Exhibit 13.1
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended June 30,
---------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(in thousands, except per share data)
Statements of Operations Data:
Net revenues..................................... $ 33,658 $ 43,065 $ 50,618 $ 59,069 $ 81,572
Cost of revenues................................. 18,312 22,142 28,089 34,788 46,812
-------- -------- -------- -------- --------
Gross margin.................................. 15,346 20,923 22,529 24,281 34,760
Operating expenses:
Research, development and engineering......... 4,246 5,628 7,075 6,598 8,098
Selling, general and administrative........... 12,754 13,451 13,486 14,722 20,201
Acquired in-process research and
development (1)............................. -- -- -- 2,972 --
-------- -------- -------- -------- --------
Total operating expenses.................... 17,000 19,079 20,561 24,292 28,299
Operating income (loss)....................... (1,654) 1,844 1,968 (11) 6,461
Interest income, net.......................... 212 191 163 440 496
-------- -------- -------- -------- --------
Income (loss) before provision for
income taxes................................ (1,442) 2,035 2,131 429 6,957
Provision for (benefit from) income taxes..... 37 145 (150) (496) 1,180
-------- -------- -------- -------- --------
Net income (loss)............................. $ (1,479) $ 1,890 $ 2,281 $ 925 $ 5,777
======== ======== ======== ======== ========
Net income (loss) per share (2)............... $ (.26) $ .32 $ .37 $ .14 $ .75
======== ======== ======== ======== ========
Shares used in per share calculation (2)...... 5,703 5,912 6,218 6,405 7,733
======== ======== ======== ======== ========
June 30,
---------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short term investments $ 5,361 $ 8,350 $ 6,677 $ 8,812 $ 10,975
Working capital.................................. 15,374 16,664 18,772 19,757 35,030
Total assets..................................... 21,776 25,892 29,304 38,371 56,352
Long term liabilities............................ 169 127 203 117 26
Total shareholders' equity....................... 17,337 19,307 21,598 25,678 42,823
<FN>
- ---------------
(1) In June 1995 the Company acquired SILMA Incorporated and incurred a charge
of $3.0 million for acquired in-process research and development in
connection with such purchase. See Note 2 of Notes to Consolidated
Financial Statements.
(2) See Note 1 of Notes to Consoldiated Financial Statements for a discussion
of the computation of net income (loss) per share.
</FN>
Quarterly Results of Operations (Unaudited) Exhibit 13.1
The Company operates and reports financial results ending on the last
Saturday of a thirteen week period for each of its first three fiscal quarters
and at June 30 for its fiscal year end. For convenience, the Company has
indicated in this annual report its fiscal quarters end on September 30,
December 31, and March 31.
Three Months Ended
------------------------------------------------------------------------------
Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30,
1994 1994 1995 1995 1995 1995 1996 1996
------- ------- ------- ------- ------- ------- ------- -------
(in thousands)
Net revenues .................................. $13,483 $13,846 $15,016 $16,724 $19,671 $20,743 $20,800 $20,358
Cost of revenues .............................. 7,872 7,884 8,937 10,095 11,358 11,923 11,852 11,679
------- ------- ------- ------- ------- ------- ------- -------
Gross margin ................................ 5,611 5,962 6,079 6,629 8,313 8,820 8,948 8,679
Operating expenses:
Research, development and engineering ....... 1,602 1,605 1,587 1,804 1,946 2,073 2,112 1,967
Selling, general and administrative ......... 3,401 3,599 3,674 4,048 4,801 4,985 5,126 5,289
Acquired in-process research and
development(1) ............................. -- -- -- 2,972 -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses .................. 5,003 5,204 5,261 8,824 6,747 7,058 7,238 7,256
Operating income (loss) ....................... 608 758 818 (2,195) 1,566 1,762 1,710 1,423
Interest income, net .......................... 68 86 130 156 101 33 210 152
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before provision income taxes ... 676 844 948 (2,039) 1,667 1,795 1,920 1,575
Provision for (benefit from) income taxes ..... (99) (123) (138) (136) 288 312 325 255
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) ............................. $ 775 $ 967 $ 1,086 $(1,903) $ 1,379 $ 1,483 $ 1,595 $ 1,320
======= ======= ======= ======= ======= ======= ======= =======
As a Percentage of Net Revenues:
Net revenues .................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues .............................. 58.4 56.9 59.5 60.3 57.7 57.5 57.0 57.4
------- ------- ------- ------- ------- ------- ------- -------
Gross margin ................................ 41.6 43.1 40.5 39.7 42.3 42.5 43.0 42.6
Operating expenses:
Research, development and engineering ....... 11.9 11.6 10.6 10.8 9.9 10.0 10.2 9.6
Selling, general and administrative ......... 25.2 26.0 24.5 24.2 24.4 24.0 24.6 26.0
Acquired in-process research and development. -- -- -- 17.8 -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses .................. 37.1 37.6 35.1 52.8 34.3 34.0 34.8 35.6
Operating income (loss) ....................... 4.5 5.5 5.4 (13.1) 8.0 8.5 8.2 7.0
Interest income, net .......................... 0.5 0.6 0.9 0.9 0.5 0.2 1.0 0.7
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before provision for income taxes 5.0 6.1 6.3 (12.2) 8.5 8.7 9.2 7.7
Provision for (benefit from) income taxes ..... (0.7) (0.9) (0.9) (0.8) 1.5 1.5 1.5 1.2
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) ............................. 5.7% 7.0% 7.2% (11.4)% 7.0% 7.2% 7.7% 6.5%
======= ======= ======= ======= ======= ======= ======= =======
<FN>
- ---------------
(1) In June 1995 the Company acquired SILMA Incorporated and incurred a charge
of $3.0 million for acquired in-process research and development in
connection with such purchase. See Note 2 of Notes to Consolidated
Financial Statements.
</FN>
Market for Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock has been traded on the NASDAQ National Market
under the symbol ADTK since the Company's initial public offering on December
15, 1995. The following table sets forth the range of high and low closing sale
prices as reported on the Nasdaq National Market System.
Dec. 31, Mar. 31, Jun. 30,
1995 1996 1996
-------- -------- --------
High........................... $ 11.25 $ 17.75 $ 20.25
Low............................ $ 9.50 $ 9.25 $ 12.00
At June 30, 1996, there were approximately 487 shareholders of record. To
date, the Company has neither declared nor paid cash dividends on shares of its
Common Stock. The Company currently intends to retain all future earnings for
its business and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future.
Exhibit 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in the following Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: the potential fluctuations in the Company's
quarterly and annual results of operations; the cyclicality of capital spending
of the Company's customers; the Company's dependence on the continued growth of
the intelligent automation market; the risks associated with sole or single
sources of supply and lengthy procurement lead times; the Company's highly
competitive industry; rapid technological change within the Company's industry;
the lengthy sales cycles for the Company's products; the risks associated with
reliance on system integrators; the risks associated with international sales
and purchases; the risks associated with potential acquisitions and the need to
manage growth; the risks associated with new product development and the need to
manage product transitions, including any difficulties or delays in the
development, production, testing and marketing of the Company's new PC products
under development, and generally in the migration of Silma from the UNIX
platform to the PC platform or difficulties or delays in the development,
production, testing and marketing of the Company's other new products under
development; the Company's dependence on retention and attraction of key
employees; the risks associated with product defects; the Company's dependence
on third-party relationships; the uncertainty of patent and proprietary
technology protection and third party intellectual property claims; changes in,
or failure or inability to comply with, government regulations; general economic
and business conditions; the failure of any new products to be accepted in the
marketplace; the inability of the Company to effectively integrate Silma's
personnel into the Company; decreased investment in robotics generally, and in
the Company's intelligent automation products particularly, as a result of
general or specific economic conditions or conditions affecting any of the
Company's primary markets; decreased acceptance of the Company's current
products in the marketplace; and the other factors referenced in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
OVERVIEW
The Company designs, manufactures and markets intelligent automation software
and hardware products for assembly, material handling and packaging
applications. The Company's products currently include machine controllers for
robot mechanisms and other flexible automation equipment, machine vision
systems, simulation software and a family of mechanisms including robots and
linear modules. In addition, the Company recently introduced a vision-based
flexible part feeder. The Company's net revenues have increased over time as its
robot product lines have grown, its advanced software and sensing technologies
have enabled robots to perform a wider range of functions and the Company has
expanded its channel of system integrators. In fiscal 1994 the Company began
selling significant volumes of its software and controller products to OEMs. In
addition, net revenues from international sales have increased as the Company
has expanded its international sales and marketing operations.
The Company sells its products through system integrators, its direct sales
force and OEMs. System integrators and OEMs add application-specific hardware
and software to the Company's products, thereby enabling the Company to provide
solutions to a diversified industry base, including the electronics,
telecommunications, appliances, pharmaceutical, food processing and automotive
components industries. Net revenues have increased in each of the Company's last
three fiscal years; however, there can be no assurance that the Company's net
revenues will continue to grow or that the Company will be profitable in future
periods. Accordingly, the Company's historical results of operations should not
be relied upon as an indication of future performance.
In June 1995 the Company purchased the assets and assumed the liabilities of
SILMA Incorporated ("Silma"), a developer of simulation software. The
acquisition was accounted for under the purchase method of accounting.
1
Exhibit 13.1
Results of Operations
Comparison of Fiscal 1994 to 1995
Net revenues. The Company's net revenues increased by 16.7% from $50.6 million
in fiscal 1994 to $59.1 million in fiscal 1995. The growth in net revenues was
primarily attributable to increased shipments of robot products, in particular
the Company's then new Adept 550 Robot, increased shipments of the Company's
motion controller product, and to a lesser extent, to increased service
revenues. International sales, including sales to Canada, were $23.1 million or
45.6% of net revenues in fiscal 1994 as compared with $24.0 million or 40.6% of
net revenues in fiscal 1995. The absolute dollar increase in international sales
in fiscal 1995 reflects the Company's continued investment in international
sales, marketing and distribution activities.
Gross margin. Gross margin percentage was 44.5% in fiscal 1994 and 41.1% in
fiscal 1995. The decrease in gross margin was primarily attributable to a higher
proportion of sales of lower margin mechanical subsystems sourced from third
parties in the second half of the fiscal year, increased warranty costs
associated with new products, and higher costs for yen denominated purchases of
mechanisms and components due to unfavorable exchange rates.
Research, Development and Engineering. Research, development and engineering
expenses decreased by 7.0%, from $7.1 million or 14.0% of net revenues in fiscal
1994 to $6.6 million or 11.2% of net revenues in fiscal 1995. The decrease in
research, development and engineering expenses is primarily attributable to a
reduction in prototype expenses and receipt of third party development funding
of $250,000, partially offset by higher outside consulting expenses.
Selling, General and Administrative. Selling, general and administrative
expenses increased 8.9% from $13.5 million or 26.6% of net revenues in fiscal
1994 to $14.7 million or 24.9% of net revenues in fiscal 1995. This increased
spending was primarily attributable to increased headcount, and to a lesser
extent, to an increase in sales commissions associated with the Company's higher
revenue levels.
Acquired In-Process Research and Development. In June 1995 the Company purchased
the assets and assumed the liabilities of Silma for $5.0 million. The assets
acquired included net tangible assets valued at $531,000, completed software,
goodwill and other intangibles totaling $1.5 million, and software in the
development stage valued at approximately $3.0 million which was expensed in the
June 1995 fiscal quarter as it had not yet reached technological feasibility and
did not have alternative future uses.
Interest Income (Expense), Net. Interest income, net increased from $163,000 in
fiscal 1994 to $440,000 in fiscal 1995. The increase was primarily attributable
to additional interest income earned on higher invested cash balances.
Provision for (Benefit from) Income Taxes. Income tax benefit was $150,000 and
$496,000 in fiscal years 1994 and 1995, respectively. These tax provisions are
comprised primarily of state income taxes, foreign taxes and federal alternative
minimum taxes and have been reduced due to the utilization of net operating loss
carryforwards. The tax provisions were further reduced by adjustments of the
valuation allowance for deferred tax assets of $300,000 and $1.0 million in
fiscal years 1994 and 1995, respectively, offset by the tax impact of the
nondeductible charge for acquired in-process research and development made in
connection with the acquisition of Silma in June 1995.
Comparison of Fiscal 1995 to 1996
Net revenues. The Company's net revenues increased by 38.1% from $59.1 million
in fiscal 1995 to $81.6 million in fiscal 1996. The growth in net revenues was
primarily attributable to higher shipments of existing products, increased
service and upgrade revenues and, to a lesser extent, to increased net revenues
from simulation software. International sales, including sales to Canada, were
$24.0 million or 40.6% of net revenues in fiscal 1995, as compared with $32.2
million or 39.4% of net revenues in fiscal 1996.
2
Exhibit 13.1
Although net revenues increased in fiscal year 1996, the Company did experience
moderation in its overall growth rate in the second half of fiscal 1996 as
compared to the Company's growth rate in prior quarters. See "Significant
Fluctuations in Operating Results." In addition, although the Company's Silma
business contributed to the Company's overall revenue growth in fiscal 1996, in
the fourth quarter of fiscal 1996 the Silma business experienced lower revenues
due to unexpected competitive pressures and organizational issues. The Company
is continuing to work on the integration of Silma into the Company following the
management reorganization of the Silma group during the third quarter of fiscal
1996 to better integrate the group's activities into the Company.
Gross margin. Gross margin percentage was 41.1% in fiscal 1995 and 42.6% in
fiscal 1996. The increase in gross margin was primarily attributable to higher
gross margins on simulation software products from Silma, of which there were
none in fiscal 1995.
The Company expects that it will continue to experience fluctuations in gross
margin percentage due to changes in its sales and product mix.
Research, Development and Engineering. Research, development and engineering
expenses increased by 22.7% from $6.6 million in fiscal 1995 to $8.1 million in
fiscal 1996. The increase in research, development and engineering expenses is
primarily attributable to the addition of the research and development expenses
of the Company's Silma business. The increase in research, development and
engineering expenses for fiscal 1996 was partially offset by $1.1 million of
third party development funding as compared with only $250,000 of third party
development funding in fiscal 1995. The Company expects that it will continue to
receive third party development funding from the federal and California state
governments during fiscal 1997 but that the amount of such funding will be lower
than amounts received in fiscal 1996. There can be no assurance that any funds
budgeted by either government for the Company's development projects will not be
curtailed or eliminated at any time. As a percentage of net revenues, research,
development and engineering expenses decreased from 11.2% in fiscal 1995 to 9.9%
in fiscal 1996. Research, development and engineering expenses as a percentage
of net revenues declined because the increase in research, development and
engineering expenses was more than offset by the increase in net revenues.
Selling, General and Administrative. Selling, general and administrative
expenses increased 37.2% from $14.7 million or 24.9% of net revenues in fiscal
1995 to $20.2 million or 24.8% of net revenues in fiscal 1996. This increased
spending was primarily attributable to the addition of the Company's Silma
business, and to a lesser extent, to increased headcount and sales commissions
associated with the Company's higher revenue levels, additional administrative
expenses associated with being a public company and a higher employee incentive
bonus accrual. The increase in the incentive bonus accrual was primarily
attributable to higher operating profitability in fiscal 1996 as compared with
fiscal 1995. The Company expects that selling, general and administrative
expenses will continue to increase in absolute dollars in future periods,
although as a percentage of net revenues, selling, general and administrative
expenses may fluctuate in future periods.
Interest Income (Expense), Net. Interest income, net in fiscal 1995 was
$440,000, compared to $496,000 in fiscal 1996. The increase was due to
additional interest income earned by the investment of cash proceeds from the
sale of common stock in the Company's initial public offering in December 1995,
partially offset by lower investment yields in fiscal 1996.
Provision for (Benefit from) Income Taxes. The Company recorded a tax benefit of
($496,000) in fiscal 1995 due to the utilization of net operating loss
carryforwards and a reduction in the valuation allowance for deferred tax
assets, offset by the tax impact of the nondeductible charge for acquired
in-process research and development made in connection with the acquisition of
Silma in June 1995. The Company's effective tax rate in fiscal 1996 was 17%. The
Company's tax rate differed from the statutory income tax rate primarily due to
the utilization of tax credit carryforwards and to a reduction in the valuation
allowance for deferred tax assets, partially offset by state income taxes and
taxes on the Company's foreign operations.
3
Exhibit 13.1
Derivative Financial Instruments. The Company makes yen-denominated purchases of
certain components and mechanical subsystems from Japanese suppliers. In fiscal
1995 this resulted in material unfavorable foreign exchange transactions
included in cost of revenues. At certain times the Company has entered into
forward foreign exchange contracts, primarily to hedge against the short term
impact of foreign currency fluctuations on purchases denominated in yen. The
maturities of the forward foreign exchange contracts are short term in nature,
generally 90 days. The Company sells its products to certain Japanese customers
in yen. Depending on the ratio of yen-denominated purchases to yen-denominated
sales, the Company may engage in additional hedging transactions in the future.
Notwithstanding these precautions, however, the Company remains subject to the
transaction exposures that arise from foreign exchange movements between the
dates foreign currency export sales or purchase transactions are recorded and
the dates cash is received or payments are made in foreign currencies.
Significant Fluctuations in Operating Results
The Company's operating results have historically been, and will continue to be,
subject to significant quarterly and annual fluctuations due to a number of
factors, including fluctuations in capital spending domestically and
internationally or in one or more industries to which the Company sells its
products, new product introductions by the Company or its competitors, changes
in product mix and pricing by the Company, its suppliers or its competitors,
availability of components and raw materials, failure to manufacture a
sufficient volume of products in a timely and cost-effective manner, failure to
introduce new products on a timely basis, failure to anticipate changing
customer product requirements, lack of market acceptance or shifts in the demand
for the Company's products, changes in the mix of sales by distribution channel,
changes in the spending patterns of the Company's customers, and extraordinary
events such as litigation or acquisitions. The Company's gross margins may vary
greatly depending on the mix of sales of lower margin hardware products,
particularly mechanical subsystems sourced from third parties, and higher margin
software products. The Company's operating results will also be affected by
general economic and other conditions affecting the timing of customer orders
and capital spending. The Company generally recognizes product revenue upon
shipment or, for certain international sales, upon receipt by the customer. The
Company's net revenues and results of operations for a fiscal period will
therefore be affected by the timing of orders received and orders shipped during
such period. A delay in shipments near the end of a fiscal period, due for
example to product development delays or to delays in obtaining materials, could
materially adversely affect the Company's business, financial condition and
results of operations for such period. Moreover, continued investments in
research and development, capital equipment and ongoing customer service and
support capabilities will result in significant fixed costs which the Company
will not be able to reduce rapidly and, therefore, if the Company's sales for a
particular fiscal period are below expected levels, the Company's business,
financial condition and results of operations for such fiscal period could be
materially adversely affected. In addition, while in some years revenue from
international sales has helped buffer the Company against slowdowns in U.S.
capital spending, in other years the higher costs associated with international
sales, combined with downturns in international markets, have adversely affected
the Company's results of operations. There can be no assurance that the Company
will be able to increase or sustain profitability on a quarterly or annual basis
in the future.
The Company has experienced and is expected to continue to experience
seasonality in product bookings. The Company has historically had higher
bookings for its products during the June quarter of each fiscal year and lower
bookings during the September quarter of each fiscal year, due primarily to the
slowdown in sales to European markets. In the past the Company has generally
been able to maintain revenue levels during the September fiscal quarter by
utilizing backlog from the June fiscal quarter.
In the June quarter of fiscal 1996, however, sales were lower than anticipated
due to competitive pressures and organizational issues with respect to the
Company's Silma group. In addition, in the September quarter of fiscal 1997,
sales to European and other international markets decreased substantially, as
several large orders were delayed by customers. The decrease in product bookings
has resulted in decreased net revenues for the September quarter of fiscal 1997.
The Company currently expects that net revenues for the September fiscal quarter
will be between $17.8 and $18.8 million. The Company currently expects that it
will show a profit for the September fiscal quarter. As a result of the
decreased net revenues, however, the Company expects that earnings for the
September fiscal quarter will be significantly below analysts' expectations. In
addition, the Company currently believes that a number of factors will limit the
Company's ability to grow earnings through the end of calendar 1996. These
factors include the overall moderation in the growth rate of the intelligent
automation industry, the slowdown in sales to European and other international
markets, the competitive pressures and organizational issues facing the Silma
business and increased investments in product development and marketing
programs. The Company currently expects that production
4
Exhibit 13.1
shipments of certain new products under development, including AdeptRAPID and
CimStation Inspection on the PC, an AdeptWindows PC interface for MV Controllers
and AdeptModules on MV Controller Integration Kits, will commence in the latter
half of fiscal 1997. However, there can be no assurance that these products will
be timely developed or that they will achieve acceptance in the marketplace.
Moreover, because product bookings were low in the September quarter of fiscal
1997, the Company's backlog is also down and inventories have increased. In the
event product bookings and net revenues for the December quarter of fiscal
1997 are insufficient to compensate for the lower product bookings in the
September fiscal quarter, the Company's results of operations for the December
quarter of fiscal 1997 and future fiscal quarters could be materially adversely
affected.
In addition, a significant percentage of the Company's product shipments occur
in the last month of each fiscal quarter. Historically this has been due to a
lack of component availability from sole or single source suppliers or, with
respect to components with long procurement lead times, due to inaccurate
forecasting of the level of demand for the Company's products or of the product
mix for a particular fiscal quarter. The Company has therefore from time to time
been required to utilize components and other materials for current shipments
which were scheduled to be incorporated into products to be shipped in
subsequent periods. If the Company were unable to obtain additional components
or mechanical subsystems to meet increased demand for its products, or to meet
demand for a product mix which differed from the forecasted product mix, or if
for any reason the Company failed to ship sufficient product prior to the end of
the fiscal quarter, the Company's business, financial condition and results of
operations could be materially adversely affected.
Liquidity and Capital Resources
The Company completed its initial public offering of common stock in December
1995, raising approximately $10.0 million net of offering expenses. Prior to
December 1995, the Company financed its operations through private sales of
equity securities, cash flow from operations, capital equipment leases, and bank
lines of credit. As of June 30, 1996, the Company had working capital of
approximately $35.0 million, including $8.1 million in cash and cash equivalents
and $2.9 million in short term investments.
Cash Flows From Operating Activities
Net cash provided by (used in) operating activities was $6.1 million for fiscal
1995 and ($5.6) million for fiscal 1996. The decrease from fiscal 1995 to fiscal
1996 reflects an increase in accounts receivable and inventories, partially
offset by net income adjusted for depreciation. The increase in accounts
receivable is attributable in part to the Company's higher net revenues in
fiscal 1996. In addition, some of the Company's customers have been lengthening
the time period over which they pay the Company for products shipped to such
customers. The increase in inventories is attributable in part to the Company's
higher net revenues in fiscal 1996 and also to lower than expected product
shipments in the June quarter of fiscal 1996.
Cash Flows From Investing Activities
Net cash used in investing activities was $6.7 million in fiscal 1995, due
primarily to purchases of short term investments aggregating $2.9 million,
purchases of property and equipment aggregating $2.0 million, and $1.8 million
paid for the acquisition of Silma. Net cash used in investing activities was
$2.9 million in fiscal 1996, due primarily to purchases of property and
equipment aggregating $3.0 million, offset by some proceeds from the sale of
property and equipment. Property and equipment purchases in fiscal 1996 included
$551,000 for test fixtures, tooling and other factory investments, $1.2 million
for MIS equipment and $1.1 million for laboratory and other equipment. The
Company currently anticipates capital expenditures of approximately $4.4 million
during fiscal 1997, including approximately $1.5 million for test fixtures,
tooling and other factory investments, approximately $1.3 million for MIS
equipment and approximately $1.6 million for laboratory and other equipment.
5
Exhibit 13.1
Cash Flows From Financing Activities
Net cash of $10.7 million was provided by financing activities in fiscal 1996,
including $10.0 million in proceeds from the sale of common stock in the
Company's initial public offering and $973,000 in proceeds from employee stock
incentive and purchase plans and payments on notes receivable from shareholders,
partially offset by principal payments on capital lease obligations of $292,000.
The Company believes that the existing cash and cash equivalent balances as well
as short term investments and anticipated cash flow from operations will be
sufficient to support the Company's working capital requirements for at least
the next twelve months.
New Accounting Pronouncements
In 1995, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of". FAS 121
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. FAS 121 is effective for fiscal years beginning
after December 15, 1995. Adoption of FAS 121 is not expected to have a material
impact on the Company's financial position or results of operations.
The Company accounts for its stock option plans and its employee stock purchase
plan in accordance with the provisions of the Accounting Principles Board's
Opinion No. 25 (APB), "Accounting for Stock Issued to Employees". In 1995, the
Financial Accounting Standards Board released the Statement of Financial
Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation". FAS 123 provides an alternative to APB 25 and is effective for
fiscal years beginning after December 15, 1995. As permitted under FAS 123, the
Company expects to continue to account for its employee stock plans in
accordance with provisions of APB 25. Accordingly, FAS 123 is not expected to
have any material impact on the Company's financial position or results of
operations.
6
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, June 30,
1995 1996
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 5,912 $ 8,075
Short term investments 2,900 2,900
Accounts receivable, less allowance for doubtful
accounts of $482 in 1995 and $465 in 1996 13,592 20,495
Inventories 8,787 14,808
Deferred tax assets and prepaid expenses 1,142 2,255
------- -------
Total current assets 32,333 48,533
Property and equipment at cost:
Computer equipment 2,849 3,312
Office furniture and equipment 1,438 1,767
Machinery and equipment 8,496 11,450
------- -------
12,783 16,529
Less accumulated depreciation and amortization 8,866 10,798
------- -------
Net property and equipment 3,917 5,731
Intangible assets related to acquisition of Silma
Incorporated, net of accumulated amortization
of $306 in 1996 1,473 1,167
Other assets 648 921
------- -------
Total assets $38,371 $56,352
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,785 $ 6,894
Accrued payroll and related expenses 2,014 2,635
Accrued warranty 1,026 1,387
Accrued customer rebates 644 99
Deferred revenue 408 561
Other accrued liabilities 1,410 1,839
Current portion of obligations under capital leases 289 88
------- -------
Total current liabilities 12,576 13,503
Obligations under capital leases 117 26
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
5,000 shares authorized, none issued and outstanding -- --
Convertible preferred stock, no par value:
4,372 shares authorized at June 30, 1995;
none at June 30, 1996; 4,043 issued and outstanding
at June 30, 1995, none at June 30, 1996 30,185 --
Common stock, no par value:
25,000 shares authorized; 2,120 and 7,869 issued and
outstanding at June 30, 1995 and 1996, respectively 3,977 45,383
Accumulated deficit (8,337) (2,560)
------- -------
25,825 42,823
Less notes receivable from shareholders 147 --
------- -------
Total shareholders' equity 25,678 42,823
------- -------
Total liabilities and shareholders' equity $38,371 $56,352
======= =======
See accompanying notes.
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Year Ended June 30,
---------------------------------
1994 1995 1996
------- ------- -------
Net revenues $50,618 $59,069 $81,572
Cost of revenues 28,089 34,788 46,812
------- ------- -------
Gross margin 22,529 24,281 34,760
Operating expenses:
Research, development and engineering 7,075 6,598 8,098
Selling, general and administrative 13,486 14,722 20,201
Acquired in-process research
and development -- 2,972 --
------- ------- -------
Total operating expenses 20,561 24,292 28,299
------- ------- -------
Operating income (loss) 1,968 (11) 6,461
Interest income 236 476 540
Interest expense 73 36 44
------- ------- -------
Income before provision for income taxes 2,131 429 6,957
Provision for (benefit from) income taxes (150) (496) 1,180
------- ------- -------
Net income $ 2,281 $ 925 $ 5,777
======= ======= =======
Net income per share $ .37 $ .14 $ .75
======= ======= =======
Shares used in computing net income per share 6,218 6,405 7,733
======= ======= =======
See accompanying notes.
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended June 30,
-------------------------------
1994 1995 1996
------- ------- -------
Operating activities
Net income $ 2,281 $ 925 $ 5,777
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,410 1,533 2,364
(Gain) loss on disposal of property and equipment 256 87 (45)
Acquired in-process research and development -- 2,972 --
Tax benefit from stock plans -- -- 367
Changes in operating assets and liabilities:
Accounts receivable (2,890) (1,206) (6,903)
Inventories (1,515) (1,491) (6,853)
Deferred tax assets and prepaid expenses (421) (406) (1,113)
Other assets 201 (620) (317)
Accounts payable 1,081 3,887 109
Accrued payroll and related expenses (700) (2) 621
Accrued warranty (107) 315 361
Accrued customer rebates 78 176 (545)
Deferred revenue (6) (189) 153
Other accrued liabilities 627 151 388
------- ------- -------
Total adjustments (1,986) 5,207 (11,413)
------- ------- -------
Net cash provided by (used in) operating activities 295 6,132 (5,636)
------- ------- -------
Investing activities
Purchase of property and equipment, net (2,177) (2,040) (2,968)
Proceeds from the sale of property and equipment 51 24 58
Purchases of available for sale investments -- (2,900) (13,500)
Sales of available for sale investments -- -- 13,500
Cash paid for acquisition, net of cash received -- (1,818) --
------- ------- -------
Net cash used in investing activities (2,126) (6,734) (2,910)
------- ------- -------
Financing activities
Principal payment for capital lease obligations (263) (186) (292)
Proceeds from sales and leaseback of property and equipment 411 -- --
Proceeds from common stock issued under initial public offering -- -- 10,028
Proceeds from employee stock incentive program, employee
stock purchase plan, net of repurchases, cancellations, and
payments of notes receivable from shareholders 10 23 973
------- ------- -------
Net cash provided by (used in) financing activities 158 (163) 10,709
------- ------- -------
Increase (decrease) in cash and cash equivalents (1,673) (765) 2,163
Cash and cash equivalents, beginning of period 8,350 6,677 5,912
------- ------- -------
Cash and cash equivalents, end of period $ 6,677 $ 5,912 $ 8,075
======= ======= =======
Supplemental disclosure of noncash activities:
Conversion of preferred stock to common stock $ -- $ -- $30,185
Inventory capitalized into property, equipment and related tax $ -- $ -- $ 873
Cash paid during the period for:
Interest $ 73 $ 36 $ 44
Taxes $ 252 $ 27 $ 1,781
<FN>
Capital lease obligations of approximately $411 were incurred when the Company
entered into capitalized leases for new equipment in fiscal 1994. There were no
new capital leases in fiscal 1995 or 1996. Capital lease obligations of
approximately $202 were assumed as part of the Company's acquisition of SILMA
Incorporated (see Note 2).
See accompanying notes.
</FN>
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Convertible Notes
Preferred Stock Common Stock Receivable Total
----------------- ---------------- Accumulated From Shareholders'
Shares Amount Shares Amount Deficit Shareholders Equity
------ ------ ------ ------ ----------- ------------ -------------
Balance at June 30, 1993 4,043 $ 30,185 1,570 $ 812 ($11,543) ($ 147 $ 19,307
Common stock issued under employee
stock incentive program -- -- 10 10 -- -- 10
Net income -- -- -- -- 2,281 -- 2,281
------ ------- ----- ------- ------- ------ --------
Balance at June 30, 1994 4,043 30,185 1,580 822 (9,262) (147) 21,598
Common stock issued under
employee stock incentive program -- -- 18 23 -- -- 23
Common stock issued in connection
with acquisition -- -- 522 3,132 -- -- 3,132
Net income -- -- -- -- 925 -- 925
------ ------- ----- ------- ------- ------ --------
Balance at June 30, 1995 4,043 30,185 2,120 3,977 (8,337) (147) 25,678
Common stock issued under initial public
offering net of issuance costs -- -- 1,250 10,028 -- -- 10,028
Conversion of preferred stock to common stock (4,043) (30,185) 4,067 30,185 -- -- --
Common stock issued under employee stock
incentive program, employee
stock purchase plan, net of repurchase,
cancellations, and payments of notes
receivable from shareholders -- -- 432 826 -- 147 973
Tax benefit from stock plans -- -- -- 367 -- -- 367
Net income -- -- -- -- 5,777 -- 5,777
------ ------- ----- ------- ------- ------ --------
Balance at June 30, 1996 -- $ -- 7,869 $45,383 ($ 2,500) $ -- $ 42,823
====== ======= ===== ======= ======= ====== ========
<FN>
See accompanying notes.
</FN>
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Adept Technology, Inc. ("Adept" or the "Company") was incorporated under the
laws of the state of California on June 14, 1983. The Company designs,
manufactures and markets intelligent automation software and hardware products
for automating assembly, material handling and packaging applications.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned international subsidiaries, and SILMA Incorporated
("Silma"), acquired by the Company on June 28, 1995 (see Note 2).
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
The Company applies Financial Accounting Standards Board Statement No. 52
(FAS 52), "Foreign Currency Translation," with respect to its international
operations, which are sales and service entities. All monetary assets and
liabilities are translated at the current exchange rate at the end of the
period, nonmonetary assets and liabilities are translated at historical exchange
rates, and revenues and expenses are translated at average exchange rates in
effect during the period. Gains or (losses) which result from the process of
remeasuring foreign currency financial statements in U.S. dollars were $72,000,
$38,000 and $(105,000) in fiscal 1994, 1995 and 1996, respectively. As these
amounts have been immaterial, the Company has included these gains and (losses)
in net income. Transaction gains and (losses) were $30,000, $(59,000) and
$70,000 in fiscal 1994, 1995 and 1996, respectively.
Reverse Stock Split
In October 1995, the Company's Board of Directors and shareholders approved
a 1-for-4 reverse stock split of the Company's preferred and common stock. All
preferred, common, common equivalent shares and income per share amounts in the
accompanying consolidated financial statements have been retroactively adjusted
to give effect to this reverse stock split. In addition, the Board of Directors
and shareholders approved changing the authorized common stock from 30,000,000
shares to 25,000,000.
Cash, Cash Equivalents and Short Term Investments
Cash and Cash Equivalents--Cash and cash equivalents reflect highly liquid
investments with maturities at the date of purchase of three months or less.
Cash equivalents consist of commercial paper and money market accounts. Through
June 30, 1996, the Company has invested cash in excess of operating requirements
in A1/P1 rated investments at prevailing market interest rates at the time of
purchase. At June 30, 1995, the Company had reflected a bank overdraft of
approximately $991,000 in accounts payable on the consolidated balance sheet.
This amount was repaid to the bank on July 5, 1995.
Short Term Investments--Effective at the beginning of fiscal year 1995, the
Company adopted Statement of Financial Accounting Standards No. 115 (FAS
115), "Accounting for Certain Investments in Debt and Equity Securities." FAS
115 requires the Company to determine the appropriate classification of its
investments in debt and equity securities at the time of purchase and to
reevaluate such classification as of each balance sheet date. The Company's
short term investments consist of U.S. government agency securities and money
market auction rate preferred stock with maturities of one year or less, are
classified as available for sale, and as such are carried at fair value. Fair
value is based upon quoted market prices on the last day of the fiscal year. The
cost of debt securities sold is based on the specific identification method. The
Company had no investments in equity securities at June 30, 1995 and 1996. Due
to insignificant differences between the cost and fair value of the Company's
investments, the adoption of FAS 115 had no material effect on the Company's
investments at
1
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 1, 1994. In accordance with FAS No. 115, prior period financial statements
have not been restated. Cash, cash equivalents, and short term investments
consisted of the following (in thousands):
Cost at FMV at Cost at
6/30/95 6/30/96 6/30/96
------- -------- --------
Cash and cash equivalents
Cash............................................ $ 514 $ 1,486 $ 1,486
Money market funds.............................. 157 1,143 1,143
Commercial paper................................ 5,241 5,446 5,446
------- -------- --------
Cash and cash equivalents........................... 5,912 8,075 8,075
------- -------- --------
Short-term investments
Government agency notes......................... - 1,000 1,000
Market auction preferred........................ 2,900 1,900 1,900
------- -------- --------
Short-term investments.............................. 2,900 2,900 2,900
------- -------- --------
Cash, cash equivalents and short-term investments... $ 8,812 $ 10,975 $ 10,975
======= ======== ========
Realized gains or losses, interest, and dividends are included in interest
income. At June 30, 1995, the fair market value of cash, cash equivalents and
short term investments approximated cost. At June 30, 1995, and 1996, realized
and unrealized gains or losses from available-for-sale securities were not
material.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
The components of inventories are as follows (in thousands):
June 30,
---------------------
1995 1996
------- --------
Raw materials................................. $ 4,877 $ 9,488
Work-in-process............................... 2,473 3,069
Finished goods................................ 1,437 2,251
------- --------
$ 8,787 $ 14,808
======= ========
Revenue Recognition
The Company generally recognizes revenue on products at the time of
shipment. For certain international sales where title and risk of loss are
transferred at the customer's site, revenue is recognized upon receipt of
product by the customer. A provision for the estimated cost to repair or replace
products under warranty at the time of sale are recorded in the same period as
the related revenues.
The Company recognizes software revenue, primarily related to its simulation
software products, in accordance with the American Institute of Certified Public
Accountants' Statement of Position 91-1 on Software Revenue Recognition. License
revenue is recognized on shipment of the product provided that no significant
vendor or postcontract support obligations remain and that collection of the
resulting receivable is deemed probable by management. Insignificant vendor and
post contract support obligations are accrued upon shipment. Service revenue
includes training, consulting and customer support. Revenues from training and
consulting are recognized at the time the service is performed.
Deferred revenue, which is included in other accrued liabilities, primarily
relates to software support contracts sold under separate arrangements with
customers. The term of the software support contract is generally one year, and
the Company recognizes the associated revenue on a pro rata basis over the life
of the contract.
2
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents, money market auction rate
preferred stocks and trade receivables. The Company places its cash equivalents
and short term investments with high credit-quality financial institutions. The
Company invests its excess cash in commercial paper, readily marketable debt
instruments and collateralized funds of U.S., state and municipal government
entities. The Company has established guidelines relative to credit ratings,
diversification and maturities that seek to maintain safety and liquidity. The
Company manufactures and sells its products to system integrators, end users and
OEMs in diversified industries. The Company performs ongoing credit evaluations
of its customers and does not require collateral. However, the Company may
require the customers to make payments in advance of shipment or to provide a
letter of credit. The Company provides reserves for potential credit losses, and
such losses have been within management's expectations.
Depreciation and Amortization
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets, which range from three to five
years. Assets under capital leases are amortized over the shorter of the asset
life or the remaining lease term.
Research, Development and Engineering Costs
Research, development and engineering costs, other than research and
development costs of computer software, are charged to expense when incurred.
The Company has received third party funding of $0, $250,000 and $1,081,000 in
fiscal 1994, 1995 and 1996, respectively. The Company has offset research,
development and engineering expenses by the third party funding, as the third
party funding is based upon research and development expenditures and the
Company retains the rights to any technology that is developed.
Software Development Costs Software development costs have been accounted
for in accordance with Statement of Financial Accounting Standards No. 86 (FAS
86), "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed (FAS 86)." Under the standard, capitalization of software
development costs begins upon the establishment of technological feasibility,
subject to net realizable value considerations. In the Company's case,
capitalization would begin upon completion of a working model, as the Company
does not prepare detail designs as part of the development process. Through June
30, 1996, the Company has only capitalized the $898,000 of purchased software
acquired in the Silma acquisition (see Note 2) which is included in intangible
assets on the consolidated balance sheet. Such costs are amortized on a
straight-line basis over five years, the estimated useful life or the ratio of
current revenue to the total current and anticipated future revenue, whichever
is greater. Amortization expense for the fiscal year ended June 30, 1996 was
$180,000.
Intangible Assets Related to Acquisition of Silma
Intangible assets related to the acquisition of Silma included goodwill of
$486,000, $898,000 of purchased software and a non-compete agreement of $89,000.
Goodwill and the non-compete agreement are amortized on a straight-line basis
over estimated useful lives of five and three years, respectively.
Reclassification
Certain amounts presented in the financial statements for fiscal 1994 have
been reclassified to conform to the presentation for fiscal 1996.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes". Under FAS
109, the liability method is used to account for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
3
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation." The Company will be required to adopt FAS 123 in fiscal 1997. It
is the Company's intention to continue to account for employee stock options in
accordance with Accounting Principles Board Opinion No. 25 and to adopt the
"disclosure only" alternative described in FAS 123.
Long-Lived Assets In March 1995, the Financial Accounting Standards Board
issued Statement No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in operations, such as property
and equipment, when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amount of the assets. The Company will adopt FAS 121 in fiscal 1997. Based on
current circumstances management does not believe the effect of such adoption
will be material.
Net Income Per Share
Net income per share is computed using the weighted average number of shares
of common stock and dilutive common equivalent shares from convertible preferred
stock (using the if-converted method) and from stock options and warrants (using
the treasury stock method). Pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common stock and common equivalent shares issued by
the Company at prices below the assumed public offering price during the
twelve-month period prior to the initial public offering have been included in
the calculation through September 30, 1995 as if they were outstanding for all
periods presented regardless of whether they are dilutive (using the treasury
stock method at an assumed public offering price).
2. Acquisition
Effective June 28, 1995, the Company completed the acquisition of the
outstanding stock of Silma, a developer of simulation software. The total
purchase price was $4,976,000, including a cash payment of $1,380,000, the
issuance of 521,992 shares of the Company's common stock at a $6.00 fair market
value per share and related acquisition costs of $464,000. The transaction was
accounted for as a purchase.
The purchase price, including related acquisition costs, was allocated based
on an independent appraisal obtained by the Company to the tangible and
intangible assets acquired and liabilities assumed based on their respective
fair values on the date of the acquisition as follows (in thousands):
Cash................................................ $ 23
Trade accounts receivable........................... 773
Equipment, furniture and fixtures................... 504
Other current assets................................ 46
Other assets........................................ 20
Intangibles:........................................
Completed software............................. 898
Non-compete agreement.......................... 89
Acquired in-process research and development... 2,972
Goodwill....................................... 486 4,445
----- -------
Total assets........................................ 5,811
Liabilities assumed................................. (835)
-------
Net assets acquired............................ $ 4,976
=======
To determine the value of the completed software, the expected future cash
flow of each existing software product was discounted, taking into account risks
related to the characteristics and applications of each product, existing and
future markets, and assessments of the life cycle stage of each product. This
analysis resulted in a valuation of $898,000 for
4
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
completed software, which had reached technological feasibility and therefore
was capitalizable. This software is being amortized on a straight-line basis
over a five year period.
To determine the value of the software in the development stage, the Company
considered, among other factors, the stage of development of each project, the
time and resources needed to complete each project, expected income and
associated risks. Associated risks include the inherent difficulties and
uncertainties in completing each project and thereby achieving technological
feasibility, and risks related to the viability of potential changes in future
target markets. This analysis resulted in a valuation of $2,972,000 for software
in the development stage that had not yet reached technological feasibility and
did not have alternative future uses. Therefore, in accordance with generally
accepted accounting principles, the $2,972,000 of software in the development
stage was expensed in June 1995 as acquired in-process research and development.
Other intangible assets will be amortized on a straight-line basis over
estimated useful lives ranging from three to five years.
The following unaudited pro forma combined results of operations of the
Company and Silma for the year ended June 30, 1995 have been prepared assuming
that the acquisition of Silma had occurred at the beginning of the period
presented. The following pro forma information is not necessarily indicative of
the results that would have occurred had the transaction been completed at the
beginning of the period indicated, nor is it indicative of future operating
results (in thousands, except per share data):
Year ended June 30,
---------------------
1994 1995
------- --------
Net revenues................................ $ 54,449 $ 62,721
Income (loss) from operations............... 2,063 (746)
Net income.................................. 2,391 59
Net income per share........................ $ .35 $ .01
3. Derivative Financial Instruments
The Company purchased certain components and mechanical subsystems from
Japanese suppliers denominated in yen. During September 1995, the Company began
selling some of its products to certain Japanese customers in yen. As a result,
the Company is subject to transaction exposures that arise from foreign exchange
movements between the dates foreign currency transactions are recorded (i.e.,
export sales or purchases) and the dates they are paid (i.e., cash receipts or
payments in foreign currencies). The Company from time to time may enter into
forward foreign exchange contracts primarily to hedge against the short term
impact of foreign currency fluctuations of invoices and orders denominated in
yen. The maturities of the forward exchange contracts are short term in nature,
(generally 90 days). Because the impact of movements in currency exchange rates
on forward foreign exchange contracts offsets the related impact on the
underlying items being hedged, these financial instruments do not subject the
Company to speculative risk that would otherwise result from changes in currency
exchange rates. Realized and unrealized gains and losses on instruments that
hedge firm commitments are deferred and included in the measurement of the
subsequent transaction; however, losses are deferred only to the extent of
expected gains on the future commitment.
Currency forward contract amounts for derivatives at June 30, 1995 and June
30, 1996 are approximately $994,000 and $0, respectively.
4. Commitments and Contingencies
Commitments
The Company leases certain equipment under long term leases which are
treated as capital leases. Accordingly, capitalized costs of approximately
$692,000 and $534,000 are included in property and equipment for the years ended
June 30, 1995 and 1996, respectively. Accumulated amortization of the leased
equipment amounted to approximately $366,000 and $372,000 for the respective
periods and related amortization is included in depreciation expense on the
Consolidated Statements of Cash Flows.
5
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's lease on its major facility will expire in December 1997.
Future minimum payments for capital and operating leases as of June 30, 1996 are
as follows (in thousands):
June 30, 1996
-------------------------
Capital Operating
Leases Leases
------- ---------
Fiscal Year
1997...................................... $ 97 $ 1,409
1998...................................... 27 914
1999...................................... -- 411
2000...................................... -- 288
2001...................................... -- 136
Later years............................... -- 91
----- -------
Total minimum lease payments................... 124 $ 3,249
Less amount representing interest......... 10
-----
Present value of net minimum payments..... $ 114
=====
Total rent expense for all facility and equipment operating leases was
approximately $1,182,000, $1,195,000 and $1,406,000 in fiscal years 1994, 1995
and 1996, respectively.
Contingencies
The Company has from time to time received communications from third parties
asserting that the Company is infringing certain patents and other intellectual
property rights of others or seeking indemnification against such alleged
infringement. There is presently no litigation involving such claims, and, the
Company believes that the ultimate resolution, if any, of these matters will not
have a material adverse effect on its financial position, results of operations
or cash flows.
5. Shareholders' Equity
Public Offering
In December 1995, the Company sold a total of 1,250,000 shares of common
stock at $9.50 per share through its initial public offering. The net proceeds
(after underwriters' commission and fees and other costs associated with the
offering) totaled approximately $10,028,000. In connection with the offering,
all convertible preferred stock totaling approximately 4,043,000 shares with an
aggregate paid-in value of approximately $30,185,000 were converted into
approximately 4,067,000 shares of common stock of the Company.
Preferred Stock
The Board of Directors has the authority to issue, without further action by
the Shareholders, up to 5,000,000 shares of preferred stock in one or more
series and to fix the price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting a series or the designation of such series,
without any further vote or action by the Company's shareholders. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the shareholders and may adversely affect the market price of,
and the voting and other rights of, the holders of Common Stock.
Stock Plans
The Company's 1983 Employee Stock Incentive Program (the "1983 Plan") was
adopted by the Board of Directors in August 1983. The 1983 Plan provided for the
grant of incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options to employees (including officers and
employee directors) and consultants of the Company. In general, options and
common stock purchased pursuant to stock purchase rights granted under the 1983
Plan vest and become exercisable starting one year after the date of grant, with
25% of the shares subject to the option exercisable at that time and an
additional 1/48th of the shares subject to the option becoming exercisable each
month thereafter. Upon the voluntary or involuntary termination of employment
(including as a result of death or disability) by a holder of unvested
6
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
shares of the Company's common stock purchased pursuant to stock purchase rights
granted under the 1983 Plan, the Company may exercise an option to repurchase
such shares at their original issue price. The Board of Directors determines the
exercise price which must be at least equal to the fair market value of shares
on the date of grant. The 1983 Plan expired according to its terms in August
1993. Currently outstanding options under the 1983 Plan and common stock
purchased pursuant to stock purchase rights granted under the 1983 Plan continue
to be governed by the terms of the 1983 Plan and by the terms of the respective
option and stock purchase and stock restriction agreements between the Company
and the holders thereof.
The Company's 1993 Stock Plan (the "1993 Plan") was adopted by the Board of
Directors in April 1993 and approved by the Company's shareholders in June 1993.
The 1993 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options to
employees (including officers and employee directors) and consultants of the
Company. The terms of the 1993 Plan are similar to the 1983 Plan, and the terms
of the options granted under the 1993 Plan generally may not exceed ten years.
The Board of Directors determines the exercise price which must be at least
equal to the fair market value of shares on the date of grant.
The options may be exercised at the time or times determined by the Board of
Directors.
The following table summarizes activity for the stock plans (in thousands,
except per share data):
Options
------------------------------------------------------
Available Price Per Aggregate
for Grant Outstanding Share Price
--------- ----------- --------------- ---------
Balance at June 30, 1993................. 188 512 $ .80 - $ 3.20 $ 417
Additional shares authorized........ 438 -- -- --
Granted............................. (320) 320 $1.20 - $ 5.40 448
Canceled............................ 19 (19) $ .80 - $ 3.00 (18)
Shares expired...................... (199) -- $ .80 - $ 2.00 --
Exercised........................... -- (10) $ .80 - $ 2.00 (10)
---- ----- -------
Balance at June 30, 1994................. 126 803 $ .80 - $ 5.40 837
Additional shares authorized........ 375 -- -- --
Granted............................. (280) 280 $5.40 - $ 6.00 1,645
Canceled............................ 23 (23) $ .80 - $ 6.00 (66)
Shares Expired...................... (6) -- $ .80 - $ 5.40 --
Exercised........................... -- (18) $ .80 - $ 5.40 (23)
---- ----- -------
Balance at June 30, 1995................. 238 1,042 $ .80 - $ 6.00 2,393
Additional shares authorized........ 800 -- -- --
Granted............................. (203) 203 $7.00 - $ 18.25 2,130
Canceled............................ 39 (39) $ .80 - $ 14.75 (175)
Shares Expired...................... (1) -- $ .80 --
Exercised........................... -- (382) $ .80 - $ 14.75 (524)
---- ----- -------
Balance at June 30, 1996................. 873 824 $ .80 - $ 18.25 $ 3,824
==== ===== =======
Stock options totaling approximately 645,000 and 454,000 were exercisable at
June 30, 1995 and 1996, respectively. The Company has an option to repurchase
all or a portion of the shares, depending on the length of employment, at the
original selling price in the event the employee terminates employment. At June
30, 1995 and 1996, 0 and 439 common shares issued were subject to repurchase
under these agreements. In October 1995, the Company's Board of Directors and
shareholders approved a 650,000 share increase in the number of common shares
available for grant under the Company's 1993 Stock Plan.
7
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Purchase Plan
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors and approved by the shareholders in October
1995. The Purchase Plan allows eligible employees, through payroll deductions,
to purchase shares of the Company's common stock at 85% of the lesser of the
fair market value of the common stock on the first day or last day of the six
month purchase period. Each offering period is 12 months in duration. The
initial offering period began on the effective date of the initial public
offering and will end on the last trading day on or before October 31, 1996, and
subsequent offering periods will begin on the first trading day on or after May
1 and November 1 of each year. A total of 300,000 shares of the Company's common
stock has been reserved for issuance under the Purchase Plan.
Director Option Plan
The Company's 1995 Director Option Plan (the "Director Plan") was adopted by
the Board of Directors and approved by the shareholders of the Company in
October 1995. The option grants under the Director Plan are automatic and
nondiscretionary, and the exercise price of the options is at the fair market
value of the common stock on the date of grant. A total of 150,000 shares of
common stock has been reserved for issuance under the Director Plan.
Notes Receivable From Shareholders
The notes receivable from shareholders arose from the sale of the Company's
common stock to certain employees under the stock purchase rights. Such full
recourse notes were secured by the shares sold, bore interest at rates ranging
from 7% to 9% per year. All notes receivable from shareholders were repaid
before June 30, 1996.
6. Employee Savings and Investment Plan
In May 1988, the Company adopted a 401(k) savings and investment plan in
which all employees, at least 21 years of age, are eligible to participate. The
Company may make a matching contribution based on an employee's elective
deferrals of $0.25 per every dollar deferred by the employee, not to exceed
$12.00 per week. The Company's matching contributions were $82,000, $90,000 and
$133,000 in fiscal 1994, 1995 and 1996.
7. Income Taxes
The provision for (benefit from) income taxes consists of the following (in
thousands):
Year Ended June 30,
-----------------------------
1994 1995 1996
------ ------- -------
Current:
Federal.................................. $ 30 $ 150 $ 1,545
State.................................... 92 241 585
Foreign.................................. 28 113 250
------ ------- -------
Total current................................ 150 504 2,380
Deferred:
Federal.................................. (255) (822) (1,160)
State.................................... (45) (178) (40)
------ ------- -------
Total deferred............................... (300) (1,000) (1,200)
------ ------- -------
Provision for (benefit from) income taxes.... $ (150) $ (496) $ 1,180
====== ======= =======
8
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The difference between the provision for (benefit from) income taxes and the
amount computed by applying the federal statutory income tax rate to income
before provision for income taxes is explained below (in thousands):
Year Ended June 30,
----------------------------
1994 1995 1996
----- ------- -------
Tax at federal statutory rate.............. $ 725 $ 146 $ 2,366
Tax benefits of net operating loss
carryforward utilization................ (661) (1,158) (1,149)
Nondeductible charge for purchased
research and development................ -- 1,010 --
Adjustment of valuation allowance.......... (300) (1,000) (805)
State taxes, net of federal benefit........ 61 241 360
Impact of temporary differences............ -- 276 --
Foreign taxes.............................. -- -- 173
Other...................................... 25 (11) 235
----- ------- -------
Provision for (benefit from) income taxes.. $(150) $ (496) $ 1,180
===== ======= =======
Significant components of the Company's deferred tax assets and liabilities
as of June 30, 1995 and 1996 are as follows (in thousands):
1995 1996
------- -------
Deferred tax assets:
Net operating loss carryforwards............... $ 1,000 $ 800
Tax credit carryforwards....................... 1,400 500
Inventory valuation accounts................... 500 950
Warranty reserves.............................. 400 550
Depreciation................................... 400 100
Other accruals and reserves not currently
deductible for tax purposes................ 800 780
Other.......................................... 100 10
------- -------
Total deferred tax assets.......................... 4,600 3,690
Valuation allowance................................ (2,900) (890)
------- -------
Net deferred tax assets............................ 1,700 2,800
Deferred tax liabilities:
Intangible assets.............................. (400) (300)
------- -------
Total net deferred tax assets...................... $ 1,300 $ 2,500
======= =======
The change in the valuation allowance was a net decrease of approximately
$900,000 for fiscal year 1995.
At June 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $2.3 million, which if unused, will
expire beginning in fiscal year 2001. The Company also had research credit
carryforwards of approximately $500,000, which if unused, will expire beginning
in fiscal year 1997. Utilization of the net operating loss carryforwards and the
deduction equivalent of approximately $375,000 of the tax credit carryforwards
is limited to approximately $350,000 per year.
For financial reporting purposes, a valuation allowance of $890,000 has been
established to offset the deferred tax assets related to certain tax credits and
net operating loss carryforwards. When realized, the tax benefits related to the
valuation allowance will be applied to reduce goodwill and other intangible
assets related to the acquisition of Silma.
Pretax income (losses) from foreign operations were approximately $2,000,
$(257,000) and $548,000 in fiscal years 1994, 1995 and 1996, respectively.
9
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Industry and Geographic Information
The Company and its subsidiaries operate in one industry segment: the
design, manufacturing and marketing of intelligent automation software and
hardware products for automating assembly, material handling and packaging
applications. International sales, which include export sales and foreign
operation net revenues, account for a significant portion of the Company's net
revenues and are summarized as a percentage of net revenues by geographic areas
as follows:
Year Ended June 30,
--------------------------
1994 1995 1996
------ ------ ------
United States........................... 54.4% 59.4% 60.6%
International:
Europe.............................. 30.0 29.1 31.7
Other international................. 15.6 11.5 7.7
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
Foreign operations net revenues and identifiable assets have constituted
less than 10% of consolidated net revenues and identifiable assets,
respectively, to date.
The Company had export sales of approximately 37%, 32% and 29% of the net
revenues in fiscal years 1994, 1995 and 1996, respectively. Approximately 59%,
66% and 79% of the export sales were to Europe in fiscal years 1994, 1995 and
1996, respectively. The balance of export sales was primarily to Asia in each of
the three fiscal years.
10