SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from Commission File Number
______ to ______ 0-24934
PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2495703
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
805 Middlesex Turnpike 01821
Billerica, MA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number: (508) 663-8555
_________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--------- ---------
The number of shares outstanding of each of the issuer's classes of common
stock as of May 6, 1996:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, $.01 par value 7,216,607
Page 1 of 13 pages
Exhibit Index Located on Page 12
PRI AUTOMATION, INC.
INDEX
Page No.
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Part I. Financial Information
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Item 1. Financial Statements
Condensed Consolidated
Statements of Operations for
the Three and Six Months
Ended March 31, 1996 and
March 31, 1995 3
Condensed Consolidated
Balance Sheets as of
March 31, 1996 and September 4
30, 1995
Condensed Consolidated
Statements of Cash Flows for
the Six Months Ended March
31, 1996 and March 31, 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
Exhibit Index 12
Exhibit 11.1 Computation of Net Income
Per Common Share 13
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRI AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
March 31, March 31,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
Net revenue............................. $26,200 $14,451 $48,237 $26,914
Cost of revenue......................... 13,421 7,551 24,774 14,090
------- ------- ------- -------
Gross profit............................ 12,779 6,900 23,463 12,824
Operating expenses:
Research and development............... 4,097 2,379 7,721 4,393
Selling, general and administrative.... 4,006 2,163 7,496 4,063
------- ------- ------- -------
Operating profit........................ 4,676 2,358 8,246 4,368
Other income, net....................... 482 265 1,117 303
Income before income tax provision...... 5,158 2,623 9,363 4,671
Income tax provision.................... 1,857 892 2,871 1,588
------- ------- ------- -------
Net income.............................. $ 3,301 $ 1,731 $ 6,492 $ 3,083
======= ======= ======= =======
Net income per common share:
Primary................................ $0.44 $0.27 $0.86 $0.50
Assuming full dilution................. $0.44 $0.27 $0.86 $0.50
Weighted average number of common and
common equivalent shares outstanding:
Primary................................ 7,552 6,319 7,562 6,104
Assuming full dilution................. 7,564 6,374 7,588 6,136
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
PRI AUTOMATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, September 30,
1996 1995
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents............................................ $30,006 $38,005
Marketable Securities................................................ 12,363 10,868
Trade accounts receivable, net....................................... 20,336 16,624
Contracts in progress................................................ 17,297 7,382
Inventories.......................................................... 14,800 11,416
Deferred income taxes................................................ 1,228 1,038
Other current assets................................................. 535 1,431
-------- -------
Total current assets................................................ 96,565 86,764
Property and equipment, net.......................................... 6,409 5,027
Marketable Securities................................................ 3,345 3,179
Other assets......................................................... 1,324 29
-------- -------
Total assets........................................................ $107,643 $94,999
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
...................................................................
Accounts payable..................................................... $ 7,771 $ 7,037
Accrued expenses..................................................... 1,261 1,332
Accrued compensation................................................. 3,103 2,616
Contract advances.................................................... 1,173 938
Billings in excess of costs
and estimated earnings............................................. 3,139 239
Income taxes payable................................................. 2,758 1,411
-------- -------
Total current liabilities........................................... 19,205 13,573
Stockholders' equity:
Common stock, $.01 par value; 12,000,000 shares
authorized; 7,187,962 and 6,998,266 issued and
outstanding at March 31, 1996 and
September 30, 1995, respectively.................................. 72 70
Additional paid-in capital.......................................... 70,562 70,044
Retained earnings................................................... 17,804 11,312
-------- -------
Total stockholders' equity......................................... 88,438 81,426
-------- -------
Total liabilities and stockholders' equity......................... $107,643 $94,999
======== =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
PRI AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended March 31,
----------------------------
1996 1995
-------- --------
Net cash used in operating activities:........... $(4,646) $(1,475)
------- -------
Cash flows from investing activities:
Purchases of marketable securities.............. (6,311) --
Proceeds from sales and maturities of
marketable securities.......................... 4,653 --
Purchases of property and equipment............. (2,215) (743)
------- -------
Net cash used in investing activities.......... (3,873) (743)
------- -------
Cash flows from financing activities:
Proceeds from borrowings........................ -- 1,330
Repayments of borrowings........................ -- (5,138)
Repayments of capital lease obligation.......... -- (218)
Proceeds from exercise of stock options......... 246 95
Proceeds from issuance of common stock, net of
issuance costs................................. 274 26,887
------- -------
Net cash provided by financing activities...... 520 22,956
------- -------
Net increase (decrease) in cash and cash
equivalents..................................... (7,999) 20,738
Cash and cash equivalents at beginning of period. 38,005 667
------- -------
Cash and cash equivalents at end of period....... $30,006 $21,405
======= =======
Supplemental disclosure of cash flow information:
Noncash transactions:
Conversion of Series A Redeemable Convertible
Preferred Stock................................ -- $ 4,063
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
PRI AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Basis of Presentation
The condensed consolidated financial statements include the accounts of PRI
Automation, Inc., and its wholly-owned subsidiaries (collectively, the
"Company"). All significant inter-company transactions and balances have been
eliminated.
While the financial information furnished is unaudited, the financial
statements included in this report reflect all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the results of operations for the interim periods covered and of
the financial condition of the Company at the date of the interim balance sheet.
The results for interim periods are not necessarily indicative of the results
for the entire year. The condensed consolidated financial statements should be
read in connection with the audited consolidated financial statements of the
Company for the year ended September 30, 1995 included in its Form 10-K, filed
with the Securities and Exchange Commission.
B. Inventories
Inventories consist of the following:
March 31, September 30,
1996 1995
---- ----
Raw materials....................... $13,378 $ 9,420
Work in process..................... 1,422 1,996
------- -------
$14,800 $11,416
======= =======
6
PRI AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements. Factors which could cause such
differences include those set forth under "Risk Factors" in the Company's
Registration Statement on Form S-1, file no. 33-94070.
Results of Operations
Revenue: Net revenue for the three and six months ended March 31, 1996 was
$26.2 million and $48.2 million, respectively, an increase of 81.3% and 79.2%,
respectively, over the corresponding periods in fiscal 1995. The increases
resulted from greater market acceptance of, and demand for, the Company's
flexible factory automation systems, from a general expansion of the
semiconductor manufacturing industry which has caused semiconductor
manufacturers to upgrade or expand existing fabrication facilities and to
construct new facilities, and from the Company's strong results from Europe and
the Asia Pacific region. Net export sales to unaffiliated customers for the
three and six months ended March 31, 1996 were $3.6 million and $8.3 million,
respectively, compared with $1.0 million and $2.1 million, for the corresponding
periods in fiscal 1995, and accounted for 13.9% and 17.3% of net revenue,
respectively, compared with 6.9% and 7.8% for the corresponding periods in
fiscal 1995.
Gross profit: The gross profit margin for the three and six months ended
March 31, 1996 was 48.8% and 48.6%, respectively, as compared to 47.7% and 47.6%
for the corresponding periods in fiscal 1995. The increases are largely
attributable to an increase in sales volume, which permitted increased
utilization of certain fixed and semi-variable components of the manufacturing
overhead cost structure.
Research and development: Research and development expenses for the three
and six months ended March 31, 1996 were $4.1 million and $7.7 million,
representing 15.6% and 16.0% of net revenue, respectively, compared with
research and development expenses of $2.4 million and $4.4 million, representing
16.5% and 16.3% of net revenue, respectively, for the corresponding periods in
fiscal 1995. The increase in dollar amount primarily reflects an increase in
personnel and materials expense in response to the increasing demand for new
products and new product enhancements. The decrease as a percentage of net
revenue is attributable to the fact that net revenue in fiscal 1996 grew more
rapidly than did research and development expenses.
Selling, general and administrative: Selling, general and administrative
expenses for the three and six months ended March 31, 1996 were $4.0 million and
$7.5 million, representing 15.3% and 15.5% of net revenue, respectively,
compared with selling, general and administrative expenses of $2.2 million and
$4.1 million, representing 15.0% and 15.1% of net revenue, respectively, for
the corresponding periods in fiscal 1995. The increase in dollar amount is
primarily due to an increase in personnel, commissions, and related expenses
associated with
7
higher sales volume, expanding marketing, market research and communications
programs, and to increased sales and marketing efforts in the Asia Pacific
region.
Operating profit: As a result of the foregoing factors, operating profit for
the three and six months ended March 31, 1996 increased to $4.7 million and $8.2
million, respectively, an increase of 98.3% and 88.8%, respectively, over the
corresponding periods in fiscal 1995.
Other income, net: Other income, net, for the three and six months ended
March 31, 1996 was $482,000 and $1.1 million respectively, as compared to
$265,000 and $303,000, respectively for the corresponding periods in fiscal
1995. Interest income for the three and six months ended March 31, 1996 was
$492,000 and $1.1 million, respectively, as compared to $277,000 and $490,000
for the corresponding periods in fiscal 1995. The increases are attributable to
the investment of a significant portion of the net proceeds from the Company's
public offering of common stock in July 1995 in marketable securities. Interest
expense for the three and six months ended March 31, 1996 was $11,000 and
$19,000, respectively, as compared to $12,000 and $187,000 for the corresponding
periods in fiscal 1995. A significant portion of the interest expense for the
six months ended March 31, 1995 is attributable to a prepayment charge on the
early retirement of a note in connection with the Company's initial public
offering in October 1994.
Income tax provision: The effective tax rate for the three and six months
ended March 31, 1996 was 36.0% and 30.7%, respectively, compared to 34.0% for
each of the corresponding periods in fiscal 1995. For the three months ended
March 31, 1996, the increase is due primarily to an expected lower proportion of
tax credits due to tax law changes. For the six months ended March 31, 1996 the
decrease is largely attributable to a one-time benefit due to the elimination of
certain valuation allowances placed against certain deferred tax assets, partly
offset by an expected proportion of tax credits due to tax law changes.
Liquidity and Capital Resources
Since its inception, the Company has funded its operations primarily through
private equity financings, bank lines of credit, public stock offerings in
October 1994 and July 1995 and cash generated from operations.
As of March 31, 1996, the Company had working capital of $77 million,
including cash and cash equivalents of $30 million and short-term marketable
securities of $12 million.
Net cash used in operating activities for the six months ended March 31,
1996 was $4.6 million, compared to $1.5 million for the corresponding period in
1995. The net use of cash in operating activities for the six months ended March
31, 1996 was primarily attributable to an increase in trade accounts receivable
of $3.7 million, resulting from increased shipments; an increase in contracts in
progress of $9.9 million; and an increase in inventory of $3.4 million due to
increased product demand. These uses of cash were offset in part by an increase
in billings in excess of costs and estimated earnings of $2.9 million; an
increase in income taxes payable of $1.3 million; a decrease of other current
assets of $900,000, and net income of $6.5 million. The net use of cash in
operating activities for the six months ended March 31, 1995 was primarily
attributable to an increase in trade accounts receivable of $6.0 million
resulting from increased shipments and an increase in inventory of $1.5 million
due to increased product demand, offset in part by a reduction of other current
assets of $1.1 million, an increase in billings in excess of costs and estimated
earnings of $1.6 million and net income of $3.1 million.
8
Net cash used in investing activities for the six months ended March 1996
was $3.9 million as compared to $743,000 for the corresponding period in 1995.
The increase is largely attributable to investments in computers and peripherals
associated with an increase in employees.
Net cash provided by financing activities for the six months ended March 31,
1996 was $520,000 as compared to $23.0 million for the corresponding period in
fiscal 1995. Net cash provided by financing activities for the six months ended
March 31, 1996 was attributable to the exercise of stock options and issuance of
common stock pursuant to the Company's Employee Stock Purchase Plan. Net cash
provided by financing activities for the six months ended March 31, 1995 was due
primarily to $26.7 million of net proceeds from the Company's initial public
offering, net of application of a portion of these proceeds to repayments of
borrowings.
Since December 31, 1995, the Company has had no borrowings under its working
capital line of credit from the Bank. The line of credit enabled the Company to
borrow or grant letters of credit on an unsecured basis up to the lesser of 80%
of eligible accounts receivable or $5,000,000 in revolving loans, with
outstanding borrowings under revolving loans bearing interest at the Bank's
prime lending rate. The ability of the Company to effect borrowings under such
line of credit is conditioned upon, among other things, the Company meeting
certain financial covenants, including covenants requiring the maintenance of
specific levels of quarterly and annual earnings, working capital, tangible net
worth, debt service coverage and liquidity. The Company could elect to convert
revolving loans into loans bearing interest at 2.25% above the Bank's cost of
funds. The working capital line of credit expired on March 1, 1996, and the
Company is in the process of negotiating an extension of the line of credit or
the establishment of a new lending facility with the Bank.
The Company believes that anticipated cash flow from operations, and
existing cash and marketable securities balances will be sufficient to meet the
Company's cash requirements to fund operations and expected capital expenditures
during the next twelve months.
9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
- - ------ -----------
*3.4 Amended and Restated By-Laws of the Company
*3.5 Restated Articles of Organization of The Company
*4.1 Specimen certificate for the Common Stock of the Company
11.1 Computation of Net Income Per Common Share
_______________
* Incorporated by reference to the similarly-numbered Exhibit to the
Company's Registration Statement on Form S-1, File No. 33-81836, as declared
effective by the Securities and Exchange Commission on October 13, 1994.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
March 31, 1996.
10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRI AUTOMATION, INC.
Date: May 13, 1996 By: /S/ John J. Schickling
----------------------------
John J. Schickling
Duly Authorized Officer and
Principal Financial Officer
11
EXHIBIT INDEX
Exhibit
Number Description Page
------ ----------- ----
11.1 Computation of Net Income Per Common Share 13
12