SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
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 December 28, 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
PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2495703
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
805 Middlesex Turnpike 01821-3986
Billerica, MA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number: (978) 670-4270
-----------------
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 February 6, 1998:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, $.01 par value 19,549,717
PRI AUTOMATION, INC.
INDEX
Page No.
--------
Part I. Financial Information
---------------------
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the Three Months
Ended December 28, 1997 and
December 29, 1996 3
Condensed Consolidated Balance Sheets
as of December 28, 1997 and
September 30, 1997 4
Condensed Consolidated Statements of
Cash Flows for the Three Months
Ended December 28, 1997 and
December 29, 1996 5
Notes to Condensed Consolidated
Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-14
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
Exhibit Index 17
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
------------------
December 28, December 29,
1997 1996
---- ----
Net revenue.................................... $46,830 $37,228
Cost of revenue................................ 26,035 21,171
------- -------
Gross profit................................... 20,795 16,057
Operating expenses:
Research and development...................... 6,947 5,627
Selling, general and administrative........... 6,689 4,889
Acquired in-process research and development.. 8,417 --
------- -------
Operating (loss) profit........................ (1,258) 5,541
Other income, net.............................. 312 347
------- -------
(Loss) income before income tax provision...... (946) 5,888
Income tax provision........................... 2,503 2,002
------- -------
Net (loss) income.............................. $(3,449) $ 3,886
======= =======
Net (loss) income per common share:
Basic......................................... $ (0.23) $ 0.27
Diluted....................................... $ (0.23) $ 0.25
Weighted average shares outstanding:
Basic......................................... 15,093 14,622
Diluted....................................... 15,093 15,422
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)
December 28, September 30,
1997 1997
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents............................ $ 39,793 $ 29,118
Marketable securities................................ 3,077 2,642
Trade accounts receivable, net....................... 48,200 62,085
Contracts in progress................................ 19,603 15,463
Inventories.......................................... 27,203 29,888
Deferred income taxes................................ 1,012 1,012
Other current assets................................. 3,324 2,562
-------- --------
Total current assets............................... 142,212 142,770
Property and equipment, net.......................... 12,056 11,400
Marketable securities................................ 492 506
Deferred income taxes................................ 475 475
Other assets......................................... 1,728 1,833
-------- --------
Total assets....................................... $156,963 $156,984
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 16,650 $ 18,319
Accrued expenses and other liabilities............... 12,637 15,819
Billings in excess of revenues and customer advances.. 3,578 3,462
-------- --------
Total current liabilities........................... 32,865 37,600
Stockholders' equity:
Common stock, $.01 par value: 24,000,000 shares
authorized; 15,157,311 and 14,984,765 shares issued
and outstanding at December 28, 1997 and
September 30, 1997, respectively..................... 152 150
Additional paid-in capital............................ 85,275 77,113
Retained earnings..................................... 38,670 42,119
Unrealized gain on securities......................... 1 2
-------- --------
Total stockholders' equity.......................... 124,098 119,384
-------- --------
Total liabilities and stockholders' equity.......... $156,963 $156,984
======== ========
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)
Three Months Ended
------------------
December 28, December 29,
------------ ------------
1997 1996
---- ----
Cash flows from operating activities:
Net (loss) income............................... $(3,449) $ 3,886
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating
activities:
Depreciation and amortization expense........ 1,222 797
Amortization of premiums or discounts on
marketable securities...................... 6 7
Acquired in-process research and development. 8,417 -
Changes in operating assets and liabilities:
Trade accounts receivable.................. 13,885 (6,385)
Contracts in progress...................... (4,140) (5,490)
Inventories................................ 2,685 (3,296)
Other assets............................... (1,107) (73)
Accounts payable........................... (1,704) 545
Accrued expenses and other liabilities..... (3,212) (678)
Billings in excess of revenues and
customer advances......................... 116 (132)
------- --------
Net cash provided by (used in) operating
activities...................................... 12,719 (10,819)
------- --------
Cash flows from investing activities:
Proceeds from the sale of marketable securities. -- 5,959
Proceeds from maturities of marketable
securities..................................... 685 2,890
Purchases of marketable securities.............. (1,113) (3,196)
Purchases of property and equipment............. (1,847) (1,116)
------- --------
Net cash (used in) provided by investing
activities...................................... (2,275) 4,537
------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options and
Employee Stock Purchase Plan................... 231 707
------- --------
Net increase (decrease) in cash and cash
equivalents..................................... 10,675 (5,575)
Cash and cash equivalents at beginning of period.. 29,118 28,487
------- --------
Cash and cash equivalents at end of period........ $39,793 $ 22,912
======= ========
Significant non-cash transactions:
Acquisition of Interval Logic
Corporation (see Note E)................... $ -- $ --
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, 1997 included in the
Company's Annual Report 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):
December 28, September 30,
1997 1997
------------ -------------
Raw materials............. $21,103 $24,533
Work-in-process........... 6,100 5,355
------- -------
$27,203 $29,888
======= =======
C. Accrued Expenses and Other Liabilities
The significant components of accrued expenses and other liabilities consist
of the following (in thousands):
December 28, September 30,
1997 1997
------------ -------------
Accrued expenses.......... $ 4,523 $ 3,923
Accrued compensation...... 4,801 5,955
Income taxes payable...... 3,313 5,941
------- -------
$12,637 $15,819
======= =======
6
D. Earnings Per Share
The Company has adopted Statement of Financial Accounting Standard ("SFAS")
No. 128, "Earnings Per Share," which specifies the computation, presentation and
disclosure requirements for net income (loss) per common share. Basic net
income (loss) per common share is computed based on the weighted average number
of common shares outstanding during the period. Diluted net income (loss) per
common share gives effect to all dilutive potential common shares outstanding
during the period. Under SFAS No. 128, the computation of diluted earnings per
share does not assume the issuance of common shares that have an antidilutive
effect on net income per common share.
Three Months Ended
------------------
December 28, 1997 December 29, 1996
------------------ -----------------
Net (loss) income...................... $(3,449,000) $ 3,886,000
Shares used in computation:
Weighted average common shares
outstanding used in computation of
basic net (loss) income per share...... 15,092,666 14,622,148
Dilutive effect of stock options....... -- 800,171
----------- -----------
Shares used in computation of diluted
net (loss) income per share........... 15,092,666 15,422,319
=========== ===========
Basic net (loss) income per share...... ($0.23) $ 0.27
Diluted net (loss) income per share.... ($0.23) $ 0.25
Options to purchase 15,967 shares of common stock at prices ranging from
$20.13 to $23.88 per share were outstanding at December 29, 1996, but were not
included in the computation of diluted EPS because the option's exercise price
was greater than the average market price of the common shares as of such date
and, therefore, would be antidilutive under the treasury stock method.
E. Acquisition of Interval Logic Corporation
On October 29, 1997 the Company acquired Interval Logic Corporation ("ILC"),
a California corporation, for aggregate consideration of 111,258 shares of the
Company's Common Stock. In addition, the Company issued or assumed options to
purchase an aggregate of 199,170 shares of the Company's Common Stock. ILC was
formed in 1995 to develop advanced, high-performance planning and scheduling
software solutions for the semiconductor industry. The value of the transaction
is $8.5 million including approximately $600,000 of expenses related to the
acquisition. The transaction was accounted for as a purchase.
The purchase price was allocated to the tangible and intangible assets of
ILC based on the fair market value of those assets using a risk adjusted
discounted cash flow approach. Specifically, the purchased technology was
evaluated through extensive interviews and analysis of data concerning the state
of the technology and needed developments. This evaluation of underlying
technology acquired considered the inherent difficulties and uncertainties in
completing the development, and thereby achieving technological feasibility, and
the risks related to the viability of and potential changes in future target
markets. The technology was deemed to be in-process research and development
because the Company needs to make significant further investments in development
of the technology, to integrate it with the Company's products, including the
"Transnet" product line, and to meet expected customer requirements. The
necessary
7
developments include completion of the software requirements definition, data
integration and validation, completion of the graphics user interface,
development of alpha and beta versions for customer testing, and integration and
adaptation with customer systems. The underlying technology had no alternative
future use to the Company in other research and development projects or
otherwise. Therefore, the Company recognized a charge of $8,417,000 for the
purchase of in-process research and development in October 1997.
F. Provision for Income taxes
The effective tax rate for the three months ended December 28, 1997, was
adversely affected by the effect of the charge for the acquired in-process
research and development which is not deductable for federal income tax
purposes. Excluding this charge, the effective tax rate was 33.5% for the three
months ended December 28, 1997, as compared to 34% for the corresponding period
in fiscal year 1997.
G. Subsequent Events
On January 22, 1998, the Company completed the acquisition of Equipe
Technologies, Inc. and two related companies (collectively "Equipe"). Equipe is
a leading worldwide developer, manufacturer, and supplier of wafer and substrate
handling robots, pre-aligners and controllers to the semiconductor process tool
manufactures. The acquisition will be accounted for as a pooling-of-interests.
The following pro forma information combines the results of operations of the
Company and Equipe as if the acquisition of Equipe had occurred at the beginning
of the periods presented. Equipe Technologies Inc. and one of the related
companies prior to the acquisition were S-corporations for tax purposes. The pro
forma information gives effect to certain adjustments, including an adjustment
to provide for income taxes as if Equipe Technologies, Inc. and the related
company were treated as C-corporations for the periods presented. The pro forma
information is shown for comparative purposes only.
Three Months Ended
------------------
December 28, December 29,
1997 1996
---- ----
(in thousands, except per share data)
Net revenue........................ $65,133 $44,134
Operating profit................... 2,022 7,219
Net (loss) income.................. (1,563) 4,895
Diluted net (loss) income per
common share...................... ($0.08) $ 0.25
H. New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement requires that changes in comprehensive
income be shown in a financial statement that is displayed with the same
prominence as other financial statements. The statement will be effective for
annual periods beginning after December 15, 1997 and the Company will adopt its
provisions in fiscal year 1999. Reclassification for earlier periods is
required for comparative purposes. The Company is currently evaluating the
impact this statement will have on its financial statements; however, because
the statement requires only additional disclosure, the Company does not expect
the statement to have a material impact on its financial position or results of
operations.
8
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." This statement
includes requirements to report selected segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
statement will be effective for annual periods beginning after December 15, 1997
and the Company will adopt its provisions in fiscal year 1999. Reclassification
for earlier periods is required, unless impracticable, for comparative purposes.
The Company is currently evaluating the impact this statement will have on its
financial statements; however, because the statement requires only additional
disclosure, the Company does not expect the statement to have a material impact
on its financial position or results of operations.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued the Statement of Position ("SOP") 97-2 "Software Revenue
Recognition," which will supersede SOP 91-1. SOP 97-2 has not changed the basic
rules of revenue recognition but does provide more guidance particularly with
respect to multiple deliverables and "when and if available" products. SOP 97-2
is effective for transactions entered into for annual periods beginning after
December 15, 1997. The Company will adopt SOP 97-2 in fiscal year 1999 and has
not yet determined its impact.
9
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 revenue and
expense levels, 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 future results are subject to substantial risks and
uncertainties. The Company's business and results of operations depend in
significant part upon capital expenditures from 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 expenditures, 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, the
timing of investments in engineering and development, the Company's ability to
absorb and manage acquisitions, and risks associated with doing business in Asia
and Europe. The current financial uncertainty within the economies of certain
Asian countries could affect the worldwide semiconductor industry and the
Company. This uncertainty could result in delay or
10
cancellation of orders from customers in these countries. 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.
Results of Operations
Net Revenue: Net revenue for the three months ended December 28, 1997 was
$46.8 million, an increase of 25.8% over the corresponding period in fiscal year
1997. The increase resulted primarily from strong domestic demand for the
Company's flexible factory automation systems and customer service and support.
Net export sales to Europe and Asia customers for the three months ended
December 28, 1997 were $16.8 million as compared to $17.4 million for the
corresponding period in fiscal year 1997, and accounted for 35.9% and 46.8% of
net revenue, respectively.
Gross Profit: The gross profit margin for the three months ended December
28, 1997 increased to 44.4% as compared to 43.1% for the corresponding period in
fiscal year 1997. The increase is primarily attributable to greater efficiency
in the Company's manufacturing operations associated with higher volumes and
cost reduction efforts undertaken by the Company.
Research and Development: Research and development expenses for the three
months ended December 28, 1997 were $6.9 million as compared to $5.6 million for
the corresponding period in fiscal year 1997, representing 14.8% and 15.1% of
net revenue, respectively. The increase in total spending primarily reflects the
increase in personnel and materials expense associated with continuing efforts
in new product development, particularly in 300mm product programs.
Selling, General and Administrative: Selling, general and administrative
expenses for the three months ended December 28, 1997 were $6.7 million as
compared to $4.9 million for the corresponding period in fiscal year 1997,
representing 14.3% and 13.1% of net revenue, respectively. The increase in total
spending reflects the Company's continuing investments in sales and support
organization in Europe, Taiwan, and to a lesser extent, Korea.
Acquired In-Process Research and Development: In October 1997, the company
acquired Interval Logic Corporation in a transaction valued at $8.5 million,
accounted for as a purchase. Interval Logic Corporation was formed in 1995 to
develop advanced, high-performance planning and scheduling software solutions
for the semiconductor industry. At the time of the acquisition, the purchase
price was allocated to the tangible and intangible assets of ILC based on the
fair market value of those assets using a risk adjusted discounted cash flow
approach. Specifically, the purchased technology was evaluated through extensive
interviews and analysis of data concerning the state of the technology and
needed developments. This evaluation of underlying technology acquired
considered the inherent difficulties and uncertainties in completing the
development, and thereby achieving technological feasibility, and the risks
related to the viability of and potential changes in future target markets. The
technology was deemed to be in-process research and development because the
Company needs to make significant further investments in development of the
technology, to integrate it with the Company's products, including the
"Transnet" product line, and to meet expected customer requirements. The
necessary developments include completion of the software requirements
definition, data integration and validation, completion of the graphics user
interface, development of alpha and beta versions for customer testing, and
integration and adaptation with customer systems. The underlying technology had
no alternative future use to the Company in other research and development
11
projects or otherwise. Therefore, the Company recognized a charge of $8,417,000
for the purchase of in-process research and development in October 1997.
Operating (Loss) Profit: The loss from operations for the three months
ended December 28, 1997 was $1.3 million as compared to income from operations
of $5.5 million for the corresponding period in fiscal 1997. Excluding the non-
recurring charge of $8.4 million related to acquired in-process research and
development recorded in the connection with the acquisition of Interval Logic
Corporation, operating income for the three months ended December 28, 1997 would
have been $7.2 million and operating margins would have increased to 15.3% from
14.9% in the comparable period in fiscal 1997.
Other Income, Net: Other income, net for the three months ended December
28, 1997 was $312,000 as compared to $347,000 for the corresponding period in
fiscal year 1997. Interest income for the three months ended December 28, 1997
was $325,000 as compared to $346,000 for the corresponding period in fiscal year
1997. The decrease is attributable to lower average cash and investment
balances.
Income Tax Provision: The effective tax rate for the three months ended
December 28, 1997 was adversely affected by the effect of the charge for the
acquired in-process research and development which is not deductible for federal
income tax purposes. Excluding this charge, the effective tax rate was 33.5% for
the three months ended December 28, 1997, as compared to 34.0% for the
corresponding period in fiscal year 1997.
Net (Loss) Income: The net loss for the three months ended December 28,
1997 was $3.4 million compared to net income of $3.9 million for the
corresponding period in fiscal year 1997. Excluding the charge for acquired in-
process research and development, net income for the three months ended December
28, 1997 would have been $5.0 million, or 10.6% of net revenue, as compared to
$3.9 million, or 10.4% of net revenue, in the same period in fiscal year 1997.
Diluted net income per common share excluding the charge for acquired in-process
research and development would have been $0.31 for the three months ending
December 28, 1997 as compared to $0.25 for the corresponding period in fiscal
year 1997.
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 December 28, 1997 the Company had working capital of $109.3 million,
including cash and cash equivalents of $39.8 million and short-term marketable
securities of $3.1 million.
Net cash provided by operating activities for the three months ended
December 28, 1997 was $12.7 million, compared to net cash used in operating
activities of $10.8 million for the corresponding period in fiscal year 1997.
Net cash provided by operating activities for the three months ended December
28, 1997 was primarily attributable to net income prior to the non-cash charge
associated with acquired in-process research and development of $5.0 million and
decreases in trade accounts receivable of $13.9 million, and inventory of $2.7
million, offset partially by an increase in contracts in process of $4.1 million
and decreases in accounts payable of $1.7 million and in accrued expenses of
$3.2 million. Net cash used in operating activities for the three months ended
December 29, 1996 was primarily attributable to increases in trade
12
accounts receivable of $6.4 million, contracts in progress of $5.5 million and
in inventory of $3.3 million, which more than offset net income of $3.9 million.
Net cash used in investing activities for the three months ended December
28, 1997 was $2.3 million as compared to net cash provided by investing
activities of $4.5 million for the corresponding period in fiscal year 1997. Net
cash used in investing activities for the three months ended December 28, 1997
was attributable to purchases of property and equipment of $1.8 million and of
marketable securities of $1.1 million offset partially by proceeds from
maturities of marketable securities of $685,000. Net cash provided by investing
activities for the three months ended December 29, 1996 was attributable to net
proceeds from sales of marketable securities of $6.0 million and proceeds from
maturities of marketable securities of $2.9 million offset partially by the
purchases of marketable securities of $3.2 million and property and equipment of
$1.1 million.
Net cash provided by financing activities for the three months ended
December 28, 1997 was $231,000 as compared to $707,000 for the corresponding
period in fiscal year 1997, and was attributable to the exercise of stock
options and issuance of common stock pursuant to the Company's Employee Stock
Purchase Plan.
At December 28, 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 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.
Acquisition of Equipe Technologies
On January 22, 1998, the Company completed the acquisition of Equipe
Technologies, Inc. and two related companies (collectively, "Equipe"). Equipe is
a leading worldwide developer, manufacturer, and supplier of wafer and substrate
handling robots, pre-aligners and controllers to the semiconductor process tool
manufacturers. The acquisition will be accounted for as a pooling-of interests.
The company believes the acquisition strengthens its position in semiconductor
factory automation and extends its ability to deliver complete wafer-flow
solutions allowing it to automate virtually every wafer move throughout the fab.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards (the "SFAS") No. 130, "Reporting
Comprehensive Income." This statement requires that changes in comprehensive
income be shown in a financial statement that is displayed with the same
prominence as other financial statements. The statement will be effective for
annual periods beginning after December 15, 1997 and the Company will adopt its
provisions in fiscal year 1999. Reclassification for earlier periods is
required for comparative
13
purposes. The Company is currently evaluating the impact this statement will
have on its financial statements; however, because the statement requires only
additional disclosure, the Company does not expect the statement to have a
material impact on its financial position or results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." This statement
includes requirements to report selected segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
statement will be effective for annual periods beginning after December 15, 1997
and the Company will adopt its provisions in fiscal year 1999. Reclassification
for earlier periods is required, unless impracticable, for comparative purposes.
The Company is currently evaluating the impact this statement will have on its
financial statements; however, because the statement requires only additional
disclosure, the Company does not expect the statement to have a material impact
on its financial position or results of operations.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued the Statement of Position ("SOP") 97-2 "Software Revenue
Recognition," which will supersede SOP 91-1. SOP 97-2 has not changed the basic
rules of revenue recognition but does provide more guidance particularly with
respect to multiple deliverables and "when and if available" products. SOP 97-2
is effective for transactions entered into for annual periods beginning after
December 15, 1997. The Company will adopt SOP 97-2 in fiscal year 1999 and has
not yet determined its impact.
14
PART II. OTHER INFORMATION
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 to the Restated Articles of Organization of
the Company
3.7 Articles of Amendment to the Restated Articles of Organization of
the Company
10.19 Agreement and Plan of Reorganization, dated as of October 25,
1997, among PRI Automation, Inc., E-Acquisition Corp., Equipe
Technologies, Inc. and Certain Stockholders of Equipe Technologies,
Inc. (filed as Exhibit 10.19 to the Company's Current Report on
Form 8-K, filed with the Commission on November 10, 1997, and
incorporated herein by reference).
10.20 Stock Purchase Agreement, dated as of October 25, 1997, among PRI
Automation, Inc. and the Shareholders of E-Machine, Inc. (filed as
Exhibit 10.20 to the Company's Current Report on Form 8-K, filed
with the Commission on November 10, 1997, and incorporated herein
by reference).
10.21 Stock Purchase Agreement, dated as of October 25, 1997, among PRI
Automation, Inc. and the Shareholders of Equipe Japan Corporation
(filed as Exhibit 10.21 to the Company's Current Report on Form 8-
K, filed with the Commission on November 10, 1997, and incorporated
herein by reference).
10.22 PRI Automation, Inc. 1997 Non-Incentive Stock Option Plan, as
amended
10.23 Lease agreement dated as of November 1, 1997 by and between the
Company and M/A-COM, a Division of AMP Incorporated.
27.1 Financial Data Schedule
- ---------------
* Incorporated by reference to the similarly-numbered Exhibit to the
Company's Registration Statement on Form S-1, File No. 33-81836.
** Incorporated by reference to the similarly numbered Exhibit to the
Company's Quarterly Report Form 10-Q, for the period ended March 30, 1997.
b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K (the "Form 8-K") with the
commission on November 10, 1997. The Form 8-K reported that the Company had
entered into agreements to acquire Equipe Technologies, Inc., a California
corporation ("Equipe"), and two companies related to Equipe, Equipe Japan
Corporation, a Japanese corporation, and E-Machine, Inc., a California
corporation. The Financial statements required by Item 7 of the Form 8-K were
filed by amendment of such form on December 12, 1997.
15
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: February 9, 1998 By: /s/ Stephen D. Allison
---------------------------------
Stephen D. Allison
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting
Officer)
16
EXHIBIT INDEX
Exhibit
Number Description Page
------ ----------- ----
3.7 Articles of Amendment to the Restated Articles of
Organization of the Company
10.19 Agreement and Plan of Reorganization, dated as of October
25, 1997, among PRI Automation, Inc., E-Acquisition Corp.,
Equipe Technologies, Inc. and Certain Stockholders of Equipe
Technologies, Inc. (filed as Exhibit 10.19 to the Company's
Current Report on Form 8-K, filed with the Commission on
November 10, 1997, and incorporated herein by reference).
10.20 Stock Purchase Agreement, dated as of October 25, 1997,
among PRI Automation, Inc. and the Shareholders of E-
Machine, Inc. (filed as Exhibit 10.20 to the Company's
Current Report on Form 8-K, filed with the Commission on
November 10, 1997, and incorporated herein by reference).
10.21 Stock Purchase Agreement, dated as of October 25, 1997,
among PRI Automation, Inc. and the Shareholders of Equipe
Japan Corporation (filed as Exhibit 10.21 to the Company's
Current Report on Form 8-K, filed with the Commission on
November 10, 1997, and incorporated herein by reference).
10.22 PRI Automation, Inc. 1997 Non-Incentive Stock Option Plan,
as amended
10.23 Lease agreement dated as of November 1, 1997 by and between
the Company and M/A-COM, a Division of AMP Incorporated.
27.1 Financial Data Schedule
1