-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Db+yJ5KBcNqBPHv2LwSkVXClbJwr9d16MYVO+8wL06OWbk30g8OofODG/JO1R0bH Yn14VYhhIlC5e5DgatpP4Q== 0000837913-96-000012.txt : 19961118 0000837913-96-000012.hdr.sgml : 19961118 ACCESSION NUMBER: 0000837913-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENUS INC CENTRAL INDEX KEY: 0000837913 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942790804 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17139 FILM NUMBER: 96664642 BUSINESS ADDRESS: STREET 1: 1139 KARLSTAD DR CITY: SUNNYVALE STATE: CA ZIP: 94089-2117 BUSINESS PHONE: 4087477120 MAIL ADDRESS: STREET 2: 1139 KARLSTAD DR CITY: SUNNYVALE STATE: CA ZIP: 94089-2117 10-Q 1 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 September 30, 1996 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___ to ___ Commission file number 0-17139 GENUS, INC. (Exact name of registrant as specified in its charter) California 94-279080 ______________________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1139 Karlstad Drive, 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 November 8, 1996: 16,605,755 GENUS, INC. Index
PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Statements of Operations - Three and nine months ended September 30, 1996 and 1995 3 Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 4 Consolidated Statements of Cash Flows - Nine months ended September 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Index to Exhibit 16 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ------ ------ ------ ------ Net sales $13,892 $27,241 $65,347 $74,824 Costs and expenses: Cost of goods sold 10,493 16,743 43,334 44,938 Research and development 3,788 3,204 11,371 9,038 Selling, general & administrative 4,926 5,009 14,007 14,161 Special Charge 3,540 - 3,540 - ______ ______ _____ ______ Income loss from operations (8,855) 2,285 (6,905) 6,687 Other net (25) 254 38 452 ______ ______ ______ ______ Income (loss) before provision for income taxes (8,880) 2,539 (6,867) 7,139 Provision for (benefit from) income taxes (775) 178 - 500 _______ ______ _______ ______ Net income (loss) $(8,105) $2,361 $(6,867) $6,639 ======= ====== ======= ====== Net income (loss) per share $ (.48) $ .14 $ (.41) $ .42 ======= ===== ====== ===== Shares used in per share calculation 16,841 16,728 16,630 15,915 ======= ====== ====== ======
The accompanying notes are an integral part of these financial statements. 3 GENUS, INC. Consolidated Balance Sheets (Unaudited) (Amounts in thousands, except share data)
September 30, December 31, 1996 1995 ------ ------ ASSETS Current assets: Cash and cash equivalents $ 10,961 $ 12,630 Accounts receivable (net of allowance for doubtful accounts of $250 in 1996 and 1995) 16,206 26,796 Inventories, net 28,584 24,437 Other current assets 991 623 Current deferred taxes 4,427 4,427 ______ ______ Total current assets 61,169 68,913 Property and equipment, net 16,322 14,627 Other assets, net 4,254 3,824 Non-current deferred taxes 7,883 7,883 _______ _______ $ 89,628 $ 95,247 ======= ======= LIABILITIES Current liabilities: Accounts payable 5,558 7,129 Accrued expenses 11,540 11,042 Current portion of long-term debt 967 681 _______ _______ Total current liabilities 18,065 18,852 _______ _______ Long-term debt, less current portion 1,423 1,034 _______ _______ SHAREHOLDERS' EQUITY Preferred stock, no par value: Authorized, 2,000,000 shares; Issued and outstanding, none Common stock, no par value: Authorized, 20,000,000 shares; Issued and outstanding 16,593,977 shares at September 30, 1996 and 16,163,539 shares at December 31, 1995 97,329 95,683 Accumulated deficit (27,189) (20,322) _______ _______ Total shareholders' equity 70,140 75,361 _______ _______ $ 89,628 $ 95,247 ======= =======
The accompanying notes are an integral part of these financial statements. 4 GENUS, INC Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands)
Nine Months Ended September 30, 1996 1995 ----- ----- Cash flows from operating activities: Net income (loss) $ (6,867) $ 6,639 Adjustments to reconcile to net cash from operating activities: Special charge 3,281 - Depreciation and amortization 4,879 2,951 Changes in assets and liabilities: Accounts receivable 10,590 (7,713) Inventories (6,129) (8,051) Other current assets (368) 31 Accounts payable (1,571) 3,095 Accrued expenses 247 3,567 Other, net (1,062) (682) ______ ______ Net cash provided by (used in) operating activities 3,000 (163) ______ ______ Cash flows from investing activities: Acquisition of property and equipment (5,228) (4,566) Capitalization of software development costs (352) - ______ ______ Net cash used in investing activities (5,580) (4,566) ______ ______ Cash flows from financing activities: Proceeds from issuance of common stock 1,646 17,782 Proceeds from short-term bank borrowings 1,500 - Payments of short-term bank borrowings (1,500) (3,800) Payments of long-term debt (735) (1,015) ______ ______ Net cash provided by financing activities 911 12,967 ______ ______ Increase (decrease) in cash and cash equivalents (1,669) 8,238 Cash and cash equivalents, beginning of period 12,630 10,188 ______ _______ Cash and cash equivalents, end of period $ 10,961 $ 18,426 ====== =======
The accompanying notes are an integral part of these financial statements. 5 GENUS, INC. Notes to Consolidated Financial Statements September 30, 1996 (Unaudited) (Amounts in thousands) Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with SEC requirements for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1995 Annual Report to Shareholders which is incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 1995. The information furnished reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of financial position, results of operations and cash flows for the interim periods. The results of operations for the periods presented are not necessarily indicative of results to be expected for the full year. Net Income (Loss) Per Share Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common and common equivalent (when dilutive) shares of common stock outstanding during each period. Statement of Cash Flows Information (Unaudited)
Nine Months Ended September 30, 1996 1995 ---- ---- Supplemental Cash Flow Information: Cash paid during the period for: Interest $ 159 $ 172 Income taxes 105 177 Non cash investing activities: Purchase of property and equipment under long-term debt obligations $ 1,410 $ 1,263
Line of Credit The Company has a revolving line of credit agreement with a bank that provides for maximum borrowings of $10.0 million and expires in July 1997. Borrowings under the line of credit, which are secured by substantially all of the assets of the Company, bear interest at the bank's prime rate. The agreement requires the Company to comply with certain financial covenants and restricts the payment of dividends. At September 30, 1996, the Company had $2.8 million in letters of credit and no borrowings outstanding under the line of credit. Based on rates available to the Company for letters of credit with similar terms, the estimated fair value of the letters of credit approximates the face value of the letters of credit. 6 GENUS, INC. Notes to Consolidated Financial Statements (Unaudited) (Amounts in thousands) Inventories Inventories comprise the following:
September 30, December 31, 1996 1995 ------ ------ Raw materials and parts $ 14,980 $ 12,922 Work in process 10,538 10,048 Finished goods 3,066 1,467 _______ _______ $ 28,584 $ 24,437 ======= =======
Property and Equipment Property and equipment are stated at cost and comprise the following:
September 30, December 31, 1996 1995 ------ ------ Demonstration equipment $ 14,587 $ 12,877 Equipment 14,148 12,512 Furniture and fixtures 2,581 1,960 Leasehold improvements 6,610 6,366 Building 310 - _______ _______ 38,236 33,715 Less accumulated depreciation and amortization (23,891) (19,944) _______ _______ 14,345 13,771 Construction in progress 1,977 856 _______ _______ $ 16,322 $ 14,627 ======= =======
Accrued Expenses Accrued expenses comprise the following:
September 30, December 31, 1996 1995 ------ ------ System installation and warranty $ 5,250 $ 4,318 Accrued commissions and incentives 1,874 3,227 Accrued payroll and related items 1,736 1,104 Other 2,680 2,393 _______ _______ $ 11,540 $ 11,042 ======= =======
7 GENUS, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto, and with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 1995. The information in this discussion contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the Safe Harbor provisions created by that statute. Such statements are subject to certain risks and uncertainties, including those discussed below, that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. RESULTS OF OPERATIONS The components of the Company's statements of income, expressed as percentage of total revenue, are as follows:
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ----- ------ ------ ------ Net sales 100.0% 100.0% 100.0% 100.0% Costs and expenses: Cost of goods sold 75.5 61.4 66.3 60.1 Research and development 27.3 11.7 17.4 12.1 Selling, general & administrative 35.4 18.4 21.5 18.9 Special charge 25.5 0.0 5.4 0.0 _____ _____ _____ _____ Income (loss) from operations (63.7) 8.5 (10.6) 8.9 Other income, net (0.2) 0.9 0.1 0.7 _____ _____ _____ _____ Income (loss) before provision for income taxes (63.9) 9.4 (10.5) 9.6 Provision for (benefit) from income taxes 5.6 0.7 0.0 0.7 _____ _____ _____ _____ Net income (loss) (58.3)% 8.7% (10.5)% 8.9% ===== ===== ===== ===== Net sales for the three and nine months ended September 30, 1996 were $13.9 million and $65.3 million, respectively, compared to net sales of $27.2 million and $74.8 million, respectively, for the corresponding periods in 1995. The decrease in net sales for the three months ended September 30, 1996 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 nine months, and the push out of one high energy ion implantation MeV system sale from the third quarter of 1996 to the fourth quarter of 1996. The decrease during the nine months ended September 30, 1996 was primarily due to lower unit sales of Genus systems, offset by greater non-system sales. The semiconductor industry is presently experiencing volatility in terms of product demand and product pricing. As a result, semiconductor manufacturers are exercising caution in making their capital equipment decisions and have in certain cases rescheduled or canceled planned capital purchases. As a result of the uncertainties of this current market environment, the Company anticipates that its quarterly revenues and operating results may fluctuate from quarter to quarter. The Company expects revenue and 8 earnings for the next two to three quarters to be below first half results due in part to the current soft business conditions, particularly in the DRAM- sensitive tungsten CVD segment, retrenchment in the semiconductor industry, and general conditions in the Company's industry sector. Gross margin for the three and nine months ended September 30, 1996 was 24 percent and 34 percent, respectively, compared to 39 percent and 40 percent, respectively, for the same periods in 1995. The decline in gross margin was primarily due to lower system sales, lower absorption of manufacturing costs, and higher service costs associated with the opening of Genus Korea, Ltd. in January 1996. The Company's gross margins have historically been affected by variations in ASP, changes in the mix of product sales, unit shipments levels, the level of foreign sales, and competitive pricing pressures. The Company anticipates that these conditions will continue for the foreseeable future in light of current market conditions. As a percentage of net sales, research and development (R&D) expenses for the three and nine months ended September 30, 1996 were 27 percent and 17 percent, compared to 12 percent during the same periods in 1995. On an absolute dollar basis, R&D expenses during the three and nine months ended September 30, 1996, increased $0.6 million and $2.3 million when compared to the same periods in 1995. The increases in absolute dollars were primarily due to increased headcount, product development material costs, and investments in equipment costs on engineering tools for new product development. The increase as a percentage of net sales during the quarter ended September 30, 1996 was due primarily to lower net sales volumes. The increase as a percentage of net sales during the first nine months of 1996 was due primarily to increased R&D investment and, secondarily, to lower net sales volumes. The Company serves markets that are highly competitive and rapidly changing. For these reasons, the Company believes that it must continue to maintain its investment in R&D to develop competitive products. However, the Company will evaluate its R&D investment in view of evolving competitive and market conditions. Selling, general and administrative (S,G&A) expenses were 35 percent and 21 percent, respectively, of net sales for the three and nine months ended September 30, 1996, compared to 18 percent and 19 percent of net sales for the same periods in 1995. On an absolute dollar basis, S,G&A expenses for the three and nine months ended September 30, 1996 were flat when compared to the same period in 1995. During the third quarter of 1996, the Company incurred one-time charges of $460 thousand related to deferred rent expense and property taxes. Given the current market conditions, the Company anticipates S,G&A to decrease in the next two to three quarters. During the three months ended September 30, 1996, the Company had $25 thousand in other expenses, compared to $0.3 million in other income for the comparable period in 1995. For the nine months ended September 30, 1996, the Company had other income of $38 thousand, compared to $0.5 million of other income for the same period in 1995. The decrease in both periods was principally due to lower interest income as a result of lower cash balances and higher interest expense associated with lease financing. As a result of the losses incurred by the Company during the quarter and nine months ended September 30, 1996, no taxes were incurred. The effective tax rate for the third quarter and first nine months of 1995 was 7 percent. During the quarter ended September 30, 1996, the Company incurred a special charge of $3.5 million, relating primarily to capacity cost reductions in association with the Company s reduction in force in September 1996, increased inventory reserves and write-off of property and equipment. As a result of the current market conditions, the fluctuation in the Company's order rates in the last twelve months, the Company's continued reliance on one customer for a significant portion of its orders and that customer's recent announcements to reduce or delay semiconductor equipment purchases, the slow down in the Korean semiconductor market, the overall decline in the worldwide DRAM market, the continued competitive market environment for the Company's products and the historically cyclical nature of the semiconductor equipment market, the Company remains cautious about the prospects for its business over the next two to three quarters. The Company continues to make strategic 9 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. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1996, the Company's cash and cash equivalents decreased $1.7 million principally due to the purchase of property and equipment of $5.2 million and payments of long-term debt of $0.7 million, offset by cash generated from operating activities of $3.0 million and the proceeds from the issuance of common stock of $1.6 million. The positive change in cash from operating activities primarily resulted from depreciation and amortization of $4.9 million, and a decrease in accounts receivable of $10.6 million as a result of improved collections. The increase in cash from operating activities was offset by a net loss, less the non-cash portion of the special charge which totals $3.3 million, an increase in inventory of $6.1 million due to purchases made late in the third quarter of 1996 to meet early fourth quarter 1996 shipments and lower system orders, a $1.5 million decrease in accounts payable related primarily to lower inventory purchases and overhead expenses and an increase in non-current other assets of $1.1 million. The Company's primary source of funds at September 30, 1996 consisted of $11.0 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 September 30, 1996, the Company had no borrowings outstanding under the line of credit. Capital expenditures during the first nine months of 1996 were $5.2 million and related primarily to acquisition of machinery and equipment for the Company's R&D and Applications Laboratories. In September 1995, the Company entered into an agreement to lease a new facility in Newburyport, Massachusetts for its Ion Technology Division. The Company expended approximately $3.0 million for leasehold improvements and equipment associated with the new facility. The Company financed these expenditures through new or existing lease lines. Furthermore, the Company anticipates that additional capital expenditures, if any, during 1996 will be funded through existing working capital or lease financing. The Company believes that cash generated from operations, if any, and existing credit facilities will be sufficient to satisfy its cash needs in the near term and for the foreseeable future. CERTAIN BUSINESS CONSIDERATIONS The Company's business is subject to the following risks and uncertainties. Historical Performance. Although the Company had net income of $19.3 million and $4.2 million in the years ended December 31, 1995 and 1994, the Company experienced losses of $6.9 million, $17.1 million and $6.9 million for the years ended December 31, 1993 and 1992 and nine months ended September 30, 1996, respectively. In addition, although the Company has experienced improved sales and operating results in recent quarters, there can be no assurance that the Company will be able to sustain similar revenue growth on a quarterly or annual basis, or that the Company will be able to maintain profitability on a quarterly or annual basis. 10 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 than the Company. The Company expects its competitors to continue to improve the design and performance of their current products and processes and to introduce new products and processes with improved price and performance characteristics. If the Company's competitors enter into strategic relationships with leading semiconductor manufacturers covering MeV or CVD products similar to those sold by the Company, this could have a material adverse effect on the Company's ability to sell its products to these manufacturers. No assurance can be given that the Company will continue to compete successfully in the United States or worldwide. The Company faces direct competition in CVD tungsten silicide from Applied Materials, Inc. and Tokyo Electron, Ltd. In the MeV marketplace, the Company's MeV ion implantation systems compete with MeV systems marketed by Eaton Corporation. There can be no assurance that competitors will not succeed in developing new technologies, in offering products that are offered at lower prices than those of the Company or in obtaining market acceptance for products more rapidly than the Company. Dependence on New Products and Processes. The Company believes that its future performance will depend in part upon its ability to continue to enhance its existing products and their process capabilities and to develop and manufacture new products with improved process capabilities. As a result, the Company expects to continue to invest in research and development. The Company also must manage product transitions successfully, as introductions of new products could adversely affect sales of existing products. There can be no assurance that the market will accept the Company's new products or that the Company will be able to develop and introduce new products or enhancements to its existing products and processes in a timely manner which satisfy customer needs or achieve market acceptance. The failure to do so could have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, if the Company is not successful in the development of advanced processes or equipment for manufacturers with whom it has formed strategic alliances, its ability to sell its products to those manufacturers would be adversely affected. Cyclical Nature of the Semiconductor Industry. The Company's business depends upon the capital expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits and products utilizing integrated circuits. The semiconductor industry is cyclical and has historically experienced periodic downturns, which often have had an adverse effect on the semiconductor industry's demand for semiconductor manufacturing capital equipment. Prior semiconductor industry downturns have adversely affected the Company's revenue, operating margins and results of operations. No assurance can be given that the Company's revenue and operating results will not be materially and adversely affected if a downturn in the semiconductor industry occurs in the future. In addition, the need for continued investment in research and development, substantial capital equipment requirements and extensive ongoing worldwide customer service and support capability may limit the Company's ability to reduce expenses or to maintain them at current levels. Accordingly, there is no assurance that the Company will be able to remain profitable in the future. Reliance on International Sales. International sales accounted for approximately 84%, 89%, 88% and 90%, respectively, of total net sales in fiscal 1993, 1994 and 1995 and the first nine months of 1996. In addition, net sales to Korean customers accounted for approximately 32%, 50%, 63% and 62% respectively, of total net sales during the same periods. The Company anticipates that international sales, including sales to Korea, will continue to account for a significant portion of net sales. As a result, a significant 11 portion of the Company's sales will be subject to certain risks, including unexpected changes in regulatory requirements, tariffs and other barriers, political and economic instability, difficulties in accounts receivable collection, difficulties in managing distributors or representatives, difficulties in staffing and managing foreign subsidiary operations and potentially adverse tax consequences. Although the Company's foreign sales are denominated in U.S. dollars and the Company does not engage in hedging transactions, the Company's foreign sales are subject to the risks associated with unexpected changes in exchange rates, which could have the effect of making the Company's products more or less expensive. There can be no assurance that any of these factors will not have a material adverse effect on the Company's business, financial condition and results of operations. Reliance on a Small Number of Customers. Historically, the Company has relied on a limited number of customers for a substantial portion of its net sales. In fiscal 1993, net sales to Innotech, Samsung and SGS Thomson accounted for 26%, 23% and 14%, respectively, of total net sales, In fiscal 1994, net sales to Samsung, Innotech and SGS Thomson accounted for 33%, 19% and 14%, respectively, of total net sales. Net sales to Samsung accounted for 63% of total net sales in 1995. In the first nine months of 1996 Samsung and Innotech accounted for 56% and 18%, respectively, of the Company's net sales. Because the semiconductor manufacturing industry is concentrated in a limited number of generally larger companies, the Company expects that a significant portion of its future product sales will be concentrated within a limited number of customers. None of these customers has entered into a long-term agreement requiring it to purchase the Company's products. Furthermore, sales to certain of these customers may decrease in the future when those customers complete their current semiconductor equipment purchasing requirements for new or expanded fabrication facilities. Although the composition of the Company's largest customer varies from year to year, the loss of a significant customer or any reductions in orders from a significant customer, including reductions due to customer departures from recent buying patterns, market, economic or ompetitive conditions in the semiconductor industry or in the industries that manufacture products utilizing integrated circuits, could have a material adverse effect on the Company's business, financial condition and results of operations. Product Concentration; Rapid Technological Change. Semiconductor manufacturing equipment and processes are subject to rapid technological change. The Company derives its revenue primarily from the sale of its MeV ion implantation and tungsten silicide CVD systems. The Company estimates that the life cycle for these systems is generally from three to five years. The Company believes that its future prospects will depend in part upon its ability to continue to enhance its existing products and their process capabilities and to develop and manufacture new products with improved process capabilities. As a result, the Company expects to continue to make significant investments in research and development. The Company also must manage product transitions successfully, as introductions of new products could adversely affect sales of existing products. There can be no assurance that future technologies, processes or product developments will not render the Company's product offerings obsolete or that the Company will be able to develop and introduce new products or enhancements to its existing and future processes in a timely manner which satisfies customer needs or achieves market acceptance. The failure to do so could adversely affect the Company's business, financial condition and results of operations. Furthermore, if the Company is not successful in the development of advanced processes or equipment for manufacturers with whom it currently does business, its ability to sell its products to those manufacturers would be adversely affected. Fluctuations in Quarterly Operating Results. The Company's revenue and operating results may fluctuate significantly from quarter to quarter. The Company derives its revenue primarily from the sale of a relatively small number of high-priced systems, many of which may be ordered and shipped during the same quarter. The Company's results of operations for a particular quarter could be adversely affected if anticipated orders for even a small number of systems were not received in time to enable shipment during the quarter, if anticipated shipments were delayed or canceled by one or more customers or if 12 shipments were delayed due to manufacturing difficulties. The Company's revenue and operating results may also fluctuate due to the mix of products sold and the channel of distribution. Dependence on Key Suppliers. Certain of the components and sub-assemblies included in the Company's products are obtained from a single supplier or a limited group of suppliers. Disruption or termination of these sources could have a temporary adverse effect on the Company's operations. The Company believes that alternative sources could be obtained and qualified to supply these products, if necessary. Nevertheless, a prolonged inability to obtain certain components could have a material adverse effect on the Company's business, financial condition and results of operations. Dependence on Independent Distributors. The Company currently sells and supports its MeV ion implantation and CVD products through direct sales and customer support organizations in the U.S., Western Europe and Korea and through five exclusive sales representatives and distributors in the U.S., Japan, Korea, Taiwan and Hong Kong. Although the Company believes that alternative sources of distribution are available, the disruption or termination of its existing distributor relationships could have a temporary adverse effect on the Company's business, financial condition and results of operations. Volatility of Stock Price. The Company's Common Stock has experienced substantial price volatility, particularly as a result of quarter-to-quarter variations in the actual or anticipated financial results of, or announcements by, the Company, its competitors or its customers. Also, the stock market has experienced extreme price and volume fluctuations which have affected the market price of many technology companies, in particular, and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions in the United States and the countries in which the Company does business, may adversely affect the market price of the Company's Common Stock. In addition, the occurrence of any of the events described in these "Risk Factors" could have a material adverse effect on such market price. See "Price Range of Common Stock" in the Company's 1995 Form 10-K. 13 GENUS, INC. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Exhibit 11.1 - Computation of Net Income (Loss) Per Share (b) Report on Form 8-K No report on Form 8-K was filed during the period July 1, 1996 to September 30, 1996. 14 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 November 12, 1996 GENUS, INC. James T. Healy _________________________ James T. Healy, President and Chief Executive Officer Ernest P. Quinones _________________________ Ernest P. Quinones Acting Chief Financial Officer 15 GENUS, INC. Index to Exhibit Exhibit Description Page Exhibit 11.1 Computation of Net Income (Loss) per Share 17 16 Exhibit 11.1 GENUS, INC. Computation of Net Income (Loss) Per Share (Unaudited) (Amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ------ ------ ------ ------ Average common shares outstanding 16,572 15,950 16,315 15,095 Computation of incremental outstanding shares Net effect of dilutive stock options based on treasury stock method 269 778 315 820 ______ ______ ______ ______ 16,841 16,728 16,630 15,915 ====== ====== ====== ====== Net income (Loss) $(8,105) $ 2,361 $(6,867) $ 6,639 ====== ====== ====== ====== Net income (Loss) per share (a) $ (.48) $ .14 $ (.41) $ .42 ====== ====== ====== ======
Computation Notes: (a) Presentation of fully diluted earnings per share for the three and nine months ended September 30, 1996 and 1995 is omitted because such amounts are materially the same as those presented above. 17 EX-27 2
5 0000837913 GENUS, INC. 1,000 US 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 10961 0 16456 250 28584 61169 40213 23891 89628 18065 0 0 0 97329 0 70140 65347 65347 43334 72252 0 0 0 (6905) 0 0 0 0 0 (6867) (.41) (.41)
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