Research and development 2,976 1,999
Selling, general & administrative 4,218 2,750
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Income from operations 2,026 568
Other income, net 58 110
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Income before provision for income
taxes 2,084 678
Provision for income taxes 146 26
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Net income $ 1,938 $ 652
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------- -------
Net income per share $ 0.13 $ 0.05
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------- -------
Shares used in per share calculation 14,579 12,942
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The accompanying notes are an integral part of these financial statements.
3
GENUS, INC.
Consolidated Balance Sheets (Unaudited)
(Amounts in thousands, except share data)
March 31, December 31,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 17,531 $ 10,188
Accounts receivable
(net of allowance for doubtful
accounts of $250 in 1995 and
1994) 21,953 15,169
Inventories, net 17,599 14,677
Other current assets 884 655
-------- --------
Total current assets 57,967 40,689
Property and equipment, net 11,696 11,492
Other assets, net 2,902 2,816
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$ 72,565 $ 54,997
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-------- --------
LIABILITIES
Current liabilities:
Short-term bank borrowings - 3,800
Accounts payable 8,633 5,858
Accrued expenses 6,868 6,625
Current portion of long-term debt 1,091 1,205
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Total current liabilities 16,592 17,488
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Long-term debt, less current portion 662 523
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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, 15,407,095
shares (1995)and 12,813,028 shares
(1994) 92,977 76,590
Accumulated deficit (37,666) (39,604)
-------- --------
Total shareholders' equity 55,311 36,986
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$ 72,565 $ 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)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net income $ 1,938 $ 652
Adjustments to reconcile to net cash
from operating activities:
Depreciation and amortization 934 643
Changes in assets and liabilities:
Accounts receivable (6,784) 3,043
Inventories (2,922) 497
Other current assets (229) (89)
Accounts payable 2,775 1,407
Accrued expenses 243 (2,483)
Other, net (219) (116)
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Net cash provided by (used in) operating
activities (4,264) 3,554
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Cash flows from investing activities:
Acquisition of property and equipment (640) (114)
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Net cash used in investing activities (640) (114)
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Cash flows from financing activities:
Net proceeds from issuance of common stock 16,387 123
Payment of short-term bank borrowings (3,800) (2,100)
Payments of long-term debt (340) (225)
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Net cash provided by (used in) financing
activities 12,247 (2,202)
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Increase in cash and cash equivalents 7,343 1,238
Cash and cash equivalents, beginning of period 10,188 10,423
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Cash and cash equivalents, end of period $17,531 $11,661
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The accompanying notes are an integral part of these financial statements.
5
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)
March 31, 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 the consolidated 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 (Unaudited)
Three Months Ended
March 31,
1995 1994
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 59 $ 46
Income taxes $ 25 $ 48
Non cash investing activities:
Purchase of property and equipment
under long-term debt obligations $365 $114
Line of Credit
In May 1995, the Company renewed its working capital line of credit agreement
with a bank that provides for maximum borrowings of $10 million, limited to
80% of eligible accounts receivable, which expires in May 1996. Borrowings
under the line of credit, which are secured by substantially all of the
assets of the
6
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)(Continued)
(Amounts in thousands)
Company, bear interest at the bank's prime rate plus 0.75%. The line of
credit agreement requires the Company to comply with certain financial
covenants and restricts the payment of dividends. At March 31, 1995, the
Company had no such 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 current facility. At March 31,
1995, $0.7 million was outstanding under the Term Loan Agreement. The Term
Loan Agreement requires the Company to comply with the same financial
covenants and restrictions regarding the payment of dividends under the
working capital line of credit agreement.
Inventories
Inventories comprise the following:
March 31, December 31,
1995 1994
Raw materials and spare parts $ 9,132 $ 8,156
Work in process 8,114 6,118
Finished goods 353 403
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$17,599 $14,677
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Property and Equipment
Property and equipment are stated at cost and comprise the following:
March 31, December 31,
1995 1994
Building and improvements $ 248 $ 248
Demonstration equipment 11,912 11,909
Equipment 8,948 8,460
Furniture and fixtures 1,955 1,952
Leasehold improvements 5,712 5,653
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28,775 28,222
Less accumulated depreciation
and amortization (19,063) (18,262)
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9,712 9,960
Construction in process 1,984 1,532
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$11,696 $11,492
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7
GENUS, INC.
Notes to Consolidated Financial Statements (Unaudited)(continued)
(Amounts in thousands)
Accrued Expenses
Accrued expenses comprise the following:
March 31, December 31,
1995 1994
System installation and warranty $2,892 $2,394
Accrued payroll and related items 1,258 966
Accrued commissions and incentives 1,177 1,527
Customer advances and deferred revenue 416 502
Other 1,125 1,236
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$6,868 $6,625
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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.
8
GENUS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net sales for the quarter ended March 31, 1995 were $22.5 million compared
with net sales of $13.8 million in the same period of 1994, a 63 percent
increase. The increase was primarily due to the introduction of the tungsten
chemical vapor deposition (CVD) 7000 product line with higher average selling
prices (ASP), higher unit sales of ion implantation systems and greater
spares revenue. The Company's net sales results continue to benefit from
strong market conditions in Korea.
Gross margin for the quarter ended March 31, 1995 was 41 percent compared to
39 percent for the same period in 1994. The improvement in gross margin was
primarily due to higher ASP, higher unit sales volumes, greater absorption of
manufacturing costs, and other gross margin improvement programs. The
Company's gross margins have historically been affected by variations in ASP,
changes in the mix of product sales, unit shipments levels, the level of
foreign sales, and competitive pricing pressures.
During the first quarter of 1995, Research and Development (R&D) expenses as
a percentage of net sales, were 13 percent compared to 15 percent in the same
period of 1994. The change was primarily due to higher net sales volumes.
On an absolute dollar basis, R&D expenses during the first quarter of 1995
increased $1.0 million when compared with the same period in 1994. The
increase was primarily due to higher development material cost 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 expenses (S,G&A) were 19 percent of net
sales during the first quarter of 1995 compared to 20 percent in the same
period of 1994. The change was primarily due to higher sales volume. On an
absolute dollar basis, S,G&A increased $1.5 million when compared with the
same period in 1994. The change was primarily due to increased headcount and
related payroll costs, higher sales commissions and increased depreciation
expense.
During the first quarter of 1995, the Company earned the same amount in other
income when compared with the same period in 1994. The effective tax rate
for the first quarter of 1995 was 7 percent compared with the effective tax
rate of 4 percent during the same period in 1994.
In recent quarters, the Company has recorded positive financial performance
and consistently solid order rates. 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. The
Company anticipates that these positive trends will continue in the
near-term. However, due to the continued competitive market
9
environment for the Company's products, the cyclical nature of the
semiconductor equipment market and the Company's reliance on a limited number
of customers for a significant portion of its orders, the Company remains
cautiously optimistic about the future prospects for its business. The
Company continues to make strategic investments for 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 first quarter ended March 31,
1995, the Company's cash and cash equivalents increased $7.3 million
principally due to the net proceeds from the issuance of common stock of
$16.4 million, offset by cash used in operating activities of $4.3 million,
payment of short-term bank borrowings of $3.8 million and the purchase of
property and equipment of $0.6 million. The negative change in cash from
operating activities primarily resulted from an increase of $6.8 million in
accounts receivable due to higher net sales, and the inability to collect
shipments made late in the quarter, and an increase in inventories of $2.9
million as a result of inventory purchases received late in the quarter to
support shipments early in the second quarter of 1995. The reduction in cash
from operating activities was offset by the increase in accounts payable of
$2.8 million as a result of higher inventory purchases and the cash
management practices of the Company; depreciation and amortization of $0.9
million and net income of $1.9 million.
The Company's primary source of funds at March 31, 1995 consisted of $17.5
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
March 31, 1995, the Company had no borrowings outstanding under the line of
credit.
Capital expenditures during the first quarter of 1995 were $1.0 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. These
expenditures, primarily for the R&D and Applications Laboratories are
anticipated to 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 gross proceeds of
approximately $17.5 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 for the foreseeable future.
10
GENUS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Common Stock Purchase Agreement dated as of
February 8, 1995 between Registrant and ING
Sivllupo Gestioni SpA
Exhibit 10.2 Common Stock Purchase Agreement dated as of
February 8, 1995 between Registrant and TR
Technology Investment Trust, PLC
Exhibit 10.3 Common Stock Purchase Agreement dated as of
February 8, 1995 between Registrant and Conseco
Capital Management
Exhibit 10.4 Common Stock Purchase Agreement dated as of
February 8, 1995 between Registrant and Oberweis
Emerging Growth Fund
Exhibit 10.5 Common Stock Purchase Agreement dated as of
February 8, 1995 between Registrant and San
Paolo Fundi SpA
Exhibit 10.6 Common Stock Purchase Agreement dated as of
February 8, 1995 between Registrant and HTR
Global Technology Fund
Exhibit 10.7 Common Stock Purchase Agreement dated as of
February 10, 1995 between Registrant and Bachow
Investment Partners III,L.P., Paul S. Bachow Co-
Investment Fund, L.P. and Paul S. Bachow
Exhibit 11.1 - Computation of Net Income Per Share
(b) Report on Form 8-K
No report on Form 8-K was filed during the quarter ended March 31, 1995.
11
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: May 10, 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
Acting Chief Financial
Officer
12
GENUS, INC.
Index to Exhibits
Exhibit Description Page
Exhibit 10.1 Common Stock Purchase Agreement dated as
of February 8, 1995 between Registrant and
ING Sivllupo Gestioni SpA
Exhibit 10.2 Common Stock Purchase Agreement dated as
of February 8, 1995 between Registrant and
TR Technology Investment Trust, PLC
Exhibit 10.3 Common Stock Purchase Agreement dated as
of February 8, 1995 between Registrant and
Conseco Capital Management
Exhibit 10.4 Common Stock Purchase Agreement dated as
of February 8, 1995 between Registrant and
Oberweis Emerging Growth Fund
Exhibit 10.5 Common Stock Purchase Agreement dated as
of February 8, 1995 between Registrant and
San Paolo Fundi SpA
Exhibit 10.6 Common Stock Purchase Agreement dated as
of February 8, 1995 between Registrant and
HTR Global Technology Fund
Exhibit 10.7 Common Stock Purchase Agreement dated as
of February 10, 1995 between Registrant and
Bachow Investment Partners III,L.P.,
Paul S. Bachow Co-Investment Fund, L.P. and
Paul S. Bachow
Exhibit 11.1 Computation of Net Income per Share
13