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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2495703
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
805 MIDDLESEX TURNPIKE
BILLERICA, MASSACHUSETTS 01821-3986
(978) 670-4270
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
MITCHELL G. TYSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRI AUTOMATION, INC.
805 MIDDLESEX TURNPIKE
BILLERICA, MASSACHUSETTS 01821-3986
(978) 670-4270
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
ROBERT L. BIRNBAUM, ESQUIRE
ROBERT W. SWEET, JR., ESQUIRE
FOLEY, HOAG & ELIOT LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 832-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,405,433 shares $10.375 $14,581,367 $4,302
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee. In
accordance with Rule 457(c) under the Securities Act of 1933, the above
calculation is based on the average of the high and low sale prices reported
in the consolidated reporting system of the Nasdaq National Market on
September 24, 1998.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
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PRI AUTOMATION, INC.
1,405,433 SHARES OF COMMON STOCK
____________________
The 1,405,433 shares (the "Shares") of common stock, par value $.01 per share
(the "Common Stock"), of PRI Automation, Inc. ("PRI" or the "Company") covered
by this Prospectus are presently outstanding securities of the Company that are
being registered for the accounts of, and may from time to time be offered and
sold by, certain stockholders of the Company (the "Selling Stockholders") on a
delayed or continuous basis, pursuant to the exercise of registration rights.
See "Selling Stockholders."
The Company is not offering any shares and will not receive any proceeds from
the sale of any Shares by the Selling Stockholders. The Company will bear the
costs relating to the registration of the Shares offered hereby (other than
selling commissions).
The Selling Stockholders, or any pledgees, donees, transferees or other
successors in interest of the Selling Stockholders, may offer the Shares, from
time to time during the effectiveness of this registration statement, for sale
through the Nasdaq National Market, in the over-the-counter market, in one or
more negotiated transactions, or through a combination of methods of sale, at
prices and on terms then prevailing or at negotiated prices. Sales may be
effected to or through broker-dealers, who may receive compensation in the form
of discounts, concessions or commissions in connection therewith. See "Plan of
Distribution."
The Common Stock is traded on the Nasdaq National Market under the symbol
"PRIA." On September 24, 1998, the last sale price for the Common Stock, as
reported on the Nasdaq National Market, was $10.4375 per share.
____________________
FOR A DESCRIPTION OF CERTAIN RISKS ASSOCIATED WITH THE COMMON STOCK
OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 3 THROUGH 10 HEREOF.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________
ALL SECURITIES TO BE REGISTERED HEREBY ARE TO BE OFFERED BY CERTAIN OF THE
COMPANY'S STOCKHOLDERS.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER __, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and be
copied, at prescribed rates, at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. The public may obtain information on
the operation of such facilities by calling the Commission at 1-800-SEC-0330.
The Company files certain documents with the Commission electronically and these
documents may be inspected and copied at the Commission's Web site
(http://www.sec.gov). The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports, proxy statements and other information concerning the
Company may be inspected at the offices of Nasdaq Stock Market, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto in accordance with the rules and regulations of
the Commission. For further information concerning the Company and the Common
Stock offered hereby, reference is hereby made to the Registration Statement and
the exhibits and schedules filed therewith, which may be inspected without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and copies of which may be obtained from the Commission at prescribed
rates. Any statements contained herein concerning the contents of any document
are not necessarily complete, and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
are hereby incorporated in this Prospectus by reference and made a part hereof:
(a) the Company's annual report, as amended, on Form 10-K for the fiscal year
ended September 30, 1997;
(b) the Company's quarterly reports on Form 10-Q for the quarters ended
December 28, 1997, March 29, 1998 and June 28, 1998;
(c) the Company's current reports on Form 8-K dated November 10, 1997,
December 12, 1997, March 23, 1998 and July 16, 1998; and
(d) the description of the Company's Common Stock contained in the
registration statement on Form 8-A filed with the Commission on October 12,
1994 under Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Common Stock
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the respective dates of the filing of
such reports and documents. Any statement or information contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed
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modified or superseded for the purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates by reference documents that are not presented
herein or delivered herewith. These documents (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
therein) are available, without charge, upon written or oral request by any
person to whom this Prospectus is delivered, including any beneficial owner, to:
PRI Automation, Inc., 805 Middlesex Turnpike, Billerica, MA 01821-3986,
Attention: Chief Financial Officer, telephone (978) 670-4270.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and in the documents incorporated by
reference into this Prospectus constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Further, any statements contained in or incorporated into this Prospectus
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "expect," "anticipate,"
"plan," "believe," "seek," "estimate," "internal," "backlog" and similar words
are intended to identify expressions that may be forward-looking statements.
Such statements are not guarantees of future performance, and involve 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 risk factors discussed below.
RISK FACTORS
In addition to other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby:
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The Company's business depends in significant part upon capital expenditures
by manufacturers of semiconductors, including manufacturers that are opening new
or expanding existing semiconductor fabrication facilities ("FABs"), which in
turn depend upon the current and anticipated market demand for semiconductors
and products incorporating semiconductors. The semiconductor industry is highly
cyclical and historically has experienced periods of oversupply, resulting in
significantly reduced demand for capital expenditures, including the systems
manufactured and marketed by the Company. In the last year, the semiconductor
industry has experienced a significant downturn, which has had a material
adverse effect on the Company's business, financial condition and results of
operations. Several of the Company's customers have announced reductions in
their planned capital expenditures, including expenditures for the construction
or expansion of FABs and recent uncertainties affecting Asian markets have also
affected demand for semiconductor manufacturing equipment. These and other
factors have adversely affected the rate of growth of the Company's revenues and
the profitability of the Company
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in the first three quarters of fiscal 1998. The Company's total revenues for the
nine months ended June 28, 1998 were $150.6 million, compared with total
revenues of $149.5 million in the corresponding period of fiscal 1997. For the
nine months ended June 28, 1998, the Company incurred a net loss of $13.0
million, compared with net income of $18.3 million in the corresponding period
of fiscal 1997. In July 1998, the Company announced a restructuring and cost
reduction plan, including a reduction in the Company's workforce of
approximately 15%, and recorded a pre-tax restructuring charge of $2.1 million,
including severance costs, costs related to reduction in facilities and other
restructuring costs in the third quarter of fiscal 1998. The Company also
recorded a pre-tax charge of $4.9 million for the write-down of inventories to
their net realizable value in the third quarter of fiscal 1998. A prolonged
period of reduced demand for semiconductor automation equipment would have a
material adverse effect on the Company's business, results of operations and
financial condition. Expense reduction measures taken in response to a prolonged
industry downturn could also impair the Company's ability to make the continued
investments in marketing, research, development and engineering necessary to
maintain its competitive position. (See "Management of Growth in Light of
Fluctuating Demand.")
LENGTHY SALES CYCLE
Sales of the Company's systems depend, in significant part, upon the decision
of a prospective customer to increase manufacturing capacity by upgrading or
expanding existing manufacturing facilities or constructing new manufacturing
facilities, all of which typically involve a significant capital commitment.
The Company's systems often have a lengthy sales cycle while the customer
evaluates and receives approvals for the purchase of the Company's systems and
completes the upgrading or expansion of existing facilities or the construction
of new facilities. During such sales cycle the Company may expend substantial
funds and management effort with no assurance that a sale will result. In
addition, the cyclicality of the semiconductor industry, among other factors,
may cause prospective customers to postpone decisions regarding major capital
expenditures, including purchases of the Company's systems. As a result of the
length of the sales cycle for its products, the Company's ability to forecast
the timing and amount of specific sales is limited, and the delay or failure to
complete one or more large transactions could have a material adverse effect on
the Company's business, financial condition and results of operations.
FLUCTUATIONS IN OPERATING RESULTS
A variety of factors may cause the Company's future results of operations to
fluctuate. These include the timing of significant orders, the gain or loss of
any significant customer, the timing of new product announcements and releases
by the Company or its competitors, order cancellations and shipment rescheduling
or delays, patterns of capital spending by customers, market acceptance of new
and enhanced versions of the Company's products, changes in pricing by the
Company, its competitors, customers or suppliers, the mix of products sold and
cyclicality in the semiconductor industry and the markets served by the
Company's customers. Turmoil in Asian markets, particularly in Korea, and
uncertainties in customer demand for automation equipment as the semiconductor
industry transitions from 200mm to 300mm wafer processing equipment, have caused
and could continue to cause delays in, or cancellations of, customer orders.
(See "Risks Associated With Asian Markets and "Delay in Transition to 300mm
Wafer Technology.") The Company derives a substantial portion of its annual
revenues from the sale of a relatively small number of interbay flexible factory
automation systems which typically range in purchase price from approximately
$3,000,000 to approximately $15,000,000 and typically involve deliveries during
several fiscal periods. As a result, any delay in the recognition of revenue for
a single system could have a material adverse effect on the Company's results of
operations for a given accounting period. A delay in a shipment near the end of
a fiscal period, due, for example, to rescheduling or cancellations by customers
or to unexpected manufacturing difficulties experienced by the Company, may
cause sales in a particular fiscal period to fall significantly below the
Company's expectations and may thus materially adversely affect the Company's
business, financial condition and results of operations for such period.
The Company's operating results also fluctuate based on gross margins. Gross
margins may vary based on a variety of factors including the mix and average
selling prices of products sold, costs to manufacture, market, service and
support new product introductions and enhancements and customization of systems
and the efforts of the Company to enter new markets. The Company's contracts
typically provide for fixed prices, and as a result
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higher than expected costs incurred in the performance of a contract generally
cannot be passed on to the customer. In addition, continued investments in
research and development, capital equipment and extensive ongoing customer
service and support capability worldwide will result in significant fixed costs
which the Company will not be able to reduce rapidly if its sales goals for a
particular period are not met. The absence of significant backlog for an
extended period of time could hinder the Company's ability to plan production
and inventory levels, which could cause fluctuations in operating results.
Fluctuations in the Company's quarterly operating results may increase the
volatility of the trading price of the Company's Common Stock. (See "Volatility
of Stock Price.") The Company's results of operations for any fiscal period are
not necessarily indicative of results for any future period.
CUSTOMER CONCENTRATION
Historically, a significant portion of the Company's revenues in any
particular period has been attributable to sales to a limited number of
customers. Sales to the Company's three largest customers accounted for 54%, 40%
and 47% of the Company's total sales during fiscal years 1995, 1996 and 1997,
respectively. One customer, Intel Corporation, accounted for 41%, 29% and 36% of
the Company's net revenue in fiscal years 1995, 1996 and 1997, respectively. The
Company's largest customers may also change from year to year, as large FABs are
completed and new projects are initiated. The Company expects that sales of its
products to relatively few customers will continue to account for a high
percentage of its revenues in the foreseeable future. None of the Company's
customers has entered into a long-term agreement requiring it to purchase the
Company's products. In the case of cancellation of an order, the Company's sale
contracts generally provide for the Company to be reimbursed for its out-of-
pocket expenses and a portion of anticipated profits. The Company believes that
sales to certain of its customers will decrease in the near future as those
customers complete current purchasing requirements for new or expanded FABs. If
completed contracts are not replaced on a timely basis by new orders, the
Company's business, financial condition and results of operations could be
materially adversely affected. There can be no assurance that any of the
Company's customers will not reduce or cease ordering the Company's products or
services. Any such reduction or cessation would likely have a material adverse
effect on the Company's business, operating results and financial condition.
Furthermore, attempts to mitigate the adverse effects of such reduction or
cessation through the prompt addition of a new customer or customers would
likely be difficult since prospective customers typically require lengthy
qualification periods prior to placing orders for the Company's products.
Anticipated orders from the Company's customers have in the past sometimes
failed to materialize and delivery schedules have been deferred or canceled as a
result of changes in customer requirements. Order deferrals and cancellations
may have a material adverse effect on the Company's business, operating results
and financial condition.
RISKS ASSOCIATED WITH ASIAN MARKETS
The current financial uncertainty within the economies of certain Asian
countries has adversely affected, and may continue to adversely affect, the
worldwide semiconductor industry and, therefore, the Company. According to
industry analysts, the recession in Japan, along with currency fluctuations and
other problems in other Asian countries, have caused Asian consumers to slow
purchases of personal computers, cellular phones and other products that use
semiconductors. The resulting reduction in demand for semiconductors has led and
could hereinafter lead semiconductor manufacturers, both in Asia and the United
States, to build fewer new FABs and undertake fewer capital improvement projects
in existing FABs, and, as a result, the Company has experienced, and could
hereinafter experience, among other things, delays or cancellations of orders
from its customers. Such delays or cancellations could have a material adverse
effect on the Company's business, financial condition and results of operations.
Notwithstanding the financial uncertainty in such Asian countries, the Company
believes that its continued presence in Asian markets will be important to its
long-term future financial performance, and expects to invest significant
resources in increasing its presence in Asia. These markets, which principally
include Korea, Taiwan, Singapore, China and, most significantly, Japan,
represent a substantial percentage of worldwide semiconductor manufacturing
capacity. In addressing the Japanese market (including FABs operated outside of
Japan by Japanese semiconductor manufacturers), the Company is at a competitive
disadvantage as compared to Japanese suppliers, many of whom have longstanding
collaborative relationships with Japanese and other Asian semiconductor
manufacturers. There can be no assurance that the Company will be able to
achieve continued sales growth in Asian semiconductor markets. (See
"International Operations" and "Competition.")
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DELAY IN TRANSITION TO 300MM WAFER TECHNOLOGY
The semiconductor manufacturing process currently most widely in use is based
on the use of 200mm semiconductor wafers. Industry analysts expect that, to
increase manufacturing efficiencies and reduce costs, semiconductor
manufacturers will in the future adopt the use of 300mm wafers. The Company
believes that this expected transition to 300mm manufacturing technology
represents an important opportunity, as entirely new FABs will need to be built,
and entirely new process tools and automation systems developed, to enable
manufacturers to process 300mm wafers. In addition, the Company believes that,
due to ergonomic, safety and cost factors, increasing levels of factory-wide
automation will be a practical necessity in new 300mm FABs.
For this reason, the Company has invested, and continues to invest,
substantial resources in developing new systems and technologies to automate the
processing of 300mm wafers. However, the industry transition from 200mm to
300mm manufacturing technology is occurring more slowly than expected, due in
part to recent reduced demand for semiconductors. While pilot projects are
underway, no new 300mm FAB is yet under construction. If adoption of 300mm
manufacturing technology is significantly delayed, or fails to occur, while the
Company's substantial investment in its 300mm development efforts continues, the
Company's results of operations could be materially adversely affected. In
addition, delay in the transition to 300mm technology may permit competitors of
the Company whose 300mm development programs are currently less advanced than
those of the Company to introduce 300mm products competitive with the Company's
systems.
MANAGEMENT OF GROWTH IN LIGHT OF FLUCTUATING DEMAND
The Company has hired and may be required to hire in the future substantial
numbers of new employees, particularly personnel with technical backgrounds for
the Company's engineering and technical support staffs. The market for such
personnel has become increasingly competitive and the Company has occasionally
experienced delays in meeting its staffing requirements. Protracted inability of
the Company to recruit, retain and train adequate numbers of qualified personnel
on a timely basis would adversely affect the Company's ability to manufacture,
install and support its systems.
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If and when growth in the semiconductor industry resumes, the Company may be
required to design and manufacture its systems in larger volumes than at
present. If demand for its products increases rapidly, it may be difficult for
the Company to increase its production capacity sufficiently while maintaining
its standards of quality and reliability, and delivery times for its systems may
grow longer. A failure to meet on-time delivery or performance criteria could,
in addition to resulting in the loss of revenue from and the loss of future
business with, such customer, cause long term damage to the Company's reputation
and increase warranty and service costs, any of which could have a material
adverse effect upon the Company's business, financial condition and results of
operations. Further, if the Company were to be unable to expand its
manufacturing capacity to meet demand, the placement of a large order requiring
the development and delivery of flexible factory automation systems during a
particular period might deter other semiconductor manufacturers from placing
orders with the Company that would require development and delivery of such
systems during the same period. (See "Fluctuations in Operating Results.")
There can be no assurance that the Company's systems, procedures, controls and
staffing will be adequate to support rapid growth in the Company's operations.
Failure to respond effectively to fluctuating demand for its products and to
manage the Company's future growth, if any, effectively could have a material
adverse effect on the Company's business, financial condition and results of
operations.
EFFECTS OF RECENT ACQUISITION ACTIVITY
The Company is continuing to integrate the operations of Equipe Technologies,
Inc. ("Equipe") and Equipe's European distributor, Chiptronix Handling Systems
GmbH ("Chiptronix"), which were acquired by the Company in January 1998 and May
1998, respectively. Equipe develops, manufactures and supplies atmospheric wafer
and substrate handling robots, pre-aligners and controllers. There can be no
assurance that the Company will be able to absorb and effectively manage the
foregoing acquisitions and any future acquisitions, or that the Company will be
able to develop, market and sell the Equipe products successfully. The
difficulty and management distraction inherent in integrating the acquired
businesses, the costs of integrating the businesses, the risks of entering
markets in which the Company has no or limited direct prior experience, the
potential loss of key employees of the acquired companies and the risk that the
benefits sought in the acquisitions will not be fully achieved, could materially
affect the Company's business, financial conditions, stock price and results.
INTERNATIONAL OPERATIONS
International sales accounted for 13%, 15% and 46% of the Company's total
revenues in fiscal years 1995, 1996 and 1997, respectively. The Company intends
to maintain its presence in European markets and to expand its presence in Asian
markets and anticipates that international sales will account for a significant
portion of net sales in the future. Such international expansion will require
significant management attention and expenditure of significant financial
resources. Moreover, international operations are subject to certain risks,
including unexpected changes in regulatory requirements, exchange rates, tariffs
and other barriers, political and economic instability, difficulties in accounts
receivable collection, difficulties in managing distributors or representatives,
restrictions on the export or import of technology, potentially limited
intellectual property protection, an even lengthier sales cycle than with
domestic customers, difficulties in staffing and managing foreign subsidiary
operations and potentially adverse tax consequences. (See "Risks Associated With
Asian Markets" and "Limited Intellectual Property Protection.") In particular,
although the Company's international sales are primarily denominated in U.S.
dollars, currency exchange fluctuations in countries where the Company does
business could materially adversely affect the Company's business, financial
condition and results of operations, by rendering the Company less price-
competitive than foreign manufacturers. If the Company's international sales
become a greater component of total revenue the foregoing factors may have a
pronounced effect on the Company's operating results. In any event, there can be
no assurance that any of these factors will not have a material adverse effect
on the Company's business, financial condition and results of operations.
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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 foreign and domestic manufacturers of
equipment used to automate the process of semiconductor manufacturing. 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 vendor's capital equipment,
the manufacturer generally relies upon that equipment for the specific
production line application and frequently will attempt to consolidate its other
capital equipment requirements with the same vendor. Accordingly, the Company
expects to experience difficulty in selling to a particular customer for a
significant period of time if that customer selects a competitor's capital
equipment. The expected transition to 300mm technology may result in the
entrance of new competitors in the Company's markets, or diminish the
competitive advantage enjoyed by the Company in accounts where it currently is
the incumbent supplier of automation equipment. There can be no assurance that
the Company will be able to compete successfully in the future. Increased
competitive pressure could cause the Company to lower prices for its products,
thereby adversely affecting the Company's business, financial condition and
results of operations.
RAPID TECHNOLOGICAL CHANGE
The semiconductor manufacturing industry is subject to rapid technological
change and new product introductions and enhancements. The Company's ability to
remain competitive in this market will depend in part upon its ability to
develop new and enhanced systems and to introduce these systems at competitive
prices and on a timely and cost-effective basis to enable customers to integrate
them into their operations either prior to or as they begin volume product
manufacturing. In addition, new product introductions or enhancements by the
Company's competitors could cause a decline in sales or loss of market
acceptance of the Company's existing products. The success of the Company in
developing, introducing, selling and supporting new and enhanced automated
material handling systems depends upon a variety of factors including component
selection, timely and efficient completion of product design and development,
timely and efficient implementation of manufacturing and assembly processes,
software development, product performance in the field and effective sales,
marketing, service and project management. Because new product development
commitments must be made well in advance of sales, new product decisions must
anticipate advances in semiconductor manufacturing by leading semiconductor
manufacturers. There can be no assurance that the Company will be successful in
selecting, developing, manufacturing and marketing new products or in enhancing
its existing products. An inability to do so could adversely affect the
Company's business, financial condition and results of operations.
PRODUCT DEVELOPMENT DELAY
Because of the large number of components in and the complexity of the
Company's systems, significant delays can occur between a system's initial
introduction and commencement of volume production of such systems. In the
past, the Company has experienced delays from time to time in the introduction
of, and certain technical and manufacturing difficulties with, certain of its
systems and enhancements and may experience delays and technical and
manufacturing difficulties in future introductions or volume production of new
systems or enhancements. In addition, some of the systems built by the Company
must be customized to meet individual customer site or operating requirements.
The Company's inability to complete the development or meet the technical
specifications of any of its new systems or enhancements or to manufacture and
ship these systems or enhancements in volume in a timely manner would materially
adversely affect the Company's business, financial condition and results of
operations as well as its relationships with customers. In addition, the Company
may incur substantial unanticipated costs to ensure the functionality and
reliability of its future product introductions early in the product's life
cycle, such as increased cost of materials due to expedited charges, and other
purchase inefficiencies and greater than expected installation and support costs
which cannot be passed on to the customer. Any of such events could materially
adversely affect the Company's business, financial condition and results of
operations.
-8-
<PAGE>
SOLE OR LIMITED SOURCES OF SUPPLY
In certain instances, the Company is dependent upon a sole supplier or a
limited number of suppliers, or has qualified only a single or limited number of
vendors, for certain components or specialized processes (such as painting of
system cabinets and enclosures) utilized in its products. The Company has
experienced no significant disruption or delay in obtaining required components
for its products, and believes that it could in most instances develop other
sources of supply or qualify other vendors for such components or processes.
However, a prolonged inability to obtain adequate deliveries could require the
Company to pay more for inventory, parts and other supplies, seek alternative
sources of supply, delay its ability to ship its products and damage
relationships with current and prospective customers. Any such delay or damage
could have a material adverse effect on the Company's business, financial
condition and results of operations.
LIMITED INTELLECTUAL PROPERTY PROTECTION
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 seeks,
wherever appropriate, to obtain patent protection for its technologies. The
Company holds several patents and patent applications, including a patent
relating to certain key elements of its AeroTrak monorail system, which forms an
important component of the Company's interbay automation systems. The Company
believes, however, that its financial performance will depend more upon its
innovation and technological expertise and the capabilities of its employees
than upon the protection 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 product or design around any
patents issued to the Company.
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of governmental regulations relating to
the use, storage, handling, manufacture and disposal of toxic or other hazardous
substances used to manufacture the Company's products. The Company uses small
quantities of lubricants, adhesives, solvents and cleaners in connection with
its manufacturing and assembly operations. The Company believes that its
storage, use and disposal of such materials complies in all material respects
with applicable governmental regulations, and that it has obtained all necessary
environmental permits to conduct its business. Any failure by the Company to
control the use, disposal or storage of, or adequately restrict the discharge
of, hazardous or toxic substances could subject the Company to significant
liabilities, thereby having a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's financial performance will depend in significant part upon the
continued contributions of its founder, Chairman of the Board and Treasurer,
Mordechai Wiesler, its President and Chief Executive Officer, Mitchell G. Tyson,
and other officers and key personnel, many of whom would be difficult to
replace. Although the Company maintains key person life insurance on Messrs.
Wiesler and Tyson, the loss of Mr. Wiesler, Mr. Tyson or any other key person
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the Company's future operating
results depend in part upon its ability to attract and retain other qualified
management, engineering, financial, technical, marketing and sales and support
personnel for its operations. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting or
retaining such personnel. The failure to attract or retain such persons could
materially adversely affect the Company's business, financial condition and
results of operations.
-9-
<PAGE>
YEAR 2000
Computer systems and software products that were designed to accept entries of
only two digits in the "year" date code field may be unable to properly process
date information beyond the year 1999. Inability of the Company's products to
process these dates could have a material adverse effect on its business. The
Company has established a centrally coordinated project team, including
representatives of each of the Company's divisions, to determine the Year 2000
readiness of the Company's products, business processes and systems. The Company
has reviewed all equipment and software currently being marketed or already
installed at customer sites for Year 2000 compliance. The Company expects to
complete all internal and field testing and upgrades of current and installed
products by the end of calendar 1998. The Company cannot presently estimate the
total cost of this testing and upgrade process but does not expect it to be
material. The Company is also assessing its internal systems, including business
information systems, systems utilized in its manufacturing and service
operations, and systems providing electronic interfaces between the Company and
its business associates and customers, to ensure the Company's operations are
not interrupted by Year 2000 issues. The Company expects to have addressed all
internal Year 2000 issues identified in this process by the end of calendar
1998. The Company is also working closely with suppliers and other third parties
upon which it is dependent to determine the extent of their Year 2000
compliance. Based on its investigation to date the Company does not expect the
total cost of its Year 2000 assessment and remediation program to be material.
However, there can be no assurance that the Company will be able to complete
its Year 2000 assessment and remediation programs on a timely basis, that the
costs of such programs will not be greater than expected, or that as yet
undiscovered unanticipated Year 2000 problems will not affect the Company's
products or material systems. Greater than expected assessment and remediation
costs or unanticipated Year 2000 problems could have a material adverse effect
on the Company's business, results of operations or financial condition.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has in the past and will be
subject to wide fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new products by the
Company or its competitors, trends in the semiconductor manufacturing industry,
and other events or factors. In addition, the stock market has experienced
extreme price and volume fluctuations that have particularly affected the market
prices for many high technology companies, including the Company. These broad
market fluctuations may adversely affect the market price of the Company's
Common Stock. In the past, following periods of volatility in the market price
of a Company's securities, securities class action litigation has been initiated
against the issuing company. There can be no assurance that such litigation
will not occur in the future with respect to the Company.
The Company issued 4,469,016 shares of the Company's Common Stock to the
former stockholders of Equipe and its two related corporations and to the former
stockholders of Chiptronix, in connection with the Company's acquisition of
those companies. Immediately after they were issued, such shares were not freely
transferable, were "restricted securities" for purposes of Rule 144 promulgated
under the Securities Act and may have been subject to other restrictions on
transfer if any such stockholders were affiliates of Equipe or the Company.
However, the Company has provided such stockholders with certain registration
rights in relation to such shares, and, pursuant to such rights, this Prospectus
and the Registration Statement of which it is a part register approximately 31%
of such shares for sale in the public market. Moreover, the Company may be
required pursuant to such registration rights to file additional registration
statements pursuant to which more of such shares will be able to be sold in the
public markets. Also, such stockholders may also be able to sell such shares in
accordance with Rule 144 commencing in January 1999. Sales of substantial
amounts of such shares could adversely affect the market price of the Company's
Common Stock.
ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS, BY-LAWS AND MASSACHUSETTS LAW
The Company's Restated Articles of Organization, as amended, contain
provisions that could discourage a proxy contest or make more difficult the
acquisition of a substantial block of the Company's Common Stock. The Company's
Board of Directors is authorized to issue shares of Common Stock and Preferred
Stock, par value $.01 per share, without stockholder approval. Any such
issuance could dilute and adversely affect various rights of the holders of
Common Stock and, in addition, could be used to discourage an unsolicited
attempt to acquire control of the Company. The Company's Restated Articles of
Organization, as amended, also contain certain other provisions which may
discourage an unsolicited takeover attempt. These provisions could limit the
price that investors might be willing to pay in the future for shares of Common
Stock and could make it more difficult for stockholders of the Company to effect
certain corporate actions.
-10-
<PAGE>
THE COMPANY
PRI is a leading supplier of factory automation systems that serve the needs
of large, mid-sized and specialty semiconductor manufacturers. The Company
combines advanced robotics technology with material handling software to
automate the complex processes of integrated circuit manufacturing. PRI's
flexible factory automation systems -- which include overhead monorails, wafer
stockers, reticle stockers, tool automation systems, material control software,
atmospheric wafer and substrate handling robots, pre-aligners and controllers,
factory simulation and other services, including project management and on-site
support -- are designed to 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 products 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 and
supported by the Company's direct sales force and technical support organization
with offices in England, France, the Netherlands, Germany, Ireland, Israel,
South Korea, Singapore and Japan.
The executive offices of PRI are located at 805 Middlesex Turnpike, Billerica,
Massachusetts 01821-3986, and its telephone number is (978) 670-4270. PRI was
incorporated in Massachusetts in 1972 under another name and began its present
business in 1982.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
offered hereunder by the Selling Stockholders.
SELLING STOCKHOLDERS
The Shares are being registered, and may be offered for sale from time to time
during the period of effectiveness of the Registration Statement of which this
Prospectus is a part, for the accounts of the Selling Stockholders set forth
below. Each of the Selling Stockholders acquired the Shares being offered
hereunder either in connection with the acquisition by the Company of Equipe and
two related corporations or in connection with the acquisition by the Company of
Chiptronix. The Equipe acquisition was made pursuant to (a) an Agreement and
Plan of Reorganization (the "Merger Agreement") dated as of October 25, 1997, by
and among the Company, E-Acquisition Corp., a California corporation and wholly-
owned subsidiary of the Company ("E-Acquisition"), Equipe and certain former
stockholders of Equipe, (b) a Stock Purchase Agreement dated as of October 25,
1997, among the Company and the former stockholders of E-Machine, Inc., a
California corporation ("E-Machine"), and (c) a Stock Purchase Agreement dated
as of October 25, 1997, among the Company and the former stockholders of Equipe
Japan Corporation, a Japanese corporation ("Equipe Japan"). The Chiptronix
acquisition was made pursuant to a Stock Purchase Agreement dated May 19, 1998
among the Company and the former stockholders of Chiptronix.
The Company has filed with the Commission a Registration Statement on Form S-
3, of which this prospectus forms a part, with respect to the resale of the
Shares from time to time on the Nasdaq Stock Market or in privately-negotiated
transactions. The Company has agreed to use best efforts to keep such
-11-
<PAGE>
Registration Statement effective until the first anniversary of the consummation
of the Company's acquisition of Equipe or, if earlier, until the distribution
contemplated by this Prospectus has been completed.
Based on the information supplied by each Selling Stockholder to the Company,
the following table sets forth, as of August 31, 1998, certain information
regarding the beneficial ownership of each Selling Stockholder and any material
relationship of such Selling Stockholder during the last three years with the
Company or any of its predecessors or affiliates.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER
OWNED PRIOR TO OF SHARES TO BE BENEFICIALLY
OFFERING SHARES OWNED AFTER OFFERING
------------------- BEING ------------------
NAME NUMBER PERCENT(1) OFFERED(2) NUMBER(3) PERCENT(1)
- -------------------------- ------------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Paul Rogan (4) 883,210 4.5% 220,553 662,657 3.4%
James Cameron (5) 802,212 4.1% 200,303 601,909 3.0%
Frantisek Pavlik (5) 800,952 4.1% 200,113 600,839 3.0%
Lubomir Skrobak (5) 800,952 4.1% 200,113 600,839 3.0%
Steven The (5) 800,952 4.1% 200,113 600,839 3.0%
Ralph Cameron 78,339 * 78,339 - -
Ruth Cameron 78,339 * 78,339 - -
Ekkehard Hans (6) 73,500 * 73,500 - -
Hidetsugu Yokoi (5) 39,150 * 38,400 750 *
Patrick Allen 20,440 * 20,440 - -
John Hoctor 20,440 * 20,440 - -
Kerstin Czenkusch-Hans (6) 15,750 * 15,750 - -
Jorg-Michael Hans (6) 15,750 * 15,750 - -
Masahiro Kadowaki (5) 15,650 * 14,400 1,250 *
Hideo Ukai (5) 14,900 * 14,400 500 *
Kirsten Cameron (7) 6,080 * 6,080 - -
Mikinori Yasuda (5) 4,800 * 4,800 - *
Mario Plascencia (5) 3,975 * 3,600 375 *
</TABLE>
__________________
* Less than 1%.
(1) At August 31, 1998 there were outstanding 19,759,036 shares of Common Stock.
For purposes of computing the number and percentage of shares beneficially
owned by any person, shares issuable to such person upon exercise of options
that are exercisable within 60 days of the date of this table are deemed to
be outstanding and beneficially owned by such person.
(2) This Prospectus and the Registration Statement of which it is a part shall
also cover any additional shares of Common Stock that become issuable in
connection with the shares registered for sale hereby by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration that results in an increase in
the number of the Company's outstanding shares of Common Stock.
-12-
<PAGE>
(3) Assumes all shares offered hereby are sold.
(4) Mr. Rogan is a director of the Company and Executive Vice President of its
Equipe Division. Prior to the Company's acquisition of Equipe and its
related corporations, Mr. Rogan was a director of Equipe, E-Machine and
Equipe Japan and President, Chief Financial Officer and Secretary of Equipe
and Chief Financial Officer and Secretary of E-Machine.
(5) Mr. Cameron is the President and General Manager of the Company's Equipe
Division and, prior to the Company's acquisition of Equipe and its related
corporations, Mr. Cameron was a director of Equipe, E-Machine and Equipe
Japan and Chief Executive Officer of Equipe and President of E-Machine, Mr.
Pavlik was a director of Equipe and E-Machine and Director of Electronic
Technology of Equipe, Mr. Skrobak was a director of Equipe and E-Machine and
Director of Mechanical Technology of Equipe, Mr. The was a director of
Equipe and E-Machine and Director of Software Technology of Equipe, Mr.
Plascencia was a director and General Manager of E-Machine, Mr. Yasuda was
the Statutory Auditor of Equipe Japan, Mr. Kadowaki was a director and
President of Equipe Japan, Mr. Yokoi was a director and Vice President and
Sales Manager of Equipe Japan and Mr. Ukai was a director and Managing
Director of Equipe Japan.
(6) Ekkehard Hans is the Managing Director of the Company's subsidiary
Chiptronix. Kerstin Czenkusch-Hans and Jorg-Michael Hans, each of whom is
an employee of Chiptronix, are the spouse and son, respectively, of Ekkehard
Hans.
(7) Ms. Cameron holds 5,320 of the Shares in her capacity as a custodian for the
following minors pursuant to the California Uniform Transfers to Minors Act,
California Probate Code (S)(S) 3900 to 3925: Sydney Hoffman, Alexandra
Hoffman, Regan Cameron, Erin Cameron, Lauren Cameron, Elizabeth Cameron and
John Cameron. Each such minor is the beneficial owner of 760 of such
shares.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest. Such sales may
be made on one or more exchanges or in the over-the-counter market, or otherwise
at prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The Shares may be sold by one or
more of the following: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive commissions
or discounts from Selling Stockholders in amounts to be negotiated immediately
prior to the sale. Such brokers or dealers and any other participating brokers
or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales, and any commission received by
them and profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. In addition,
any securities covered by this Prospectus which qualify for sale pursuant to
Rule 144 may be sold under Rule 144 rather than pursuant to the Prospectus.
Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of the
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, disclosing (a) the name of each Selling Stockholder and of the
participating broker-dealer(s), (b) the number of shares involved, (c) the price
at which such shares were sold, (d) the commissions paid or discounts or
concessions allowed to such
-13-
<PAGE>
broker-dealer(s), where applicable, (e) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus and (f) other facts material to the transaction.
The Company has agreed to pay the expenses incurred in connection with
preparing and filing this Prospectus and the Registration Statement of which it
is a part (other than selling commissions). The Company has agreed to indemnify
the Selling Stockholders against certain liabilities, including liabilities
under the Securities Act.
DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Article 6C of the Company's Restated Articles of Organization provides that
the Company (with certain exceptions) will indemnify and hold harmless to the
fullest extent authorized by the Massachusetts Business Corporation Law each
person who was or is made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (hereinafter a "Proceeding"), by
reason of the fact that he or she is or was (a) a director of the Company,
(b) an officer of the Company elected or appointed by the stockholders or the
Board of Directors, or (c) serving, at the request of the Company as evidenced
by a vote of the Board of Directors prior to the occurrence of the event to
which the indemnification relates, as a director, officer, employee or other
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan (such
persons described in (a), (b) and (c) are sometimes hereinafter referred to as
an "Indemnitee") against all expense, liability, and loss reasonably incurred by
any such Indemnitee in connection therewith. The Company may also, to the extent
authorized by the Board of Directors, grant rights to indemnification, and to an
advancement of expenses, to any employee or agent of the Company.
Notwithstanding the foregoing, if Massachusetts Business Corporation Law
requires, an advancement of expenses incurred by an Indemnitee will be made only
upon delivery to the Company of an undertaking, by or on behalf of such
Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is not further right to
appeal that such Indemnitee is not entitled to be indemnified for such expenses.
The rights under Article 6C may not be amended or terminated so as to
adversely affect an individual's rights with respect to the period prior to such
amendment without the consent of the person entitled to the indemnification
(unless otherwise required by the Massachusetts Business Corporation Law).
Section 67 of Chapter 156B of the Massachusetts Business Corporation Law
authorizes a corporation to indemnify its directors, officers, employees and
other agents unless such person shall have been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that his action was in
the best interests of the corporation or to the extent that such matter relates
to service with respect to an employee benefit plan, in the best interests of
the participants of such employee benefit plan.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
-14-
<PAGE>
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Foley, Hoag
& Eliot LLP, Boston, Massachusetts. A member of that firm owns beneficially
9,000 shares of the Company's Common Stock.
EXPERTS
The consolidated balance sheets of PRI Automation, Inc. as of September 30,
1997 and 1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1997, incorporated by reference herein, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The restated consolidated balance sheets of PRI Automation, Inc. as of
September 30, 1997 and 1996 and the related restated consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended September 30, 1997 included herein, except as they relate to
the Equipe Combined Companies as of December 31, 1996 and for the years ended
December 31, 1996 and 1995, have been audited by PricewaterhouseCoopers LLP,
independent accountants, and insofar as such financial statements relate to the
Equipe Combined Companies as of and for the year ended December 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, and insofar as such
financial statements relate to the Equipe Combined Companies for the year ended
December 31, 1995, have been audited by Mohler, Nixon & Williams Accountancy
Corporation, independent accountants, whose reports thereon are included herein.
The restated consolidated balance sheets of PRI Automation, Inc. as of September
30, 1997 and 1996 and the related restated consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended September 30, 1997 have been included herein in reliance on the
reports of such independent accountants, given on the authority of such firms as
experts in accounting and auditing.
-15-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
PRI Automation, Inc.:
In our opinion, based upon our audits and the reports of other auditors,
the accompanying consolidated balance sheets and the related consolidated
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of PRI Automation, Inc.
and its subsidiaries at September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting principles.
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 did not audit the financial statements of the Equipe Combined
Companies for the years ended December 31, 1996 and 1995, which statements
reflect total assets of $7,757,000 at December 31, 1996, and net revenues of
$35,066,000 and $28,590,000 for the years ended December 31, 1996 and 1995,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for Equipe Combined Companies as of and for
the periods described above, is based solely on the reports of the other
auditors. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits and the reports of other auditors provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 12, 1997, except as to
the pooling of interests with the
Equipe Combined Companies described in
Note P which is as of September 11, 1998
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Equipe Combined Companies
We have audited the combined balance sheet of the Equipe Combined Companies
as of December 31, 1996 and the related combined statements of income,
shareholders' equity and cash flows for the year then ended, not presented
separately herein. These financial statements are the responsibility of the
Companies' managements. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1996 financial statements referred to above present
fairly, in all material respects, the combined financial position of the Equipe
Combined Companies at December 31, 1996, and the combined results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
San Jose, California
November 19, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
and Shareholders of
Equipe Combined Companies
We have audited the combined statements of income, shareholders' equity and
cash flows of the Equipe Combined Companies for the year ended December 31,
1995. These combined financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined results of the operations,
shareholders' equity and cash flows of the Equipe Combined Companies for the
year ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Mohler, Nixon & Williams
---------------------------
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
November 7, 1997
F-3
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 29,384 $ 28,669
Marketable securities................................... 2,642 7,582
Trade accounts receivable, less allowance for doubtful
accounts of $1,600 at 1997 and $700 at 1996.......... 71,549 32,181
Contracts in progress................................... 15,463 21,824
Inventories............................................. 34,117 23,055
Deferred income taxes................................... 1,012 --
Other current assets.................................... 2,658 1,299
-------- --------
Total current assets................................. 156,825 114,610
Property and equipment, net............................... 12,794 9,993
Marketable securities..................................... 506 4,666
Deferred income taxes..................................... 475 644
Other assets.............................................. 1,879 1,630
-------- --------
Total assets......................................... $172,479 $131,543
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 21,564 $ 17,120
Accrued expenses and other liabilities.................. 17,764 12,830
Line of credit.......................................... 1,769 --
Current portion of obligation under capital lease....... 171 82
Billings in excess of revenues and customer advances.... 3,462 1,505
-------- --------
Total current liabilities............................ 44,730 31,537
Obligation under capital lease............................ 204 78
-------- --------
Total liabilities......................................... 44,934 31,615
Commitments and contingencies (Notes H, L and O)
Stockholders' equity:
Preferred stock, 400,000 shares authorized;
none outstanding..................................... -- --
Common stock, $.01 par value; 24,000,000 shares
authorized; 19,348,781 and 18,934,936 issued and
outstanding at September 30, 1997 and 1996,
respectively........................................ 193 189
Additional paid-in capital.............................. 77,721 72,376
Retained earnings....................................... 49,629 27,363
Unrealized gain on securities........................... 2 --
-------- --------
Total stockholders' equity........................... 127,545 99,928
-------- --------
Total liabilities and stockholders' equity........... $172,479 $131,543
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Net revenue.......................................... $213,159 $145,750 $92,632
Cost of revenue...................................... 118,263 74,802 46,839
-------- -------- -------
Gross profit......................................... 94,896 70,948 45,793
Operating expenses:
Research and development........................... 29,214 19,488 11,965
Selling, general and administrative................ 31,332 20,723 12,165
-------- -------- -------
Operating profit..................................... 34,350 30,737 21,663
Other income, net.................................... 1,204 2,078 1,001
-------- -------- -------
Income before income tax provision................... 35,554 32,815 22,664
Income tax provision................................. 8,982 6,800 3,875
-------- -------- -------
Net income........................................... $ 26,572 $ 26,015 $18,789
======== ======== =======
Net income per common share:
Basic.............................................. $ 1.39 $ 1.40 $ 1.20
Diluted............................................ $ 1.32 $ 1.33 $ 1.09
Weighted average number of shares outstanding:
Basic.............................................. 19,162 18,621 15,642
Diluted............................................ 20,137 19,527 17,288
Unaudited pro forma net income per common share
(Note P):
Historical net income:............................... $ 26,572 $ 26,015 $18,789
Adjustment to Equipe income tax expense to
convert from S-corporation to C-corporation status.. (3,639) (4,731) (4,327)
-------- -------- -------
Unaudited pro forma net income....................... $ 22,933 $ 21,284 $14,462
======== ======== =======
Unaudited pro forma net income per common share:
Basic........................................... $ 1.20 $ 1.14 $ 0.92
Diluted......................................... $ 1.14 $ 1.09 $ 0.84
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED TOTAL
--------------------- PAID-IN RETAINED GAINS ON STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SECURITIES EQUITY
---------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1994, as previously
reported...................................... 6,352 $ 64 $ 1,640 $ 3,753 -- $ 5,457
Adjustment to effect pooling of interests with
Equipe Combined Companies..................... 3,802 38 12 537 -- 587
------- ------ ------- -------- ------- --------
Balance, September 30, 1994 as restated......... 10,154 102 1,652 4,290 -- 6,044
Exercise of stock options....................... 356 4 474 478
Tax benefit from disqualified dispositions...... 360 360
Conversion of Series A redeemable
convertible preferred stock................... 694 7 4,055 4,062
Issuance of common stock pursuant to
an initial public offering net of
issuance costs of $1,152...................... 4,446 44 26,699 26,743
Issuance of common stock pursuant to
an additional public offering net of
issuance costs of $310........................ 2,100 21 36,383 36,404
Issuance of common stock in connection
with the Employee Stock Purchase Plan......... 48 363 363
Issuance of common stock in connection with
incorporation by Equipe Technologies, Inc. of
E-Machine Inc................................. 32 100 100
Distributions to shareholders of Equipe Combined
Companies..................................... (10,600) (10,600)
Net income...................................... 18,789 18,789
------- ------ ------- -------- ------- --------
Balance, September 30, 1995..................... 17,830 178 70,086 12,479 -- 82,743
Exercise of stock options....................... 380 4 584 588
Tax benefit from disqualified dispositions...... 591 591
Cashless exercise of stock warrants............. 138 1 (1) --
Issuance of common stock in connection with
the Employee Stock Purchase Plan.............. 57 1 585 586
Conversion of Equipe Combined Companies
convertible debt into common stock............ 286 3 67 70
Issuance of common stock of E-Machine, Inc...... 4 11 11
Issuance of common stock in connection with
the incorporation of Equipe Japan Ltd......... 240 2 453 455
Distributions to shareholders of Equipe Combined
Companies..................................... (11,131) (11,131)
Net income...................................... 26,015 26,015
------- ------ ------- -------- ------- --------
Balance, September 30, 1996..................... 18,935 189 72,376 27,363 -- 99,928
Exercise of stock options....................... 365 4 2,328 2,332
Tax benefit from disqualified dispositions...... 2,065 2,065
Stock-based compensation........................ 140 140
Issuance of common stock in connection with
the Employee Stock Purchase Plan.............. 49 812 812
Change in unrealized gain on securities........ $ 2 2
Distributions to shareholders of Equipe Combined
Companies..................................... (8,011) (8,011)
Adjustment to conform fiscal year of Equipe
Combined Companies............................ 3,705 3,705
Net income...................................... 26,572 26,572
------- ------ ------- -------- ------- --------
Balance, September 30, 1997..................... 19,349 $ 193 $77,721 $ 49,629 $ 2 $127,545
======= ====== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 26,572 $ 26,015 $ 18,789
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense................ 4,050 2,239 781
Provision for bad debts.............................. 900 -- 453
Deferred income taxes................................ (2,674) 2,227 (942)
Tax benefit from disqualified dispositions........... 2,065 591 360
Non-cash compensation................................ 140 -- --
Amortization of premiums or discounts on marketable
securities........................................ 64 148 --
Changes in operating assets and liabilities:
Trade accounts receivable.......................... (38,882) (10,014) (16,960)
Contracts in progress.............................. 6,361 (14,442) (2,089)
Inventories........................................ (11,051) (9,067) (4,550)
Other assets....................................... (1,618) (719) (174)
Accounts payable................................... 4,267 8,675 3,457
Accrued expenses and other liabilities............. 10,002 2,178 2,410
Billings in excess of revenues and customer
advances........................................ 1,957 328 261
-------- -------- --------
Net cash provided by operating activities................. 2,153 8,159 1,796
-------- -------- --------
Cash flows from investing activities:
Proceeds from the sale of marketable securities......... 9,079 1,908 448
Proceeds from maturities of marketable securities....... 5,390 12,571 --
Purchases of marketable securities...................... (5,431) (12,828) (14,495)
Capitalized software development costs.................. -- (726) --
Purchases of property and equipment..................... (6,628) (6,770) (3,662)
-------- -------- --------
Net cash provided by (used in) investing activities....... 2,410 (5,845) (17,709)
-------- -------- --------
Cash flows from financing activities:
Proceeds from borrowings................................ 1,769 (365) 1,330
Repayments of borrowings................................ (900) -- (5,888)
Repayment of capital lease obligations.................. (71) (73) (462)
Proceeds from issuance of common stock, net of
issuance costs....................................... -- 466 63,247
Distributions to shareholders........................... (8,011) (12,869) (5,800)
Proceeds from exercise of stock options and Employee
Stock Purchase Plan.................................. 3,144 1,174 841
-------- -------- --------
Net cash (used in) provided by financing activities....... (4,069) (11,667) 53,268
-------- -------- --------
Adjustment to conform to fiscal year of Equipe............ 218 -- --
Effect of changes in exchange rates on cash............... 3 -- --
-------- -------- --------
Net increase (decrease) in cash and cash equivalents...... 715 (9,353) 37,355
Cash and cash equivalents at beginning of period.......... 28,669 38,022 667
-------- -------- --------
Cash and cash equivalents at end of period................ $ 29,384 $ 28,669 $ 38,022
======== ======== ========
</TABLE>
F-7
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.......................................... $ 36 $ 79 $ 274
Taxes............................................. 5,272 4,026 3,099
Noncash transactions:
Conversion of Series A redeemable convertible
preferred stock into common stock upon
closing of initial public offering........... -- -- 4,063
Conversion of convertible debt to common stock -- 70 --
Property and equipment acquired under capital
leases....................................... 265 108 146
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<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,
process tool wafer-handling 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 and uncertainties 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, rapid technological change and the development by the
Company or its competitors of new technological innovations, dependence on key
personnel, the protection of proprietary technology, management of growth
including inventory management and manufacturing capacity expansion,
fluctuations in operating results, doing business in Asian and European markets
and related currency risks, competitive pressure on selling prices, the timing
and cancellation of customer orders and the Company's ability to absorb and
manage acquisitions.
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 intercompany transactions and balances have been
eliminated.
On January 22, 1998, the Company acquired Equipe Technologies, Inc.,
E-Machine, Inc., and Equipe Japan Ltd. (collectively, "Equipe" or "Equipe
Combined Companies"). The acquisition of Equipe was accounted for using the
pooling of interests method of accounting. The consolidated financial statements
of the Company for periods prior to the acquisition have been restated to
include the financial position, results of operations, and cash flows of Equipe
(see Note P).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect 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 and would
impact future results of operations and cash flows. Significant estimates are
inherent in determining revenue recognition and associated profits under the
percentage-of-completion method.
F-9
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Revenue Recognition
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 $100,699,000, $77,695,000 and $40,460,000 during fiscal
years 1997, 1996 and 1995, respectively. Revenue from product sales not
recognized under the percentage-of-completion method are 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.
Retainages
Accounts receivable include certain amounts which are not due until final
customer acceptance. Such retainages were approximately $22,092,000 and
$11,545,000 at September 30, 1997 and 1996, respectively. The retainages 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. These amounts are expected to be collected within the
next twelve months as units are delivered. Amounts billed at September 30, 1997
and 1996, which were netted against costs and estimated profits, were
$27,006,000 and $13,116,000, respectively.
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 such commissions that are contingent upon the
Company receiving payment in full from the customers are generally charged
against the related revenues. These amounts totaled approximately $2,381,000,
$1,852,000 and $845,000 for fiscal years 1997, 1996 and 1995, respectively.
Inventories
Inventories, consisting of raw materials, work-in-process and finished
goods, are stated at the lower of cost (determined principally on a first-in,
first-out basis) or market.
F-10
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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. The amortization of assets recorded under
capital leases is included in depreciation and amortization expense. Upon
retirement or sale, the cost of the assets disposed and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
credited or charged to operations.
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 the expected tax rates in the year in which the
differences are expected to reverse. 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. Equipe Technologies, Inc. and one of the related companies, E-Machine,
Inc. elected to be treated as a S Corporation under the provisions of the
Internal Revenue Code, and as such, the shareholders of Equipe Technologies,
Inc. and E-Machine, Inc. have been liable for individual Federal and certain
State income taxes on their allocated portions of the respective company's
taxable income. Accordingly, Federal and certain State income tax expense
related to Equipe Technologies, Inc. and E-Machine, Inc. has not been recorded
by the Company for all periods through January 22, 1998, the date of
consummation of the merger with the Company (see Note P). However, Equipe
Technologies, Inc. and E-machine, Inc. were subject to California franchise tax
based on 1.5% of taxable income.
Cash and Cash Equivalents
Cash equivalents consist of commercial papers, eurodollars, money market
mutual funds and other highly liquid investments with original maturities of
three months or less.
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. The
Company classifies all securities as available-for-sale. These securities are
reported at fair value as of the balance sheet date with net unrealized holding
gains and losses included in stockholders' equity. Gains and losses on sales of
securities are calculated using the specific identification method.
Financial Instruments
Financial instruments that potentially subject the Company to significant
concentrations of financial or credit risk consist principally of cash and cash
equivalents, current and non-current investments and trade accounts receivable.
The Company generally invests its cash and investments in investment-grade
securities.
F-11
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The Company's customers are primarily concentrated in one industry segment,
the semiconductor manufacturing and related capital goods industry.
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 which are denominated in
foreign currencies are remeasured into U.S. dollars at rates of exchange in
effect at the end of the fiscal year except nonmonetary assets and liabilities
which are remeasured using historical exchange rates. Revenue and expense
amounts are remeasured using an average of exchange rates in effect during the
period, except those amounts related to nonmonetary assets and liabilities,
which are remeasured at historical exchange rates. Net realized and unrealized
gains and losses resulting from foreign currency remeasurement are included in
the consolidated statements of operations as other income or expense.
Accounting for Stock-Based Compensation
The Company continues to apply the accounting provisions of Accounting
Principles Board ("APB") Opinion 25 and has elected the disclosure-only
alternative permitted under Statement of Financial Accounting Standards ("SFAS")
No. 123, Accounting for Stock-Based Compensation. The Company has disclosed
herein pro forma net income and pro forma net income per share in the footnotes
using the fair value based method beginning in fiscal year 1997 with comparable
disclosures for fiscal year 1996.
Net Income Per Common Share
The Company has adopted Statement of Financial Accounting Standard ("SFAS")
No. 128, "Earnings Per Share," which specifies the computation, presentation and
disclosure requirements for net income per common share. SFAS No. 128 requires
a restatement of all prior periods presented. Basic net income per common share
is based upon the weighted average number of common shares outstanding during
each period. Diluted net income per common share gives effect to all dilutive
potential common shares outstanding during the period. Under SFAS No. 128, the
computation of diluted net income per common share does not assume the issuance
of common shares that have an antidilutive effect.
Reclassification of Prior Year Balances
Certain reclassifications have been made to prior years' financial
statements to conform to the current presentation.
F-12
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement requires that changes
in comprehensive income be shown in a financial statement that is displayed with
the same prominence as other financial statements. The statement will be
effective for annual periods beginning after December 15, 1997 and the Company
will adopt its provisions in fiscal year 1999. Reclassification for earlier
periods is required for comparative purposes. The Company is currently
evaluating the impact this statement will have on its financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." This statement
includes requirements to report selected segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
statement will be effective for annual periods beginning after December 15, 1997
and the Company will adopt its provisions in fiscal year 1999. Disclosures for
earlier periods is required, unless impracticable, for comparative purposes.
The Company is currently evaluating the impact this statement will have on its
financial statements.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued the Statement of Position ("SOP") 97-2 "Software Revenue
Recognition," which will supersede SOP 91-1. SOP 97-2 has not changed the basic
rules of revenue recognition but does provide more guidance particularly with
respect to multiple deliverables and "when and if available" products. SOP 97-2
is effective for transactions entered into for annual periods beginning after
December 15, 1997. The Company will adopt SOP 97-2 in fiscal year 1999 and does
not expect the statement to have a material impact on it's financial position or
results of operations.
C. CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consisted of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Cash on hand............... $ 4 $ 4
Cash deposited with banks.. 2,200 7,851
Eurodollars................ 19,805 3,450
Money market funds......... 939 3,143
U.S. government notes...... 747 992
Municipal bonds............ 1,955 2,400
Commercial paper........... 3,734 10,829
------- -------
$29,384 $28,669
======= =======
</TABLE>
F-13
<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>
1997 1996
------------------ ------------------
COST FAIR VALUE COST FAIR VALUE
------ ---------- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
CURRENT:
Municipal notes............ $2,142 $2,143 $7,584 $7,582
U.S. government notes...... 497 499 -- --
------ ------ ------ ------
$2,639 $2,642 $7,584 $7,582
====== ====== ====== ======
NON-CURRENT:
U.S. Treasury obligations.. $1,248 $1,250
Municipal notes............ $ 507 $ 506 3,416 3,416
------ ------ ------ ------
$ 507 $ 506 $4,664 $4,666
====== ====== ====== ======
</TABLE>
Gross realized gains and losses for the year ended September 30, 1997,
were $9,000 and $7,000, respectively. Gross unrealized gains and losses at
September 30, 1997, were $3,000 and $1,000 respectively. Interest income
included in other income (expense), net was $1,240,000, $2,163,000 and
$1,235,000 for the years ended September 30, 1997, 1996 and 1995,
respectively.
Information regarding the range of contractual maturities of
investments in debt securities at September 30, 1997 is as follows:
<TABLE>
<CAPTION>
COST FAIR VALUE
------------ ----------
(in thousands)
<S> <C> <C>
Within 1 year...................................... $ 2,639 $ 2,642
After 1 year through 2 years....................... 507 506
------- -------
$ 3,146 $ 3,148
======= =======
</TABLE>
E. INVENTORIES:
Inventories consisted of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Raw materials........................................ $27,178 $21,322
Work-in-process...................................... 6,312 1,408
Finished goods....................................... 627 325
------- -------
$34,117 $23,055
======= =======
</TABLE>
F-14
<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 1997 1996
-------------------- -------- --------
(in thousands)
<S> <C> <C> <C>
Machinery and equipment....... 2-7 years $15,031 $ 9,275
Furniture and fixtures........ 5-7 years 4,115 3,372
Leasehold improvements........ Shorter of life of
lease or useful life 2,030 1,736
------- -------
21,176 14,383
Accumulated depreciation and
amortization............. (8,382) (4,390)
------- -------
$12,794 $ 9,993
======= =======
</TABLE>
Depreciation expense was $3,891,000, $2,195,000 and $772,000 for years
ending September 30, 1997, 1996 and 1995, respectively. Assets capitalized under
leases totaled $520,000 and $254,000 as of September 30, 1997 and 1996,
respectively. Accumulated depreciation of these assets was $105,000 and
$97,000 as of September 30, 1997 and 1996, respectively.
G. STOCKHOLDERS' EQUITY:
Common Stock Split
On April 22, 1997, the shareholders approved a two-for-one stock split
effected in the form of a 100% stock dividend on its common stock. This action
became effective on May 2, 1997 for shareholders of record as of April 22, 1997.
A total of 7,421,594 shares of common stock were issued in connection with the
split. The par value of common stock remains unchanged. All share and per
share amounts have been adjusted to reflect the stock split on a retroactive
basis.
Stock Options
During 1984, the Board of Directors voted to adopt the 1984 Incentive Stock
Option Plan (the "1984 Option Plan") and subsequently reserved 1,050,000 shares
of its authorized Common stock for issuance under this plan. On March 17, 1994,
the Board of Directors approved the 1994 Incentive and Nonqualified Stock Option
Plan (the "1994 Option Plan") and reserved 810,000 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 1,810,000 shares. The Board of
Directors has also granted nonqualified options to directors and employees of
the Company. The fair value of options issued to non-employees is recorded as a
charge to earnings over the shorter of the service period or the vesting period.
Incentive stock options generally vest over five years and expire six years
after issuance. Nonqualified stock options generally vest between zero and five
years and expire between five and ten years after issuance.
F-15
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
On February 1, 1996, the board of Directors determined that certain stock
options issued to employees of the Company had an exercise price significantly
higher than the fair market value of the Company's common stock. In light of
the Board's conclusions that such options were not providing the desired
incentive, the Board provided employees with the opportunity to exchange options
previously granted to them under the 1994 Plan for new options (the "replacement
options") to purchase a reduced number of shares at an exercise price of $13.63,
the then fair market value of the Company's common stock. The Company canceled
and replaced options to purchase 380,600 shares of common stock with an average
exercise price of $18.88 per share.
Information with respect to option activity for the fiscal years 1995, 1996
and 1997 is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at September 30, 1994.. 1,403,344 $ 1.73
---------
Granted.......................... 355,015 8.57
Canceled......................... (24,676) 2.63
Exercised........................ (355,572) 1.34
---------
Outstanding at September 30, 1995.. 1,378,111 3.57
---------
Granted.......................... 857,227 16.17
Canceled......................... (442,152) 17.47
Exercised........................ (379,932) 1.59
---------
Outstanding at September 30, 1996.. 1,413,254 7.40
---------
Granted.......................... 804,592 20.46
Canceled......................... (240,775) 11.62
Exercised........................ (364,851) 6.59
---------
Outstanding at September 30, 1997.. 1,612,220 $13.46
=========
</TABLE>
Summarized information about stock options outstanding at September 30,
1997 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------- --------------- -------------------- ------------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 4.00 396,079 2.12 $ 2.24 231,431 $ 2.14
6.57 - 13.63 459,467 4.09 11.38 120,700 10.48
15.13 - 17.69 476,205 5.11 17.57 57,441 17.55
18.00 - 23.88 219,469 5.68 22.12 40,876 22.73
34.63 - 56.75 61,000 5.72 38.66 2,475 35.25
$ 1.00 - $56.75 1,612,220 4.19 $13.46 452,923 $ 8.35
</TABLE>
F-16
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
At September 30, 1996 and 1995 options exercisable were 467,503 and
574,010, respectively. Estimated weighted average fair value of options granted
in fiscal year 1997 and 1996 are $11.92 and $9.29, respectively, on the date of
grant.
Employee Stock Purchase Plan
Since May 1994, the Company has offered an Employee Stock Purchase Plan
("ESPP") under which rights are granted to purchase shares of common stock at
85% of the lesser of the market value of such shares at either the beginning or
the end of each six month offering period. 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. Under the ESPP, the Company has
reserved 450,000 shares of common stock for issuance to eligible employees.
During fiscal years 1997 and 1996, 49,044 and 56,958 shares, respectively, were
purchased at an average price ranging from $10.20 to $19.34 per share. Shares
available for future purchase under the ESPP totaled 295,752 at September 30,
1997. Equipe employees did not participate in the plan prior to the
acquisition.
Stock-Based Compensation Plans
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock-based compensation plan and no compensation expense has
been recognized for options granted to employees and shares purchased under
these plans. Had compensation expense for the stock-based compensation plans
been determined based on the fair value at the grant dates for options granted
and shares purchased under the plans consistent with the method of SFAS 123,
Accounting for Stock-Based Compensation, the net income and diluted net income
per common share would have been as follows:
1997 1996
-------- ---------
(in thousands, except per share data)
<TABLE>
<CAPTION>
DILUTED NET DILUTED NET
INCOME PER INCOME PER
NET INCOME COMMON SHARE NET INCOME COMMON SHARE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
As Reported $26,572 $1.32 $26,015 $1.33
Pro Forma 24,406 1.21 24,904 1.28
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
likely to be representative of the effects on reported net income for future
years. SFAS 123 does not apply to awards granted prior to fiscal year 1996 and
additional awards are anticipated in future years.
F-17
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The fair value of options and other equity instruments at the date of grant
was estimated using the Black-Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
Expected life (years)-stock options 5 5
Expected life (years)-ESPP 0.5 0.5
Risk-free interest rate 5.51%-6.07% 4.88%-5.83%
Volatility 65% 65%
Dividend yield -0- -0-
</TABLE>
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the use of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimates, in management's
option, the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock-based compensation.
Stock Warrants
A warrant to purchase 112,500 shares of the Company's common stock, which
was issued in fiscal year 1993, 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 and equipment under
noncancelable operating and capital leases expiring through the year 2002 (see
Notes F and L). Rent expense under operating leases was $1,652,000, $1,068,000
and $761,000 for fiscal years 1997, 1996 and 1995, respectively.
At September 30, 1997, future minimum payments required under all
noncancelable operating and capital leases were as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
- ----------- --------- -------
(IN THOUSANDS)
<S> <C> <C>
1998..................................... $1,728 $185
1999..................................... 1,367 122
2000..................................... 1,290 106
2001..................................... 889 --
2002..................................... 158 --
------ ----
Total minimum lease payments............. $5,432 413
======
Less: amount representing interest...... 38
----
Present value of minimum lease payments.. $375
====
</TABLE>
F-18
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
I. ACCRUED EXPENSES AND OTHER LIABILITIES:
The significant components of accrued expenses and other liabilities
consisted of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Accrued expenses...................................................... $ 5,256 $ 2,566
Accrued compensation.................................................. 6,555 3,916
Accrued distributions to shareholders................................. 3,061
Income taxes payable.................................................. 5,953 1,457
Deferred income taxes................................................. -- 1,830
------- -------
$17,764 $12,830
======= =======
</TABLE>
J. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
(in thousands except per share data)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
DECEMBER, MARCH, JUNE, SEPTEMBER,
--------- ------ ----- ----------
1996 1995 1997 1996 1997 1996 1997 1996
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue $44,134 $32,217 $49,262 $36,509 $56,150 $36,111 $63,613 $40,913
Operating profit 7,218 7,914 7,865 8,676 8,902 7,317 10,365 6,830
Income before income taxes 7,555 8,533 8,092 9,144 9,159 7,839 10,748 7,299
Net income $ 5,468 $ 7,518 $ 6,001 $ 7,218 $ 6,869 $ 5,979 $ 8,234 $ 5,300
Net income per common share:
Basic $ 0.29 $ 0.41 $ 0.31 $ 0.39 $ 0.36 $ 0.32 $ 0.43 $ 0.28
Diluted $ 0.28 $ 0.39 $ 0.30 $ 0.37 $ 0.34 $ 0.30 $ 0.40 $ 0.27
</TABLE>
K. INCOME TAXES:
The following summarizes the Company's provision for income
taxes:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------ -------
(in thousands)
<S> <C> <C> <C>
Federal income taxes:
Current.............................. $10,811 $4,000 $3,986
Deferred............................. (2,324) 1,958 (599)
State income taxes:
Current.............................. 845 573 830
Deferred............................. (350) 269 (342)
------- ------ ------
Total income tax provision................ $ 8,982 $6,800 $3,875
======= ====== ======
</TABLE>
F-19
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The differences between the effective tax rates and the U.S. federal
statutory tax rates were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ------
<S> <C> <C> <C>
U.S. federal income tax statutory rate...................................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.................................................. 3.0 2.7 1.7
Federal tax credits......................................................................... (1.7) (0.6) (1.1)
Release of deferred tax valuation allowances................................................ 0.0 (3.0) (0.4)
Foreign sales corporation tax benefit....................................................... (2.5) (0.1) (0.4)
S corporation income of Equipe.............................................................. (9.5) (13.3) (17.6)
Other....................................................................................... 1.0 0.0 (0.1)
------- ------- -----
Effective tax rate.......................................................................... 25.3% 20.7% 17.1%
======= ======= =====
</TABLE>
At September 30, 1997 and 1996 the components of net deferred tax assets
(liabilities) were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Gross deferred tax assets:
Bad debts............................................................................. $ 325 $ 221
Inventory............................................................................. 3,078 927
Compensation.......................................................................... 321 260
Intangible assets..................................................................... 1,079 1,285
Tax credits........................................................................... 230 398
Other................................................................................. 638 466
------- -------
Subtotal......................................................................... 5,671 3,557
------- -------
Gross deferred tax liabilities:
Long-term contracts................................................................... (2,645) (4,212)
Accounts receivable................................................................... (1,036)
Depreciation.......................................................................... (503) (531)
------- -------
Subtotal......................................................................... (4,184) (4,743)
------- -------
Net deferred tax assets (liabilities)......................................... $ 1,487 $(1,186)
======= =======
</TABLE>
At September 30, 1997, the Company had state tax credit carryforwards of
$230,000 that expire beginning in 2008.
L. FINANCING ARRANGEMENTS:
Lines of Credit
The Company entered into a credit agreement, as amended March 1, 1996, with
Fleet Bank of Massachusetts, N.A. (the " Fleet 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 Fleet 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
F-20
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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 Fleet 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 expired on March 1, 1998.
Equipe Technologies, Inc. had a revolving line of credit agreement with
Comerica Bank-California ("Comerica") that allowed for, as of September 30,
1997, borrowings up to the lesser of $3,000,000 or 75% of accounts receivable
with outstanding balances under the line of credit bearing interest at
Comerica's prime interest rate plus 1.0%. Prior to January 14, 1997 the line of
credit allowed for borrowings up to $2,000,000. The agreement also required
that Equipe Technologies, Inc. comply with certain defined loan covenants and
provided that outstanding amounts be secured by all of Equipe Technologies,
Inc.'s assets. As of September 30, 1997, Equipe Technologies, Inc. was not in
compliance with certain of the required covenants. A waiver of compliance with
these covenants was obtained from Comerica through September 30, 1997. At
September 30, 1997, the line of credit was personally guaranteed by certain
shareholders of Equipe Technologies, Inc. and in November 1997, these personal
guarantees were released by the bank. Outstanding balances against this line of
credit at September 30, 1997 and 1996 were $1,769,000 and $0, respectively.
Convertible Debt
During fiscal 1996, $70,000 of Equipe convertible debt outstanding, all of
which was held by shareholders and related parties, was converted into 286,161
shares of common stock.
Capital Lease Obligations
The Company holds certain property and equipment under capital leases. The
obligations under capital leases represent the present value of future minimum
lease payments and are secured by certain assets of E-Machine, Inc. The capital
lease obligations bear interest at rates of 8.7% to 9.9% per annum and expire at
various dates through August 2000 (see Note H).
M. 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 $696,000, $418,000 and $102,000 for fiscal years
1997, 1996 and 1995, respectively. Above amounts exclude Equipe employees who
did not participate in the plan prior to the acquisition. Employees of Equipe
were not eligible until after the acquisition described in Note P.
F-21
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
N. SIGNIFICANT CUSTOMERS, RELATED PARTY AND INTERNATIONAL NET REVENUE:
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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Customer A.................. 36% 29% 41%
</TABLE>
Net export sales to unaffiliated customers were approximately $97,388,000,
$22,457,000, and $11,913,000 for the years ending September 30, 1997, 1996 and
1995, respectively. Net export sales by geographic location for the years ended
September 30 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
(in thousands)
Europe and Middle East.. $67,985 $14,320 $5,278
Asia.................... 29,403 8,137 6,635
</TABLE>
O. ACQUISITION OF INTERVAL LOGIC CORPORATION:
On October 29, 1997, the Company acquired Interval Logic Corporation, a
California corporation ("ILC"), for aggregate consideration of 111,258 shares of
the Company's common stock pursuant to an Agreement and Plan of Merger dated as
of October 12, 1997. In addition, the Company issued or assumed options to
purchase an aggregate of 199,170 shares of the Company's common stock. ILC was
formed in 1995 to develop advanced, high-performance planning and scheduling
software solutions for the semiconductor industry. The Company expects to
invest significantly in further development of the ILC technology in order to
integrate it with the Company's proprietary software and to develop products
that can meet the Company's customers' requirements. The Company recorded a
significant charge to earnings in the quarter ending December 28, 1997
for the portion of the purchase price which was allocated to in-process
technology.
P. EQUIPE ACQUISITION:
On January 22, 1998 the Company acquired Equipe Technologies, Inc., E-
Machine, Inc. and Equipe Japan Ltd., (collectively, "Equipe"or "Equipe Combined
Companies"). Equipe is a leading worldwide developer, manufacturer, and
supplier of wafer and substrate handling robots, pre-aligners and controllers to
semiconductor process tool manufacturers. The Company issued 4,088,016 shares of
common stock in exchange for all of the outstanding stock of Equipe
Technologies, Inc. using an exchange ratio of 0.760372 of one share of the
company's common stock for each share of Equipe Technologies, Inc. The Company
issued 36,000 and 240,000 shares of the Company's common stock to E-Machine,
Inc. and Equipe Japan Ltd., respectively. In addition, all outstanding Equipe
stock options were converted, at the common stock exchange ratio, into options
to purchase the Company's common stock. The business combination was accounted
for as a pooling of interests. The consolidated financial statements of the
Company for periods prior to the acquisition have been restated to include the
financial position, results of operations and cash flows of Equipe. Significant
intercompany transactions for the Equipe Combined Companies prior to the period
in which the business combination occurred have been eliminated from the
accompanying financial statements.
F-22
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
In connection with the acquisition of Equipe, direct acquisition costs of
$4,490,000, primarily relating to legal, investment banking, and accounting
fees, have been charged against results of operations during the three months
ending March 29, 1998.
Prior to the acquisition, Equipe prepared its financial statements based on
a December 31 fiscal year-end. Accordingly, Equipe's results of operations,
statements of stockholders' equity and cash flows for the years ended December
31, 1996 and 1995 have been combined with the Company's results of operations,
statements of stockholders' equity and cash flows for the years ended September
30, 1996 and 1995, respectively. The results of operations, statements of
stockholders' equity and cash flows for fiscal 1997 are for the twelve months
ended September 30, 1997 for both the Company and Equipe. Equipe's unaudited
results of operations for the three months ended December 31, 1996 (including
revenues, net income and distributions to shareholders of $6,906,000, $1,582,000
and $5,287,000, respectively) are included in the consolidated statements of
operations, statements of stockholders' equity and cash flows for both the years
ended September 30, 1997 and 1996. Therefore, an amount equal to Equipe's net
income and distributions to shareholders for the three months ended December 31,
1996 was eliminated from the consolidated statement of stockholders' equity for
the year ended September 30, 1997.
The following information presents certain statement of operations data (in
thousands) of the Company and Equipe for the periods prior to the acquisition:
<TABLE>
<CAPTION>
COMBINED
PRI AUTOMATION, INC. EQUIPE COMPANIES
-------------------- ------- ---------
<S> <C> <C> <C>
Net revenue for:
Fiscal 1997....................... $169,465 $43,694 $213,159
Fiscal 1996....................... 110,684 35,066 145,750
Fiscal 1995....................... 64,042 28,590 92,632
Net income for:
Fiscal 1997....................... $ 17,076 $ 9,496 $ 26,572
Fiscal 1996....................... 13,731 12,284 26,015
Fiscal 1995....................... 7,559 11,230 18,789
</TABLE>
Equipe Technologies, Inc. and E-Machine, Inc. were S-corporations for
income tax purposes prior to the acquisition. Pro forma net income and net
income per common share, which gives effect to adjustments that provide for
income taxes as if Equipe Technologies, Inc. and E-Machine, Inc. were treated as
C-corporations for the periods presented, have been presented on the
Consolidated Statements of Operations. The pro forma information is shown for
comparative purposes only.
F-23
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Q. EARNINGS PER SHARE:
A reconciliation between basic and diluted earnings per share is as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income:........................................ $26,572 $26,015 $18,789
Shares used in computation:
Weighted average common shares outstanding
used in computation of basic net income per
common share.................................. 19,162 18,621 15,642
Dilutive effect of stock options and warrants..... 975 906 1,646
------- ------- -------
Shares used in computation of diluted net income
per common share.............................. 20,137 19,527 17,288
======= ======= =======
Basic net income per common share................. $ 1.39 $ 1.40 $ 1.20
Diluted net income per common share............... $ 1.32 $ 1.33 $ 1.09
</TABLE>
Options to purchase 55,281, 128,377 and 14,139 shares of common stock
were outstanding for fiscal years 1997, 1996, and 1995, respectively, but were
not included in the computation of diluted net income per common share because
the options' exercise prices are greater than the average market price of the
common shares and therefore would be antidilutive under the treasury stock
method.
F-24
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering covered by this Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company or any Selling Stockholder. This Prospectus does not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which it relates or an offer to sell or the solicitation of an
offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof or the
information contained herein is correct as of any time subsequent to its date.
1,405,433
Shares
PRI AUTOMATION, INC.
Common Stock
(par value $.01 per share)
_____________________
PROSPECTUS
_____________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid by the Company
in connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions. All amounts shown
are estimates except for amounts of filing and listing fees. The Company will
pay all expenses in connection with the issuance and distribution of any
securities sold by the Selling Stockholders, except for any discounts,
concessions, commissions or other compensation due to any broker or dealer in
connection with the sale of any of the shares offered hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee $ 4,302
---------
Legal fees and expenses 15,000
---------
Accounting fees and expenses 15,000
---------
Printing, EDGAR formatting and mailing expenses 2,000
---------
Miscellaneous 1,198
=========
Total 37,500
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 6C of the Company's Restated Articles of Organization provides that
the Company (with certain exceptions) will indemnify and hold harmless to the
fullest extent authorized by the Massachusetts Business Corporation Law each
person who was or is made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (hereinafter a "Proceeding"), by
reason of the fact that he or she is or was (a) a director of the Company, (b)
an officer of the Company elected or appointed by the stockholders or the Board
of Directors, or (c) serving, at the request of the Company as evidenced by a
vote of the Board of Directors prior to the occurrence of the event to which the
indemnification relates, as a director, officer, employee or other agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan (such
persons described in (a), (b) and (c) are sometimes hereinafter referred to as
an "Indemnitee") against all expense, liability, and loss reasonably incurred by
any such Indemnitee in connection therewith. The Company may also, to the
extent authorized by the Board of Directors, grant rights to indemnification,
and to an advancement of expenses, to any employee or agent of the Company.
Notwithstanding the foregoing, if Massachusetts Business Corporation Law
requires, an advancement of expenses incurred by an Indemnitee will be made only
upon delivery to the Company of an undertaking, by or on behalf of such
Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is not further right to
appeal that such Indemnitee is not entitled to be indemnified for such expenses.
The rights under Article 6C may not be amended or terminated so as to
adversely affect an individual's rights with respect to the period prior to such
amendment without the consent of the person entitled to the indemnification
(unless otherwise required by the Massachusetts Business Corporation Law).
Section 67 of Chapter 156B of the Massachusetts Business Corporation Law
authorizes a corporation to indemnify its directors, officers, employees and
other agents unless such person shall have been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that his action was in
the best interests
II-1
<PAGE>
of the corporation or to the extent that such matter relates to service with
respect to an employee benefit plan, in the best interests of the participants
of such employee benefit plan.
The effect of these provisions would be to authorize such indemnification by
the Company for liabilities arising out of the Securities Act of 1933.
ITEM 16. EXHIBITS
4.1 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).
4.2 Articles of Amendment to Restated Articles of Organization (filed as
Exhibit 3.6 to the Company's quarterly report on Form 10-Q, for the
quarterly period ended March 30, 1997, File No. 000-24934, and
incorporated herein by reference).
4.3 Articles of Amendment to Restated Articles of Organization (filed as
Exhibit 3.7 to the Company's quarterly report on Form 10-Q, for the
quarterly period ended December 28, 1997, File No. 000-24934, and
incorporated herein by reference).
4.4 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).
5.1 Opinion of Foley, Hoag & Eliot LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Mohler, Nixon & Williams.
23.4 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on the signature page).
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change
II-2
<PAGE>
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table upon effectiveness hereof;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration, by means of a post-effective amendment,
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Billerica, state of Massachusetts, on this 28th day
of September 1998.
PRI AUTOMATION, INC.
By: /s/ Mitchell G. Tyson
---------------------------------------
Mitchell G. Tyson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Mordechai Wiesler, Mitchell G. Tyson and Stephen
D. Allison, and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing which they, or either of them, may deem necessary or advisable to be done
in connection with this Registration Statement, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or any substitute or
substitutes for any of them, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Mordechai Wiesler Chairman of the Board, September 28, 1998
- ----------------------- Treasurer and Director
Mordechai Wiesler
/s/ Mitchell G. Tyson President, Chief Executive September 28, 1998
- ----------------------- Officer and Director
Mitchell G. Tyson (Principal Executive Officer)
/s/ Stephen D. Allison Chief Financial Officer September 28, 1998
- ----------------------- (Principal Financial
Stephen D. Allison and Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Alexander V. d'Arbeloff Director September 28, 1998
- ---------------------------
Alexander V. d'Arbeloff
/s/ Boruch B. Frusztajer Director September 28, 1998
- ---------------------------
Boruch B. Frusztajer
/s/ Amram Rasiel Director September 28, 1998
- ---------------------------
Amram Rasiel
/s/ Paul F. Rogan Director September 28, 1998
- ---------------------------
Paul F. Rogan
/s/ Kenneth M. Thompson Director September 28, 1998
- ---------------------------
Kenneth M. Thompson
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
5.1 Opinion of Foley, Hoag & Eliot LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Mohler, Nixon & Williams.
II-6
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF FOLEY, HOAG & ELIOT LLP]
September 29, 1998
PRI Automation, Inc.
805 Middlesex Turnpike
Billerica, Massachusetts 01821
Ladies and Gentlemen:
We are familiar with the Registration Statement on Form S-3 (the "S-3
Registration Statement") filed today by PRI Automation, Inc., a Massachusetts
corporation (the "Company"), with the Securities and Exchange Commission under
the Securities Act of 1933, as amended. The S-3 Registration Statement relates
to the proposed offering by certain Selling Stockholders named therein of
1,405,433 shares (the "Shares") of its Common Stock, $0.01 par value per share,
all of which Shares are now issued and outstanding.
In arriving at the opinions expressed below, we have examined and relied on
the following documents: (a) the Restated Articles of Organization of the
Company, as amended; (b) the Amended and Restated By-Laws of the Company; and
(c) the records of meetings and consents of the Board of Directors and
stockholders of the Company provided to us by the Company. In addition, we have
examined and relied on the originals or copies certified or otherwise identified
to our satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below.
<PAGE>
PRI Automation, Inc.
September 29, 1998
Page 2
Based upon the foregoing, it is our opinion that:
1. the Company has taken all necessary corporate action required to
authorize the issuance and sale of the Shares; and
2. the Shares have been validly and legally issued and are fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the S-3
Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: /s/ Robert W. Sweet, Jr.
-------------------------
A Partner
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in this registration statement
on Form S-3 of PRI Automation, Inc. (the "Company") to register 1,405,433 shares
of Common Stock of our report dated November 12, 1997, on our audits of the
consolidated financial statements of the Company as of September 30, 1997 and
1996, and for each of the three years in the period ended September 30, 1997,
which report is included in the Company's 1997 Annual Report on Form 10-K, and
to the inclusion in this registration statement on Form S-3 of our report dated
November 12, 1997, except as to the pooling of interests with the Equipe
Combined Companies described in Note P which is as of September 11, 1998, on
our audits of the restated consolidated financial statements of the Company as
of September 30, 1997 and 1996, and for each of the three years in the period
ended September 30, 1997. We also consent to the reference to our firm under the
caption "Experts."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 24, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
--------------------------------------------------
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated November 19, 1997 with respect to the combined
financial statements of the Equipe Combined Companies incorporated by reference
in the Registration Statement (Form S-3) and the related Prospectus of PRI
Automation, Inc. for the registration of 1,405,433 shares of its common stock.
/s/ Ernst & Young LLP
San Jose, California
September 24, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and the related Prospectus of PRI Automation,
Inc. (the "Company") for the registration of 1,405,433 shares of its common
stock and to the inclusion therein of our report dated November 7, 1997, on our
audit of the combined financial statements of Equipe Combined Companies, insofar
as such combined financial statements relate to the year ended December 31,
1995, included in the current report on Form 8-K/A for the Company dated
December 12, 1997, filed with the Securities and Exchange Commission.
/s/ Mohler, Nixon & Williams
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
September 24, 1998
