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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
September 30, 1996 0-24934
PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2495703
(State of other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
805 MIDDLESEX TURNPIKE 01821-3986
BILLERICA, MA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number: (508) 670-4270
____________________
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $.01
Securities registered pursuant to Section 12(g) of the Act:
NONE
____________________
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
--- ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant, based on the closing price of the Common Stock on December 13, 1996
as reported by the Nasdaq National Market, was approximately $337,909,238.
Shares of Common Stock held by officers and directors and by persons who own of
record 5% or more of the outstanding Common Stock have been excluded from this
computation in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of December 13, 1996 the Registrant had outstanding 7,345,853 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on February 7, 1997 are incorporated by
reference into Items 10, 11, and 12 of this Annual Report on Form 10-K.
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ITEM 1. BUSINESS
THE COMPANY
PRI Automation, Inc. ("PRI" or the "Company") is a leading supplier of
factory automation systems that serve the needs of large, mid-sized and
specialty semiconductor manufacturers and the flat panel display industry. The
Company combines advanced robotics technology with material handling software to
automate the complex processes of integrated circuit manufacturing. PRI's
systems-which include overhead monorails, wafer stockers, reticle stockers, tool
automation systems, material control software, and factory simulation and other
services, including project management and on-site support-maximize wafer yield
and equipment utilization in a wide range of semiconductor manufacturing
environments, while providing efficient work-in-process logistics to help
optimize manufacturing throughput.
The Company sells its systems and services to semiconductor manufacturers, as
well as to OEM equipment suppliers which incorporate the Company's products into
systems sold to semiconductor manufacturers. The Company markets its flexible
factory automation systems in North America through a direct sales force
operating out of its headquarters in Billerica, Massachusetts and sales offices
in California, New Jersey and Texas, and through an independent manufacturer's
representative organization covering specific accounts. Outside North America,
the Company's products are sold by the Company's direct sales force with sales
offices in England, South Korea, Taiwan and France, in conjunction with
independent manufacturer's representative organizations with offices in eight
countries.
PRODUCTS
In response to demands from users of integrated circuits, the semiconductor
industry is continuously required to package more functionality and higher
performance in smaller semiconductor devices at ever lower costs. In addition,
users of semiconductor devices today expect manufacturers to provide a broad
range of differentiated products, often including custom versions of standard
products, designed for specific customers. They also require semiconductor
fabrication facilities ("FABs") to respond to accelerating product design cycles
and shorter product lives, and to provide quicker time to market for new
products.
The technical and operational challenges which face semiconductor
manufacturers, as they seek to meet these customer demands while maintaining and
improving their profitability and competitive positions in an environment of
increasing cost pressures and continuously evolving technology, fall into three
principal categories:
* Achieving and maintaining high production yields;
* Controlling production costs by improving utilization of expensive
facilities and equipment; and
* Managing the logistics of an increasingly complex semiconductor
fabrication process.
The Company has developed an integrated line of flexible factory automation
systems designed to automate the front-end semiconductor fabrication process and
to address these challenges. The Company's comprehensive product line and broad
range of implementation services provide a total factory automation solution
which assists its customers to achieve and maintain high wafer yields, to reduce
operating costs and increase their return on investment in expensive production
facilities and equipment, and to manage the increasingly complex process of
semiconductor fabrication. The Company's products are designed to provide its
customers with flexibility in the configuration, installation and operation of
factory automation systems. The Company's broad range of robotic devices and
systems permits systems to be configured to meet a variety of customer
requirements. The Company's systems are also designed to be installed and
subsequently modified, if necessary, with minimum disruption of customers'
operations. The Company
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also provides its customers with systems integration, factory simulation,
project management, and on-site support services.
The Company's products are built by combining modular components, each
incorporating elements of the Company's core technology, to provide the storage,
transport, wafer transfer, loading and control functions required for a
particular customer application. The Company has developed numerous components
and subsystems, including several basic types of vehicles, robot arms and other
robotic systems, various end effectors (such as vacuum pick-up tools and
mechanical pod, box, cassette and wafer grippers), and numerous monorail and
floor track elements, elevators, conveyors, tilt and transfer stations,
aligners, controllers and other specialized components. These modular building
blocks are combined in a range of standard products. They also can be readily
mixed and matched in custom-engineered solutions which provide the precise
functionality and features required by a particular customer.
A core competency of the Company is its ability to build sophisticated
electromechanical assemblies featuring high levels of reliability and
cleanliness. The Company's expertise in cleanroom robot design, precise motion
control, contamination-free air handling techniques, accurate materials control
and tracking software and other core technologies, combined with its intimate
knowledge of the technical and operational aspects of the semiconductor
fabrication process, enable the Company to provide its customers with factory
automation hardware which is effective, reliable and flexible.
INTERBAY AUTOMATION SYSTEMS
The Company's interbay automation systems consist of automated storage and
retrieval systems linked by an overhead monorail transport system, together with
the associated controllers, software and communications capabilities that
control them. The Company believes that almost all new FABs constructed since
1990 have adopted some form of interbay automation system. Interbay systems
provide automated storage, retrieval and delivery of work-in process throughout
the factory, linking each complex process step. This group of products consists
of two major sub-systems:
* Overhead monorail (AeroTrak/TM/)--PRI's AeroTrak monorail is a patented
system of components linked to provide clean, fast, accurate material delivery
from bay to bay. The AeroTrak system consists of a monorail track which carries
a number of transport vehicles which deliver materials from point to point
within a FAB, replacing manual delivery. The track typically connects various
storage systems and provides the roadway system for the factory's automated
materials traffic. The simple design and construction of the extruded aluminum
track make it feasible to redesign and modify the track configuration at any
time, providing a flexible transportation layout to meet the needs of the FAB.
The monorail and vehicles are also designed to present minimum interference to
the air-flow of the cleanroom.
Vehicles traveling on the track carry the material to be distributed and are
constructed to hold a cassette, box, pod or reticle, or combinations of the
above (obviating the need for separate handling systems for each type of
carrier). The vehicles are self-propelled using internal batteries, a feature
which eliminates external power cables, permits the use of flexible, lightweight
track components and simplifies the installation and modification of the
AeroTrak system. The AeroTrak vehicles' on-board microprocessors and infra-red
communication system allow each vehicle to communicate with the system's
supervisory computer as it passes control nodes along the route. The supervisory
computer can then guide the vehicle through the most efficient route to its
destination.
The system's turntable permits switching of vehicle traffic among branches of
the track system, enabling a large factory layout to be broken into smaller
elements for more precise computer control. A horizontal transfer switch, which
permits a vehicle and section of track to be moved in a horizontal plane while a
new track section is put in place to close the gap, enables a car to be diverted
to a storage system or other tool for delivery or retrieval of its payload
without holding up other traffic in the loop.
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A PC-based supervisory computer controls the movement of vehicles and all
node operations. System software provides all control functions for vehicle
communications, turntable and horizontal transfer commands and traffic routing.
Traffic routing algorithms determine the most efficient route for each vehicle
to deliver its load in the shortest time. A backup computer is available in the
event of primary computer failure.
* Automated Storage and Retrieval System ("stocker")--The stocker system is
built as a stand-alone unit and acts as a storage buffer for work-in-process
within the FAB, replacing manually stocked work-in-process ("WIP") racks. When
linked with the AeroTrak system, it helps provide a total flexible factory
automation solution that reduces contamination, provides for accurate process
sequencing and eliminates ergonomic risks. The Company has installed interbay
automation systems which incorporate as few as one and as many as 100 stocker
systems.
The stocker consists of an enclosed cabinet containing multiple rows of
vertically stacked shelving on which cassettes, boxes, pods or reticles can be
stored. The stocker has one or more openings through which carriers can be
inserted or removed ("input/output" or "I/O" ports). A two- or three-axis
vertical robot transfers carriers from the input/output ports to the storage
shelves. Floor-level input/output stations provide other robotic systems, as
well as human operators, with access to stored materials. Input/output options
may also include an overhead material transport system interface, permitting the
stocker to be connected to an AeroTrak overhead transport system to provide
automated delivery and retrieval of work-in-process to and from other FAB
locations during the fabrication process.
The Company's systems are made to utilize the full height of the cleanroom
(usually 10-12 feet) to provide maximum storage density per square foot of floor
space-a feature that can increase FAB storage capacity per square foot of
cleanroom footprint by a factor of three or four. The system is built of
standard modules to permit the Company to provide systems of varying storage
capabilities. The modularity of the system also allows a customer to expand
storage capacity easily at a later date.
An internal supervisory computer provides all robot motion control and
maintains a database of stored work-in-process. When connected to the factory
host computer, the control system provides complete data on the position and
status of all work-in-process factory-wide.
In addition to providing compact work-in-process storage, the Company's
stockers can be used to provide automated storage, retrieval and tracking of
reticles used in the photolithography process. A FAB's entire complement of
several thousand reticles can be safely and securely stored within a small
footprint, while the stocker's supervisory computer database maintains precise
inventory control and tracks reticle location and usage to facilitate required
periodic cleaning operations.
* Interfloor and Interbuilding Transport Systems--The Company's interfloor
transport system can be used to transfer in-process wafers vertically between
different floors of a single FAB either between stockers or between AeroTrak
loops. The Company's interbuilding transport system uses an AeroTrak monorail
and is designed for movement of materials in a "clean tunnel" between two
separate fabrication facilities or buildings.
* Distributed Control Architecture--PRI's distributed control architecture,
in which "intelligent" vehicles, nodes and stockers equipped with independent
microprocessors share responsibility for control of the system with the system's
supervisory computer, enhances the flexibility and reliability of the Company's
interbay transport systems. Portions of an AeroTrak monorail system can be taken
off-line for re-routing or repairs while the remainder of the system continues
in use. Similarly, each stocker is capable of stand-alone operation, so that
failure of a customer's host system or of an overhead transport system
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does not inhibit continued storage/retrieval operations-adding flexibility and
reliability to FAB operations.
Prices for the Company's interbay systems range from approximately $1,500,000
to $10,000,000, based on the length of monorail track, number and type of
vehicles and stockers, optional features selected and software and services
required.
INTRABAY AUTOMATION SYSTEMS
While interbay systems are utilized to link the bays of a factory into an
integrated material delivery system, intrabay products extend the automation
scheme to the individual process tools within each bay. Intrabay automation
presents manufacturers with technical challenges due to the presence of multiple
types of process tools and high traffic within each process bay. The Company
expects industry recognition of the value of intrabay automation to increase due
to the expected industry needs for process tool integration, as well as the
upcoming ergonomic issues associated with the 300mm wafers. The Company also
believes that intrabay systems represent an area of potential growth because
future FABs may have up to 40 or more bays, and will require full intrabay
factory automation.
Intrabay systems typically work with a material stocker serving as a
temporary storage buffer positioned at one or both ends of a bay. The Company's
intrabay technology provides the ability to transport a pod, box, cassette or
other product carrier from the stocker to each individual tool under automated
control. PRI's intrabay product offering currently consists of four types of
systems (each used in conjunction with one or more stockers):
* The RoboTrak System--This system consists of the Company's articulated arm
robot mounted on a linear track. The track may be embedded in the cleanroom
floor or mounted on the floor. The robot is equipped with an end effector
capable of gripping and manipulating the carrier utilized by the particular
process. A supervisory computer commands the robotic system to transport the
carrier from the stocker to the particular process tool awaiting material
loading. On the return trip, the robot carries the processed material back to
the stocker to be delivered to the next process step. The RoboTrak system is
particularly well suited for short bays (less than 30 feet in length) and cell
automation (described below).
* Machine Loading Robotic Vehicle ("MLRV")--The MLRV is a guided vehicle
incorporating a robotic arm, suited for loading the I/O ports of process tools.
The MLRV is mounted on a "wireless" track system. The vehicle incorporates an
enclosure providing a contamination-free Class 1 "mini-environment" in which
work-in-process can be carried from the stocker to the process tool. The
wireless track eliminates the need for a long cable for the supply of power and
communication, reducing contamination, simplifying mechanical and electrical
function and reducing FAB layout complexity. The wireless feature also permits
track of 100 ft. or longer to accommodate the longer bays expected in the next
generation of larger semiconductor fabrication plants.
* Overhead Monorail (AeroTrak) and Machine Loading Robot--The ability to
switch track traffic using a turntable permits the Company's AeroTrak monorail
systems to extend into and along the bay. The Company's Machine Loading Robot
("MLR") is designed to reach up to the track, remove the carrier from the
AeroTrak vehicle and transport it to the process tool. A small mini-stocker or
vertical switch may also be incorporated as a buffer-and-transfer mechanism to
deliver material to the production floor level.
* Cell Automation Systems--In a typical semiconductor fabrication facility,
tools are grouped together by function. Some process steps must be performed in
close proximity due to sequencing, timing or other needs. For example, chemical
spraytools require wafers to be transferred from plastic cassettes into Teflon
carriers before the tool can be loaded, and carriers coming out of a
planarization tool must be transferred quickly to a cleaning tool. Functionally
related tools grouped closely together constitute an
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ideal situation for a robotic application. In such a grouping of closely related
process tools, known as a cell, both throughput and yields can be increased by
automated coordination of the transfer of material from tool to tool based on a
pre-arranged programming. The Company's intrabay systems provide the necessary
components to integrate such cell operations. Examples of two such cell
automation applications are as follows:
* Advanced MLRV/BOCs-In many manufacturing facilities, horizontal diffusion
furnaces are being replaced by banks of single tube vertical furnaces. The
Company has applied its intrabay MLRV system to automate the delivery of
cassettes and/or boxes along a vertical diffusion bay. In conjunction with a
stocker system equipped with the Company's automatic cassette box opener/closer
situated at the stocker I/O port, the MLRV system supplies a steady stream of
open cassettes to and from the bank of furnaces.
* CMP (Chemical/Mechanical Planarization)--In the CMP process, wafers are
processed in a wet condition and must be kept wet and transferred to a separate
cleaning tool within a prescribed amount of time. Since cleaner throughput
exceeds planarization throughput, the Company provides an intrabay RoboTrak
system that enables one cleaner to serve several planarization tools, permitting
the complete cycle to be performed without operator intervention. The
supervisory computer control system tracks all operations, coordinates critical
timing sequences, and maintains lot integrity. In some cases, a metrology
capability is incorporated, enabling measurement of results as part of the
process.
To date, the Company's intrabay and cell automation systems have been
installed in diffusion, planarization and spray tool (wet etch and cleaning)
process bays. The Company will shortly install intrabay automation systems for
use in photolithography.
Prices for the Company's intrabay and cell automation systems range from
approximately $150,000 for automation of a simple cell to approximately
$5,000,000 for a long intrabay system incorporating a floor-level robotic
vehicle, in-floor track and automation of multiple tool types.
LITHOGRAPHY AUTOMATION SYSTEMS
The Company's Lithography Automation Systems automate the storage, retrieval,
tracking, and delivery of reticles to and within the photolithography bay(s).
Reticles are glass plates containing the device images that are projected onto
wafers during the photolithography process. Since the photolithography bay
paces overall FAB output, productivity improvements gained through automation in
this part of the FAB can be very important. In recognition of the strategic
importance of this bay, the Company has increased its focus in this area. The
products that support lithography automation include Automated Reticle
Management Systems ("ARMS"), Interfloor Transport Systems ("IFTS"), the AeroTrak
system, and the Stepper Loading Robot.
* Automated Reticle Management Systems -- ARMS are reticle stockers that
can safely and securely store a FAB's entire complement of several thousands of
reticles within a small footprint, minimizing the use of valuable FAB cleanroom
floorspace. ARMS provide an ultraclean environment and carefully designed
airflow patterns that help prevent reticle contamination and extend the time
between required periodic reticle cleaning operations. The stocker's supervisory
computer database maintains precise inventory control and tracks reticle
location, providing immediate access to the correct reticle when needed.
* AeroTrak System -- Multiple ARMS can be linked by the AeroTrak monorail
system to provide a distributed network of reticle stockers throughout the FAB.
Active or frequently used reticles can be stored in small stockers in close
proximity to their point of use, and relatively inactive reticles can be stored
in large centralized stockers outside the cleanroom. Also, this same system can
transfer wafer
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carriers within the bay, utilizing the same AeroTrak cars, thus having the one
system perform two applications.
* Interfloor Transport System -- The interfloor transport system links
stockers located on separate floors, allowing further flexibility in reticle
location. This distributed stocker architecture improves access to active
reticles while minimizing the use of valuable cleanroom floorspace.
* Stepper Loading Robot -- The stepper loading robot is an extension of the
Company's line of reticle storage systems that has recently been developed by
the Company. These systems, the first of which were shipped during fiscal 1996,
are designed to increase the efficiency of the photolithography process, one of
the most expensive steps in the semiconductor manufacturing process, by
automating the loading and unloading of reticles into and out of the
photolithography stepper.
TOOL AUTOMATION SYSTEMS
Tool automation involves the use of robotic systems to automate the manual
transfer of wafers to and from carriers and loading and unloading of individual
process tools, eliminating human contact with the product and enhancing yield
and productivity. The Company provides tool automation systems in process
applications including both diffusion and plasma-enhanced chemical vapor
deposition processes, wet chemistry processes, including wet bench processing
and spray tool applications, and planarization applications.
* Diffusion Automation System--The Company produces a dual-robot system that
automates the loading of 4-tube horizontal diffusion furnaces, enabling full
cassette-to-cassette operation. It performs the transfer of wafers from
cassettes or pods to the heat-resistant quartz containers or "boats" in which
they pass through the furnace, a tedious, contamination-prone operation when
done manually. Additionally, the system stores loaded boats and automatically
unloads and re-loads the furnace tube when ready, thereby increasing furnace
utilization. Further, it eliminates the ergonomic problems created when human
operators are required to load furnace tubes at a height that entails stepping
up on a platform while carrying a heavy quartz boat full of expensive wafers.
* PECVD Reactor Loader--Similar to diffusion furnaces, plasma-enhanced
chemical vapor deposition ("PECVD") reactors contain two tubes into which a long
graphite boat with wafers is loaded. A PRI system performs the transfer of
individual wafers from cassettes to the boat, staging the full boat and
unloading and re-loading the boats into the reactor tubes.
* Wet Bench Automation--The Company provides robotic systems for the
automation of wet bench systems, which consist of a series of tanks containing a
variety of chemicals, some very toxic, into which product cassettes must be
dipped following critical timing requirements. The Company's system employs a
computer-controlled robotic arm, mounted on a rail attached to the wet bench, to
immerse the cassettes in each tank in sequence. Use of the Company's system both
increases the accuracy and throughput of the process and eliminates the exposure
of human operators to toxic chemicals.
* Spraytool Automation--Spraytools are self-contained chemical processing
tools designed to accomplish, by means of a spray applied to a rotating set of
cassettes, tasks which otherwise would be performed by a wet bench process. The
process requires that the wafers first be transferred to a Teflon cassette. The
Company has developed a robotic system that automatically transfers wafers from
normal plastic cassettes into Teflon cassettes and unloads and reloads the
spraytool. By storing and pre-staging the cassettes, the Company's system
enables the tool to be reloaded as soon as it is ready, thereby maximizing its
utilization. Because the system stores all cassettes internally until finished,
lot tracking is automatic and mistakes in lot identity are eliminated. In some
cases, the Company is able to service two spraytools with one robot to reduce
equipment cost.
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Certain fabrication processes, such as horizontal diffusion and PECVD
deposition, are being superseded in advanced FABs by newer techniques. As a
result, the Company expects to receive fewer orders for products designed to
automate these processes-such as its horizontal diffusion automation or PECVD
reactor loader systems-from customers constructing new FABs. However, systems
based on these older technologies still provide opportunities for retrofit or
"spot" automation business as customers upgrade or refurbish existing
facilities. The Company believes, for example, that there is a large installed
base of horizontal diffusion furnaces being operated by smaller FABs which may
not wish to incur the expense of purchasing new vertical diffusion equipment but
would benefit from the increased yields and reliability which could result from
automation of the wafer transfer and loading operations which the Company's
systems can provide.
The Company's tool automation systems range in price from approximately
$25,000 to approximately $500,000, depending on the tool to be automated and the
level of functionality required.
STANDARD FEATURES AND OPTIONS
The Company's systems share many standard features and options which increase
their flexibility and utility to customers and reflect the Company's extensive
experience in automation of the semiconductor fabrication process. The Company's
expertise in contaminant-free design and construction enables it to build
cleanroom robots utilizing specially sealed body parts and arm joints, evacuated
by a vacuum system which pulls particles generated inside the robot through the
arm and exhausts them outside the cleanroom. Extensive experience with motion
control systems enables the Company to deliver robotic systems which minimize
the vibration and excessive acceleration or "g-forces" which can contribute to
particle contamination. The Company's stocker systems can be equipped with
optional air handling and filtration systems which maintain a Class 1
environment within the storage cabinet, and system components are designed to
allow optimal laminar air flow. Safety features of the Company's systems include
proximity detectors and "light curtains" which monitor operator and robot access
to input/output ports and robot tracks and stop robot motion if the operator's
presence is detected.
The Company's systems are also designed to interface with products and tools
provided by other suppliers. For example, the Company systems are compatible
with so-called "mini-environment" systems based on the Standard Mechanical
Interface or "SMIF" standard. These systems, intended to control the environment
in the immediate vicinity of in-process wafers and process equipment,
incorporate special equipment enclosures which provide ultraclean (Class 1 or
better) "mini-environments" within which processing takes place and among which
wafers are transported in sealed containers or "pods." SMIF pods, when mated
with a SMIF port on the equipment enclosure, are intended to permit materials to
be transferred from the pod to the "mini-environment" without exposure to the
surrounding cleanroom air. The Company's interbay, intrabay and tool automation
systems readily accommodate the handling of SMIF pods and interface with
standard SMIF enclosures.
Input/output options available on the Company's systems include bar code
readers, infra-red links and radio frequency ("RF") tag reading capabilities,
enabling the systems to decode identifying information provided by other
suppliers' systems and provide automatic material tracking and reporting.
AUTOMATION SERVICES
In addition to its hardware and software products, the Company provides many
services that are essential to the success of large-scale flexible factory
automation projects.
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AUTOMATION PLANNING AND DESIGN
The Company has established an Automation Planning and Design group that
assists customers in assessing their automation needs, developing automation
plans and designing factory-wide automation systems. The group includes several
automation managers who formerly were employed by semiconductor manufacturers.
The Automation Planning and Design group has contributed significantly to the
Company's efforts to enter the Asian market. The Company also believes that the
availability of this service is attractive to mid-size and specialty
semiconductor manufacturers, who might otherwise lack the resources and
expertise necessary to assess, plan and execute a large-scale automation
project.
FACTORY SIMULATION
The Company has the software and hardware capability to provide computerized
simulation of automation performance. This capability allows the Company to
perform statistical and graphical analyses of various components in a system and
establish the proper parameters for optimum performance. In an interbay system,
the simulation will establish the proper number of vehicles required to achieve
given delivery times and verify the amount of stocker storage capacity required.
Simulation graphics are also used as sales tools to demonstrate actual system
performance to customer management. Internally, simulation is used to assist
development of new systems and verify their performance. Basic simulation is
included in the price of a system. More sophisticated simulations, if required,
are performed for an additional fee, based on the scope and complexity of the
FAB being modeled.
PROJECT MANAGEMENT
Large-scale factory automation systems, such as interbay systems, are
complex, multi-million dollar projects which may extend over many months and
involve the efforts of numerous contractors, suppliers and customer personnel.
The Company's Project Management group is responsible for ensuring that these
projects are delivered on time and on budget. Experienced project managers
schedule the various aspects of the project, oversee a multi-disciplinary team,
interface with the needs of the customer and coordinate delivery and
installation. The Company generally charges a management fee, based on the scope
of the project, for this service.
SYSTEM INTEGRATION
The Company believes that system integration is critical to the success of
any interbay, intrabay, cell or even tool automation project. The integration
process typically consists of systems engineering and software development
activities as well as the generation of the layout plan, test protocols and
implementation plan necessary to coordinate multiple systems under one control
architecture and to interface mechanical, electrical and software components
into a single operating entity integrated into the customer's facility. The
Company receives a separate integration fee, based on the scope of work
performed, in most projects it undertakes.
CUSTOMER SUPPORT
The Company provides extensive customer support to provide its customers with
reliable continuous service. Although system prices typically include one year
of basic customer support, many customers request more extensive support. The
Company makes available, on a fee basis, various levels of support supplemental
to the included first-year warranty support, and extending into the post-
warranty period. These services can range from telephone hotline support,
providing for a 48-hour response time, to full-time on-site customer service
provided by Company personnel permanently based on the customer's facility. Fees
are based upon the type of service and number of company personnel required. The
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Company maintains support locations in Portland, Oregon; Albuquerque, New
Mexico; Austin and Dallas, Texas; Billerica, Massachusetts; Burlington, Vermont;
Mesa, Arizona; and San Jose, California. Overseas, the Company maintains support
locations in South Korea, Taiwan and the United Kingdom in conjunction with
factory-trained engineers working for the Company's manufacturer's
representative organizations.
RESEARCH AND DEVELOPMENT
The Company believes its future success will depend in large part on its
ability to enhance, in collaboration with customers, its existing product lines
to meet the changing needs of semiconductor manufacturers and intends to
continue to devote substantial resources to product research and development.
The Company expended $6,973,000, $10,407,000 and $17,089,000 on research and
development in fiscal 1994, 1995 and 1996, representing 19.2%, 16.3% and 15.4%
of its net revenue for such periods, respectively.
The Company's Marketing and Engineering departments are responsible for
establishing technical product direction and system architecture and for
enhancing PRI's longer term technology leadership in the semiconductor
automation industry. The Company's Engineering department is responsible for
implementing new capabilities and products, maintaining and improving the
functionality and performance of the Company's existing products, and performing
specific research and development relating to more immediate technical and
performance issues. The Automation Systems Division is responsible for the
Company's program to extend its products and technologies to other semiconductor
and non-semiconductor markets. Among the Company's current product research and
development projects are the following:
360MLR System--The Company's 360 degree machine loading robot ("360MLR"), is
an extension of the line of machine loading robots used in the Company's
intrabay and tool automation systems. This device, developed by the Company's
Automation Systems Division, can transport loads of up to 20 pounds within a 360
degree radius of up to three feet. This capability makes the 360MLR particularly
suited for the handling of large objects such as flat panel displays.
TransNet (TransNet/TM/)--In fiscal 1996 the Company introduced TransNet, a
fully integrated software solution for FAB automation. TransNet, a suite of
software products intended to totally automate material handling for FAB
operations, is linked to PRI's existing family of material handling products,
providing management and control of the entire material handling system,
including stockers, AeroTrak/TM/ transport and intrabay components. TransNet
operates in a Microsoft/TM/ Windows NT/TM/ environment, providing a foundation
inherently designed for open connectivity and growth.
Bare Reticle Stocker -- To supplement the company's line of ARMS that store
reticles contained in plastic carriers, a new product was developed that stores
reticles which are not contained in carriers. By storing reticles "bare" a much
higher storage density can be achieved. The bare reticle stocker was introduced
in fiscal 1996.
The Company cannot predict whether its newly announced products will achieve
market acceptance if and when commercial shipments of such systems commence, nor
can it predict whether any marketable product will result from any of the other
product development efforts described above. The Company does not expect
revenues attributable to any such product to contribute materially, if at all,
to its results of operations in the next twelve months.
9
<PAGE>
MARKETING, SALES AND SUPPORT
The Company markets its products to semiconductor manufacturers worldwide
through its own sales and service organization and in conjunction with
independent manufacturer's representative organizations in certain areas of the
world. In North America, the Company sells through a direct sales force of 22
people, operating out of the Company's Billerica, Massachusetts headquarters and
regional sales offices located in California, New Jersey and Texas, and assisted
by an independent manufacturer's representative organization covering specific
accounts in Arizona, California, Idaho and Oregon. To augment the selling
process, PRI conducts marketing programs that include trade shows, product
literature and newsletters.
Outside North America, the Company's products are sold by the Company's
direct sales force with sales offices in England, South Korea, Taiwan and France
and in conjunction with independent manufacturer's representative organizations
with offices in France, Germany, Israel, Italy, Taiwan, Singapore, South Korea
and Switzerland. The Company does not market directly in Japan at this time.
The Company strives to provide its customers with a turnkey automation system
and to this end provides comprehensive support and services before the order is
received, during the project and after acceptance of the system. After the order
is received and during the execution phase (which includes final design and
layout, manufacture, test, installation and final integration with the
customer's facilities and host software), the customer's primary interface is
with the Company's Project Management group. Regular project reviews keep the
customer informed and help the customer prepare the site and ensure a smooth
integration and on-time turnover to the customer's production operation. After
the system is accepted, PRI's Customer Support organization takes responsibility
for ensuring optimal system operation. Customer Support provides a range of
services to customers including emergency on-call response, comprehensive on-
site service contracts, technical support, 24-hour hotline, customer training,
data collection, upgrades, spare parts management, and preventive maintenance.
MANUFACTURING
The Company's manufacturing operations take place at its headquarters in
Billerica, Massachusetts. The Company's products consist primarily of standard
components and, in certain cases, special made-to-order components, which are
assembled and tested by the Company. Completed subassemblies are tested for
functionality prior to their assembly into completed systems. Class 100 laminar
flow hoods are used in the assembly of sensitive components which must be
assembled in a clean environment. Completed systems are "burned in" for 48 to 72
hours and subjected to functional testing before being triple-wrapped in the
Company's Class 1,000 packaging area and packed for shipment.
The Company's manufacturing department includes, in addition to production
personnel, manufacturing engineering and systems groups which are responsible
for managing the transition of new products from engineering to production, and
for improving manufacturing efficiency by introducing standardization, measuring
productivity within discrete processes and analyzing the costs of manufacturing
operations.
The Company operates a "concurrent engineering" process in which system
design and manufacture are performed cooperatively, and engineering,
manufacturing, quality, support and field service organizations participate on
project teams intended to provide an effective integration of disciplines from
design through manufacturing, acceptance testing and installation. The Company's
objective is not only to better accommodate customers tight delivery deadlines
but to ensure that products are designed with "manufacturability" in mind and
manufactured in a way which enhances their utility and reliability and
simplifies their service and support.
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<PAGE>
The Company has implemented quality control ("QC") and quality assurance
("QA") processes based on Total Quality Management principles. QC is maintained
through incoming inspections of components, in-process inspection and testing of
subassemblies and through burn-in and cycle testing of completed systems. After
all manufacturing operations, final assembly and testing are complete, the
Company's QA personnel, acting as "surrogate customers," perform independent
acceptance testing of each system to make sure that it meets product
specifications and quality standards before it is shipped to the customer.
A supplier management process assists management in assessing, qualifying and
selecting external suppliers. Outsourcing practices provide multiple sources for
most components, although in certain instances, the Company is dependent upon a
sole supplier, or has qualified only a single supplier, for certain components
or specialized processes (such as painting of system cabinets and enclosures)
utilized in its products.
CUSTOMERS
The Company's customers include most of the leading semiconductor
manufacturers in the U.S. and Europe. The Company has recently begun to
penetrate the Asia Pacific market. Historically, a significant portion of the
Company's revenues in any particular period has been attributable to sales to a
limited number of customers. Net revenue from the Company's three largest
customers accounted for 81%, 80% and 53% of the Company's net revenue during
fiscal 1994, 1995 and 1996, respectively. The Company's largest customers also
change from year to year, as large FAB projects are completed and new projects
are initiated. One customer, Intel Corporation, accounted for 51%, 60% and 38%
of the Company's net revenue in fiscal 1994, 1995 and 1996, respectively. In
fiscal 1994, Motorola, Inc. and Digital Equipment Corporation accounted for 19%
and 11% of net revenue, respectively. In fiscal 1995, Mosel Vitelic, the
Company's first customer in the Asia Pacific region, and SGS Thomson each
accounted for 10% of net revenue. In fiscal 1996, Intel was the only customer
accounting for 10% or more of the Company's net revenue.
BACKLOG
The Company's backlog at September 30, 1996 was approximately $104,747,000,
compared to approximately $59,272,000 at September 30, 1995. The Company
includes in its backlog only those customer orders for products, spare parts and
services for which it has accepted signed purchase orders with assigned delivery
dates within twelve months. The equipment requirements of new fabrication
facilities cannot be determined with accuracy. An increasing percentage of the
Company's backlog is attributable to follow-on orders for existing customers
that are expanding the scope of their original installations or refurbishing or
retrofitting existing facilities. Nevertheless, the Company's backlog at any
certain date may not be indicative of future demand of the Company's products or
of actual revenues for any succeeding period. The Company's standard terms and
conditions include penalties for cancellation; however, not all negotiated
orders have penalties.
COMPETITION
The Company experiences intense competition worldwide from one principal
competitor, the clean automation division of Daifuku Co., Ltd., a large Japanese
manufacturer of factory automation systems. Daifuku Co., Ltd. has substantially
greater financial and other resources than the Company. The Company also
experiences competition from a number of other foreign and domestic
manufacturers of automated machinery used in semiconductor fabrication
facilities. There can be no assurance that the Company's competitors will not
develop enhancements to or future generations of competitive products that will
offer superior price or performance features or that new competitors will not
enter the Company's markets and develop such enhanced products. The Company
believes that once a semiconductor manufacturer has selected a particular
supplier's capital equipment, the manufacturer generally relies upon that
equipment
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<PAGE>
for the specific production line application and frequently will attempt to
consolidate its other capital equipment requirements with the same supplier.
The principal elements of competition in the Company's markets include
product performance, quality, supplier track record and stability, customer
service and support, delivery capability, and price. Product performance
criteria include cleanliness, reliability, footprint, cost of ownership,
throughput and flexibility.
The Company believes that as the semiconductor equipment market matures,
major semiconductor manufacturers are increasingly intolerant of delays in
production start-up and quality and reliability problems attributable to factory
automation systems. Manufacturers' dependence on factory automation systems,
once installed, and their focus on minimizing the risks associated with
increasingly expensive FAB construction projects, have resulted in a tendency to
choose and maintain long-term relationships with proven automation suppliers.
While new competitors could enter the semiconductor factory automation market
with technically superior products, the Company believes that its knowledge of
automation applications, breadth of product line, specialized manufacturing
skills, experience in managing large scale factory automation projects and
customer support infrastructure create a difficult barrier to entry by new
competitors.
While the Company has a strong market position in the U.S. and Europe,
Japanese suppliers have a dominant position in Asia. The tendency for customers
to stay with a supplier and the strong support infrastructure in Asia makes
penetration of the Asian markets difficult for non-Japanese suppliers. The
Company successfully competed against Daifuku in winning its first orders from
Taiwan and Korea. However, there is no assurance that such success will continue
in fiscal year 1997.
INTELLECTUAL PROPERTY RIGHTS
The Company protects its proprietary technologies primarily through employee
and third-party non-disclosure agreements and legal principles restricting the
unauthorized disclosure or use of trade secrets. The Company also holds a patent
relating to certain key elements of its AeroTrak monorail system, which forms an
important component of the Company's interbay automation systems. This patent
expires in 2007. The Company believes, however, that its financial performance
will depend more upon its technological expertise and the capabilities of its
employees than upon protection through the legal system of its intellectual
property rights. There can be no assurance that foreign intellectual property
laws will protect the Company's intellectual property rights. There can be no
assurance that any patent issued to the Company will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
competitive advantages to the Company. Furthermore, there can be no assurance
that others will not independently develop similar products, duplicate the
Company's products or design around any patents issued to the Company.
The Company has been advised by a customer who purchased a tool automation
system from the Company for approximately $190,000 that the customer has
received a demand letter from an inventor. The inventor's letter alleges that
semiconductor manufacturing equipment used by the customer, possibly including
the system purchased from the Company, violates patents of the inventor. After
reviewing the patents in question, the Company does not believe that the tool
automation system incorporates the technology which appears to be the basis of
the patents, and therefore believes that any claim that its system infringes the
patents is without merit. There can be no assurance, however, that infringement
claims by third parties or claims for indemnification resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to be true, will not materially adversely affect the Company's
business, financial condition and results of operations. If any such claims are
asserted against the Company, the Company may seek to obtain a license under the
third party's intellectual property rights. There can be no assurance that a
license will be available on reasonable terms or at all. The
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<PAGE>
Company could decide, in the alternative, to resort to litigation to challenge
such claims. Such challenges could be extremely expensive and time consuming and
could materially adversely affect the Company's business, financial condition
and result of operations.
EMPLOYEES
At September 30, 1996, the Company had 841 full-time employees. In addition,
the Company utilizes the services of temporary or contract personnel within all
functional areas to assist on project related activities. The number of such
personnel will vary depending on specific project activity. At September 30,
1996, the Company employed 140 temporary or contract personnel. In addition to
confidentiality agreements, most key employees have stock or stock option
arrangements with the Company that provide for vesting over several years. The
Company believes its future success will depend in large part on its ability to
attract and retain highly skilled employees. None of the employees of the
Company is covered by a collective bargaining agreement. The Company considers
its relationship with its employees to be good.
ITEM 2. PROPERTIES
Facilities
The Company's corporate headquarters and principal research and development
and manufacturing facilities are located in a 122,342 square foot leased
building in Billerica, Massachusetts. The lease on this facility expires in
2001, and provides for average annual lease payments of approximately $563,000.
The Company also leases an additional 80,000 square foot facility adjacent to
its headquarters facility in Billerica, Massachusetts. The lease on this
facility expires in 2000, and provides for average annual lease payments of
approximately $260,000. The Company also leases facilities in Austin and Dallas,
Texas; Mesa, Arizona; San Jose, California; South Korea and Taiwan under leases
with expiration dates ranging from June 30, 1997 to July 13, 2001. The Company
believes that its existing facilities and planned expansion will be adequate to
meet its currently anticipated requirements and that suitable additional or
substitute facilities will be available as required.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION
In April 1994, Ben Franklin Technology Center of Southeastern Pennsylvania
("BFTC"), a creditor of ProgramMation, Inc. ("PMI"), the corporation from which
the Company in fiscal 1993 purchased the technology which the Company has
developed into its AeroTrak overhead monorail system, instituted suite against
PMI, certain stockholders and directors of PMI, and the Company in the Court of
Common Please of Philadelphia, Pennsylvania. The action alleged that PMI
breached a contract between it and BFTC by failure to pay royalties and other
amounts alleged to be due under the contract and by selling the technology, in
which BFTC claimed a security interest, to the Company. In March 1996, the
parties entered into an agreement pursuant to which BFTC agreed to dismiss the
Company from the litigation with prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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<PAGE>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the over-the-counter market under the
Nasdaq symbol PRIA. The following table sets forth the high and low sale prices
for the Company's Common Stock as reported on the Nasdaq National Market for
each quarter during the two year period ended September 30, 1996.
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal 1996 $33.75-43.50 $19.00-36.50 $20.00-40.00 $20.50-37.50
Fiscal 1995 $13.75-17.50 $13.25-24.00 $21.25-33.50 $33.50-46.25
</TABLE>
The approximate number of holders of record of the Company's Common Stock as
of December 13, 1996 is 254. The Company has never paid cash dividends on its
Common Stock. The current policy of its Board of Directors is to retain all
earnings for the continued growth of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected historical consolidated
financial data, which should be read in conjunction with the Company's financial
statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net revenue............................. $110,684 $64,042 $36,293 $19,215 $ 7,483
Gross profit............................ 52,364 30,685 16,271 8,563 3,054
Operating profit (loss)(1).............. 18,203 10,233 4,318 (2,191) (1,480)
Net income (loss)(1).................... 13,731 7,559 2,822 (2,109) (882)
Net income (loss) per common share:(1)
Primary.............................. 1.81 1.17 0.71 (0.64) (0.28)
Assuming full dilution............... 1.81 1.16 0.71 (0.64) (0.28)
BALANCE SHEET:
Total assets............................ $123,786 $94,999 $22,242 $12,345 $ 6,076
Long-term obligations, less current
portions............................. - - 4,075 213 281
Series A redeemable convertible
preferred stock(2)................... - - 4,063 3,998 -
- ----------
</TABLE>
(1) For the year ended September 30, 1993, reflects a one-time charge of $3,739
for the purchase of incomplete technology.
(2) All outstanding Series A Convertible Preferred Stock was converted into
Common Stock in connection with the Company's initial public offering
in October 1994.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal years indicated, certain
income and expense items as a percentage of net revenue:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net revenue............................. 100.0% 100.0% 100.0%
Cost of revenue......................... 52.7 52.1 55.2
----- ----- -----
Gross profit............................ 47.3 47.9 44.8
Operating expenses:
Research and development.............. 15.4 16.3 19.2
Selling, general and administrative... 15.4 15.7 13.7
----- ----- -----
Operating profit........................ 16.5 15.9 11.9
Other income (expense), net............. 1.9 1.7 (0.8)
----- ----- -----
Net income before income tax provision.. 18.4 17.6 11.1
Income tax provision.................... 6.0 5.8 3.3
----- ----- -----
Net income.............................. 12.4% 11.8% 7.8%
===== ===== =====
</TABLE>
FISCAL 1996 VS. FISCAL 1995
Net revenue: Net revenue for fiscal year 1996 increased to $110,684,000 as
compared to $64,042,000 for fiscal 1995. This increase resulted from greater
market acceptance of, and demand for, the Company's flexible factory automation
systems as a result of semiconductor manufacturers' continuing upgrades and
expansion of existing fabrication facilities and construction of new facilities,
and from the Company's growth in Europe and in the Asia Pacific region. Net
export sales to unaffiliated customers comprised $18,428,000 or 16.6% of net
revenue for fiscal year 1996 compared to $9,664,000 or 15.1% of net revenue for
the prior fiscal year. The increase is primarily due to the Company's expansion
into both Europe and the Asia Pacific region.
Gross profit: The Company's gross profit margin decreased to 47.3% for
fiscal 1996 as compared to 47.9% for the prior fiscal year. The decrease is
primarily attributable to increased costs associated with the support of global
expansion and reduced prices to compete in the Asia Pacific region.
Research and development: Research and development expenses increased to
$17,089,000 or 15.4% of net revenue for fiscal 1996 as compared to $10,407,000
or 16.3% of net revenue for the prior fiscal year. The increase in dollar amount
primarily reflects the continued 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. In fiscal 1996 the Company capitalized $726,000 of internal software
development costs associated with TransNet, its integrated software solution for
FAB automation.
Selling, general and administrative: Selling, general and administrative
expenses increased to $17,072,000 or 15.4% of net revenue for fiscal 1996 as
compared to $10,045,000 or 15.7% of net revenue for the prior fiscal year. The
increase in dollar amount primarily reflects the increases in personnel,
commissions and related expenses associated with higher sales volume, expansion
of the Company's marketing, market research and communications programs, and
increased sales and marketing efforts in
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<PAGE>
support of the Company's global expansion. The decrease as a percentage of net
revenue is largely attributable to the fact that net revenue grew faster than
general and administrative expenses.
Operating profit: As a result of the foregoing factors, operating profit for
fiscal 1996 increased to $18,203,000 or 16.5% of net revenue as compared to
$10,233,000 or 15.9% of net revenue for the prior fiscal year.
Other income (expense), net: Other income (expense), net increased to
$2,128,000 or 1.9% of net revenue as compared to $1,021,000 or 1.7% of net
revenue for the prior fiscal year. Interest income increased to $2,163,000 or
2.0% of net revenue for fiscal 1996 as compared to $1,235,000 or 1.9% of net
revenue for the prior fiscal year. The increase in dollar amount is largely
attributable to the investment of proceeds resulting from the second offering of
the Company's Common Stock in July 1995. Interest expense decreased to $34,000
or 0.03% of net revenue as compared to $214,000 or 0.3% of net revenue. The
dollar amount and percentage decrease reflect the repayment of the Company's
debt out of the proceeds of its initial public offering in October 1994, the
effect of which was partially offset by related prepayment penalties in fiscal
1995.
Income tax provision: The income tax provision increased to $6,600,000 for
fiscal 1996 as compared to $3,695,000 for the prior fiscal year. The effective
tax rate decreased for fiscal 1996 to 32% as compared to 33% for the prior
fiscal year. The decrease is primarily due to the elimination of certain
valuation allowances placed against certain deferred tax assets, offset
partially by an increase in state income taxes.
FISCAL 1995 VS. FISCAL 1994
Net revenue: Net revenue for fiscal year 1995 increased to $64,042,000 as
compared to $36,293,000 for fiscal 1994. This increase 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
expansion into the Asia Pacific region. Net export sales to unaffiliated
customers comprised $9,664,000 or 15.1% of net revenue for fiscal year 1995
compared to $3,858,000 or 10.6% of net revenue for the prior fiscal year. The
increase in dollar amount is primarily due to the aforementioned expansion into
the Asia Pacific region.
Gross profit: The Company's gross profit margin increased to 47.9% for
fiscal 1995 as compared to 44.8% for the prior fiscal year. The percentage
increase is primarily attributable to an increase in the profit margins of
installations and 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 increased to
$10,407,000 or 16.3% of net revenue for fiscal 1995 as compared to $6,973,000 or
19.2% of net revenue for the prior fiscal year. 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 1995 grew more rapidly than did research and development
expenses.
Selling, general and administrative: Selling, general and administrative
expenses increased to $10,045,000 or 15.7% of net revenue for fiscal 1995 as
compared to $4,980,000 or 13.7% of net revenue for the prior fiscal year. The
increase in dollar amount is primarily due to increases in salaries, commissions
and related expenses associated with higher sales volume, to expansion of the
Company's marketing, market research and communications programs, and to
increased sales and marketing efforts in the Asia Pacific region. The increase
as a percentage of net revenue is a direct result of the increased sales and
marketing efforts in the Asia Pacific region.
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<PAGE>
Operating profit: As a result of the foregoing factors, operating profit for
fiscal 1995 increased to $10,233,000 or 15.9% of net revenue as compared to
$4,318,000 or 11.9% of net revenue for the prior fiscal year.
Other income (expense), net: Other income (expense), net increased to
$1,021,000 or 1.7% of net revenue for fiscal 1995 as compared to $(286,000) or
(0.8)% of net revenue for the prior fiscal year. Interest income increased to
$1,235,000 or 1.9% of net revenue compared to $9,000 or 0.1% of net revenue in
the prior fiscal year. The increase is attributable to the investment of a
significant portion of the proceeds from the Company's public offerings in
October 1994 and July 1995. Interest expense decreased to $214,000 or 0.3% of
net revenue for fiscal 1995 as compared to $294,000 or 0.8% of net revenue for
the prior fiscal year. The decrease reflects the repayment of the Company's debt
out of the proceeds of its initial public offering in October 1994, the effect
of which was partially offset by prepayment penalties.
Income tax provision: The income tax provision increased to $3,695,000 for
fiscal 1995 as compared to $1,210,000 for the prior fiscal year. The effective
tax rate increased to 33% as compared to 30% for the prior fiscal year, due
primarily to a lower proportion of tax credits due to tax law changes.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1996, the Company used cash in operating activities of $5,369,000,
due primarily to increases in trade accounts receivable, contracts in progress
and inventory, partially offset by net income, depreciation, deferred income
taxes and an increase in accounts payable.
Net cash utilized in investing activities was $5,323,000, consisting
primarily of the purchase of fixed assets including computers, automation
equipment and leasehold improvements, offset partially by proceeds from the sale
of marketable securities.
Net cash provided from financing activities of $1,174,000 was generated by
the issuance of common stock in connection with the Employee Stock Purchase Plan
and the exercise of stock options.
At September 30, 1996, the Company had no borrowings under its working
capital line of credit from Fleet Bank of Massachusetts, N.A. (the "Bank"). The
Company still maintains the working capital line of credit, which enables the
Company to borrow or grant letters of credit on an unsecured basis up to the
lesser of 80% of eligible accounts receivable or $10,000,000 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
lines of credit is conditioned upon, among other things, the Company's meeting
certain financial covenants, including covenants requiring the maintenance of
specific levels of quarterly and annual earnings, working capital, tangible net
worth, debt service coverage and liquidity. The Company may elect to convert
revolving loans into loans bearing interest at 1.5% above the Bank's cost of
funds. The working capital line of credit expires on March 1, 1998.
The Company believes that existing cash and investment balances and funds
available under its existing lines of credit will be sufficient to meet the
Company's cash requirements to fund operations and expected capital expenditures
during the fiscal year ending September 30, 1997.
Statement of Financial Accounting Standards No. 123, "Accounting of Stock-
Based Compensation" ("SFAS 123"), will require the Company to elect either
expense recognition under SFAS 123 or its disclosure-only alternative for stock-
based employee compensation. The expense recognition provision encouraged by
SFAS 123 would require fair value-based financial accounting to recognize
compensation expense for employee stock compensation plans. SFAS 123 must be
adopted in the Company's fiscal 1997 financial statements with comparable
disclosures for the prior year. The Company has determined that it will elect
the disclosure-only alternative permitted under SFAS 123. The Company will be
required to
17
<PAGE>
disclose pro forma net income and pro forma earnings per share in the footnotes
using the fair value-based method beginning in fiscal 1997 with comparable
disclosures for fiscal 1996. The Company has not determined the impact of these
pro forma adjustments to its net income or earnings per share.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange Commission may contain statements which are not historical facts but
which are "forward-looking statements" which involve risks and uncertainties.
In particular, statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to the Company's shipment level
and profitability, and the sufficiency of capital to meet working capital and
capital expenditures requirements may be forward-looking statements. The words
"expect," "anticipate," "internal," "plan," "believe," "seek," "estimate" and
similar expressions also are intended to identify such forward-looking
statements. This Report also contains other forward-looking statements. Such
statements are not guarantees of future performance, and involve certain risks,
uncertainties and assumptions that could cause the Company's future results to
differ materially from those expressed in any forward-looking statements made by
or on behalf of the Company. Many of such factors are beyond the Company's
ability to control or predict. Readers are accordingly cautioned not to place
undue reliance on forward-looking statements. The Company disclaims any intent
or obligation to update publicly any forward-looking statements whether in
response to new information, future events or otherwise. Important factors that
may cause the Company's actual results to differ from such forward-looking
statements include, but are not limited to, the factors discussed below.
The Company's future results are subject to substantial risks and
uncertainties. The Company's business and results of operations depend in
significant part upon capital expenditures of manufacturers of semiconductors,
which in turn depend upon the current and anticipated market demand for
semiconductors and products incorporating semiconductors. Historically, the
semiconductor industry has been highly cyclical with recurring periods of over
supply, which often have had a severe effect on the semiconductor industry's
demand for capital expenditures, including systems manufactured and marketed by
the Company. The Company believes that the markets for newer generations of
semiconductors will also be subject to similar fluctuations. Also, the recent
high rate of technical innovation and resulting improvements in the performance
and price of semiconductor devices, which have driven much of the demand for the
Company's products, could slow, or encounter limits, in the future. In addition,
any other factor adversely affecting the semiconductor industry or particular
segments within the semiconductor industry may adversely effect the Company's
business, financial condition and operating results.
Additional risks and uncertainties include: competitive pressures on selling
prices; inventory management, including suppliers' ability meet the Company's
needs in a timely manner; the timing and cancellation of customer orders;
changes in product mix; the Company's ability to introduce new products and
technologies on a timely basis; the Company's ability to increase its
manufacturing capacity to meet increased demand while maintaining satisfactory
levels of product quality, service levels, and timeliness of deliveries; rapid
technological change and introduction of products and technologies by the
Company's competitors; market acceptance of the Company's and its competitors'
products; the level of orders received which can be shipped in a quarter; and
the timing of investments in engineering and development. As a result of the
foregoing and other factors, the Company may experience material fluctuations
in future operating results on a quarterly or annual basis which could
materially and adversely affect its business, financial condition, operating
results and stock price.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements and Financial Statement Schedules as of
September 30, 1996 and 1995 and for each of the three years in the period ended
September 30, 1996 are filed as exhibits hereto and listed in Items 14(a)(1) and
(2), and are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors and executive
officers of the Company is incorporated herein by reference to the information
set forth under the caption "Directors and Executive Officers" contained in the
Company's Definitive Proxy Statement for its Annual Meeting of Stockholders to
be held on February 7, 1997 (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item with respect to executive compensation
is incorporated herein by reference to the information set forth under the
caption "Renumeration of Executive Officers and Directors" contained in the
Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item with respect to security ownership of
management and certain beneficial owners of the Company is incorporated herein
by reference to the information set forth under the caption "Security Ownership
of Certain Beneficial Owners and Management" contained in the Company's Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS
Report of Independent Accountants
Consolidated Balance Sheets as of September 30, 1996 and 1995
Consolidated Statements of Operations for the years ended September 30, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended September
1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended September 30, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because the required information is either
inapplicable or presented in the Consolidated Financial Statements or Notes
thereto.
(3) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Amended and Restated By-Laws of the Company (filed as Exhibit 3.4 to the
Company's Registration Statement on Form S-1, File No. 33-81836 and
incorporated herein by reference).
3.2 Restated Articles of Organization (filed as Exhibit 3.5 to the Company's
Registration Statement on Form S-1, File No. 33-81836, and incorporated
herein by reference).
4.1 Specimen certificate for the Common Stock of the Company (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-1, File
No. 33-81836, and incorporated herein by reference).
10.1* 1984 Incentive Stock Option Plan of the Company (filed as Exhibit 10.4
to the Company's Registration Statement on Form S-1, File No. 33-81836,
and incorporated herein by reference).
10.2* 1994 Incentive and Non-Qualified Stock Option Plan of the Company (filed
as Exhibit 10.5 to the Company's Registration Statement on Form S-1,
File No. 33-81836, and incorporated herein by reference).
10.3 Letter Agreement dated March 2, 1994, between the Company and Fleet Bank
of Massachusetts, N.A. (exhibits and schedules have been omitted) (filed
as Exhibit 10.6 to the Company's Registration Statement on Form S-1,
File No. 33-81836, and incorporated herein by reference).
10.5 Security Agreement dated as of March 2, 1994, by and between the Company
and Fleet Bank of Massachusetts, N.A. (filed as Exhibit 10.8 to the
Company's Registration Statement on Form S-1, File No. 33-81836, and
incorporated herein by reference).
20
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.10 Lease Agreement dated as of May 5, 1994, by and between the Company and
The Prudential Insurance Company of America (filed as Exhibit 10.14 to
the Company's Registration Statement on Form S-1, File No. 33-81836, and
incorporated herein by reference).
10.11 Master Lease Agreement dated as of June 18, 1992, by and between the
Company and Banc Boston Leasing, Inc. (filed as Exhibit 10.15 to the
Company's Registration Statement on Form S-1, File No. 33-81836, and
incorporated herein by reference).
10.12* 1994 Employee Stock Purchase Plan of the Company (filed as Exhibit 10.16
to the Company's Registration Statement on Form S-1, File No. 33-81836,
and incorporated herein by reference).
10.13 Modification Agreement and Supplement No. 1 to Security Agreement dated
September 1, 1994 between the Company and Fleet Bank of Massachusetts,
N.A. (filed as Exhibit 10.19 to the Company's Registration Statement on
Form S-1, File No. 33-81836, and incorporated herein by reference).
10.14 Term Note dated September 1, 1994 made by the Company to the order of
Fleet Bank of Massachusetts, N.A. (filed as Exhibit 10.20 to the
Company's Registration Statement on Form S-1, File No. 33-81836, and
incorporated herein by reference).
10.16 Second Loan Modification Agreement dated as of March 1, 1996 between the
Company and Fleet Bank of Massachusetts, N.A. (filed as Exhibit 10.16 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, and incorporated herein by reference).
10.17 $10,000,000 Promissory Note dated as of March 1, 1996 made by the
Company to the order of Fleet Bank of Massachusetts, N.A. (filed as
Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, and incorporated herein by reference).
11.1** Computation of Net Income Per Common Share.
21.1** List of Subsidiaries of the Company.
23.1** Consent of Coopers & Lybrand L.L.P.
__________
* management contracts and compensatory arrangements
** filed herewith
(B) REPORTS ON FORM 8-K
The Company did not file any Report on Form 8-K during the quarter ended
September 30, 1996.
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
PRI Automation, Inc.:
We have audited the accompanying consolidated balance sheets of PRI
Automation, Inc. as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1996. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PRI Automation,
Inc. as of September 30, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 6, 1996
1
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
ASSETS 1996 1995
-------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 28,487 $38,005
Marketable securities................................... 7,582 10,868
Trade accounts receivable, less allowance for doubtful
accounts of $500 at 1996 and 1995..................... 27,561 16,624
Contracts in progress................................... 21,824 7,382
Inventories............................................. 20,988 11,416
Deferred income taxes................................... - 1,038
Other current assets.................................... 1,268 1,431
-------- -------
Total current assets..................................... 107,710 86,764
Property and equipment, net.............................. 9,180 5,027
Marketable securities.................................... 4,666 3,179
Deferred income taxes.................................... 644 3
Other assets............................................. 1,586 26
-------- -------
Total assets............................................. $123,786 $94,999
======== =======
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Accounts payable........................................ $ 16,171 $ 7,037
Accrued expenses and other liabilities.................. 9,188 5,359
Billings in excess of revenues and customer advances.... 1,505 1,177
-------- -------
Total current liabilities................................ 26,864 13,573
Commitments and contingencies (Notes H, K and O)......... - -
Stockholders' equity:
Preferred stock; 400,000 shares authorized; none
outstanding.......................................... - -
Common stock, $.01 par value; 12,000,000 shares
authorized; 7,285,460 and 6,998,266 issued and
outstanding at September 30, 1996 and 1995,
respectively......................................... 73 70
Additional paid-in capital.............................. 71,806 70,044
Retained earnings....................................... 25,043 11,312
-------- -------
Total stockholders' equity............................... 96,922 81,426
-------- -------
Total liabilities and stockholders' equity............... $123,786 $94,999
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Net revenue(1)........................... $110,684 $64,042 $36,293
Cost of revenue.......................... 58,320 33,357 20,022
-------- ------- -------
Gross profit............................. 52,364 30,685 16,271
Operating expenses:
Research and development............... 17,089 10,407 6,973
Selling, general and administrative.... 17,072 10,045 4,980
-------- ------- -------
Operating profit......................... 18,203 10,233 4,318
Other income (expense), net.............. 2,128 1,021 (286)
-------- ------- -------
Income before income tax provision 20,331 11,254 4,032
Income tax provision..................... 6,600 3,695 1,210
-------- ------- -------
Net income............................... $ 13,731 $ 7,559 $ 2,822
======== ======= =======
Net income per common share:
Primary................................ $1.81 $1.17 $0.71
Assuming full dilution................. $1.81 $1.16 $0.71
Weighted average number of common and
common equivalent shares outstanding:
Primary................................ 7,578 6,456 3,961
Assuming full dilution................. 7,605 6,502 3,989
</TABLE>
__________
(1) Includes sales to related party of $18,517 for the year ended September
30, 1994.
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1993............................................... 3,124 $ 31 $ 1,555 $ 994 $ 2,580
Exercise of stock options................................................. 52 1 89 90
Issuance of stock warrants................................................ 28 28
Accretion of Series A redeemable
convertible preferred stock............................................. (63) (63)
Net income................................................................ 2,822 2,822
------- ------- ------- ------- -------
Balance, September 30, 1994............................................... 3,176 32 1,672 3,753 5,457
Exercise of stock options................................................. 178 2 476 478
Tax benefit from disqualified dispositions................................ 360 360
Conversion of Series A redeemable convertible
preferred stock......................................................... 347 3 4,059 4,062
Issuance of common stock pursuant to an initial
public offering net of issuance costs
of $1,152.............................................................. 2,223 22 26,721 26,743
Issuance of common stock pursuant to an
additional public offering net of issuance
costs of $310......................................................... 1,050 11 36,393 36,404
Issuance of common stock in connection with
the Employee Stock Purchase Plan........................................ 24 363 363
Net income................................................................ 7,559 7,559
------- ------- ------- ------- -------
Balance, September 30, 1995............................................... 6,998 70 70,044 11,312 81,426
Exercise of stock options................................................. 190 2 586 588
Tax benefit from disqualified dispositions................................ 591 591
Cashless exercise of stock warrants....................................... 69 1 (1) -
Issuance of common stock in connection with
the Employee Stock Purchase Plan........................................ 28 586 586
Net income................................................................ 13,731 13,731
------- ------- ------- ------- -------
Balance, September 30, 1996............................................... 7,285 $ 73 $71,806 $25,043 $96,922
====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 13,731 $ 7,559 $ 2,822
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization expense................ 2,095 749 372
Provision for bad debt............................... - 453 -
Deferred income taxes................................ 2,227 (942) 536
Tax benefit from disqualified dispositions........... 591 360 -
Amortization of premiums or discounts on marketable
securities......................................... 148 - -
Loss on disposition of assets........................ - 10 15
Changes in operating assets and liabilities:
Trade accounts receivable........................... (10,937) (14,020) (996)
Related party trade accounts receivable............. - 770 869
Contracts in progress............................... (14,442) (2,089) (4,156)
Inventories......................................... (9,572) (2,721) (3,599)
Other assets........................................ (671) (171) (1,095)
Accounts payable.................................... 9,134 2,720 1,816
Accrued expenses and other liabilities.............. 1,999 2,248 2,179
Billings in excess of revenues and customer
advances.......................................... 328 261 149
-------- -------- -------
Net cash used in operating activities.................. (5,369) (4,813) (1,088)
-------- -------- -------
Cash flows from investing activities:
Proceeds from the sale of marketable securities....... 1,908 448 -
Proceeds from maturities of marketable securities..... 12,571 - -
Purchases of marketable securities.................... (12,828) (14,495) -
Capitalized software development costs................ (726) - -
Purchases of property and equipment................... (6,248) (3,539) (1,867)
-------- -------- -------
Net cash used in investing activities.................. (5,323) (17,586) (1,867)
-------- -------- -------
Cash flows from financing activities:
Proceeds from borrowings.............................. - 1,330 8,472
Repayments of borrowings.............................. - (5,139) (5,667)
Proceeds from financing of equipment.................. - - 237
Repayment of capital lease obligations................ - (442) (73)
Proceeds from issuance of common stock, net of
issuance costs - 63,147 -
Proceeds from exercise of stock options and Employee
Stock Purchase Plan.................................. 1,174 841 90
Proceeds from issuance of stock warrants.............. - - 28
-------- -------- -------
Net cash provided by financing activities.............. 1,174 59,737 3,087
-------- -------- -------
Net (decrease) increase in cash and cash equivalents... (9,518) 37,338 132
Cash and cash equivalents at beginning of period....... 38,005 667 535
-------- -------- -------
Cash and cash equivalents at end of period............. $ 28,487 $ 38,005 $ 667
======== ======== =======
</TABLE>
5
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................... $ 34 $ 248 $ 278
Taxes.............................................. 3,765 2,948 302
Noncash transactions:
Cashless exercise of warrants...................... - - -
Conversion of Series A redeemable convertible
preferred stock into common stock upon closing
of initial public offering...................... - 4,063 -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. DESCRIPTION OF BUSINESS:
PRI Automation, Inc. (the "Company") operates in one business segment. The
Company designs, develops, manufactures and markets factory automation systems
and related software used by semiconductor manufacturers to automate the
fabrication of integrated circuits in cleanroom manufacturing operations. The
Company also provides a broad range of automation services, including system
integration, factory simulation, project management, and on-site support. The
Company is subject to risks common to companies in the semiconductor industry
including, but not limited to, the highly cyclical nature of the semiconductor
industry leading to recurring periods of over supply, development by the Company
or its competitors of new technological innovations, dependence on key personnel
and the protection of proprietary technology.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that effect the 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.
Significant estimates are inherent in determining revenue recognition and
associated profits under the percentage-of-completion method.
REVENUE RECOGNITION
Revenue from product sales is generally recorded upon shipment to the
customer provided that no significant vendor obligations remain outstanding and
collection of the related receivable is deemed probable by management. If
insignificant vendor obligations remain after shipment of the product, the
Company accrues for the estimated costs of such obligations. Additionally, the
Company accrues for warranty costs upon shipment. Service revenue is recognized
ratably over applicable contract periods or as the services are performed. For
certain contracts eligible under AICPA Statement of Position No. 81-1, revenue
is recognized using the percentage-of-completion accounting method based upon an
efforts-expended method. In all cases, changes to total estimated costs and
anticipated losses, if any, are recognized in the period in which determined.
Revenue recognized under the percentage-of-completion accounting method was
approximately $77,695,000, $40,460,000 and $19,169,000 during fiscal years 1996,
1995 and 1994, respectively.
7
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
RETAINAGES
Accounts receivable include certain amounts which are not due until final
customer acceptance. Such retainages were approximately $11,545,000 and
$3,201,000 at September 30, 1996 and 1995, respectively. The retainages of
approximately $11,545,000 at September 30, 1996 are expected to be collected
within the next twelve months.
CONTRACTS IN PROGRESS
Contracts in progress include costs and estimated profits under uncompleted
contracts accounted for using the percentage-of-completion method, net of
amounts billed. Amounts billed at September 30, 1996 and 1995, which were netted
against costs and estimated profits, were $13,116,000 and $15,926,000,
respectively. These amounts are expected to be collected within the next twelve
months as units are delivered.
BILLINGS IN EXCESS OF REVENUES
Billings in excess of revenues include amounts billed on uncompleted
contracts accounted for using the percentage-of-completion method net of costs
and estimated profits recognized.
COMMISSIONS
The Company pays commissions to agents and distributors under certain
agreements in return for obtaining orders and providing installation and
warranty services. The payment of commissions that are contingent upon the
Company receiving payment in full from the customers are charged against the
related revenues. These amounts totaled approximately $1,852,000, $845,000 and
$714,000 for fiscal years 1996, 1995 and 1994, respectively.
INVENTORIES
Inventories, consisting of raw materials, work-in-process and finished
goods, are stated at the lower of cost (determined on a first-in, first-out
basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Betterments and major renewals
are capitalized and included in property and equipment, while repairs and
maintenance are charged to expense as incurred. Depreciation and amortization of
plant and equipment are provided using the straight-line method over the
estimated useful lives of the assets.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities based on
temporary differences between the financial statement and tax bases of assets
and liabilities using current statutory tax rates. The Company records a
valuation allowance against net deferred tax assets if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.
8
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
CASH AND CASH EQUIVALENTS
Cash equivalents consist of money market mutual funds and other highly
liquid investments with maturities of three months or less when acquired.
MARKETABLE SECURITIES
Current marketable securities include all investments with remaining
maturities of twelve months or less. Non-current marketable securities include
all investments with remaining maturities greater than twelve months. In the
first quarter of fiscal 1995, the Company adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). SFAS 115 requires that, except for debt
securities classified as held-to-maturity which are reported at amortized cost,
investments in debt and equity securities be reported at fair value. Gains and
losses on sales of securities are calculated using the specific identification
method. At September 30, 1996 the Company has classified all securities as
available-for-sale.
FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
current and non-current investments and trade accounts receivable. The Company
generally invests its cash investments in investment-grade securities.
The Company's customers are concentrated in one industry segment, the
semiconductor manufacturing industry, and, historically, a significant portion
of the Company's sales have been to a limited number of customers within this
industry. The Company performs ongoing credit evaluations of its customers'
financial condition and may require deposits on large orders but does not
require collateral or other security to support customer receivables.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated at year-end
exchange rates, while revenue and expense accounts are translated at average
exchange rates. Resulting translation adjustments are recorded in the income
statement.
NET INCOME PER COMMON SHARE
Net income per common share is based upon the weighted average number of
common and common equivalent shares (using the treasury stock method)
outstanding after certain adjustments described below. Common equivalent shares
are included in the per share calculations where the effect of their inclusion
would be dilutive. Common equivalent shares consist of outstanding stock
options.
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes internal software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for
Software Development Costs" ("SFAS 86"). As of September 30, 1996, capitalized
software development costs were $726,000 and are included in Other Assets.
Software development costs incurred after a product's technological feasibility
has been
9
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
established and before it is available for general release to customers are
capitalized. Amortization is computed on an individual product basis and is the
greater of a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or b)
the straight-line method over the estimated economic life of 24 months for all
capitalized software costs. As of September 30, 1996, no capitalized software
costs had been amortized.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which is effective for fiscal year 1997. The Company
has determined that it will elect the disclosure-only alternative. The Company
will be required to disclose pro forma net income and pro forma earnings per
share in the footnotes using the fair value-based method beginning in fiscal
1997 with comparable disclosures for fiscal 1996. The Company has not determined
the impact of these pro forma adjustments.
RECLASSIFICATION OF PRIOR YEAR BALANCES
Certain reclassifications have been made to prior years' financial
statements to conform to the current presentation.
A. CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consisted of the following at September 30:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
(in thousands)
Cash on hand................... $ 4 $ 8
Cash deposited with banks...... 7,669 4,723
Eurodollars.................... 3,450 2,820
Money market funds............. 3,143 2,974
Federal government securities.. 992 497
Municipal bonds................ 2,400 9,934
Commercial paper............... 10,829 17,049
------- -------
$28,487 $38,005
======= =======
</TABLE>
10
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
D. INVESTMENTS
Investments in marketable securities consisted of the following at
September 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
COST FAIR VALUE COST FAIR VALUE
------ ---------- ------- ----------
<S> <C> <C> <C> <C>
(in thousands)
CURRENT:
U.S. Treasury obligations.. $ 1,288 $ 1,289
Municipal notes............ $7,584 $7,582 9,380 9,375
Corporate obligations...... - - 200 200
------ ------ ------- -------
$7,584 $7,582 $10,868 $10,864
====== ====== ======= =======
NON-CURRENT:
U.S. Treasury obligations.. $1,248 $1,250 $ 913 $ 910
Municipal notes............ 3,416 3,416 2,266 2,266
------ ------ ------- -------
$4,664 $4,666 $ 3,179 $ 3,176
====== ====== ======= =======
</TABLE>
The Company sold certain held-to-maturity securities in connection
with a change in an investment advisor and related change in investment
strategy. The securities had an amortized cost of $910,000 which had been
classified as held-to-maturity. There was no gain or loss associated with
the sale of these securities.
Gross realized gains and losses for the year ended September 30, 1996,
were $15,000 and $7,000 respectively. Gross unrealized gains and losses at
September 30, 1996, were not material and accordingly, have not been shown
as a separate component of stockholders' equity.
Interest income included in other income (expense), net was
$2,163,000, $1,235,000 and $9,000 for the years ended September 30, 1996,
1995 and 1994, respectively.
Information regarding the range of contractual maturities of
investments in debt securities at September 30, 1996 is as follows:
<TABLE>
<CAPTION>
COST FAIR VALUE
--------- ----------
(in thousands)
<S> <C> <C>
Within 1 year........................................... $ 7,584 $ 7,582
After 1 year through 2 years............................ 4,664 4,666
------- -------
$12,248 $12,248
======= =======
E. INVENTORIES:
Inventories consisted of the following at September 30:
1996 1995
------- -------
(in thousands)
Raw materials........................................... $19,892 $ 9,420
Work-in-process......................................... 1,096 1,996
------- -------
$20,988 $11,416
======= =======
</TABLE>
11
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
F. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at September 30:
<TABLE>
<CAPTION>
Depreciable life 1996 1995
-------------------- -------- --------
<S> <C> <C> <C>
(in thousands)
Machinery and equipment....... 2-7 years $ 8,760 $ 4,302
Furniture and fixtures........ 5-7 years 3,246 2,199
Leasehold improvements........ Shorter of life of
lease or useful life 1,355 612
------- -------
13,361 7,113
Accumulated depreciation and
amortization............. (4,181) (2,086)
------- -------
$ 9,180 $5,027
======= ======
</TABLE>
G. STOCKHOLDERS' EQUITY:
COMMON STOCK SPLIT
A Common Stock split was effected on September 14, 1994 in the form of a
dividend of three shares of Common Stock for every two shares held of record on
that date. All share and per share data have been restated to reflect this
Common Stock split.
12
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
STOCK OPTIONS
During 1984, the Board of Directors voted to adopt the 1984 Incentive Stock
Option Plan (the "1984 Option Plan") and subsequently reserved 465,000 shares of
its authorized Common Stock for issuance under this plan. In January 1994, the
Board of Directors increased the number of shares authorized for issuance under
this plan to 525,000 shares. On March 17, 1994, the Board of Directors approved
the 1994 Incentive and Nonqualified Stock Option Plan (the "1994 Option Plan")
and reserved 405,000 shares of Common Stock for issuance under this plan. At
the Company's annual stockholder meeting held on January 26, 1996, the
shareholders voted to increase the number of shares authorized for issuance
under this plan to 905,000 shares.
Information with respect to incentive stock option activity for the fiscal
years 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
EXERCISE
NUMBER OF PRICE PER
SHARES SHARE
---------- ------------
(in thousands)
<S> <C> <C>
Outstanding at September 30, 1993.. 447 $ 1.17-3.00
Granted....................... 316 3.00-8.00
Canceled...................... (88) 1.17-3.00
Exercised..................... (22) 1.16-3.00
---- ------------
Outstanding at September 30, 1994.. 653 2.00-8.00
---- ------------
Granted....................... 150 14.50-40.25
Canceled...................... (13) 2.00-14.50
Exercised..................... (161) 2.00-32.12
---- ------------
Outstanding at September 30, 1995.. 629 2.00-40.25
---- ------------
Granted....................... 332 26.00-38.88
Canceled...................... (157) 2.00-38.88
Exercised..................... (187) 2.00-32.13
---- ------------
Outstanding at September 30, 1996 617 $ 2.00-40.25
==== ============
</TABLE>
At September 30, 1996, approximately 208,556 options were exercisable, at
$2.00 to $40.25 per share. Options expire from four to six years after issuance.
The Board of Directors has also granted nonqualified options to directors
and employees of the Company. There were approximately 25,200 nonqualified
options exercisable at prices ranging from $2.00 to $41.00 per share outstanding
at September 30, 1996. During the year ended September 30, 1996, the Company
granted nonqualified options to purchase approximately 26,820 additional shares
of Common Stock and nonqualified options to purchase approximately 2,630 shares
were exercised at an exercise price of $2.00 per share. During the year ended
September 30, 1995, the Company granted nonqualified options to purchase 9,500
shares of Common Stock and nonqualified options to purchase 17,250 shares were
exercised at exercise prices ranging from $2.00 to $3.00 per share. During the
year ended September 30, 1994, the Company granted nonqualified options to
purchase 6,000 shares of Common Stock and nonqualified options to purchase
30,000 shares were exercised at exercise prices ranging from $1.17 to $2.00 per
share.
13
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
STOCK WARRANTS
In connection with the issuance of a subordinated note in October 1993, the
Company issued a warrant to purchase 112,500 shares of its Common Stock. The
warrant was exercised in full in January 1996 in a cashless exercise resulting
in the net issuance to the holder of 68,936 shares of the Company's Common
Stock.
H. LEASE COMMITMENTS:
The Company leases manufacturing and office facilities under noncancelable
leases expiring through the year 2001. Rent expense was $835,000, $593,000 and
$459,000 for fiscal years 1996, 1995 and 1994, respectively.
At September 30, 1996, future minimum payments required under all
noncancelable leases were as follows:
<TABLE>
<CAPTION>
OPERATING
YEAR LEASES
- ---- ------
(in thousands)
<S> <C>
Year ending September 30, 1997.... $ 893
Year ending September 30, 1998.... 820
Year ending September 30, 1999.... 888
Year ending September 30, 2000.... 970
Year ending September 30, 2001.... 723
-----
Total minimum lease payments $4,294
======
</TABLE>
I. ACCRUED EXPENSES AND OTHER LIABILITIES:
The significant components of accrued expenses and other liabilities
consisted of the following at September 30:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
(in thousands)
Accrued expenses........ $2,030 $1,332
Accrued compensation.... 3,883 2,616
Income taxes payable.... 1,445 1,411
Deferred income taxes... 1,830 -
------ ------
$9,188 $5,359
====== ======
</TABLE>
14
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
J. INCOME TAXES:
The following summarizes the Company's provision for income taxes:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
(in thousands)
Federal income taxes:
Current........................................................................................... $ 4,000 $3,986 $ 554
Deferred.......................................................................................... 1,958 (599) 536
State income taxes:
Current........................................................................................... 373 650 120
Deferred.......................................................................................... 269 (342) -
------- ------ -------
Total income tax provision.......................................................................... $ 6,600 $3,695 $1,210
======= ====== ======
The differences between the effective tax rates and the U.S. federal statutory tax rates were as
follows:
1996 1995 1994
--------- -------- --------
U.S. federal income tax statutory rate.............................................................. 35.0% 35.0% 34.0%
State income taxes, net of federal benefit.......................................................... 3.4 1.8 2.0
Tax credits......................................................................................... (0.9) (2.1) (3.7)
Release of deferred tax valuation allowances........................................................ (4.9) (0.8) (2.3)
Foreign sales corporation tax benefit............................................................... (0.2) (0.8) (1.2)
Other............................................................................................... 0.1 (0.3) 1.2
------- ------ ------
Effective tax rate.................................................................................. 32.5% 32.8% 30.0%
======= ====== ======
At September 30, 1996 and 1995 the components of net deferred tax (liabilities) assets were as
follows:
1996 1995
------ ------
(in thousands)
Gross deferred tax assets:
Bad debts......................................................................................... $ 221 $ 216
Inventory......................................................................................... 927 612
Compensation...................................................................................... 260 185
Intangible assets................................................................................. 1,285 1,362
Tax credits....................................................................................... 398 216
Other............................................................................................. 466 243
------- ------
Subtotal......................................................................................... 3,557 2,834
Valuation allowance.............................................................................. - (993)
------- ------
Deferred tax assets.............................................................................. 3,557 1,841
------- ------
Gross deferred tax liabilities:
Long-term contracts............................................................................... (4,212) (541)
Depreciation...................................................................................... (531) (259)
------- ------
Subtotal......................................................................................... (4,743) (800)
------- ------
Net deferred tax (liabilities) assets $(1,186) $1,041
======= ======
</TABLE>
15
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
The Company provided a valuation allowance of $993,000 during fiscal year
1995 due to the uncertainty of realizing certain deferred tax assets. During
fiscal year 1996, the Company has determined that it is more likely than not
that these certain deferred tax assets will be realized and, accordingly,
eliminated the valuation allowance.
At September 30, 1996, the Company had state tax credit carryforwards of
$398,000 that expire beginning in 2008.
K. CREDIT AGREEMENT:
The Company has entered into a credit agreement, as amended March 1, 1996,
with Fleet Bank of Massachusetts, N.A. (the "Bank"). The line of credit enables
the Company to borrow or grant letters of credit on an unsecured basis up to the
lesser of 80% of eligible accounts receivable or $10,000,000 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 earnings, working capital, tangible net worth, debt
service coverage and liquidity. The Company can elect to convert revolving loans
into loans bearing interest at 1.5% above the Bank's cost of funds. A facility
fee of 0.25% on the unused working capital line of credit is payable quarterly
in arrears. Since December 31, 1995, the Company has had no borrowings under its
working capital line of credit. The working capital line of credit expires on
March 1, 1998.
L. DEFINED CONTRIBUTION PLAN:
All U.S. based employees, subject to certain eligibility requirements, can
participate in the Company's defined contribution plan. Currently, the Company
may elect to match a portion of the employee deferral. Company contributions
under this plan amounted to $418,000, $102,000 and $53,000 for fiscal years
1996, 1995 and 1994, respectively.
M. SIGNIFICANT CUSTOMERS, RELATED PARTY AND INTERNATIONAL NET REVENUES:
The Company's customers are concentrated in one industry segment, the
semiconductor manufacturing industry. Customers comprising 10% or more of the
Company's total net revenue for the years ended September 30 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Customer A.... 38% 60% 51%
Customer B.... - 10% -
Customer C.... - 10% -
Customer D.... - - 19%
Customer E.... - - 11%
</TABLE>
16
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Customer A purchased the Company's Series A Convertible Preferred Stock in
June 1993. Under the related stock purchase agreement, Customer A was entitled
to certain Board observation and Board representation rights. Revenues
recognized from Customer A have been disclosed on the income statement as
related party transactions in the Company's consolidated financial statements
for fiscal 1994. Upon the completion of the Company's initial public offering in
the first quarter of fiscal 1995, the stock ownership of Customer A was diluted
to approximately 6.7%, therefore revenues from Customer A have not been treated
as related party transactions for fiscal 1995 and 1996. In November 1996,
Customer A ceased to be a stockholder of the Company, and the related covenants
in the stock purchase agreement terminated.
Net export sales to unaffiliated customers were approximately $18,428,000,
$9,664,000, and $3,858,000 for the years ending September 30, 1996, 1995 and
1994, respectively.
N. EMPLOYEE STOCK PURCHASE PLAN
On May 17, 1994, the Board of Directors of the Company adopted the
Company's 1994 Employee Stock Purchase Plan (the "Stock Purchase Plan"), under
which 225,000 shares of Common Stock were reserved for issuance to eligible
employees. The plan permits employees to purchase Common Stock through payroll
deductions, which may not exceed 6% of an employees compensation as defined in
the plan, to purchase stock at 85% of the fair market value of the Common Stock
at the beginning or end of each specified period, whichever is lower. In fiscal
1996, 28,000 shares were purchased at a weighted average price of $21.
O. LEGAL PROCEEDINGS
In April 1994, the Ben Franklin Technology Center of Southeastern
Pennsylvania ("BFTC"), a creditor of ProgramMation, Inc. ("PMI"), brought suit
against the Company and PMI and certain shareholders of PMI alleging that the
defendants owe BFTC $415,000 and seeking other monetary and non-monetary relief.
The action alleged that PMI breached a contract with BFTC by failing to pay
royalties and other amounts alleged to be due under the contract and by selling
the technology, in which BFTC alleged a security interest, to the Company. In
March 1996, the parties entered into an agreement pursuant to which BFTC agreed
to dismiss the Company from the litigation with prejudice.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) 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: December 17, 1996 /s/ Mordechai Wiesler
_________________________
Mordechai Wiesler
Chief Executive Officer
Date: December 17, 1996 /s/ John J. Schickling
_________________________
John J. Schickling
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Mordechai Wiesler Chief Executive Officer, December 17, 1996
_________________________ Treasurer and Director
Mordechai Wiesler (Principal Executive Director)
/s/ John J. Schickling Chief Financial Officer December 17, 1996
_________________________ (Principal Financial and
John J. Schickling Accounting Officer)
/s/ Alexander V. d'Arbeloff Director December 17, 1996
_____________________________
Alexander V. d'Arbeloff
/s/ Boruch Frusztajer Director December 17, 1996
_________________________
Boruch Frusztajer
/s/ Amram Raisel Director December 17, 1996
_________________________
Amram Rasiel
/s/ Mitchell G. Tyson Director December 17, 1996
_________________________
Mitchell G. Tyson
<PAGE>
Exhibit 11.1
PRI AUTOMATION, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
FULLY
PRIMARY(1) DILUTED(1)
------------- -------------
<S> <C> <C>
FOR THE YEAR ENDED SEPTEMBER 30, 1996:
COMMON STOCK OUTSTANDING, BEGINNING OF THE PERIOD................. 6,998,266 6,998,266
WEIGHTED AVERAGE COMMON STOCK ISSUED DURING THE PERIOD........... 169,481 195,740
ASSUMED EXERCISE OF COMMON STOCK WARRANTS........................ 29,377 29,376
ASSUMED EXERCISE OF COMMON SHARE OPTIONS......................... 611,315 615,761
LESS:
PURCHASE OF COMMON STOCK UNDER THE TREASURY STOCK METHOD.......... (230,442) (233,841)
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING.............................................. 7,577,997 7,605,302
========== ==========
NET INCOME PER COMMON SHARE................................... $1.81 $1.81
========== ==========
FOR THE YEAR ENDED SEPTEMBER 30, 1995:
COMMON STOCK OUTSTANDING BEGINNING OF THE PERIOD.................. 3,176,364 3,176,364
WEIGHTED AVERAGE CHEAP STOCK OUTSTANDING DURING THE PERIOD(2).... 188,169 188,169
WEIGHTED AVERAGE COMMON STOCK ISSUED DURING THE PERIOD........... 2,739,873 2,850,369
ASSUMED EXERCISE OF COMMON STOCK WARRANTS........................ 112,500 112,500
ASSUMED EXERCISE OF COMMON SHARE OPTIONS......................... 416,106 332,885
LESS:
PURCHASE OF COMMON STOCK UNDER THE TREASURY STOCK METHOD.......... (176,750) (158,080)
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING.............................................. 6,456,262 6,502,207
========== ==========
NET INCOME PER COMMON SHARE...................................... $1.17 $1.16
========== ==========
FOR THE YEAR ENDED SEPTEMBER 30, 1994:
COMMON STOCK OUTSTANDING BEGINNING OF THE PERIOD.................. 3,124,807 3,124,807
WEIGHTED AVERAGE CHEAP STOCK OUTSTANDING DURING THE PERIOD(2).... 201,192 201,192
WEIGHTED AVERAGE COMMON STOCK ISSUED DURING THE PERIOD........... 30,258 51,557
ASSUMED CONVERSION OF SERIES A REDEEMABLE CONVERTIBLE
PREFERRED STOCK................................................. 347,223 347,223
ASSUMED EXERCISE OF COMMON STOCK WARRANTS........................ 112,500 112,500
ASSUMED EXERCISE OF COMMON SHARE OPTIONS......................... 349,950 349,950
LESS:
PURCHASE OF COMMON STOCK UNDER THE TREASURY STOCK METHOD.......... (204,691) (198,534)
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING.............................................. 3,961,239 3,988,695
========== ==========
NET INCOME PER COMMON SHARE...................................... $0.71 $0.71
========== ==========
- ----------
</TABLE>
(1) ALL COMMON AND COMMON EQUIVALENT SHARES HAVE BEEN RESTATED TO REFLECT A 3-
FOR-2 COMMON STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND. SEE NOTE G
OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
(2) IN ACCORDANCE WITH THE SECURITIES AND EXCHANGE COMMISSION STAFF ACCOUNTING
BULLETIN NO. 83, ISSUANCES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS WITHIN
ONE YEAR PRIOR TO THE INITIAL FILING DATE OF THE REGISTRATION STATEMENT FOR THE
COMPANY'S INITIAL PUBLIC OFFERING IN OCTOBER 1994, AT SHARE PRICES LESS THAN
THE MID-POINT OF THE ESTIMATED INITIAL PUBLIC OFFERING PRICE RANGE (CHEAP
STOCK), ARE CONSIDERED TO HAVE BEEN MADE IN ANTICIPATION OF THE CONTEMPLATED
PUBLIC OFFERING. ACCORDINGLY, THESE EQUITY ISSUANCES ARE TREATED AS ISSUED
AND OUTSTANDING, USING THE TREASURY STOCK METHOD, FOR ALL PERIODS PRESENTED.
SEE NOTE B OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Exhibit 21.1
PRI AUTOMATION, INC.
SUBSIDIARIES
Name Jurisdiction of Incorporation
- ---- -----------------------------
Precision Robots FSC, Inc. U.S. Virgin Islands
PRI Security Corporation Massachusetts
PRI Automation Taiwan LTD Taiwan
PRI Automation Korea, Inc. Korea
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (File Nos. 33-90702, 33-90726, 33-90732 and 333-3408), of PRI
Automation, Inc. of our report dated November 6, 1996, on our audits of the
consolidated financial statements of PRI Automation, Inc. as of September 30,
1996 and 1995 and for each of the three years in the period ended September 30,
1996, which report is included in the Company's 1996 Annual Report on Form 10-K.
/s/ Coopers & Lybrand LLP
COOPERS & LYBRAND LLP
Boston, Massachusetts
December 16, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 28,487
<SECURITIES> 7,582
<RECEIVABLES> 27,561
<ALLOWANCES> 0
<INVENTORY> 20,988
<CURRENT-ASSETS> 107,710
<PP&E> 9,180
<DEPRECIATION> 0
<TOTAL-ASSETS> 123,786
<CURRENT-LIABILITIES> 26,864
<BONDS> 0
0
0
<COMMON> 73
<OTHER-SE> 71,806
<TOTAL-LIABILITY-AND-EQUITY> 123,786
<SALES> 110,684
<TOTAL-REVENUES> 110,684
<CGS> 58,320
<TOTAL-COSTS> 58,320
<OTHER-EXPENSES> 17,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,331
<INCOME-TAX> 6,600
<INCOME-CONTINUING> 13,731
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,731
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
</TABLE>
