SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from Commission File Number
to 0-24934
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PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2495703
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
805 MIDDLESEX TURNPIKE 01821-3986
BILLERICA, MA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number: (508) 670-4270
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--------- ---------
The number of shares outstanding of each of the issuer's classes of
common stock as of April 24, 1997 (does not give effect to a two-for-one stock
split distributed on May 2, 1997 to shareholders of record on april 22, 1997):
Class Number of Shares Outstanding
- ------------------------------ ----------------------------
Common Stock, $.01 par value 7,415,594
PRI AUTOMATION, INC.
INDEX
PAGE NO.
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Part I. Financial Information
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations for
the Three and Six Months Ended March 30, 1997 and
March 31, 1996 3
Condensed Consolidated Balance Sheets as of
March 30, 1997 and September 30, 1996 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended March 30, 1997 and
March 31,1996 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Part II. Other Information
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Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12-13
SIGNATURE 14
Exhibit Index 15
Exhibit 3.6 Articles of Amendment of the Company
Exhibit 11.1 Computation of Net Income Per Common Share
Exhibit 27.1 Financial Data Schedule
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRI AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
MARCH 30, MARCH 31, MARCH 30, MARCH 31,
1997 1996 1997 1996
--------- --------- --------- ---------
Net revenue............................. $41,235 $26,200 $78,463 $48,237
Cost of revenue......................... 23,404 13,421 44,575 24,774
------- ------- ------- -------
Gross profit............................ 17,831 12,779 33,888 23,463
Operating expenses:
Research and development............... 5,915 4,097 11,543 7,721
Selling, general and administrative.... 6,000 4,006 10,889 7,496
------- ------- ------- -------
Operating profit........................ 5,916 4,676 11,456 8,246
Other income, net....................... 230 482 578 1,117
------- ------- ------- -------
Income before income tax provision...... 6,146 5,158 12,034 9,363
Income tax provision.................... 2,090 1,857 4,092 2,871
------- ------- ------- -------
Net income.............................. $ 4,056 $ 3,301 $ 7,942 $ 6,492
======= ======= ======= =======
Net income per common share:
Primary................................ $0.52 $0.44 $1.02 $0.86
Assuming full dilution................. $0.52 $0.44 $1.02 $0.86
Weighted average number of common and
common equivalent shares outstanding:
Primary................................ 7,848 7,552 7,777 7,562
Assuming full dilution................. 7,849 7,564 7,805 7,588
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
PRI AUTOMATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
MARCH 30, SEPTEMBER 30,
1997 1996
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 14,841 $ 28,487
Marketable securities................................. 3,039 7,582
Trade accounts receivable, net........................ 45,287 27,561
Contracts in progress................................. 29,730 21,824
Inventories........................................... 28,575 20,988
Other current assets.................................. 1,790 1,268
-------- --------
Total current assets................................. 123,262 107,710
Property and equipment, net........................... 9,908 9,180
Marketable securities................................. 3,074 4,666
Other assets.......................................... 2,379 2,230
-------- --------
Total assets......................................... $138,623 $123,786
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................... $ 18,366 $ 16,171
Accrued expenses and other liabilities............... 10,875 9,188
Billings in excess of revenues and customer advances.. 3,116 1,505
-------- --------
Total current liabilities........................... 32,357 26,864
Stockholders' equity:
Common stock, $.01 par value; 12,000,000 shares
authorized; 7,408,653 and 7,285,460 issued and
outstanding at March 30, 1997 and
September 30, 1996, respectively..................... 74 73
Additional paid-in capital............................ 73,208 71,806
Retained earnings..................................... 32,984 25,043
-------- --------
Total stockholders' equity.......................... 106,266 96,922
-------- --------
Total liabilities and stockholders' equity.......... $138,623 $123,786
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
PRI AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
SIX MONTHS ENDED
-----------------
MARCH 30, MARCH 31,
1997 1996
----------------- ----------
Net cash used in operating activities:................. $(18,722) $(4,646)
-------- -------
Cash flows from investing activities:
Purchases of marketable securities.................... (4,531) (6,311)
Proceeds from the sale of marketable securities....... 6,684 900
Proceeds from maturities of marketable securities..... 3,990 3,753
Purchases of property and equipment................... (2,388) (2,215)
-------- -------
Net cash provided by (used in) investing activities.. 3,755 (3,873)
-------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options............... 1,321 246
Proceeds from issuance of common stock, net of
issuance costs....................................... -- 274
-------- -------
Net cash provided by financing activities............ 1,321 520
-------- -------
Net decrease in cash and cash equivalents.............. (13,646) (7,999)
Cash and cash equivalents at beginning of period....... 28,487 38,005
-------- -------
Cash and cash equivalents at end of period............. $ 14,841 $30,006
======== =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
PRI AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts
of PRI Automation, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"). All significant inter-company transactions and balances have been
eliminated.
The condensed consolidated financial statements are unaudited.
However, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such
information have been made. The results for interim periods are not necessarily
indicative of the results for the entire year. The condensed consolidated
financial statements should be read in connection with the audited consolidated
financial statements of PRI Automation, Inc. for the year ended September 30,
1996 included in its Form 10-K, filed with the Securities and Exchange
Commission.
For interim reporting purposes, the Company closes its first three fiscal
quarters on the Sunday nearest the last day of December, March and June in each
year. The Company's fiscal year ends on the last day of September.
B. INVENTORIES
Inventories consist of the following (in thousands):
MARCH 30, SEPTEMBER 30,
1997 1996
--------- -------------
Raw materials........................ $27,511 $19,892
Work in process...................... 1,064 1,096
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$28,575 $20,988
======= =======
C. ACCRUED EXPENSES AND OTHER LIABILITIES
The significant components of accrued expenses and other
liabilities consist of the following (in thousands):
MARCH 30, SEPTEMBER 30,
1997 1996
------- -------
Accrued expenses..................... $ 3,403 $ 2,030
Accrued compensation................. 3,639 3,883
Income taxes payable................. 2,003 1,445
Deferred income taxes................ 1,830 1,830
------- -------
$10,875 $ 9,188
======= =======
D. SUBSEQUENT EVENTS
On February 18, 1997, the Board of Directors declared a two-for-one stock
split (the "Stock Split") to be effected in the form of a 100% stock dividend on
its common stock, subject to shareholder approval of an Amendment to the
Company's Restated Articles of Organization to
6
increase the Company's authorized common stock from 12 million shares to 24
million shares (the "Amendment"). The Amendment was approved by the Company's
stockholders on April 22, 1997 and the Stock Split was effected by the
distribution of a 100% stock dividend on May 2, 1997 to shareholders of record
on April 22, 1997. Share and per share amounts contained in this report have not
been restated to reflect the Stock Split .
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128), which is
effective for fiscal years ending after December 15, 1997 including interim
periods. Earlier adoption is not permitted. However, an entity is permitted to
disclose pro forma earnings per share amounts computed under SFAS 128 in the
notes to the financial statements in periods prior to adoption. The statement
requires restatement of all prior-period earnings per share data presented after
the effective date. SFAS 128 specifies the computation, presentation, and
disclosure requirements for earnings per share and is substantially similar to
the standard recently issued by the International Accounting Standards Committee
entitled International Accounting Standards, Earnings Per Share. The Company
plans to adopt SFAS 128 in 1997 and has not yet determined the impact.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange Commission may contain statements which are not historical facts but
which are "forward-looking statements" which involve risks and uncertainties.
In particular, statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to the Company's shipment level
and profitability, and the sufficiency of capital to meet working capital and
capital expenditures requirements may be forward-looking statements. The words
"expect," "anticipate," "internal," "plan," "believe," "seek," "estimate" and
similar expressions also are intended to identify such forward-looking
statements. This Report also contains other forward-looking statements. Such
statements are not guarantees of future performance, and involve certain risks,
uncertainties and assumptions that could cause the Company's future results to
differ materially from those expressed in any forward-looking statements made by
or on behalf of the Company. Many of such factors are beyond the Company's
ability to control or predict. Readers are accordingly cautioned not to place
undue reliance on forward-looking statements. The Company disclaims any intent
or obligation to update publicly any forward-looking statements whether in
response to new information, future events or otherwise. Important factors that
may cause the Company's actual results to differ from such forward-looking
statements include, but are not limited to, the factors discussed below.
The Company's business and results of operations depend in significant part
upon capital expenditures of manufacturers of semiconductors, which in turn
depend upon the current and anticipated market demand for semiconductors and
products incorporating semiconductors. Historically, the semiconductor industry
has been highly cyclical with recurring periods of over supply, which often have
had a severe effect on the semiconductor industry's demand for capital
equipment, including systems manufactured and marketed by the Company. The
Company believes that the markets for newer generations of semiconductors will
also be subject to similar fluctuations. Also, the recent high rate of
technical innovation and resulting improvements in the performance and price of
semiconductor devices, which have driven much of the demand for the Company's
products, could slow, or encounter limits, in the future. In addition, any
other factor adversely affecting the semiconductor industry or particular
segments within the semiconductor industry may adversely effect the Company's
business, financial condition and operating results.
Additional risks and uncertainties include: competitive pressures on selling
prices; inventory management, including suppliers' ability to meet the Company's
needs in a timely manner; the timing and cancellation of customer orders;
changes in product mix; the Company's ability to introduce new products and
technologies on a timely basis; the Company's ability to increase its
manufacturing capacity to meet increased demand while maintaining satisfactory
levels of product quality, service levels, and timeliness of deliveries; rapid
technological change and introduction of products and technologies by the
Company's competitors; market acceptance of the Company's and its competitors'
products; the level of orders received which can be shipped in a quarter; and
the timing of investments in engineering and development. As a result of the
foregoing and other factors, the Company may experience material fluctuations in
future operating results on a quarterly or annual basis which could materially
and adversely affect its business, financial condition, operating results and
stock price.
8
RESULTS OF OPERATIONS
Revenue: Net revenue for the three and six months ended March 30, 1997 was
$41.2 million and $78.5 million, respectively, an increase of 57.4% and 62.7%,
respectively, over the corresponding periods in fiscal 1996. The increases
resulted primarily from the Company's continued expansion in Europe and in the
Asia Pacific region and to a lesser extent from the increased market acceptance
of, and demand for, the Company's flexible factory automation systems in the
United States market as a result of semiconductor manufacturers' continuing
upgrades and expansion of existing fabrication facilities and construction of
new facilities. Net export sales to customers for the three and six months
ended March 30, 1997 were $17.4 million and $34.9 million, respectively,
compared to $3.6 million and $8.3 million, respectively, for the corresponding
periods in fiscal 1996, and accounted for 42.3% and 44.5% of net revenue,
respectively, as compared to 13.9% and 17.3% of net revenue for the
corresponding periods in fiscal 1996.
Gross profit: The gross profit margin for the three and six months ended
March 30, 1997 was 43.2%, as compared to 48.8% and 48.6% for the corresponding
periods in fiscal 1996. The decreases are primarily attributable to increased
costs associated with the support of global expansion and reduced prices to
compete in the Asia Pacific region.
Research and development: Research and development expenses for the three
and six months ended March 30, 1997 were $5.9 million and $11.5 million,
respectively, representing 14.3% and 14.7% of net revenue, respectively,
compared to $4.1 million and $7.7 million, representing 15.6% and 16.0% of net
revenue for the corresponding periods in fiscal 1996. The increase in dollar
amounts primarily reflects the continued increase in personnel and materials
expense in response to an increasing demand for new products and product
enhancements. The decreases in percentage are primarily attributable to a slower
growth rate in personnel than in the Company's rate of revenue growth.
Selling, general and administrative: Selling, general and administrative
expenses for the three and six months ended March 30, 1997 were $6.0 million and
$10.9 million, respectively, representing 14.6% and 13.9% of net revenue,
compared to $4.0 million and $7.5 million, representing 15.6% and 16.0% of net
revenue for the corresponding periods in fiscal 1996. The increase in dollar
amounts primarily reflects the increases in personnel, commissions and related
expenses associated with higher sales volume, and to a lesser extent expenses
associated with continued global expansion. The decrease as a percentage of net
revenue is largely attributable to the fact that in fiscal 1997, expenses
attributable to the Company's expansion in Europe and the Asia Pacific region
grew less rapidly than the Company's revenues.
Other income, net: Other income, net for the three and six months ended
March 30, 1997 was $230,000 and $578,000, respectively, as compared to $482,000
and $1.1 million for the corresponding periods in fiscal 1996. Interest income
for the three and six months ended March 30, 1997 was $248,000 and $595,000,
respectively, as compared to $492,000 and $1.1 million for the corresponding
periods in fiscal 1996. The decreases are attributable to lower investment
balances in the three and six month periods ended March 30, 1997 as compared to
the corresponding periods in fiscal 1996.
Income tax provision: The effective tax rate for the three and six months
ended March 30, 1997 was 34.0% as compared to 36.0% and 30.7%, respectively, for
the corresponding periods in fiscal 1996. For the three months ended March 30,
1997, the decrease in the effective tax rate compared to the corresponding
period in fiscal 1996 is largely attributable to increased tax
9
benefits from the Company's foreign sales corporation due to increased export
sales. The increase in the effective tax rate for the six month period ended
March 30, 1997 is largely attributable to a one-time benefit from the
elimination of certain valuation allowances placed against certain deferred tax
assets in fiscal 1996, offset partially by a decrease in the fiscal 1997
effective tax rate associated with the increased tax benefit from the foreign
sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations primarily
through private equity financings, bank lines of credit, public stock offerings
in October 1994 and July 1995 and cash generated from operations.
As of March 30, 1997 the Company had working capital of $90.9 million,
including cash and cash equivalents of $14.8 million and short-term marketable
securities of $3.0 million.
Net cash used in operating activities for the six months ended March 30,
1997 was $18.7 million, compared to net cash used in operating activities of
$4.6 million for the corresponding period in fiscal 1996. Net cash used in
operating activities for the six months ended March 30, 1997 was primarily
attributable to increases in trade accounts receivable of $17.7 million, in
contracts in progress of $7.9 million and in inventory of $7.6 million, offset
partially by net income of $7.9 million, increases in accounts payable of $2.2
million, in accrued expenses of $1.7 million, in billings in excess of revenues
and in customer advances of $1.6 million. Net cash used in operating activities
for the six months ended March 31, 1996 was primarily attributable to increases
in trade accounts receivable of $3.7 million, and in contracts in progress of
$9.9 million and an increase in inventory of $3.4 million. These uses of cash
were offset in part by increases in billings in excess of revenues and in
customer advances of $2.9 million, an increase in income taxes payable of $1.3
million, a decrease in other current assets of $900,000, and net income of $6.5
million.
Net cash provided by investing activities for the six months ended March
30, 1997 was $3.8 million as compared to $3.9 million of net cash used for the
corresponding period in fiscal 1996. Net cash provided by investing activities
for the six months ended March 30, 1997 was attributable to the net purchase,
sale and maturities of marketable securities of $6.1 million offset partially by
the purchase of fixed assets of $2.4 million. Net cash used in investing
activities for the six months ended March 31, 1996 was attributable to the net
purchase, sale and maturities of marketable securities of $1.7 million offset
partially by the purchase of fixed assets of $2.2 million.
Net cash provided by financing activities for the six months ended March
30, 1997 was $1.3 million as compared to $520,000 for the corresponding period
in fiscal 1996. Net cash provided by financing activities for the six months
ended March 30, 1997 was attributable to the exercise of stock options. Net cash
provided by financing activities for the six months ended March 31, 1996 was
attributable to the exercise of stock options of $246,000 and net proceeds from
the issuance of common stock of $274,000.
At March 30, 1997, the Company had no borrowings under its working capital
line of credit from Fleet Bank of Massachusetts, N.A. (the "Bank"). The working
capital line of credit enables the Company to obtain revolving loans or grant
letters of credit on an unsecured basis up to the lesser of 80% of eligible
accounts receivable or $10,000,000, with outstanding borrowings under revolving
loans bearing interest at the Bank's prime lending rate. The ability of the
Company to effect borrowings under the line of credit is conditioned upon, among
other things, the
10
Company's meeting certain financial covenants, including covenants requiring the
maintenance of specific levels of quarterly and annual earnings, working
capital, tangible net worth, debt service coverage and liquidity. The Company
may elect to convert revolving loans into loans bearing interest at 1.5% above
the Bank's cost of funds. The working capital line of credit expires on March 1,
1998.
The Company believes that existing cash and investment balances and funds
available under its existing line of credit will be sufficient to meet the
Company's cash requirements to fund operations and expected capital expenditures
during the next twelve months.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128), which is
effective for fiscal years ending after December 15, 1997 including interim
periods. Earlier adoption is not permitted. However, an entity is permitted to
disclose pro forma earnings per share amounts computed under SFAS 128 in the
notes to the financial statements in periods prior to adoption. The statement
requires restatement of all prior-period earnings per share data presented after
the effective date. SFAS 128 specifies the computation, presentation, and
disclosure requirements for earnings per share and is substantially similar to
the standard recently issued by the International Accounting Standards Committee
entitled International Accounting Standards, Earnings Per Share. The Company
plans to adopt SFAS 128 in 1997 and has not yet determined the impact.
11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of stockholders of the Company held on February 7,
1997, the stockholders elected to fix the number of directors at five and re-
elected the following five directors nominated by management: Mordechai Wiesler,
Mitchell G. Tyson, Amram Rasiel, Boruch B. Frusztajer, and Alexander V.
d'Arbeloff.
The number of votes cast for, or withheld from, each nominee for election
as director were as follows:
Nominee For Withheld Authority
- ------------------------- --------- ------------------
Mordechai Wiesler 6,279,622 53,728
Mitchell G. Tyson 6,279,622 53,728
Amram Rasiel 6,279,622 53,728
Boruch B. Frusztajer 6,279,422 53,928
Alexander V. d'Arbeloff 6,279,422 53,928
In addition, the Stockholders approved an amendment to the Company's 1994
Incentive and Nonqualified Stock Option plan to increase the number of shares of
Common Stock available thereunder by 300,000 shares by the following number of
votes.
For Against Abstain Broker Nonvotes
- --- ------- ------- ---------------
3,622,839 2,666,807 10,407 34,547
Item 5. Other Information
On February 18, 1997, the Company's Board of Directors voted to effect a
stock split by means of a stock dividend of one share of fully paid and non-
assessable Common Stock on each share of Common Stock issued and outstanding at
the close of business on April 22, 1997, contingent on stockholder approval of
an Amendment to the Company's Restated Articles of Organization to increase the
number of authorized shares of Common Stock from 12,000,000 to 24,000,000 shares
(the "Amendment"). On April 22, 1997, the Company's stockholders approved the
Amendment. The payment date for the stock dividend was May 2, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
*3.4 Amended and Restated By-Laws of the Company
*3.5 Restated Articles of Organization of the Company
3.6 Articles of Amendment of the Company
11.1 Computation of Net Income Per Common Share
27.1 Financial Data Schedule
_______________
12
* Incorporated by reference to the similarly-numbered Exhibit to the Company's
Registration Statement on Form S-1, File No. 33-81836, as declared effective
by the Securities and Exchange Commission on October 13, 1994.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
March 30, 1997.
13
SIGNATURE
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.
PRI AUTOMATION, INC.
Date: May 12, 1997 By: /s/ Stephen D. Allison
----------------------------------
Stephen D. Allison
Duly Authorized Officer and
Principal Financial Officer
14
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
3.6 Articles of Amendment of the Company
11.1 Computation of Net Income Per Common Share
27.1 Financial Data Schedule
15