-----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, It5mtEsFZUqJdFK53awzxY/zRs4DQ8BOcW291lx7BJ35w43MlEGsEh5jdjey970y InNBS9FL9M7x99ywSv8paw== 0000837913-97-000009.txt : 19970821 0000837913-97-000009.hdr.sgml : 19970821 ACCESSION NUMBER: 0000837913-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENUS INC CENTRAL INDEX KEY: 0000837913 STANDARD INDUSTRIAL CLASSIFICATION: 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: 97662587 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 June 30, 1997 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___ to ___ Commission file number 0-17139 GENUS, INC. _______________________________________________________________________________ (Exact name of registrant as specified in its charter) California 94-279080 _______________________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1139 Karlstad Drive, Sunnyvale, California 94089 _______________________________________________________________________________ (Address of principal executive offices) (Zip code) (408) 747-7120 _______________________________________________________________________________ (Registrant's telephone number, including area code) Not Applicable _______________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No _______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common shares outstanding at August 11, 1997: 16,965,212 GENUS, INC. Index
PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Statements of Operations - Three and six months ended June 30, 1997 and 1996 3 Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 4 Consolidated Statements of Cash Flows - Six months ended June 30, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Index to exhibits 16
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 1997 1996 1997 1996 Net sales $ 19,351 $ 25,095 $ 39,032 $ 51,455 Costs and expenses: Cost of goods sold 11,540 15,919 23,853 32,841 Research and development 3,058 3,613 6,249 7,583 Selling, general & administrative 4,189 4,561 8,056 9,081 ------ ------ ------ ------ Income from operations 564 1,002 874 1,950 Other income (expense), net (82) 46 (97) 63 ------ ------ ------ ------ Income before provision for income taxes 482 1,048 777 2,013 Provision for income taxes 186 403 300 775 ------ ------ ------ ----- Net income $ 296 $ 645 $ 477 $ 1,238 ======= ======= ====== ====== Net income per share $ 0.02 $ 0.04 $ 0.03 $ 0.07 ======= ======= ====== ====== Shares used in per share calculation 16,854 16,639 16,855 16,587 ======= ======= ======= ======
The accompanying notes are an integral part of these financial statements. 3 GENUS, INC. Consolidated Balance Sheets (Amounts in thousands, except share data)
Unaudited Audited June 30, December 31, 1997 1996 ASSETS Current assets: Cash and cash equivalents $ 11,480 $ 11,827 Accounts receivable (net of allowance for doubtful accounts of $250 in 1997 and 1996) 25,528 15,555 Inventories, net 24,835 26,464 Other current assets 860 638 Current deferred taxes 4,427 4,427 ------- ------- Total current assets 67,130 58,911 Property and equipment, net 14,386 15,345 Other assets, net 3,955 4,459 Noncurrent deferred taxes 10,417 10,417 _______ _______ $ 95,888 $ 89,132 ======= ======= LIABILITIES Current liabilities: Short term bank borrowings $ 7,346 $ 2,500 Accounts payable 6,934 5,304 Accrued expenses 10,044 10,808 Current portion of long-term debt and capital lease obligations 851 1,009 ------ ------ Total current liabilities 25,175 19,621 ------ ------ Long-term debt and capital lease obligations, less current portion 1,357 1,260 ------ ------ SHAREHOLDERS' EQUITY Preferred stock, no par value: Authorized, 2,000,000 shares; Issued and outstanding, none --- --- Common stock, no par value: Authorized, 50,000,000 shares; Issued and outstanding, 16,873,311 shares at June 30, 1997 and 16,723,927 shares at December 31 1996 98,630 97,915 Accumulated deficit (29,050) (29,527) Cumulative translation adjustment (224) (137) ------- ------- Total shareholders' equity 69,356 68,251 ________ ________ $ 95,888 $ 89,132 ======== ========
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 1997 1996 Cash flows from operating activities: Net income $ 477 $ 1,238 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 2,420 3,175 Deferred taxes --- 705 Changes in assets and liabilities: Accounts receivable (9,973) 11 Inventories 1,629 (2,758) Other current assets (222) (83) Accounts payable 1,630 830 Accrued expenses (764) (466) Other, net 113 (489) ------ ------ Net cash provided by (used in) operating activities (4,690) 2,163 ------ ------ Cash flows from investing activities: Acquisition of property and equipment (390) (4,395) Capitalization of software development costs --- (352) ------ ----- Net cash used in investing activities (390) (4,747) ------ ------ Cash flows from financing activities: Proceeds from issuance of common stock 715 1,513 Payment of short-term bank borrowings (5,500) --- Proceeds from short-term bank borrowings 10,346 --- Payments of long-term debt and capital lease obligations (814) (430) ------ ------ Net cash provided by financing activities 4,747 1,083 ------ ------ Effect of exchange rate changes on cash (14) --- Increase (decrease) in cash and cash equivalents (347) (1,501) Cash and cash equivalents, beginning of period 11,827 12,630 ------- ------- Cash and cash equivalents, end of period $ 11,480 $ 11,129 ======= =======
The accompanying notes are an integral part of these financial statements. 5 GENUS, INC. Notes to Consolidated Financial Statements (Unaudited) June 30, 1997 (Amounts in thousands) Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with SEC requirements for interim financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1996 Annual Report to Shareholders which is incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The information furnished reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for the fair statement of financial position, results of operations and cash flows for the interim periods. The results of operations for the periods presented are not necessarily indicative of results to be expected for the full year. Net Income Per Share Net income per share is computed by dividing net income by the weighted average number of common and common equivalent shares of common stock outstanding during each period.
Statement of Cash Flows Information Six Months Ended June 30 1997 1996 Supplemental Cash Flow Information: Cash paid during the period for: Interest $ 188 $ 111 Income taxes $ 2 $ 105 Non cash investing activities: Purchase of property and equipment under long-term debt and capital lease obligations $ 753 $ 649
Line of Credit In July 1996, the Company renewed its revolving line of credit agreement with a bank that provides for maximum borrowings of $10 million and expires in July 1997. Borrowings under the line of credit, which are secured by substantially all of the assets of the Company, bear interest at the bank's prime rate. The agreement requires the Company to comply with certain financial covenants and restricts the payment of dividends. At June 30, 1997, the Company had $7.3 million outstanding under the line of credit. 6 GENUS, INC. Notes to Consolidated Financial Statements (Unaudited) (continued) (Amounts in thousands)
Inventories Inventories comprise the following: June 30, December 31, 1997 1996 Raw materials and parts $ 15,640 $ 14,776 Work in process 4,146 6,847 Finished goods 5,049 4,841 ------- ------- $ 24,835 $ 26,464 ======= =======
Property and Equipment Property and equipment are stated at cost and comprise the following:
June 30, December 31, 1997 1996 Demonstration equipment $ 14,352 $ 14,047 Equipment 17,068 16,145 Furniture and fixtures 2,647 2,631 Leasehold improvements 6,901 6,900 ------- ------- 40,968 39,723 Less accumulated depreciation and amortization (26,771) (24,669) ------- ------- 14,197 15,054 Construction in progress 189 291 ------- ------- $14,386 $15,345 ======= =======
Accrued Expenses Accrued expenses comprise the following:
June 30, December 31, 1997 1996 System installation and warranty $ 4,456 $ 4,884 Accrued commissions and incentive 1,447 1,344 Accrued payroll and related items 1,132 1,003 Other 3,009 3,577 ------- ------- $ 10,044 $ 10,808 ======= =======
7 GENUS, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange act of 1934. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth under "Risk Factors" in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in or incorporated with the Company's Fianacial Statements and Notes thereto included elsewhere in this report. RESULTS OF OPERATIONS The components of the Company's statements of income, expressed as percentage of total revenue, are as follows:
Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 Net sales 100.0% 100.0% 100.0% 100.0% Costs and expenses: Cost of goods sold 59.6 63.4 61.1 63.8 Research and development 15.8 14.4 16.0 14.8 Selling, general & administrative 21.7 18.2 20.7 17.6 ---- ---- ---- ---- Income from operations 2.9 4.0 2.2 3.8 Other income (expense), net (0.4) 0.2 (0.2) 0.1 ---- ---- ---- ---- Income before provision for income taxes 2.5 4.2 2.0 3.9 Provision for income taxes 1.0 1.6 0.8 1.5 ---- ---- ---- ---- Net income 1.5% 2.6% 1.2% 2.4% ==== ==== ==== ====
Net sales for the three and six months ended June 30, 1997 were $19.4 million and $39.0 million, respectively, compared with net sales of $25.1 million and $51.5 million, respectively, for the corresponding periods in 1996. The decline was attributable to lower unit sales of systems as well as lower revenue from spares and service. During the second half of 1996, the semiconductor manufacturing equipment industry experienced a significant slowdown in sales as a result of excess capacity within the semiconductor industry and the Company's equipment sales levels have not recovered to previous levels. Net sales include $3 million and $12.3 million related to ship-in-place transactions for the three and six month periods ended June 30, 1997, respectively, as compared with no ship-in-place transactions during the first six months of 1996. The increase is primarily due to the Company's largest customer placing significant ship-in-place orders during the first six months of 1997, pending completion of construction of its wafer fabrication facility which was completed in July, 1997. When customers request that the Company manufacture and invoice systems on a ship-in-place basis, revenue is recognized for systems prior to shipment upon completion of customer source inspection and factory acceptance of the system and where risk of loss and title to the system has passed to the customer. During the last two quarters of 1996, the Company incurred special charges of $5.9 million, relating to capacity cost reductions including a reduction in 8 force, increased inventory reserves and the write-off of property and equipment. Accordingly, this restructuring has resulted in lower spending within all of the expense categories as discussed below. Gross margin for the quarter and six months ended June 30, 1997 was 40% and 39%, respectively, compared to 37% and 36% for the same periods in 1996. Despite a lower level of sales resulting in less absorption of fixed manufacturing costs, and competitive pricing pressures, the Company was able to improve its gross margins due to operating efficiencies and product mix. In the first quarter of 1996, the Company experienced higher service costs associated with the opening of Genus, Korea, Ltd. The Company gross margins have historically been affected by variations in average selling price (ASP), changes in the mix of product sales, unit shipment levels, the percentage of foreign sales, and competitive pricing pressures. For the second quarter of 1997. research and development (R&D) expenses were $3.1 million, or 16% of sales compared to $3.6 million, or 14% of sales for the second quarter of 1996. R&D spending for the first half of 1997 of $6.2 million declined from the $7.6 million for the comparable period in 1996. The decrease in absolute dollars is primarily attributable to the restructuring of the Company's operations and two reductions in force that occurred during the second half of 1996. The Company continually evaluates in R&D investment in view of evolving competition and market conditions and expects that R&D spending may increase during the second half of 1997. Selling, general and administrative expenses (S,G&A) were $4.2 million for the second quarter of 1997, or 22% of sales, down from the $4.6 million or 18 % sales of S,G &A for the second quarter of 1996. S,G &A for the six months of $8.1 million decreased by $1.0 million from the first half of 1996. Similar to R&D, the decrease in absolute dollars is attributable to restructuring and the reduction in force. In addition, sales commissions were higher in 1996, commensurate with the higher sales level. For second quarter of 1997, other expense was $82,000 compared with other income of $46,000 for the second quarter of 1996. Other expense for the first six months of 1997 was $97,000 compared to other income of $63,000 for the same period in 1996. The other expense is comprised primarily of interest expense associated with capital leases and short term borrowings. During 1996, interest income was earned on cash balances; during 1997, the Company increased its short term borrowings resulting in net interest expense. The effective tax rate for the quarter and six months was 38.5%, unchanged from the same periods a year ago. The Company experienced losses during the third and fourth quarter of 1996 as a result of an overall industry downturn. As a result of the restructuring of operations and a 15% increase in sales over the last quarter of 1996, the Company was able to return to a break-even level of profitability in the first quarter and slightly increase the profitability in the second quarter. Nonetheless, due to the Company's order rates in the last twelve months, the Company's continued reliance on one customer for a significant portion of its orders, the continued competitive market environment for the Company's products and the historically cyclical nature of the semiconductor equipment market, the Company remains cautious about the short-term prospects for its business. The Company continues to make strategic investments in new product development and manufacturing improvements with a view to improving future performance by enhancing product offerings; however, such investment may adversely affect short-term operating performance. The Company is also continuing it efforts to implement productivity improvements for future operating performance. The Company believes that the future economic environment could continue to lengthen the order and sales cycles for its products, causing it to simultaneously book and ship some orders during the same quarter. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1997, the Company's cash and cash equivalents declined by $.3 million to $11.5 million. Accounts receivable 9 increased by $10 million receivable and the Company increased its net borrowings by $4.8 million. Some of the increase in accounts receivable resulted from extended payment terms to customers during this industry downturn, and accounts receivable due to ship-in-place transactions which increased from $3 million at December 31, 1996 to $15.3 million at June 30, 1997 The Company's primary source of funds at June 30, 1997 consisted of $11.5 million in cash and funds available under a $10.0 million revolving line of credit. The line of credit is secured by substantially all of the assets of the Company and expires in June 1997. At June 30, 1997, the Company had $7.3 million of borrowings outstanding under the line of credit. Capital expenditures and property and equipment acquired under capital lease obligations during the first six months of the year were $1.1 million and were primarily leasehold improvements for the Ion Technology Products group located in Newburyport, Massachusetts. The Company believes that cash on hand and generated from operations, if any, and existing credit facilities will be sufficient to satisfy its cash needs for the foreseeable future. There can be no assurance that any required additional funding, if needed, will be available on terms attractive to the Company, which could have a material adverse effect on the Company's business, financial condition and results of operations. Any additional equity financing may be dilutive to shareholders, and debt financing, if available, may involve restrictive covenants. RISK FACTORS The following risk factors should be considered carefully in addition to the other information presented in this report. This report contains forward looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward looking statements. Factors that might cause such differences include, but are not limited to, the following risk factors. Historical Performance. Although the Company had net income of $19.3 million and $4.2 million in the years ended December 31, 1995 and 1994, respectively, the Company experienced losses of $9.2 million, $6.9 million, and $17.1 million for the years ended December 31, 1996, 1993 and 1992, respectively. Although the Company reported net income of $296,000 for the first half of 1997, as a result of the Company's inconsistent sales and operating results in recent years, there can be no assurance that the Company will be able to sustain consistent future revenue growth on a quarterly or annual basis, or that the Company will be able to maintain consistent profitability on a quarterly or annual basis. Competition. The semiconductor manufacturing capital equipment industry is highly competitive. The Company faces substantial competition throughout the world. The Company believes that to remain competitive, it will require significant financial resources in order to offer a broader range of products, to maintain customer service and support centers worldwide and invest in product and process research and development. Many of the Company's existing and potential competitors have substantially greater finanical resources, more extensive engineering, manufacturing, marketing and customer service and support capabilities, as well as greater name recognition than the Company. The Company expects its competitors to continue to improve the design and performance of their current products and processes and to introduce new products and processes with improved price and performance characteristics. If the Company's competitors enter into strategic relationships with leading semiconductor manufacturers covering MeV or CVD products similar to those sold by the Company, it would materially adversely affect the Company's ability to sell its products to these manufacturers. There can be no assurance that the Company will continue to compete successfully in the United States or worldwide. The Company faces direct competition in CVD tungsten silicide from Applied Materials, Inc. and Tokyo Electron, Ltd. In the MeV marketplace, the Company's MeV ion implantation systems compete with MeV systems marketed by Eaton Corporation. There can be no assurance that these or other cometitors will not succeed in developing new technologies, offering products at lower prices than those of the Company or obtaining market acceptance for product more rapidly than the Company. 10 Dependence on New Products and Processes. The Company believes that its future performance will depend in part upon its ability to continue to enhance its existing products and their process capabilities and to develop and manufacture new products with improved process capabilities. As a result, the Company expects to continue to invest in research and development. The Company also must manage product transitions successfully, as introductions of new products could adversely affect sales of existing products. There can be no assurance that the market will accept the Company's new products or that the Company will be able to develop and introduce new products or enhancements to its existing products and processes in a timely manner to satisfy customer needs or achieve market acceptance. The failure to do so could have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, if the Company is not successful in the development of advanced processes or equipment for manufacturers with whom it has formed strategic alliances, its ability to sell its products to those manufacturers would be adversely affected. Cyclical Nature of the Semiconductor Industry. The Company's business depends upon the capital expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits and products utilizing integrated circuits. The semiconductor industry is cyclical and is currently experiencing a downturn, which has had an adverse effect on the semiconductor industry's demand for semiconductor manufacturing capital equipment. Prior and current semiconductor industry downtruns have adversely affected the Company's revenue, operating marging and results of operations. There can be no assurance that the Company's revenue and operating results will not continue to be materially and adversely affected if a downturn in the semiconductor industry continues, or occurs in the future. In addition, the need for continued investment in research and development, substantial capital equipment requirements and extensive ongoin worldwide customer service and support capability may limit the Company's ability to reduce expenses or to maintain them at current levels. Accordingly, there is no assurance that the Company will be profitable in the future. Reliance on International Sales. International sales accounted for approximately 86%, 88% and 89% of total net sales in years ended 1996, 1995, and 1994 respectively, and were 85% for the first six months of 1997. In addition, net sales to Korean customers accounted for approximately 59%, 63%, 60%, and 61% of total net sales, during the same periods. The Company anticipates that international sales, including sales to Korea, will continue to account for a significant portion of net sales. As a result, a significant portion of the Company's sales will be subject to certain risks, including unexpected changes in regulatory requirements, tariffs and other barriers, political and economic instability, difficulties in account receivable collection, difficulties in managing distributors or representatives, difficulties in staffing and managing foreign subsidiary operations and potentially adverse tax consequences. Although the Company's foreign sales are primarily denominated in U.S. dollars and the Company does no engage in hedging transactions, the Company's foreign sales are subject to the risks associated with unexpected changes in exchange rates, which could have the effect of making the Company's product more or less expensive. There can be no assurance that any of these factors will not have a material adverse effect on the Company's business, financial condition and results of operations. Reliance on a Small Number of Customers. Historically, the Company has relied on a limited number of customers for a substantial portion of its net sales. For the first half of 1997, one customer accounted for 60% of its net sales. In 1996, two customers accounted for 53% and 18%, respectively, of the Company's net sales. Net sales to one customer accounted for 63% of total net sales in 1995. In 1994, net sales to three customers accounted for 33%, 19% and 14%, respectively, of total net sales. Because the semiconductor manufacturing industry is concentrated in a limited number of generally larger companies, the Company expects that a significant portion of its future product sales will be concentrated within a limited number of customers. None of these customers has entered into a long-term agreement requiring it to purchase the Company's products. Sales to certain of these customers may decrease in the future when those customers complete their current semiconductor equipment purchasing requirements for new or expanded fabrication facilities. Futhermore one customer accounts for all of the sales of the Genus 7000 system, which accounted for 30% of the Company's revenues in the first half of 1997. The loss of this customer or another significant customer or any reduction in orders from this customer or another significant customer, including reductions due to 11 this customer's or another sigificant customer's departure from recent buying pattern, market, economic or competitive conditions in the semiconductor industry or in the industries that manufacture products utilizing integrated circuits, would have a material adverse effect on the Company's business, financial condition and results of operations. Product Concentration; Rapid Technological Change. Semiconductor manufacturing equipment and processes are subject to rapid technological change. The Company derives its revenue primarily from the sale of its MeV ion implantation and tungsten silicide CVD systems. The Company estimates that the life cycle for these systems is generally three to five years. The Company believes that its future prospects will depend in part upon its ability to continue to enhance its existing products and their process capabilities. As a result, the Company expects to continue to make significant investments in research and development. The Company also must manage product transitions successfully, as introduction of new products could adversely affect sales of existing products. There can be no assurance that future technologies, processes or product developments will not render the Company's product offerings obsolete or that theCompany will be able to develop and introduce new products or enhancements to its existing and future processes in a timely manner to satisfy customer needs or achieve market acceptance. The failure to do so could adversely affect the Company's business, financial condition and results of operations. Furthermore, if the Company is not successful in the development of advanced processes or equipment for manufacturers with whom it currently does business, its ability to sell its products to those manufactures would be adversely affected. Fluctuations in Quarterly Operating Results. The Company's revenue and operating results may fluctuate significantly from quarter to quarter. The Company derives its revenue primarily from the sale of a relatively small number of high-priced systems, many of which may be ordered and shipped during the same quarter. The Company's results of operations for a particular quarter could be adversely affected if anticipated orders, for even a small number of systems, were not received in time to enable shipment during the quarter, anticipated shipments were delayed or canceled by one or more customers or shipments were delayed to manufacturing difficulties. The Company's revenue and operating results may also fluctuate due to the mix of products sold and the channel of distribution. Volatility of Stock Price. The Company's Common Stock has experienced substantial price volatility, particularly as a result of quarter-to-quarter variations in the actual or anticipated financial results of, or announcements by, the Company, its competitors or its customers. Also, the stock market has experienced extreme price and volume fluctuations which have affected the market price of many technology companies, in particular, and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions in the United States and the countries in which the Company does business, may adversely affect the market price of the Company's Common Stock. In addition, the occurrence of any of the events described in this Risk Factors section could have a material adverse effect on such market price. See "Common Stock Information" in the Company's 1996 Annual Report on page 9. 12 GENUS, INC. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on May 20, 1997 in Santa Clara, California. Proxies for the meeting were solicited pursuant to Regulation 14A. At the Company's Annual Meeting, the shareholders approved the following resolutions: (1) Election of the following persons as directors. Director In Favor Withheld William W.R. Elder 14,644,196 1,072,774 James T. Healy 14,641,638 1,075,332 Todd S. Myhre 14,629,333 1,087,637 Stephen F. Fisher 14,635,726 1,081,244 G. Frederick Forsyth 14,635,426 1,081,544 Mario M. Rosati 14,636,246 1,080,724 (2) Amendment to the 1991 Incentive Stock Option Plan to increase the number of shares reserved for issuance thereunder by 650,000 shares. For: 12,855,328 shares Against: 1,783,256 shares Abstaining: 107,927 shares (3) Amendment to the 1989 Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by 150,000 shares. For: 13,002,827 shares Against: 1,645,984 shares Abstaining: 97,700 shares (4) Amendment to the Articles of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000. For: 12,481,520 shares Against: 2,178,161 shares Abstaining: 86,830 shares (5) Ratification and appointment of Coopers & Lybrand LLP as independent accountants. For: 15,512,099 Against: 118,946 Abstaining: 85,925 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The Exhibits listed on the accompanying Index to Exhibits are filed as part hereof, or incorporated by reference into, the Report. (b) Reports of Form 8-K No reports on Form 8-K were filed during the period from April 1, 1997 to June 30, 1997. 14 GENUS, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 14, 1997 GENUS, INC. /S/ James T. Healy ________________________ James T. Healy, President and Chief Executive Officer /S/ Mary F. Bobel _________________________ Mary F. Bobel Chief Financial Officer 15 GENUS, INC. Index to Exhibits Exhibit Description 3.1 Amended and Restated Articles of Incorporation of Registrant as filed June 6, 1997. 3.2 By-Laws of Registrant, as amended (3) 4.1 Common Shares Rights Agreement, dated as of April 27, 1990, between Registrant and Bank of America, N.T. and S.A., as Rights Agent (5) 10.1 Lease dated December 6, 1985, for Registrant's facilities at 4 Mulliken Way, Newburyport, Massachusetts, and amendment and extension of lease dated March 17, 1987 (1) 10.2 Lease dated June 15, 1988, for Registrant's facilities at 100 Merrick Road, West Building, Rockville Center, New York (1) 10.3 Assignment of Lease dated April 1986 for Registrant's facilities at Unit 11A, Melbourn Science Park, Melbourn, Hertz, England (1) 10.4 Registrant's 1981 Incentive Stock Option Plan, as amended (2) 10.5 Registrant's 1989 Employee Stock Purchase Plan, as amended (6) 10.6 Registrant's 1991 Incentive Stock Option Plan, as amended (13) 10.7 International Distributor Agreement dated November 23, 1987, between General Ionex Corporation and Innotech Corporation (1) 10.8 Distributor/Representative Agreement dated August 1, 1984, between Registrant and Aju Exim (formerly Spirox Holding Co./You One Co. Ltd.) (1) 10.9 Exclusive Sales and Service Representative Agreement dated October 1, 1989, between Registrant and AVBA Engineering Ltd. (4) 10.10 Exclusive Sales and Service Representative Agreement dated April 1, 1990, between Registrant and Indosale PVT Ltd. (4) 10.11 License Agreement dated November 23, 1987, between Registrant and Eaton Corporation (1) 10.12 Exclusive Sales and Service Representative Agreement dated May 1, 1989, between Registrant and Spirox Taiwan, Ltd. (3) 10.13 Lease dated April 7, 1992, between Registrant and The John A. and Susan R. Sobrato 1979 Revocable Trust for property at 1139 Karlstad Drive, Sunnyvale, California (7) 10.14 Term Loan Agreement dated April 17, 1992, between the Registrant and Silicon Valley Bank (7) 10.15 Asset Purchase Agreement dated May 28, 1992, between Registrant and Advantage Production Technology, Inc. (8) 10.16 License and Distribution Agreement dated September 8, 1992, between Registrant and Sumitomo Mutual Industries, Ltd. (9) 10.17 Mortgage dated February 1, 1993, with Bay Bank Middlesex for Registrant's facilities at One Merrimack Landing, Unit 26, Newburyport, Massachusetts (10) 10.18 Revolving Loan Agreement dated May 15, 1994, between Registrant and Silicon Valley Bank (1) 10.19 Lease Agreement dated October 1995 for Registrant's facilities at Lot 62, Four Stanley Tucker Drive, Newburyport, Massachusetts (13) 11.1 Computation of Net Income Per Share (2) 27.1 Financial Data Schedule 16 (1) Incorporated by reference to the exhibit filed with the Registrant's Registration Statement on Form S-1 (No. 33-23861) filed August 18, 1988, and amended on September 21, 1988, October 5, 1988, November 3, 1988, November 10, 1988, and December 15, 1988, which Registration Statement became effective November 10, 1988. (2) Incorporated by reference to the exhibit filed with the Registrant's Registration Statement on Form S-8 filed January 17, 1991. (3) Incorporated by reference to the exhibit filed with the Registrant's Registration Statement on Form S-1 (No. 33-28755) filed on May 17, 1989, and amended May 24, 1989, which Registration Statement became effective May 24, 1989. (4) Incorporated by reference to the exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (5) Incorporated by reference to the exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990. (6) Incorporated by reference to the exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (7) Incorporated by reference to the exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992. (8) Incorporated by reference to the exhibit filed with the Registrant's Report on Form 8-K dated June 12, 1992. (9) Incorporated by reference to the exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. (10) Incorporated by reference to the exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. (11) Incorporated by reference to the exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. (12) Incorporated by reference to the exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995. (13) Incorporated by reference to the exhibit filed with the Registrant' Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 17 Exhibit 3.1 State of California Office of the Secretary of State I, Bill Jones, Secretary of State of the State of California, hereby certify: That the attached transcript has been compared with the record on file in this office, of which it purports to be a copy, and that it is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the great Seal of the State of California this June 09, 1997 ____________________________________ (STATE OF CALIFORNIA SEAL) /s/ Bill Jones ____________________________________ Bill Jones, Secretary of State Authentication: A493124 Date: 06/09/97 18 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF GENUS, INC. James T. Healy and Mario M Rosati certify that: 1. They are the duly elected President and Secretary of Genus, Inc., a California corporation. 2. The Articles of Incorporation of this corporation, as amended to the date of the filing of these Restated Articles of Incorporation, and with the omissions required by Section 910 of the Corporations Code, are hereby amended and restated to read as follows: I. The name of this corporation is: GENUS, INC. II. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. III. The Corporation is authorized to issue two classes of shares, designated "Common Stock" and "Preferred Stock." The total number of shares which this corporation is authorized to issue is 52,000,000. The number of shares of Preferred Stock which this corporation is authorized to issue is 2,000,000. The number of shares of Common Stock which this corporation is authorized to issue is 50,000,000. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of this corporation is authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequest to the issue of shares of that series, to determine the designation and par value of any series and to fix the number of shares of any series. IV. The liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California Law. The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, 19 agreements with agents, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to the corporation and its shareholders. Any repeal or modification of the foregoing provisions of this Article IV by the shareholders of this corporation shall not adversely affect any right or protection of a director of this corporations existing at the time of such repeal or modification. 3. The foregoing Restated Articles of Incorporation have been duly approved by the Board of Directors of said corporation. 4. The foregoing Restated Articles of Incorporation were approved by the required vote of the shareholders of said corporation in accordance with Sections 902 and 903 of the California General Corporations Code at the Annual Meeting of shareholders, the record date for which was March 31, 1997. The total number of outstanding shares of the corporation entitled to vote as of the record date for said meeting was 16,738,092 shares of Common Stock. The number of shares of Stock voting in favor of the foregoing Restated Articles of Incorporation equaled or exceeded the vote required. The vote required was a majority of the outstanding shares of Common Stock entitled to vote as of the record date for said meeting. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in the foregoing Restated Articles of Incorporation are true and correct of our own knowledge. Executed at Sunnyvale, California, on May 28, 1997 /S/ James T. Healy _____________________ James T. Healy President and Chief Executive Officer /S/ Mario M. Rosati _____________________ Mario M. Rosati Secretary 20 Exhibit 11.1 GENUS, INC. Computation of Net Income Per Share (a) (Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended March 31 June 30 1997 1996 1997 1996 Average common shares outstanding 16,782 16,303 16,760 16,256 Computation of incremental outstanding shares Net effect of dilutive stock options based on treasury stock method 72 336 95 331 ______ ______ ______ ______ 16,854 16,639 16,855 16,587 ====== ====== ====== ====== Net income $ 296 $ 645 $ 477 $1,238 ====== ====== ====== ====== Net income per share (a) $ 0.02 $ 0.04 $ 0.03 $ 0.07 ====== ====== ====== ======
Computation Notes: (a) Presentation of fully diluted earnings per share for the three and six months ended June 30, 1997 and 1996 is omitted because such amounts are materially the same as those presented above. 21 EX-27 2
5 0000837913 GENUS, INC. 1000 USD 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 11480 0 25778 250 24835 67130 41157 26771 95888 25175 0 0 0 98630 29274 95888 39032 39032 23853 38158 97 0 0 777 300 477 0 0 0 477 .03 .03
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