<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 2, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from Commission File Number
______ to ______ 0-24934
PRI AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2495703
(State or other jurisdiction) (I.R.S. Employer Identification No.)
of incorporation
805 MIDDLESEX TURNPIKE 01821-3986
BILLERICA, MA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number: (978) 670-4270
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___.
The number of shares outstanding of each of the issuer's classes of common
stock as of May 2, 2000:
CLASS NUMBER OF SHARES OUTSTANDING
Common Stock, $.01 par value 23,281,261
<PAGE>
PRI AUTOMATION, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 2, 2000 and September 30, 1999 3
Consolidated Statements of Operations for
the Three and Six Months Ended April 2, 2000
and March 28, 1999 4
Consolidated Statements of Cash Flows for
the Six Months Ended April 2, 2000 and
March 28, 1999 5
Notes to Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
Exhibit Index 21
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRI AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
APRIL 2, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 34,713 $ 51,865
Trade accounts receivable, less allowance for doubtful accounts
of $2,281 and $2,646, respectively................................ 58,715 31,436
Contracts in progress............................................... 20,496 6,018
Inventories......................................................... 38,150 28,351
Other current assets................................................ 3,023 7,063
-------- --------
Total current assets.............................................. 155,097 124,733
Property and equipment, net......................................... 21,303 19,128
Other assets........................................................ 2,136 2,691
-------- --------
Total assets...................................................... $178,536 $146,552
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 23,871 $ 16,900
Accrued expenses and other liabilities.............................. 17,374 16,396
Current portion of obligations under capital lease.................. 454 570
Billings in excess of revenues and customer advances................ 13,953 11,931
------ --------
Total current liabilities....................................... 55,652 45,797
Obligations under capital lease........................................ 172 411
Other non-current liabilities.......................................... 730 788
Commitments and contingencies (Notes J and K)
Minority interest...................................................... 153 56
Stockholders' equity:
Preferred stock, $0.01 par value; 400,000 shares authorized; one
outstanding...................................................... 0 0
Common stock, $.01 par value; 75,000,000 and 50,000,000
shares authorized, respectively; 23,235,192 and 22,265,676
issued and outstanding, respectively.............................. 232 223
Additional paid-in capital.......................................... 157,689 141,469
Accumulated deficit................................................. (36,092) (42,192)
--------- ---------
Total stockholders' equity...................................... 121,829 99,500
--------- ---------
Total liabilities and stockholders' equity...................... $178,536 $146,552
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 2, MARCH 28, APRIL 2, MARCH 28,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue:
Product and equipment............................. $66,541 $ 21,410 $115,704 $ 42,127
Services and maintenance.......................... 10,128 8,881 19,658 17,799
-------- --------- -------- ------
Total net revenue............................... 76,669 30,291 135,362 59,926
Cost of revenue:
Product and equipment............................. 39,675 13,587 70,934 29,353
Services and maintenance.......................... 6,944 5,186 13,000 9,565
------- ------- ------ -------
Total cost of revenue........................... 46,619 18,773 83,934 38,918
------ ------ ------ ------
Gross profit......................................... 30,050 11,518 51,428 21,008
Operating expenses:
Research and development.......................... 12,736 10,875 24,895 21,289
Selling, general and administrative............... 11,600 9,037 20,615 18,723
Merger costs and special charges.................. -- 5,800 -- 6,450
-------- -------- -------- -------
Operating profit (loss).............................. 5,714 (14,194) 5,918 (25,454)
Other income, net.................................... 292 625 492 1,281
--------- --------- ------ --------
Income (loss) before income taxes.................... 6,006 (13,569) 6,410 (24,173)
Provision for (benefit from) income taxes............ 200 (3,367) 310 (6,316)
-------- ---------- --------- ----------
Net income (loss).................................... $ 5,806 $(10,202) $ 6,100 $(17,857)
======= ========= ========= =========
Net income (loss) per common share:
Basic............................................. $0.25 ($0.48) $0.27 ($0.84)
Diluted........................................... $0.23 ($0.48) $0.24 ($0.84)
Weighted average shares outstanding:
Basic............................................. 23,032 21,470 22,773 21,369
Diluted........................................... 25,353 21,470 24,918 21,369
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
PRI AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 2, MARCH 28,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................... $ 6,100 $(17,857)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization expense............................. 4,520 4,293
Provision for write-downs of inventories.......................... 250 200
Provision for bad debts........................................... 83 54
Net loss on disposal of assets.................................... 25 54
Deferred income taxes............................................. -- 651
Translation losses (gains), net................................... 414 (371)
Minority interest in income (losses) of subsidiaries.............. 97 (29)
Changes in operating assets and liabilities:
Trade accounts receivable....................................... (27,284) 3,786
Contracts in progress........................................... (14,478) 4,460
Inventories..................................................... (10,049) 5,590
Other assets.................................................... 3,956 1,616
Accounts payable................................................ 7,196 (2,725)
Accrued expenses and other liabilities.......................... 951 3,410
Billings in excess of revenue and customer advances............. 2,026 (2,291)
-------- -------
Net cash (used in) provided by operating activities.................... (26,193) 841
-------- -------
Cash flows from investing activities:
Purchases of intangible assets...................................... -- (272)
Proceeds from sale of property and equipment........................ -- 9
Purchases of property and equipment................................. (6,134) (1,511)
Cash paid for contingent consideration.............................. (88) (145)
-------- -------
Net cash used in investing activities.................................. (6,222) (1,919)
-------- -------
Cash flows from financing activities:
Proceeds under line of credit....................................... -- 43
Repayment of capital lease obligations.............................. (355) (323)
Investment from minority interest shareholders...................... -- 199
Proceeds from exercise of stock options and Employee Stock
Purchase Plan..................................................... 16,317 2,778
------- --------
Net cash provided by financing activities.............................. 15,962 2,697
------- --------
Effect of exchange rate changes on cash................................ (699) (147)
-------- --------
Net (decrease) increase in cash and cash equivalents................... (17,152) 1,472
Cash and cash equivalents at beginning of period....................... 51,865 57,047
-------- --------
Cash and cash equivalents at end of period............................. $ 34,713 $ 58,519
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
PRI AUTOMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of PRI
Automation, Inc., its wholly-owned domestic subsidiaries and its wholly-owned
and majority-owned foreign subsidiaries (collectively, the "Company"). All
significant intercompany transactions and balances have been eliminated.
In March 1999, the Company acquired Promis Systems Corporation Ltd.
("Promis"). The acquisition of Promis was accounted for using the pooling of
interests method of accounting. All prior period historical consolidated
financial statements presented herein have been restated to include the
financial position, results of operations, and cash flows of Promis.
PREPARATION OF FINANCIAL STATEMENTS
The interim financial data as of April 2, 2000 and for the three and six
months ended April 2, 2000 and March 28, 1999 is unaudited; however, in the
opinion of the Company, the interim data includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. The results for interim periods are not
necessarily indicative of the results for the entire year. The condensed
consolidated financial statements should be read in connection with the audited
consolidated financial statements of PRI Automation, Inc. for the year ended
September 30, 1999 included in its Annual Report on Form 10-K, filed with the
Securities and Exchange Commission.
For interim reporting purposes, the Company closes its first three fiscal
quarters on the Sunday nearest the last day of December, March and June in each
year. The Company's fiscal year ends on the last day of September.
B. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
APRIL 2, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
Raw materials................................................ $23,637 $16,492
Work-in-process.............................................. 10,487 5,804
Finished goods............................................... 4,026 6,055
-------- --------
$38,150 $28,351
======= =======
</TABLE>
6
<PAGE>
C. ACCRUED EXPENSES AND OTHER LIABILITIES
The significant components of accrued expenses and other liabilities
consist of the following (in thousands):
<TABLE>
<CAPTION>
APRIL 2, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
Accrued expenses............................................. $ 5,370 $ 7,295
Accrued compensation......................................... 6,411 4,718
Warranty reserves............................................ 5,593 4,383
--------- ---------
$17,374 $16,396
======= =======
</TABLE>
D. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per common share is computed based on the weighted
average number of common shares outstanding during the period. Diluted net
income (loss) per common share gives effect to all dilutive potential common
shares outstanding during the period. A reconciliation between basic and diluted
net income (loss) per share is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 2, MARCH 28, APRIL 2, MARCH 28,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss).................................... $5,806 $(10,202) $6,100 $(17,857)
====== ========= ====== =========
Shares used in computation:
Weighted average common shares outstanding
used in computation of basic net income (loss)
per common share.............................. 23,032 21,470 22,773 21,369
Dilutive effect of stock options and warrants... 2,321 -- 2,145 --
------- --------- ------- --------
Shares used in computation of diluted net income
(loss) per common share....................... 25,353 21,470 24,918 21,369
====== ====== ====== ======
Basic net income (loss) per common share............. $0.25 $(0.48) $0.27 $(0.84)
Diluted net income (loss) per common share........... $0.23 $(0.48) $0.24 $(0.84)
</TABLE>
Outstanding options to purchase 37,810 and 158,511 shares of common
stock during the three and six month periods ended April 2, 2000, respectively,
were not included in the computation of diluted net income per common share
because the options' exercise prices were greater than the average market
price of the common shares, and therefore, would be anti-dilutive under the
treasury stock method.
Options to purchase 1,835,641 and 1,327,793 shares of common stock were
outstanding for the three and six months ended March 28, 1999, respectively,
but were not included in the computation of diluted net loss per common share
because the Company was in a loss position and the inclusion of such shares
would be anti-dilutive. Outstanding options to purchase 6,706 and 143,978
shares of common stock during the three and six month periods ended March 28,
1999, respectively, were not included in the computation of diluted net loss
per common share because the options' exercise prices were greater than the
average market price of the common shares, and therefore, would be
anti-dilutive under the treasury stock method.
E. OTHER COMPREHENSIVE INCOME
The Company previously adopted SFAS No. 130, "Reporting Comprehensive
Income," which established standards for reporting and displaying comprehensive
income and its components in a financial statement that is displayed with the
same prominence as other financial statements. Comprehensive income (loss) is
equal to net income (loss) for the three and six month periods ended April 2,
2000 and March 28, 1999.
7
<PAGE>
F. ACQUISITION OF PROMIS
On March 2, 1999, the Company acquired Promis, a Canadian corporation, in a
transaction accounted for as a pooling of interests. Promis was a developer of
manufacturing execution systems ("MES") software solutions for semiconductor and
precision electronics manufacturers. In connection with the acquisition, the
Company issued 0.1353 exchangeable shares for each outstanding Promis share, or
an aggregate of 1,389,974 exchangeable shares. Each exchangeable share may be
exchanged at any time for one share of common stock of the Company. The Company
assumed options to purchase 270,336 shares of the Company's common stock and a
warrant to purchase 13,530 shares of common stock, converted at the common stock
exchange ratio, under this acquisition agreement. 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 Promis.
G. MERGER COSTS AND SPECIAL CHARGES
In the second quarter of fiscal year 1999, the Company recorded merger
costs of $3,950,000 related to the acquisition of Promis, primarily consisting
of legal, accounting and investment banking fees, all of which have been paid as
of April 2, 2000. Additionally, during the second quarter of fiscal 1999 the
Company recorded special charges of $1,850,000. The special charges consisted of
$1,406,000 for compensation-related costs for five management employees in the
selling, general, and administrative functions to satisfy existing contractual
obligations related to the acquired companies; $196,000 of costs associated with
the reduction of leased facilities; and $248,000 for other legal issues. In the
fourth fiscal quarter of 1999, the Company recognized a credit of $75,000 to
adjust the estimated costs to reflect actual costs. At April 2, 2000, $112,000
of these charges remained in accrued expenses and are expected to be paid by the
end of calendar year 2000.
During the first quarter of fiscal year 1999, the Company recorded special
charges of $650,000. These charges represent provisions for employee severance
compensation relating to the reduction in force of 62 personnel. These headcount
reductions were approximately 40 in manufacturing and customer support, 8 in
engineering, and 14 in selling, general and administrative functions. The
reduction in force occurred in response to the continued downturn in the
semiconductor equipment industry. All of these special charges have been paid.
H. INCOME TAXES
The income tax provision for the three and six months ended April 2, 2000
was $200,000 and $310,000, respectively. The tax provisions recorded in fiscal
2000 are primarily related to foreign and state taxes. The Company's U.S.
federal net operating loss carryforwards are sufficient to offset federal
taxable income for the three and six months ended April 2, 2000. During the
third quarter of fiscal 1999, management concluded that a full valuation
allowance against the Company's net deferred tax assets was required under
applicable accounting standards, due to uncertainties surrounding their
realization. Accordingly, a valuation allowance in an amount equal to the net
deferred tax assets was established to reflect these uncertainties.
The income tax benefit for the three and six months ended March 28, 1999
was $3,367,000 and $6,316,000, or 24.8% and 26.1%, respectively, of loss before
income taxes. The effective tax rate for the second quarter of fiscal 1999,
excluding the effect of $3,950,000 of Promis merger-related costs which were
primarily non-deductible, would have been 35.0%. The effective tax rate for the
six months ended March 28, 1999
8
<PAGE>
differed from the statutory rate primarily due to non-deductible Promis
merger-related costs and certain foreign income not subject to income tax.
I. SEGMENT REPORTING
The Company operates in three primary segments, all within the
semiconductor manufacturing and OEM equipment supply industry, which serve both
domestic and international markets. These reportable operating segments consist
of Factory Automation Systems, Tool Automation Systems and MES and Other
Systems. The MES and Other Systems segment includes factory management software
and advanced planning and scheduling software product lines. The Company's
operating segments have no significant intersegment revenues and expenses as all
segments' revenues are generated from sales to unaffiliated customers.
Operating segment information for the three and six months ended April 2,
2000 and March 28, 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
APRIL 2, MARCH 28, APRIL 2, MARCH 28,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
TOTAL NET REVENUE FROM UNAFFILIATED
CUSTOMERS:
Factory Automation Systems $ 40,482 $ 16,229 $ 73,006 $ 34,933
Tool Automation Systems 28,820 7,867 49,080 14,475
MES and Other Systems 7,367 6,195 13,276 10,518
------ ------ ------- ------
Total net revenue $ 76,669 $ 30,291 $135,362 $ 59,926
========= ========= ========= ========
SEGMENT OPERATING PROFIT (LOSS) BEFORE
CORPORATE ALLOCATIONS:
Factory Automation Systems $ 28 $ (5,327) $ (1,604) $ (9,870)
Tool Automation Systems 8,341 (463) 12,890 (1,965)
MES and Other Systems 1,193 (660) 1,005 (3,542)
OTHER RECONCILING ITEMS:
Corporate and other expenses (3,848) (7,744) (6,373) (10,077)
------- ------- ------- --------
CONSOLIDATED OPERATING PROFIT (LOSS) 5,714 (14,194) 5,918 (25,454)
Other income, net 292 625 492 1,281
------- ------- ------- --------
CONSOLIDATED INCOME (LOSS) BEFORE
INCOME TAXES $ 6,006 $(13,569) $ 6,410 $(24,173)
======== ========= ======== =========
</TABLE>
9
<PAGE>
J. CONTINGENT LIABILITY
At April 2, 2000, the Company had a contingent liability of approximately
$249,000 attributable to the Company's March 1999 acquisition of Promis. In
1993, Promis purchased the business assets and assumed selected liabilities of
Palette Systems, Inc., a Canadian company. The purchase price of approximately
$9.9 million consisted of $5.5 million in cash and 59,889 exchangeable common
shares, as converted at the common stock exchange ratio, of the Company, valued
at $73.91 per common share. At the time of the acquisition, Promis agreed that
on April 7, 1998 it would pay additional cash consideration to the sellers of an
amount equal to the amount by which the market value of the common shares owned
by the sellers on April 7, 1998 was less than approximately $4.0 million.
On March 29, 1996, Promis made a formal claim against the sellers pursuant
to the dispute resolution provisions of the original purchase and sale
agreements. The sellers filed certain counterclaims against Promis. In 1997,
Promis and the sellers reached a settlement of the dispute. The settlement
provided that commencing on April 7, 1998 Promis would pay additional cash to
the sellers in an amount equal to the amount by which the market value of 59,889
exchangeable common shares, on each of the agreed-upon payment dates, is less
than $73.91 per common share. As part of the settlement, half the additional
cash consideration was payable on April 7, 1998, with the remaining half due in
20 quarterly installments commencing on July 7, 1998 through April 7, 2003.
Under the terms of the settlement agreement, the sellers are restricted as to
the number of shares of the Company's common stock which can be sold in any
quarter prior to April 7, 2003.
Since the payment of additional consideration is determined based on the
Company's share price at various future dates, any consideration in addition to
that paid to date will be recorded as a reduction in additional paid-in capital
of the Company as the amounts become determinable. The Company's contingent
liability as of April 2, 2000, calculated based on the market value of the
Company's common stock at April 2, 2000, is approximately $249,000.
K. JOINT VENTURE
The Company, in June 1998, entered into a joint venture with Shinsung
Engineering Co. Ltd. ("SEC") and Chung Song Systems Co., Ltd. ("CSSC") to
distribute the Company's products and services in Korea. As of April 2, 2000,
CSSC has withdrawn from the joint venture. The Company continues to participate
in the joint venture with SEC. SEC is in the business of developing and
marketing products and services for the semiconductor industry. The Company and
SEC intend to invest on a pro rata basis 2.6 billion Korean won, or
approximately $2.3 million, in the joint venture over a two-year period through
June 2000. As of April 2, 2000, the Company had outstanding commitments under
this agreement of 1.2 billion Korean won, or approximately $1.1 million.
L. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company will adopt SFAS No. 133 by fiscal
2001, in accordance with SFAS No. 137, which deferred the effective
10
<PAGE>
date of SFAS No. 133. The Company is evaluating SFAS No. 133 to determine the
impact on its consolidated financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes the staff's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in the Company's first quarter of
fiscal year 2001. The effects of applying this guidance will be reported as a
cumulative effect adjustment resulting from a change in accounting principle.
The Company has not completed its evaluation of SAB 101 and is therefore unable
to determine its impact.
M. SUBSEQUENT EVENT
The Company has filed a registration statement for a public offering of
common stock by the Company and selling stockholders. Pursuant to a
post-effective amendment to the registration statement declared effective on
May 12, 2000, the offering of 1,400,000 shares of common stock by the Company
and 305,000 shares of common stock by selling shareholders commenced on that
date. The Company will also issue an additional 90,750 shares of common stock
pursuant to the exercise by the underwriters of their over-allotment option.
The closing of the offering is expected to take place on May 17, 2000. The
Company will not receive any of the proceeds from the shares sold by the
selling stockholders. The net proceeds of approximately $90.1 million from
this sale by the Company of common stock are expected to be used for general
corporate purposes, including working capital and possible acquisitions.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange Commission may contain statements which are not historical facts but
which are "forward-looking statements" involving risks and uncertainties. In
particular, statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to the Company's shipment level
and profitability and the sufficiency of capital to meet working capital and
capital expenditure requirements may be forward-looking statements. The words
"expect," "anticipate," "internal," "plan," "believe," "seek," "estimate" and
similar expressions are intended to identify such forward-looking statements.
This Report also contains other forward-looking statements. Such statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions that could cause the Company's future results to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company. Many of these 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 or future events or otherwise. Important factors
that may cause the Company's actual results to differ from such forward-looking
statements include, but are not limited to, the factors discussed in the
Company's Registration Statement on Form S-3, File No. 333-34584, filed with the
Securities and Exchange Commission, and the other factors discussed below.
The Company's future results are subject to substantial risks and
uncertainties. The Company's business and results of operations depend in
significant part upon capital expenditures of manufacturers of semiconductors,
which in turn depend upon the current and anticipated market demand for
semiconductors and products incorporating semiconductors. Historically, the
semiconductor industry has been highly cyclical with recurring periods of
over-supply. This recurring over-supply often has had a severe effect on the
semiconductor industry's demand for capital equipment, including systems
manufactured and marketed by the Company. Oversupply in the semiconductor market
may in the future reduce demand for capital equipment, including demand for the
Company's systems. The semiconductor industry recently experienced a downturn
that adversely affected the Company's operating results, and reduced demand for
semiconductors in the future could jeopardize the Company's plans. The Company
believes that the markets for newer generations of semiconductors will be
subject to similar fluctuations. Also, the recent high rate of technical
innovation and resulting improvements in the performance and price of
semiconductor devices, which have driven much of the demand for the Company's
products, could slow, or encounter limits, in the future. In addition, any other
factor adversely affecting the semiconductor industry or particular segments
within the semiconductor industry may adversely effect the Company's business,
financial condition and operating results.
In addition to the risks and uncertainties posed generally by the
cyclicality of the semiconductor industry, the Company faces the following risks
and uncertainties: the Company's lengthy sales cycle makes it difficult to
anticipate sales; the Company's operating results fluctuate significantly and
the Company's stock price could fall if its operating results are below
expectations of analysts or investors; delay in shipment of a single system
could substantially decrease the Company's sales for the period in which the
delay occurs; new accounting guidance could result in delayed recognition of the
Company's revenues; the Company typically charges a fixed price for a system
which allows for vulnerability to cost overruns; the Company has significant
fixed costs which are not easily reduced during a downturn; the Company depends
on a limited number of customers and the loss, cancellation or delay of any
order by these customers could adversely affect the Company's results; the
Company's
12
<PAGE>
customers do not have long-term purchase agreements with the Company, and as a
result, customers could stop purchasing the Company's products and services at
any time; industry consolidation and outsourcing of the manufacture of
semiconductors to foundries could reduce the number of available customers; the
Company's ongoing efforts to compete in the Asia-Pacific market may not be
successful; the Company has invested heavily in 300mm wafer technology, which is
being adopted more slowly than the Company expected; the Company needs
managerial and technical employees who because of their skills and experience
may be difficult to hire and retain; the Company may have difficulty managing
growth in light of fluctuating demand; the Company's substantial international
operations create special risks; the Company faces significant competition from
other automation companies which may limit the prices it can charge for its
products and may result in lost sales; in order to continually improve its
technology to remain competitive, the Company must expend substantial resources
on research and development, even in periods during industry downturns; the
Company may experience delays in product development and technical difficulties
that could delay new product introductions; future acquisitions may disrupt the
Company's operations; the Company depends on subcontractors and one or a few
suppliers for some components and manufacturing processes; the Company depends
on Mitchell G. Tyson, its President and Chief Executive Officer, and other
senior staff; the Company's software products may contain errors or defects that
could result in lost revenue, delayed or limited market acceptance or product
liability claims with substantial litigation costs; the Company may be unable to
protect its proprietary technology; claims by others that the Company infringes
their proprietary technology could harm the Company's business; the market price
of the Company's common stock is volatile; and certain provisions of the
Company's charter and by-laws and Massachusetts law make a takeover of the
Company more difficult. As a result of the foregoing and other factors, the
Company may experience material fluctuations in its future operating results on
a quarterly or annual basis which could materially adversely affect its
business, financial condition, operating results and stock price.
RESULTS OF OPERATIONS
On March 2, 1999, the Company acquired Promis Systems Corporation Ltd., a
Canadian corporation ("Promis"). Promis was a leading developer of manufacturing
execution systems ("MES") software solutions for semiconductor and precision
electronics manufacturers. The business combination was accounted for as a
pooling of interests; accordingly, the financial results of the Company for
fiscal 1999 have been restated to include Promis.
TOTAL NET REVENUE: Net revenue for the three and six months ended April
2, 2000 was $76.7 million and $135.4 million, respectively, an increase of
153.1% and 125.9%, respectively, over the corresponding periods in fiscal
1999. This increase was generated across all of the Company's operating
segments and represented the Company's highest quarterly net revenue and its
fifth consecutive quarter of revenue growth. Contributing to this revenue
growth, Tool Automation Systems net revenue increased by 239.1% and Factory
Automation Systems net revenue increased by 109.0% for the six months ended
April 2, 2000 as compared with the corresponding period of fiscal 1999. The
significant improvement in total net revenue, primarily generated by sales of
product and equipment, is attributable to strong growth in demand for capital
equipment by the semiconductor industry.
Net export revenue from European and Asian customers for the three and six
months ended April 2, 2000 were $31.4 million and $56.3 million, respectively,
compared to $10.8 million and $16.7 million, respectively, for the corresponding
periods in fiscal 1999. Net export revenue for the three and six months ended
April 2, 2000 accounted for 41.0% and 41.6% of total net revenue, respectively,
compared to 35.6% and 27.8%, respectively, of total net revenue for the
corresponding periods in fiscal 1999. The increase in international sales as a
percent of total net revenue resulted from the Company's increasing
13
<PAGE>
market share in Asia and Europe. Sales to foreign customers are principally
denominated in U.S. dollars with the exception of certain sales of tool
automation and spare parts products that are denominated in local currencies.
GROSS PROFIT: The gross profit margin for the three and six months ended
April 2, 2000 was 39.2% and 38.0%, respectively, compared to 38.0% and 35.1% for
the corresponding periods in fiscal 1999. The improvement in the gross profit
margin for both periods is attributable to improved manufacturing efficiencies
and related favorable manufacturing variances, a change in product mix with
stronger growth in certain higher-margin product and equipment revenues, more
favorable product pricing, and product cost reductions, primarily within the
Factory Automation Systems and Tool Automation Systems operating segments. The
gross profit margin improvements for the fiscal 2000 periods were offset
slightly by a deterioration in service and maintenance margins primarily related
to increases in personnel and related costs to support anticipated future growth
of the Company's installed base of products.
RESEARCH AND DEVELOPMENT: Research and development expenses for the three
and six months ended April 2, 2000 were $12.7 million and $24.9 million,
respectively, representing 16.6% and 18.4% of total net revenue, respectively,
compared to $10.9 million and $21.3 million, representing 35.9% and 35.5% of
total net revenue for the corresponding periods in fiscal 1999. The increase in
fiscal 2000 spending compared with fiscal 1999 is the result of the Company's
investments in next-generation 200mm and 300mm automation system products,
including interfloor transport systems, turbo stocker automated storage and
retrieval systems, bare reticle stockers, and atmospheric and vacuum wafer
handling systems in the Factory Automation Systems and Tool Automation Systems
segments, as well as in its new software products, including manufacturing
execution systems and advanced planning and scheduling software. The decrease in
spending as a percent of total net revenue is due to the increase in total net
revenue during these periods.
SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and administrative
expenses for the three and six months ended April 2, 2000 were $11.6 million and
$20.6 million, respectively, representing 15.1% and 15.2% of total net revenue,
respectively, compared to $9.0 million and $18.7 million, representing 29.8% and
31.2% of total net revenue, respectively, for the corresponding periods in
fiscal 1999. Selling, general and administrative expenses were higher in the
second quarter of fiscal 2000, compared with the corresponding period in fiscal
1999, due to increases in marketing efforts, investments in sales and other
functions in support of the growth in orders and revenues and other employee
incentive-related expenses incurred. For the six months ended April 2, 2000, the
increase in selling, general and administrative expenses was slightly offset by
savings from the consolidation of duplicate functions and activities of
previously-acquired companies. The decrease in spending as a percent of total
net revenue is due to the increase in total net revenue for these periods.
MERGER COSTS AND SPECIAL CHARGES: In the second quarter of fiscal year
1999, the Company recorded merger costs of $4.0 million related to the
acquisition of Promis, primarily consisting of legal, accounting and investment
banking fees, all of which have been paid as of April 2, 2000. Additionally,
during the second quarter of fiscal 1999 the Company recorded special charges of
$1.9 million. The special charges consisted of $1.4 million for
compensation-related costs for five management employees in the selling,
general, and administrative functions to satisfy existing contractual
obligations related to the acquired companies; $196,000 of costs associated with
the reduction of leased facilities; and $248,000 for other legal issues. In the
fourth fiscal quarter of 1999, the Company recognized a credit of $75,000 to
adjust the estimated costs to reflect actual costs. At April 2, 2000, $112,000
of these charges remained in accrued expenses and are expected to be paid by the
end of calendar year 2000.
14
<PAGE>
During the first quarter of fiscal year 1999, the Company recorded special
charges of $650,000. These charges represent provisions for employee severance
compensation relating to the reduction in force of 62 personnel. These headcount
reductions were approximately 40 in manufacturing and customer support, 8 in
engineering, and 14 in selling, general and administrative functions. The
reduction in force occurred in response to the continued downturn in the
semiconductor equipment industry. All of these special charges have been paid.
OPERATING PROFIT (LOSS): As a result of the increase in total net revenue
and the other foregoing factors, the operating profit for the three and six
months ended April 2, 2000 was $5.7 million and $5.9 million , or 7.5% and 4.4%
of total net revenue, respectively. This compares to an operating loss of $14.2
million and $25.5 million, or 46.9% and 42.5% of total net revenue, for the
corresponding periods in fiscal 1999. Excluding the merger costs and special
charges of $5.8 million and $6.5 million for the three and six months ended
March 29, 1999, respectively, the operating losses would have been $8.4 million
and $19.0 million, or 27.7% and 31.7% of total net revenue, respectively.
OTHER INCOME, NET: Other income, net, for the three and six months ended
April 2, 2000 was $292,000 and $492,000, respectively, compared to $625,000 and
$1.3 million for the corresponding periods in fiscal 1999. Interest income for
the three and six months ended April 2, 2000 was $484,000 and $1.0 million,
respectively, compared to $488,000 and $1.0 million for the corresponding
periods in fiscal 1999. Interest expense for the three and six months ended
April 2, 2000 was $24,000 and $44,000, respectively, compared to $20,000 and
$52,000 for the corresponding periods in fiscal 1999. Net translation and
foreign exchange losses for the three and six months ended April 2, 2000 were
$173,000 and $414,000, compared to net translation and foreign exchange gains of
$173,000 and $371,000 in the corresponding periods in fiscal 1999.
PROVISION FOR (BENEFIT FROM) INCOME TAXES: The income tax provision for the
three and six months ended April 2, 2000 was $200,000 and $310,000,
respectively. The tax provisions recorded in fiscal 2000 are primarily related
to foreign and state taxes. The Company's U.S. federal net operating loss
carryforwards are sufficient to offset federal taxable income for the three and
six months ended April 2, 2000. During the third quarter of fiscal 1999,
management concluded that a full valuation allowance against the Company's net
deferred tax assets was required under applicable accounting standards, due to
uncertainties surrounding their realization. Accordingly, a valuation allowance
in an amount equal to the net deferred tax assets was established to reflect
these uncertainties.
The income tax benefit for the three and six months ended March 28, 1999
was $3.4 million and $6.3 million or 24.8% and 26.1%, respectively, of the loss
before income taxes. The effective tax rate for the second quarter of fiscal
1999, excluding the effect of $4.0 million of Promis merger-related costs which
were primarily non-deductible, would have been 35.0%. The effective tax rate for
the six months ended March 28, 1999 differed from the statutory rate primarily
due to non-deductible Promis merger-related costs and certain foreign income not
subject to income tax.
NET INCOME (LOSS): Net income for the three and six months ended April 2,
2000 was $5.8 million and $6.1 million, compared to a net loss of $10.2 million
and $17.9 million for the corresponding periods in fiscal 1999. Excluding the
merger costs and special charges net of their tax effect, the net loss for the
three and six months of fiscal 1999 would have been $5.0 million and $12.3
million, respectively.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations primarily through private equity
financing, bank lines of credit, public stock offerings in October 1994 and July
1995 and cash generated from operations.
As of April 2, 2000 the Company had working capital of $99.4 million,
including cash and cash equivalents of $34.7 million, compared to working
capital of $78.9 million including cash and cash equivalents of $51.9 million
as of September 30, 1999.
Net cash used in operating activities for the six months ended April 2,
2000 was $26.2 million, compared to $841,000 of net cash provided by operating
activities for the corresponding period in fiscal 1999. Net cash used in
operating activities was primarily attributable to increases in accounts
receivable of $27.3 million, increases in contracts in progress of $14.5
million, and an increase in inventories of $10.0 million. These uses of cash
were partially offset by increases in accounts payable of $7.2 million and the
cash flow provided by net income, after adjusting for non-cash items, of $11.5
million.
Net cash used in investing activities for the six months ended April 2,
2000 was $6.2 million, compared to $1.9 million for the corresponding period in
fiscal 1999. This fluctuation is principally attributable to increased spending
for capital expenditures, primarily for leasehold improvements and computers and
telecommunications equipment. The Company anticipates that it will continue to
invest in capital equipment to support its infrastructure needs accompanying the
growth in industry demand.
Net cash provided by financing activities for the six months ended April 2,
2000 was $16.0 million, compared to $2.7 million for the corresponding period of
fiscal 1999. This increase is principally related to greater proceeds from the
exercise of stock options and the Company's Employee Stock Purchase Plan.
At April 2, 2000, the Company had a revolving credit facility agreement
with Chase Manhattan Bank (the "Bank"). The revolving credit facility enables
the Company to borrow up to $20,000,000 on an unsecured basis. Outstanding
revolving credit loans bear interest, at the Company's option, at the 30, 60 or
90 day LIBOR rate plus a credit spread or at the effective prime rate. At April
2, 2000, the LIBOR borrowing rate would have been 7.25%. The ability of the
Company to effect borrowings under the revolving credit facility is conditioned
upon meeting certain financial criteria. The Company had outstanding letters of
credit with the Bank in the aggregate amount of $1,420,000 at April 2, 2000, and
therefore, the available balance under this credit agreement was $18,580,000 at
April 2, 2000. Effective March 31, 2000, the Company renegotiated its revolving
credit agreement, which modified certain financial covenants and extended the
expiration date of this agreement up to December 31, 2000.
The Company believes its existing cash balances, access to financing and
proceeds from its upcoming sale of common stock will be sufficient for at
least the next twelve months. However, there can be no assurance that
adequate financing will be available or at terms acceptable to the Company.
The Company has filed a registration statement for a public offering of
common stock by the Company and selling stockholders. Pursuant to a
post-effective amendment to the registration statement declared effective on
May 12, 2000, the offering of 1,400,000 shares of common stock by the Company
and 305,000 shares of common stock by selling shareholders commenced on that
date. The Company will also issue an additional 90,750 shares of common stock
pursuant to the exercise by the underwriters of their over-allotment option.
The closing of the offering is expected to take place on May 17, 2000. The
Company will not receive any of the proceeds from the shares sold by the
selling stockholders. The net proceeds of approximately $90.1 million from
this sale by the Company of common stock are expected to be used for general
corporate purposes, including working capital and possible acquisitions.
16
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company will adopt SFAS No. 133 by fiscal
2001, in accordance with SFAS No. 137, which deferred the effective date of SFAS
No. 133. The Company is evaluating SFAS No. 133 to determine the impact on its
consolidated financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes the staff's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in the Company's first quarter of
fiscal year 2001. The effects of applying this guidance will be reported as a
cumulative effect adjustment resulting from a change in accounting principle.
The Company has not completed its evaluation of SAB 101 and is therefore unable
to determine its impact.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in the Company's exposure to
market risks since the year ended September 30, 1999. For more information
please read the consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on March 10,
2000 (the Annual Meeting") the Company's stockholders elected six directors of
the Company.
The number of votes cast for, or withheld from, each nominee for election
as director were as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD AUTHORITY
- ------- -- ------------------
<S> <C> <C>
Mordechai Wiesler 17,480,342 144,802
Mitchell G. Tyson 17,482,304 142,840
Amram Rasiel 17,557,548 67,596
Boruch B. Frusztajer 17,557,148 67,996
Alexander V. d'Arbeloff 17,558,348 66,796
Kenneth M. Thompson 17,559,748 65,396
</TABLE>
At the Annual Meeting the Company's stockholders also voted to approve: the
adoption of the 2000 Stock Option Plan; the 2000 Employee Stock Purchase Plan
("ESPP") and an amendment to the 1994 Employee Stock Purchase Plan; and an
amendment to the articles of organization to increase the number of authorized
shares of common stock from 50,000,000 to 75,000,000 shares. The votes were as
follows:
<TABLE>
<CAPTION>
PROPOSALS FOR AGAINST ABSTAIN NON-VOTE
- --------- --- ------- ------- --------
<S> <C> <C> <C> <C>
Approve 2000 Stock Option Plan 9,343,236 8,251,238 30,560 110
Approve adoption of 2000 ESPP
Plan and an amendment to the
1994 ESPP Plan 17,192,237 404,171 28,736 --
Approve amendment to articles of
organization to increase the
number of authorized shares
of common stock from 50,000,000
to 75,000,000 shares 16,349,739 1,247,313 28,092 --
</TABLE>
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCE DESCRIPTION
- -------- --------- -----------
<S> <C> <C>
3.4 (A) Amended and Restated By-Laws of the Company
3.5 (A) Restated Articles of Organization of the Company
3.6 (B) Articles of Amendment to the Restated Articles of Organization
of the Company, as approved by stockholders of the
Company on April 22, 1997
3.7 (C) Articles of Amendment to the Restated Articles of Organization
of the Company as approved by stockholders of the Company
on January 16, 1998
3.8 (D) Articles of Amendment to Restated Articles of Organization of
the Company as approved by the stockholders of the Company on
March 10, 2000
10.1 (E) PRI Automation, Inc. 1994 Employee Stock Purchase Plan
(as amended)
10.2 (E) PRI Automation, Inc. 2000 Employee Stock Purchase Plan
10.3 (E) PRI Automation, Inc. 2000 Stock Option Plan
10.4 (F) First Amendment to Credit Agreement dated as of March 31, 2000
between the Company and Chase Manhattan Bank
27.1 (F) Financial Data Schedule
</TABLE>
- ---------------
(A) Incorporated by reference to the similarly numbered Exhibit to the
Company's Registration Statement on Form S-1, File No. 33-81836.
(B) Incorporated by reference to the similarly numbered Exhibit to the
Company's Quarterly Report Form 10-Q, for the period ended March 30, 1997.
(C) Incorporated by reference to the similarly numbered Exhibit to the
Company's Quarterly Report Form 10-Q,for the period ended December 28,
1997.
(D) Incorporated by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-3, File No. 333-34584.
(E) Incorporated by reference to the similarly numbered Exhibit to the
Company's Registration Statement on Form S-8, File No. 333-33894.
(F) These exhibits are included herein.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended April 2,
2000.
19
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRI AUTOMATION, INC.
Date: May 16, 2000 By: /s/ Cosmo S. Trapani
-------------------------------------
Cosmo S. Trapani
Duly Authorized Officer and
Principal Financial Officer
20
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCE DESCRIPTION
- ------- --------- -----------
<S> <C> <C>
3.4 (A) Amended and Restated By-Laws of the Company
3.5 (A) Restated Articles of Organization of the Company
3.6 (B) Articles of Amendment to the Restated Articles of Organization
of the Company, as approved by stockholders of the
Company on April 22, 1997
3.7 (C) Articles of Amendment to the Restated Articles of Organization
of the Company as approved by stockholders of the Company
on January 16, 1998
3.8 (D) Articles of Amendment to Restated Articles of Organization of the
Company as approved by the stockholders of the Company as of
March 10, 2000
10.1 (E) PRI Automation, Inc. 1994 Employee Stock Purchase Plan
(as amended)
10.2 (E) PRI Automation, Inc. 2000 Employee Stock Purchase Plan
10.3 (E) PRI Automation, Inc. 2000 Stock Option Plan
10.4 (F) First Amendment to Credit Agreement dated as of March 31, 2000
between the Company and Chase Manhattan Bank
27.1 (F) Financial Data Schedule
</TABLE>
- ---------------
(A) Incorporated by reference to the similarly numbered Exhibit to the
Company's Registration Statement on Form S-1, File No. 33-81836.
(B) Incorporated by reference to the similarly numbered Exhibit to the
Company's Quarterly Report Form 10-Q, for the period ended March 30, 1997.
(C) Incorporated by reference to the similarly numbered Exhibit to the
Company's Quarterly Report Form 10-Q,for the period ended December 28,
1997.
(D) Incorporated by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-3, File No. 333-34584.
(E) Incorporated by reference to the similarly numbered Exhibit to the
Company's Registration Statement on Form S-8, File No. 333-33894.
(F) These exhibits are included herein.
21
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (the "Amendment"), dated as of
March 31, 2000, is between PRI AUTOMATION, INC. (the "Borrower"), and THE CHASE
MANHATTAN BANK (the "Bank").
WHEREAS, the Borrower and the Bank are parties to a Revolving Credit
Agreement dated as of June 16, 1998 (the "Credit Agreement"); and
WHEREAS, the Borrower and the Bank desire to amend the Credit Agreement
to provide for, among other items, an extension of the Expiration Date.
NOW, THEREFORE, in consideration of the premises herein contained, and
for other good and valuable consideration, receipt of which is acknowledged, it
is hereby agreed as follows:
SECTION 1. DEFINITIONS. Terms used but not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Credit
Agreement.
SECTION 2. AMENDMENT. The Credit Agreement is amended as follows:
(a) The definition of "Expiration Date", contained in Part 1 of
the Credit Agreement, Definitions, is superseded and replaced in its entirety,
and amended to read:
"Expiration Date" means December 31, 2000.
(b) Section 8.18 of the Credit Agreement, FINANCIAL COVENANTS,
subsection (b), is superseded and replaced in its entirety, and amended to read:
8.18 FINANCIAL COVENANTS. Measured as of the end of each fiscal
quarter, Borrower will not
(b) Permit Consolidated Net Worth to be at any time less than
the sum of (i) Consolidated Net Worth as of March 31, 2000, plus (ii) fifty
percent (50%) of positive Consolidated Net Income for the fiscal quarter then
ended, plus (iii) one hundred percent (100%) of the increase in Consolidated Net
Worth for the current fiscal year resulting from the issuance of equity
securities in such fiscal year.
SECTION 3. REPRESENTATIONS. The Borrower hereby represents and warrants
to the Bank that: (i) the covenants, representations and warranties set forth in
the Credit Agreement are true and correct on and as of the date hereof as if
made on and as of said date and as if each reference therein to the Credit
Agreement were a reference to the Credit Agreement as amended by this Amendment;
(ii) no Event of Default specified in the Credit Agreement and no event, which,
with the giving of notice or lapse of time or both, would become such an Event
of Default has occurred and is continuing; (iii) since the date of the Credit
Agreement, there has been no material adverse change in the financial condition
or business operations of the Borrower which has not been disclosed to Bank; and
(iv) the making and
<PAGE>
performance by the Borrower of this Amendment have been duly authorized by all
necessary corporate action.
SECTION 4. CONDITIONS. The amendment to the Credit Agreement set forth in
Section 2 above shall become effective on the date first above written provided
that the Bank shall have received, in form and substance satisfactory to the
Bank, (i) a counterpart of this Amendment duly executed and delivered by the
Borrower, and (ii) the payment of an amendment fee in the amount of $5,000.
SECTION 5. MISCELLANEOUS. Except as expressly provided in this
Amendment, the Credit Agreement shall remain unchanged and in full force and
effect except that each reference therein and in the Note to "this Agreement",
"hereof", "herein" and similar terms referring to the Credit Agreement shall be
deemed to refer to the Credit Agreement as amended hereby. This Amendment (i)
shall be deemed to be effective on and as of the date first above written, (ii)
shall be governed by and construed in accordance with the laws of the State of
New York, and (iii) may be executed in counterparts, which taken together shall
constitute one and the same instrument and either of the parties hereto may
execute this Amendment by signing any such counterpart. Should any terms or
provisions of the Agreement conflict with the terms and provisions contained in
this Amendment, the terms and provisions of this Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Amendment as of the day and year first above
written.
THE CHASE MANHATTAN BANK PRI AUTOMATION, INC.
By: /s/ Joan Considine By: /s/ Cosmo S. Trapani
------------------------------- -----------------------------------
Its: Vice President Title: Vice President, Chief
------------------------------- Financial Officer
--------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> APR-02-2000
<CASH> 34,713
<SECURITIES> 0
<RECEIVABLES> 60,996
<ALLOWANCES> 2,281
<INVENTORY> 38,150
<CURRENT-ASSETS> 155,097
<PP&E> 49,651
<DEPRECIATION> 28,348
<TOTAL-ASSETS> 178,536
<CURRENT-LIABILITIES> 55,652
<BONDS> 0
0
0
<COMMON> 232
<OTHER-SE> 121,597
<TOTAL-LIABILITY-AND-EQUITY> 178,536
<SALES> 115,704
<TOTAL-REVENUES> 135,362
<CGS> 70,934
<TOTAL-COSTS> 83,934
<OTHER-EXPENSES> 45,427
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 6,410
<INCOME-TAX> 310
<INCOME-CONTINUING> 6,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,100
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.24
</TABLE>
