Exhibit 13.1
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data) Year Ended June 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ------
Results of Operation:
Net revenues..................................... $ 82,767 $ 81,572 $ 59,069 $ 50,618 $ 43,065
Cost of revenues................................. 48,761 46,812 34,788 28,089 22,142
--------- --------- --------- --------- --------
Gross margin.................................. 34,006 34,760 24,281 22,529 20,923
Operating expenses:
Research, development and engineering......... 9,016 8,098 6,598 7,075 5,628
Selling, general and administrative........... 21,628 20,201 14,722 13,486 13,451
Acquired in-process research and
development (1)............................. -- -- 2,972 -- --
--------- --------- --------- --------- --------
Total operating expenses.................... 30,644 28,299 24,292 20,561 19,079
Operating income (loss)....................... 3,362 6,461 (11) 1,968 1,844
Interest income, net.......................... 704 496 440 163 191
--------- --------- --------- --------- --------
Income (loss) before provision for
income taxes................................ 4,066 6,957 429 2,131 2,035
Provision for (benefit from) income taxes..... 1,309 1,180 (496) (150) 145
--------- --------- ---------- ---------- --------
Net income.................................... $ 2,757 $ 5,777 $ 925 $ 2,281 $ 1,890
========= ========= ========= ========= ========
Net income per share (2)......................... $ .33 $ .75 $ .14 $ .37 $ .32
========= ========= ========= ========= ========
Shares used in per share calculation (2)......... 8,442 7,733 6,405 6,218 5,912
========= ========= ========= ========= ========
(in thousands) June 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ------
Balance Sheet Data:
Cash, cash equivalents and short term investments $ 18,467 $ 10,975 $ 8,812 $ 6,677 $ 8,350
Working capital.................................. 38,931 35,030 19,757 18,772 16,664
Total assets..................................... 59,493 56,352 38,371 29,304 25,892
Long term liabilities............................ -- 26 117 203 127
Total shareholders' equity....................... 47,094 42,823 25,678 21,598 19,307
<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 per share.
</FN>
Exhibit 13.1
Quarterly Results of Operations (Unaudited)
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 March 31, December
31, and September 30.
Three Months Ended
----------------------------------------------------------------------------
(in thousands, except per share data) Jun.30 Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,
1997 1997 1996 1996 1996 1996 1995 1995
------ ------- ------- ------- ------- ------- ------ -----
Net revenues............................. $ 24,339 21,104 18,887 18,437 $ 20,358 $ 20,800 $ 20,743 $19,671
Cost of revenues......................... 14,164 12,299 11,239 11,059 11,679 11,852 11,923 11,358
------ ------ ------ ------ ------ ------ ------ ------
Gross margin........................... 10,175 8,805 7,648 7,378 8,679 8,948 8,820 8,313
Operating expenses:
Research, development and engineering.. 2,681 2,305 2,054 1,976 1,967 2,112 2,073 1,946
Selling, general and administrative.... 5,674 5,474 5,328 5,152 5,289 5,126 4,985 4,801
----- ----- ------ ------ ------ ------- ----- -----
Total operating expenses............. 8,355 7,779 7,382 7,128 7,256 7,238 7,058 6,747
Operating income......................... 1,820 1,026 266 250 1,423 1,710 1,762 1,566
Interest income, net..................... 226 181 163 134 152 210 33 101
----- ----- ------ ------ ------ ------ ----- -----
Income before provision income taxes..... 2,046 1,207 429 384 1,575 1,920 1,795 1,667
Provision for income taxes............... 654 362 155 138 255 325 312 288
------ ----- ------ ------ ------ ------ ------ ------
Net income............................... $1,392 $ 845 $ 274 $ 246 $1,320 $1,595 $1,483 $1,379
====== ===== ====== ====== ====== ====== ====== ======
Net income per share.................... $ .17 $ .10 $ .03 $ .03 $ .16 $ .19 $ .20 $ .20
====== ===== ====== ====== ====== ====== ====== ======
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......................... 58.2 58.3 59.5 60.0 57.4 57.0 57.5 57.7
---- ------ ------- ------- ------- ------ ------ ------
Gross margin........................... 41.8 41.7 40.5 40.0 42.6 43.0 42.5 42.3
Operating expenses:
Research, development and engineering.. 11.0 10.9 10.9 10.7 9.6 10.2 10.0 9.9
Selling, general and administrative.... 23.3 25.9 28.2 27.9 26.0 24.6 24.0 24.4
------ ------ ------- ------- ------- ------ ------ ------
Total operating expenses............. 34.3 36.8 39.1 38.6 35.6 34.8 34.0 34.3
Operating income......................... 7.5 4.9 1.4 1.4 7.0 8.2 8.5 8.0
Interest income, net..................... 0.9 0.8 0.9 0.7 0.7 1.0 0.2 0.5
------ ------ ------- ------- ------- ------ ------ ------
Income before provision for income taxes. 8.4 5.7 2.3 2.1 7.7 9.2 8.7 8.5
Provision for income taxes............... 2.7 1.7 0.8 0.8 1.2 1.5 1.5 1.5
------ ------ ------- ------- ------- ------ ------ ------
Net income............................... 5.7% 4.0% 1.5% 1.3% 6.5% 7.7% 7.2% 7.0%
====== ====== ======= ======= ======= ====== ====== ======
Market for Registrant's Common Stock and Related Shareholder 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 reflects the range of high and low sale prices as
reported on the Nasdaq National Market for the quarters ended:
Three Months Ended
-------------------------------------------------------------------
Jun.30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
1997 1997 1996 1996 1996 1996 1995
------ ------- ------- ------- ------- ------- -----
High...................... $ 10.00 $ 8.63 $ 8.25 $ 14.00 $20.25 $17.75 $11.25
Low....................... $ 6.13 $6.75 $5.88 $ 5.00 $12.00 $ 9.25 $ 9.44
At June 30, 1997, there were approximately 450 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 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; 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 year ended June 30, 1997, in particular the
section titled "Significant Fluctuations in Operating Results."
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, linear
modules and vision-based flexible part feeders. In addition, the Company
recently introduced a new line of Cartesian scalable robots targeted for the
electronics and assembly applications markets. In recent years, the Company has
expanded its robot product lines, developed advanced software and sensing
technologies that have enabled robots to perform a wider range of functions, and
the Company has expanded its channel of system integrators. The Company has also
expanded its international sales and marketing operations. As a result of these
developments, the nature and composition of the Company's revenues have changed
over time. Specifically, software license and service revenues, although still
relatively insignificant, have increased as a percentage of total revenues, and
international sales now comprise a significant portion of the Company's
revenues.
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 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.
This discussion summarizes the significant factors affecting the Company's
consolidated operating results, financial condition, liquidity and cash flow
during the three year period ended June 30, 1997 (i.e., 1997, 1996, and 1995).
This discussion should be read in conjunction with the consolidated financial
statements and financial statement footnotes included in this annual report.
Results of Operations
Comparison of 1997 to 1996
Net revenues. The Company's net revenues increased by 1.5% to $82.8 million in
1997 from $81.6 million in 1996. The first half of 1997 saw an overall decline
in net revenues from the comparable period in 1996 as product sales fell,
particularly sales of motion controllers in the Company's international markets
and to a lesser extent, to decreased service and upgrade revenues, partially
offset by an increase in robot sales. A strong domestic market and gradual
recovery in the international markets during the second half of 1997 resulted in
increased revenues for the comparable period of 1996, bringing total net
revenues for 1997 slightly above the 1996 level. The recovery in total revenues
during the second half of 1997 reflected growth in robot sales and a return of
motion controller sales comparable to the same levels of the second half period
of 1996, as well as increases in service and upgrade revenues as compared to
both the first half of 1997 and the second half of 1996. International sales,
including sales to Canada, were $29.6 million or 35.8% of net revenues in 1997,
as compared with $32.2 million or 39.4% of net revenues in 1996.
Gross margin. Gross margin was 41.1% in 1997 compared to 42.6% in 1996. The
decrease in gross margin percentage was primarily attributable to higher sales
of lower margin mechanism systems and to lower sales of higher margin motion
controller products. In addition, sales of lower margin mechanical subsystems
sourced from third parties increased during the year. These declines in gross
margin were partially offset by increased gross margin on service and upgrade
revenues, and to a lesser extent, to increased gross margin from software
products, including simulation software products from the Company's Silma
business. 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 expenses. Research, development and
engineering expenses increased by 11.3% to $9.0 million in 1997 from $8.1
million in 1996. As a percentage of net revenues, research, development and
engineering expenses increased to 10.9% in 1997 from 9.9% in 1996, primarily
because of increases in compensation related expenses, including consulting
expenses, decreased third party development funding and to a lesser extent, to
increased project material spending. Research, development and engineering
expenses in 1997 were partially offset by $767,000 of third party development
funding as compared with $1.1 million of third party development funding in
1996. The Company expects that it will continue to receive third party
development funding from the federal and California state governments as well as
other third parties during 1998 and that such funding will be comparable to
funding received in 1997. However, there can be no assurance that any funds
budgeted by either government or other third parties for the Company's
development projects will not be curtailed or eliminated at any time.
Selling, General and Administrative expenses. Selling, general and
administrative expenses increased 7.1% to $21.6 million or 26.1% of net revenues
in 1997 from $20.2 million or 24.8% of net revenues in 1996. This increased
spending was primarily attributable to investments in new product launches and
promotions, higher depreciation expenses, increased headcount and related
expenses and to a lesser extent, to employee merit compensation adjustments and
additional administrative expenses associated with being a public company. 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, Net. Interest income, net in 1997 was $704,000, compared to
$496,000 in 1996. The increase was due to higher levels of available invested
funds, partially offset by lower investment yields in 1997.
Provision for Income Taxes. The Company's effective tax rate for 1997 was 32%,
compared to 17% for 1996. The Company's tax rate for 1997 differs from the
statutory income tax rate primarily due to the benefit of federal and state tax
credits. The Company's 17% tax rate for 1996 differed from the combined federal
and state 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.
Derivative Financial Instruments. The Company makes yen-denominated purchases of
certain components and mechanical subsystems from Japanese suppliers. 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 less than 90 days. The Company
also 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.
Comparison of 1996 to 1995
Net revenues. The Company's net revenues increased by 38.1% to $81.6 million in
1996 from $59.1 million in 1995. 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 $32.2
million or 39.4% of net revenues in 1996 as compared with $24.0 million or 40.6%
of net revenues in 1995.
Although net revenues increased in 1996, the Company did experience moderation
in its overall growth rate in the second half of 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 1996, in the fourth
quarter of 1996 the Silma business experienced lower revenues due to unexpected
competitive pressures and organizational issues.
Gross margin. Gross margin was 42.6% in 1996 and 41.1% in 1995. The increase in
gross margin was primarily attributable to higher gross margins on simulation
software products from Silma, which the Company acquired in June 1995.
Research, Development and Engineering expenses. Research, development and
engineering expenses increased by 22.7% to $8.1 million in 1996 from $6.6
million in 1995. 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 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 1995. As a percentage of net revenues, research,
development and engineering expenses decreased to 9.9% in 1996 from 11.2% in
1995, primarily because the increase in research, development and engineering
expenses was more than offset by the increase in net revenues.
Selling, General and Administrative expenses. Selling, general and
administrative expenses increased 37.2% to $20.2 million or 24.8% of net
revenues in 1996 from $14.7 million or 24.9% of net revenues in 1995. 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 1996 as compared
with 1995.
Interest Income, Net. Interest income, net in 1996 was $496,000, compared to
$440,000 in 1995. 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 1996.
Provision for (Benefit from) Income Taxes. The Company's effective tax rate in
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. The Company recorded
a tax benefit of ($496,000) in 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.
Derivative Financial Instruments. The Company makes yen-denominated purchases of
certain components and mechanical subsystems from Japanese suppliers. In 1995,
the Japanese yen strengthened substantially against the dollar, resulting in
material unfavorable foreign exchange transactions included in cost of revenues.
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 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 period, due for example to delays in
product development or 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 period are below
expected levels, the Company's business, financial condition and results of
operations for such 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 typically had higher bookings
for its products during the June quarter of each year and lower bookings during
the September quarter of each year, due primarily to the slowdown in sales to
European markets. The Company has generally been able to maintain revenue levels
during the September quarter by utilizing backlog from the June quarter. In the
event bookings for the Company's products in the June quarter are lower than
anticipated and the Company's backlog at the end of the June quarter is
insufficient to compensate for lower bookings in the September quarter, the
Company's results of operations for the September quarter and future quarters
could be materially adversely affected. In fact, in the June quarter of 1996,
sales were lower than anticipated due to competitive pressures and
organizational issues with respect to the Company's Silma business. 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 resulted in decreased net
revenues for the September quarter of fiscal 1997. Entering into the new year,
the Company's backlog is up significantly from where it began the prior year.
However, in the event product bookings and net revenues for any quarter are
insufficient to compensate for the lower product bookings in a prior quarter,
the Company's results of operations for that quarter and future quarters could
be materially adversely affected.
In addition, a significant percentage of the Company's product shipments occur
in the last month of each 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 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 quarter,
the Company's business, financial condition and results of operations could be
materially adversely affected.
Impact of Inflation
The effect of inflation on the Company's business and financial position has not
been significant to date.
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. As of June
30, 1997, the Company had working capital of approximately $38.9 million,
including $11.1 million in cash and cash equivalents and $7.4 million in short
term investments. The Company also had long term investments in obligations of
U.S. government agencies of $1.0 million.
The Company's cash requirements during the year ended June 30, 1997 were met
primarily through cash provided by operations and to a lesser extent, to cash
provided by financing activities. Cash, cash equivalents and investments
increased $8.5 million from June 30, 1996 primarily as a result of $8.7 million
of cash generated from operating activities, $1.4 million in financing
activities, offset by $1.6 million of capital expenditures.
Net cash provided by operating activities was primarily attributable to net
income adjusted by depreciation and amortization, and the decrease in accounts
receivable arising from significant improvements in collection efforts as
evidenced by a reduction in day sales outstanding to 62 days in 1997 from 85
days in 1996. Additionally, inventory reductions contributed to the increase in
cash. Financing activities consisted mainly of proceeds from employee stock
incentive and purchase plans.
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 February 1997, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share" and
Statement of Financial Accounting Standards No. 129 (SFAS 129), "Disclosure of
Information about Capital Structure," both of which are required to be adopted
on December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirement for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact to the Company
will be an increase in net income per share of $.01 and $.07 for 1997 and 1996,
respectively. The impact of SFAS 128 on the calculation of fully diluted
earnings per share for these periods is not expected to be material.
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, June 30,
1997 1996
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 11,101 $ 8,075
Short term investments 7,366 2,900
Accounts receivable, less allowance for doubtful accounts of
$449 in 1997 and $465 in 1996 17,250 20,495
Inventories 13,096 14,808
Deferred tax assets and prepaid expenses 2,517 2,255
-------- --------
Total current assets 51,330 48,533
Property and equipment, net 5,228 5,731
Long term investments 1,000 --
Intangible assets related to acquisition of Silma Incorporated, net of
accumulated amortization of $642 in 1997 and $306 in 1996 774 1,167
Other assets 1,161 921
-------- --------
Total assets $ 59,493 $ 56,352
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,927 $ 6,894
Accrued payroll and related expenses 2,311 2,635
Accrued warranty 1,846 1,387
Accrued customer rebates 143 99
Deferred revenue 1,138 561
Other accrued liabilities 3,007 1,839
Current portion of obligations under capital leases 27 88
-------- --------
Total current liabilities 12,399 13,503
Obligations under capital leases -- 26
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
5,000 shares authorized, none issued and outstanding -- --
Common stock, no par value:
25,000 shares authorized; 8,240 issued
and outstanding in 1997, and 7,869 in 1996 46,897 45,383
Retained earnings (deficit) 197 (2,560)
-------- --------
Total shareholders' equity 47,094 42,823
-------- --------
Total liabilities and shareholders' equity $ 59,493 $ 56,352
======== ========
<FN>
See accompanying note.
</FN>
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Year Ended June 30,
--------------------------------
1997 1996 1995
-------- -------- --------
Net revenues $ 82,767 $ 81,572 $ 59,069
Cost of revenues 48,761 46,812 34,788
-------- -------- --------
Gross margin 34,006 34,760 24,281
Operating expenses:
Research, development and engineering 9,016 8,098 6,598
Selling, general and administrative 21,628 20,201 14,722
Acquired in-process research
and development -- -- 2,972
-------- -------- --------
Total operating expenses 30,644 28,299 24,292
-------- -------- --------
Operating income (loss) 3,362 6,461 (11)
Interest income 717 540 476
Interest expense 13 44 36
-------- -------- --------
Income before provision for income taxes 4,066 6,957 429
Provision for (benefit from) income taxes 1,309 1,180 (496)
-------- -------- --------
Net income $ 2,757 $ 5,777 $ 925
======== ======== ========
Net income per share $ .33 $ .75 $ .14
======== ======== ========
Shares used in computing net income per share 8,442 7,733 6,405
======== ======== ========
Exhibit 13.1
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Year Ended June 30,
------------------------------
1997 1996 1995
-------- -------- --------
Operating activities
Net income $ 2,757 $ 5,777 $ 925
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,981 2,364 1,533
(Gain) loss on disposal of property and equipment 316 (45) 87
Acquired in-process research and development -- -- 2,972
Tax benefit from stock plans 73 367 --
Changes in operating assets and liabilities:
Accounts receivable 3,245 (6,903) (1,206)
Inventories 1,044 (6,853) (1,491)
Deferred tax assets and prepaid expenses (262) (1,113) (406)
Other assets (411) (317) (620)
Accounts payable (2,967) 109 3,887
Accrued payroll and related expenses (324) 621 (2)
Accrued warranty 459 361 315
Accrued customer rebates 44 (545) 176
Deferred revenue 577 153 (189)
Other accrued liabilities 1,174 388 151
-------- -------- --------
Total adjustments 5,949 (11,413) 5,207
-------- -------- --------
Net cash provided by (used in) operating activities 8,706 (5,636) 6,132
-------- -------- --------
Investing activities
Purchase of property and equipment, net (1,631) (2,968) (2,040)
Proceeds from the sale of property and equipment 63 58 24
Purchases of long term available for sale investments (1,000) -- --
Purchases of short term available for sale investments (20,123) (13,500) (2,900)
Sales of short term available for sale investments 15,657 13,500 --
Cash paid for acquisition, net of cash received -- -- (1,818)
-------- -------- --------
Net cash used in investing activities (7,034) (2,910) (6,734)
-------- -------- --------
Financing activities
Principal payment for capital lease obligations (87) (292) (186)
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 1,441 973 23
-------- -------- --------
Net cash provided by (used in) financing activities 1,354 10,709 (163)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 3,026 2,163 (765)
Cash and cash equivalents, beginning of period 8,075 5,912 6,677
-------- -------- --------
Cash and cash equivalents, end of period $ 11,101 $ 8,075 $ 5,912
======== ======== ========
Supplemental disclosure of noncash activities:
Conversion of preferred stock to common stock $ -- $ 30,185 $ --
Inventory capitalized into property, equipment and related tax $ 718 $ 873 $ --
Cash paid during the period for:
Interest $ 13 $ 44 $ 36
Taxes $ 638 $ 1,781 $ 27
<FN>
There were no new capital leases in 1997, 1996 or 1995. 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 Retained
Preferred Stock Common Stock Earnings
----------------- -----------------
Shares Amount Shares Amount (Deficit)
------ ------- ----- ------ -------
Balance at June 30, 1994 4,043 $ 30,185 1,580 $ 822 ($ 9,262)
Common stock issued under
employee stock incentive program -- -- 18 23 --
Common stock issued in connection
with acquisition -- -- 522 3,132 --
Net income -- -- -- -- 925
------ ------- ----- ------ -------
Balance at June 30, 1995 4,043 30,185 2,120 3,977 (8,337)
Common stock issued under initial public
offering net of issuance costs -- -- 1,250 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 --
Tax benefit from stock plans -- -- -- 367 --
Net income -- -- -- -- 5,777
------ ------- ----- ------ -------
Balance at June 30, 1996 -- -- 7,869 45,383 (2,560)
Common stock issued under employee stock
incentive program and employee
stock purchase plan -- -- 371 1,441 --
Tax benefit from stock plans -- -- -- 73 --
Net income -- -- -- -- 2,757
------ ------- ----- ------ -------
Balance at June 30, 1997 -- $ -- 8,240 $ 46,897 $ 197
====== ======= ===== ====== =========
Notes
Receivable Total
From Shareholders'
Shareholders Equity
------- -------
Balance at June 30, 1994 ($ 147) $ 21,598
Common stock issued under
employee stock incentive program -- 23
Common stock issued in connection
with acquisition -- 3,132
Net income -- 925
------- -------
Balance at June 30, 1995 (147) 25,678
Common stock issued under initial public
offering net of issuance costs -- 10,028
Conversion of preferred stock to common stock -- --
Common stock issued under employee stock
incentive program, employee
stock purchase plan, net of repurchase,
cancellations, and payments of notes
receivable from shareholders 147 973
Tax benefit from stock plans -- 367
Net income -- 5,777
------- -------
-- 42,823
Balance at June 30, 1996
Common stock issued under employee stock
incentive program and employee
stock purchase plan -- 1,441
Tax benefit from stock plans -- 73
Net income -- 2,757
------- -------
Balance at June 30, 1997 $ -- $ 47,094
======= =======
<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).
All material intercompany accounts and transactions have been eliminated.
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
(SFAS 52), "Foreign Currency Translation," with respect to its international
operations, which are sales and service entities. All monetary assets and
liabilities are remeasured at the current exchange rate at the end of the
period, nonmonetary assets and liabilities are remeasured at historical exchange
rates, and revenues and expenses are remeasured 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
($141,000), ($105,000) and $38,000 in 1997, 1996 and 1995, respectively.
Transaction gains and (losses) were $8,000, $70,000, and ($59,000) in 1997, 1996
and 1995, respectively.
Cash, Cash Equivalents and Investments
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Short-term
investments in marketable securities consist principally of debt instruments
with maturities between three and twelve months. Long-term investments in
marketable securities consist of debt instruments with maturities exceeding
twelve months. Investments are classified as held-to-maturity, trading, or
available-for-sale at the time of purchase.
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1997 and 1996, all of the Company's investments in marketable
securities were classified as available-for-sale and were carried at fair market
value which approximated cost. Material unrealized gains and losses, if any,
would have been recorded in shareholders' equity. Fair market value is based on
quoted market prices on the last day of the fiscal year. The cost of the
securities is based upon the specific identification method.
(in thousands) June 30,
----------------------
1997 1996
------- ------
Cash and cash equivalents
Cash ......................................... $ 1,913 $ 1,486
Money market funds ........................... 602 1,143
Commercial paper ............................. 8,586 5,446
------- -------
Cash and cash equivalents ........................ $11,101 $ 8,075
======= =======
Short-term investments
Commercial paper ............................. $ 3,466 $ --
Government agency notes ...................... 1,000 1,000
Market auction preferred stock ............... 2,900 1,900
------- -------
Short-term investments ........................... $ 7,366 $ 2,900
======= =======
Long-term investments
Government agency notes................ $ 1,000 $ --
======= =======
Realized gains or losses, interest, and dividends are included in interest
income. In 1997, 1996 and 1995, realized and unrealized gains or losses from
available-for-sale securities were not material.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in first-out method. The components of inventories are as
follows:
(in thousands) June 30,
------------------------
1997 1996
--------- --------
Raw materials........................... $ 6,323 $ 9,488
Work-in-process......................... 3,509 3,069
Finished goods.......................... 3,264 2,251
--------- ---------
$ 13,096 $ 14,808
========= =========
Property and Equipment
Property and equipment are recorded at cost. The Company has adopted
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS 121 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 adoption
had no material effect on the Company's financial statements.
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of property and equipment are summarized as follows:
(in thousands) June 30,
---------------------------
1997 1996
--------- ---------
Cost:
Machinery and equipment.................. $ 11,008 $ 9,946
Computer equipment....................... 5,211 4,406
Office furniture and equipment........... 2,193 2,177
--------- ---------
18,412 16,529
Accumulated depreciation and amortization ... 13,184 10,798
Net property and equipment .................. $ 5,228 $ 5,731
========= ==========
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 depreciated over the shorter of the asset
life or the remaining lease term.
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 post-contract 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 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.
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.
Research, Development and Engineering Costs
Research, development and engineering costs, other than purchased computer
software, are charged to expense when incurred. The Company has received third
party funding of $767,000, $1,081,000 and $250,000 in years 1997, 1996 and 1995,
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.
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Software Development Costs
The Company capitalizes software development costs incurred subsequent to
the time the product reaches technical feasibility. All capitalized internally
developed software costs and purchased software costs are amortized to the cost
of revenues on a straight-line basis based on the estimated useful lives of the
products or the ratio of current revenue to the total of current and anticipated
future revenue, whichever is greater. Capitalized internally developed software
and purchased software are stated at the lower of amortized cost or net
realizable value. Capitalized and purchased software are included in intangible
assets.
For 1997, 1996 and 1995, software amortization was $180,000, $180,000 and
$0, respectively. Unamortized software development costs at June 30, 1997 and
1996 were approximately $ 538,000 and $718,000, respectively
Intangible Assets Related to Acquisition of Silma
Intangible assets related to the acquisition of Silma in 1995 included
goodwill of $486,000, purchased software of $898,000 and a non-compete agreement
of $89,000. Goodwill is amortized on a straight-line basis over an estimated
useful life of five years. The non-compete agreement was fully amortized at June
30, 1997.
Advertising costs
Advertising costs are recorded as an expense as incurred. Advertising costs
were $217,000, $229,000 and $284,000 in 1997, 1996 and 1995, respectively. The
Company does not incur any direct response advertising costs.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Under
SFAS 109, the liability method is used to account for income taxes. 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.
Stock-Based Compensation
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation", which provides an alternative to APB Opinion No. 25 (Opinion 25),
"Accounting for Stock Issued to Employees", in accounting for stock issued to
employees. The Company has elected to account for stock-based compensation to
employees in accordance with Opinion 25, providing only proforma disclosure
required by SFAS 123.
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).
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share", which
is required to be adopted on December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirement for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact to the Company will be an incremental increase in net
income per share of $.01 and $.07 for 1997 and 1996, respectively. The impact of
SFAS 128 on the calculation of fully diluted earnings per share for these
periods is not expected to be material.
Reclassification
Certain amounts presented in the financial statements of prior years have
been reclassified to conform to the current presentation for 1997.
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisition
In June 1995, the Company acquired SILMA Incorporated ("Silma"), a developer
of automation simulation software, for a total acquisition price of $4,976,000.
The acquisition price included a cash payment of $1,380,000, and issuance of
521,992 shares of the Company's common stock at a fair market value of $6 per
share on the closing date and related acquisition costs of $464,000.
The transaction was accounted for using the purchase method and an independent
appraisal was performed for all assets acquired. As a result, $2,972,000 of the
purchase price was written off as a one-time charge related to the acquired
in-process research and development, and $898,000 was capitalized as completed
software. The completed software along with the excess cost over the fair value
of net assets acquired for the acquisition is being amortized on a straight-line
basis over estimated useful lives ranging from three to five years. The acquired
operation is included in the consolidated statements of operation from the date
of acquisition.
3. Derivative Financial Instruments
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 purchase commitments 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.
4. Commitments and Contingencies
Commitments
The Company leases certain equipment under capital leases. Capitalized costs
of approximately $152,000 and $534,000 are included in property and equipment at
June 30, 1997 and 1996, respectively. Accumulated depreciation of the leased
equipment amounted to approximately $67,000 and $372,000 for the respective
years.
The Company's lease on its major facility will expire in December 2000.
Future minimum payments for capital and operating leases as of June 30, 1997 are
as follows:
June 30, 1997
---------------------------
(in thousands) Capital Operating
Leases Leases
--------- ----------
Fiscal year
1998.................................................................... $ 28 $ 1,809
1999.................................................................... -- 1,786
2000.................................................................... -- 1,654
2001.................................................................... -- 840
2002.................................................................... -- 95
Later years............................................................. -- 256
--------- ---------
Total minimum lease payments................................................. 28 $ 6,440
=========
Less amount representing interest....................................... 1
---------
Present value of net minimum payments................................................. $ 27
=========
Total rent expense for all facility and equipment operating leases was
approximately $1,665,000, $1,406,000 and $1,195,000 in 1997, 1996 and 1995,
respectively.
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. While it is not feasible to predict or determine the outcome of
the actions brought against it, the Company believes the ultimate resolution 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 Option 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 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 shareholders of the Company 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 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
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
total of 150,000 shares of common stock has been reserved for issuance under the
Director Plan. At June 30, 1997, 51,000 shares were granted and no shares were
exercised.
The options may be exercised at the time or times determined by the Board of
Directors.
The following table summarizes activities of the stock option plans:
Options
------------------------------------------------------------------
(in thousands, except per share data) Available No. of Shares Aggregate Weighted Average
for Grant Outstanding Price Exercise Price
------------ ------------- ------------ ----------------
Balance at June 30, 1994......................... 126 803 $ 837 $ 1.04
Additional shares authorized................ 375 -- -- --
Granted..................................... (280) 280 1,645 5.87
Canceled.................................... 23 (23) (66) 2.78
Shares Expired.............................. (6) -- -- --
Exercised................................... -- (18) (23) 1.35
--------- --------- --------
Balance at June 30, 1995......................... 238 1,042 2,393 2.30
Additional shares authorized................ 800 -- -- --
Granted..................................... (203) 203 2,130 10.49
Canceled.................................... 39 (39) (175) 4.52
Shares Expired.............................. (1) -- -- --
Exercised................................... -- (382) (524) 1.37
--------- --------- ---------
Balance at June 30, 1996......................... 873 824 3,824 4.64
Granted..................................... (465) 465 3,091 6.65
Canceled.................................... 35 (35) (269) 7.70
Exercised................................... -- (158) (268) 1.70
--------- --------- ---------
Balance at June 30, 1997......................... 443 1,096 $ 6,378 $ 5.82
========= ========= =========
The following table summarizes information concerning outstanding and
exercisable options at June 30, 1997, (at June 30, 1996, 454,000 stock options
were exercisable):
(shares in thousands) Options Outstanding Options Exercisable
----------------------------- -------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Numbers Contractual Exercise Numbers Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ---------- ---------- --------- ------------ -----------
$ .80 - $ 3.00 269 1.02 $ 1.17 263 $ 1.16
$ 3.01 - $ 6.00 196 2.75 $ 5.86 133 $ 5.85
$ 6.01 - $ 9.00 540 8.32 $ 6.70 118 $ 6.74
$ 9.01 - $ 15.00 48 8.55 $ 11.22 17 $ 11.17
$ 15.01 - $ 18.25 43 8.84 $ 17.80 13 $ 17.84
------ ---
$ .80 - $ 18.25 1,096 5.56 $ 5.82 544 $ 4.22
====== =====
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1997 and 1996,
respectively, 363 and 439 common shares issued were subject to repurchase under
these agreements.
In August 1997, the Company's Board of Directors approved a 1,000,000 share
increase in the number of common shares available for grant under the Company's
1993 Plan. This increase is currently subject to shareholder approval.
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 has overlapping twelve-month offering periods that begin
every six months, starting on the first trading day on or after May 1, and
November 1 of each year. Each twelve-month offering period is divided into two
six-month purchase periods. The Purchase Plan allows eligible employees, through
payroll deductions, to purchase shares of the Company's common stock at 85% of
fair market value on either the first day of the offering period or the last day
of the purchase period, whichever is lower.
At June 30, 1997, 300,000 shares of the Company's common stock has been
reserved for issuance under the Purchase Plan, of which 283,000 shares have been
issued. In August 1997, the Company's Board of Directors approved a 500,000
share increase in the number of common shares to be reserved for issuance under
the Purchase Plan. This increase is currently subject to shareholder approval.
Stock Based Compensation
At June 30, 1997, the Company has four stock-based compensation plans as
described above. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans and its stock purchase
plan. If compensation cost for the Company's stock-based compensation plans had
been determined consistent with Statement of Financial Accounting Standards No.
123 (SFAS 123), the Company's net income and net income per share would have
been reduced to the pro forma amounts indicated below:
(in thousands, except per share data)
June 30,
---------------------------
1997 1996
--------- ---------
Net income As reported.......................................... $ 2,757 $ 5,777
Pro forma ........................................... $ 1,464 $ 5,266
Net income per share As reported.......................................... $ .33 $ .75
Pro forma............................................ $ .17 $ .68
Because the method of accounting prescribed by SFAS 123 has not been applied to
options granted prior to July 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for grants during the year ended June 30, 1997 and 1996: risk-free
interest rates of 6.63% and 5.95% for 1997 and 1996, respectively; a dividend
yield of 0% for both years; a weighted-average expected life of 3.0 and 2.9
years for 1997 and 1996; and a volatility factor of the expected market price of
the Company's common stock of .69 for both years. The weighted average grant
date fair value of options granted during 1997 and 1996 was $3.26 and $5.19,
respectively.
Compensation cost is estimated for the fair value of the employees' purchase
rights using the Black-Sholes model with the following assumptions for these
rights granted in 1997 and 1996: a dividend yield of 0% for both years; and
expected life of 6 months and 4.5 months for 1997 and 1996; and expected
volatility of .69 for both years; and a risk-free interest rate of 5.27% and
5.05% for 1997 and 1996. The weighted average fair market value of the purchase
rights granted in 1997 and 1996 was $3.45 and $3.07, respectively.
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
6. Employee Savings and Investment Plan
In May 1988, the Company adopted a 401(k) savings and investment plan in
which employees are eligible to participate. In 1997, the Company matched the
employee's contribution at a rate of $.50 per dollar, to a maximum of $19.23 per
person, per week. Through June 30, 1996, the Company's matched the employee's
contribution at a rate of $.25 per dollar, to a maximum of $12 per person, per
week. The Company's matching contributions were $235,000, $133,000 and $90,000
in 1997, 1996 and 1995, respectively.
7. Income Taxes
The provision for (benefit from) income taxes consists of the following:
(in thousands) Year Ended June 30,
-----------------------------------------
1997 1996 1995
--------- --------- ------
Current:
Federal................................................. $ 1,029 $ 1,545 $ 150
State................................................... 187 585 241
Foreign................................................. 187 250 113
--------- --------- ---------
Total current............................................... 1,403 2,380 504
Deferred:
Federal................................................. (78) (1,160) (822)
State................................................... (16) (40) (178)
---------- -------- ---------
Total deferred.............................................. (94) (1,200) (1,000)
---------- --------- ---------
Provision for (benefit from) income taxes................... $ 1,309 $ 1,180 $ (496)
========= ========= ==========
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,
-----------------------------------------
1997 1996 1995
--------- --------- ------
Tax at federal statutory rate............................... $ 1,382 $ 2,366 $ 146
Tax benefits of net operating loss carryforward utilization. -- (1,149) (1,158)
Nondeductible charge for purchased research and development. -- -- 1,010
Adjustment of valuation allowance........................... -- (805) (1,000)
State taxes, net of federal benefit......................... 113 360 241
Impact of temporary differences............................. -- -- 276
Foreign taxes............................................... 132 173 --
Tax credits................................................. (373) -- --
Other....................................................... 55 235 (11)
--------- --------- ----------
Provision for (benefit from) income taxes................... $ 1,309 $ 1,180 $ (496)
========= ========= ==========
Significant components of the Company's deferred tax assets and liabilities
are as follows:
EXHIBIT 13.1
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands) June 30,
------------------------
1997 1996
--------- ------
Deferred tax assets:
Net operating loss carryforwards........................................... $ 650 $ 800
Tax credit carryforwards................................................... 550 500
Inventory valuation accounts............................................... 910 950
Warranty reserves.......................................................... 700 550
Other accruals and reserves not currently deductible for tax purposes...... 750 780
Other...................................................................... 206 110
--------- ---------
Total deferred tax assets...................................................... 3,766 3,690
Valuation allowance............................................................ (784) (890)
---------- ---------
Net deferred tax assets........................................................ 2,982 2,800
---------- ---------
Deferred tax liabilities:
Foreign earnings ......................................................... (144) --
Intangible assets.......................................................... (244) (300)
---------- ---------
Net deferred tax liabilities................................................... (388) (300)
---------- ---------
Total net deferred tax assets.................................................... $ 2,594 $ 2,500
========= =========
The change in the valuation allowance was a net decrease of approximately
$2,010,000 for 1996.
At June 30, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $1.9 million, which if unused, will
expire beginning in 2001. The Company also had credit carryforwards of
approximately $550,000, which if unused, will expire beginning in 1998.
Utilization of the net operating loss carryforwards and the deduction equivalent
of approximately $375,000 of the tax credit carryforwards is limited to
approximately $300,000 per year.
For financial reporting purposes, a valuation allowance of $784,000 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
($271,000), $548,000 and ($257,000) in 1997, 1996 and 1995, respectively.
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:
(in thousands) Year Ended June 30,
1997 1996 1995
--------- --------- ---------
United States............................................... 64.2 % 60.6% 59.4%
International:
Europe.................................................. 30.1 31.7 29.1
Other international..................................... 5.7 7.7 11.5
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
Foreign operations' net revenues have constituted less than 10% of
consolidated net revenue to date. Identifiable assets in Europe and Asia
contributed approximately 9% and 2%, respectively to the consolidated total
assets at both June 30, 1997 and 1996.
The Company had export sales of approximately 26%, 29% and 32% of the net
revenues in 1997, 1996 and 1995, respectively. Approximately 86%, 79% and 66% of
the export sales were to Europe in 1997, 1996 and 1995, respectively. The
balance of export sales was primarily to Asia and Canada in each of the three
fiscal years.
Exhibit 13.1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Adept Technology, Inc.
We have audited the accompanying consolidated balance sheets of Adept
Technology, Inc. as of June 30, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Adept Technology, Inc. at June 30, 1997 and 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 1997, in conformity with generally accepted accounting
principles..
Ernst & Young L.L.P.
San Jose, California
July 29, 1997