FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (MF Raleigh)

PRI AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRIA)") else Response.Write("(NASDAQ: PRIA)") end if %>
805 Middlesex Tpke.
Billerica, MA 01821-3986
508-663-8555

ALEXANDRIA, Va., November 10, 1996 /FOOLWIRE/--PRI Automation, Inc. reported on November 8 record revenue, net income and backlog for the quarter and fiscal year ended September 30, 1996.

The company, the leading U.S. supplier of clean-room factory automation systems that serves the semiconductor industry, reported revenue in the fourth quarter ended September 30, 1996 of $34.0 million and net income of $3.7 million, an increase of 65.0% and 47.7%, respectively, over the same period last year. Revenues grew 19.5% from last quarter. This quarter's year-over-year growth represented the 16th consecutive quarter of increased revenue. Net income per common share was $0.49 for the fourth quarter ended September 30, 1996, compared to $0.35 for the comparable period of the prior year. For the fiscal year ended September 30, 1996 the company reported revenue of $110.7 million and net income of $13.7 million, an increase of 72.8% and 81.7%, respectively, over the same period last year.

Mord Wiesler, chairman and chief executive officer of PRI, said "The semiconductor manufacturing industry slump did not affect the growth of PRI over this past year. Fiscal year 1996 was a difficult year in that, although our results were very favorable, we were surrounded by bad news in the semiconductor industry. This made decisions concerning growth very difficult. Although our bookings rate was substantially higher than the industry, we took a very cautious approach to hiring and expansion. Despite these factors, the company produced excellent financial results as we continued to gain market share and expand our global presence."

CEO COMMENTS

Topping the $100 million mark was a very important accomplishment for PRI. In 1996, the company continued to focus on the key initiatives of market share gains, global expansion, and structuring the company for continued growth. The company added ten new customers to its list and booked 17 fab automation orders, of which four came from the Far East, and received its first OEM order for 300 mm. equipment. PRI has created a separate tool automation division and software division to better serve customers. The company is starting the year with a backlog of $105 million and is cautiously optimistic.

Plotting the company's trailing four quarters of bookings, it may say a slowing in the rate of growth in coming quarters, though the company expects growth to be about industry average while it keeps an eye out for possible changes in environment.

FINANCIAL DETAILS

Revenues for the period were approximately 80% domestic and 20% international. Product line segmentation for the year was: interbay, 65%; intrabay, 5%; tool automation, 15%; and service-related, 15%. While interbay continues to be the lead revenue generator, looking at recent booking, intrabay is showing growing customer interest.

Gross margin in Q4 was 44.4%, within expectations, but lower than prior-quarter performance. Last quarter, the CFO noted that the company would focus on growing market share. The effort resulted in added support costs on a larger installed base and price competition on Asian orders. Gross margin for the year was 47.3% of sales at $52.4 million.

Operating expenses for the quarter were 29.3% of sales, just under $10 million, compared to 32.5% and $6.1 million last year. As a percentage of sales, these expenses continue to meet expectations.

R&D represented 14.3% of quarterly sales -- the company expects that to increase as to 16-17% of sales in 1997 as the company continue to focus on leading-edge products. For the full year, R&D was 15.4% of sales.

SG&A (sales, general, and administrative expenses) amounted to 15% of sales for the quarter and 15.4% of sales for the year. Operating margins were 15.2% of sales for the quarter, compared to 15.8% in Q4 1995. For the year, operating margins were 16.4% of sales compared to 15.8% last year.

Tax rate was 34%.

EPS was $0.49 for the quarter on 7.6 million shares.

This quarter's book-to-bill ratio was 1.1. International activity picked up some of the slack in domestic ordering. The company has little dependence, however, on Asian DRAM manufacturing. Bookings for the year exceeded $155 million and the majority of backlog is shippable over the next 6-9 months. Backlog breakdown consists of: interbay, 70%; intrabay, 10%; tool automation, 10%; service-related, 10%. 60% of the backlog is for domestic delivery and 40% international. The company's largest customer has ordered 19% of the backlog and the next two largest orders account for 13% and 12% of the backlog.

Bookings for repeat and follow-on orders from the company's installed base reflect PRI's market share gains. These orders account for more than 1/3 of bookings over the last two years. Recurring revenue bookings accounted for 1/3 of Q4's bookings while repeat orders from existing customers were almost 2/3 of bookings for the year.

Accounts receivable DSO (days-sales-outstanding) was 74 days. Inventories were within expectations and turned 3.9 times during the quarter. Contracts in progress revenue was $21.8 million. Property/plant/equipment investment, net of depreciation, stands at $9.1 million, almost double last year. Other assets of $2.2 million reflect the company's investment in Pac Rim and European subsidiaries and deferred tax assets.

Cash flow was slightly larger than planned at $11.3 million for the year. Other measures: current ratio, 4.2; net working capital, $80.8 million; book value per share, $12.78; return on equity, 15.3%.

OPERATIONAL COMMENTS

The company continues to build market share with new customers such as TSMC, Siemens, TI-ACER, who had previously used the competition's products.

International expansion continues to progress -- in 1995, two of 15 interbay orders were for overseas customers. This year, 8 of 12 interbay orders came from overseas customers. Products sales per order are increasing. Existing and recurring revenues, at 40%, have not been influenced by delays in fab construction.

PRI's lead customers continue to spend in the downturn, including those who intend to invest in 64 Meg DRAM. Intel is the company's biggest customer; PRI should benefit from their plans in the coming two quarters.

The company's growth strategy includes product expansion, expanding customer base in mid-size companies, and Asian market expansion focusing on existing fabs and recurring revenue.

The COO reiterated that they did win a contracts at the IBM-Toshiba plant, at the Mosel-Siemens fab in Taiwan (their first repeat order in Taiwan), and at the TI-Acer joint-venture.

PRI sold two more TransNet systems with its interbay products in addition to four previous sales of material control software. The company also sold its first two 300 mm. Systems, which are intertool buffer systems. PRI is quoting several other orders in Taiwan and is pleased that it continues to grow its Taiwan pipeline as well as generate repeat business there.

The Samsung-RS fab is up and running and the company considers that a reference account. They are also working on other Korean orders. The sales force is working on projects in Singapore, Thailand, Malaysia, and China.

Quarter-to-quarter sequential growth was over $5 million, or 20%, but that was less than planned by approximately $2 million due to the potential cancellation from Rockwell.

The company has experienced shifts in customer intentions, which makes it more difficult to forecast and respond to the market. Overall, though, these circumstances have not exerted great influence on the company's results.

Process improvement are going well and the materials organization has improved. Suppliers are finding it challenging keeping up with PRI's growth but the company believes that they are getting better.

Based on backlog and outlook, the company believes that it will see sequential revenue growth in Q1, but not as the pace of Q3-Q4 1996. Trailing four quarters' average bookings level is approaching $40 million, which the company will use to guide its revenue planning. Growth will be slower than last year but will be much better than the industry. As far as the company can tell, its book-to-bill ratio will continue to stay above 1.0 in the near-term.

The company is continuing to make overseas investments -- the backlog contains three Asian orders and four European. PRI expects a larger percentage of orders to come from overseas sales. Engineering efforts are being expand to develop 300 mm. versions of current products and to broaden product offerings.

The company continues to see growth through the downturn and expects more growth when the upturn comes.

QUESTION & ANSWER SESSION

Capital expenditures during the quarter and year were $1 million and $5 million, respectively. Most of that has been focused on engineering software, product data management tools, and MIS spending. 1997 capital spending should total $8-10 million. Headcount at the end of the quarter was 700.

The company is actively pursuing business in Korea with the three DRAM manufacturers as well as several other companies that are building fabs right now. The company has not yet approached the Japanese DRAM manufacturers in Japan, but has tried to make sales in their facilities in other parts of the world. Looking out 2-3 years, the company would like to begin doing business in Japan proper.

The CEO said they do expect continued pressure on gross margin in the next several quarters due to price pressures and the company's building of infrastructure. PRI believes that gaining market share will lead to building recurring revenues down the road.

Contracts in progress increased as the POC number (or percentage-of-completion revenues) grew. Accounts/receivable increased due to a number of shipments made late in the quarter. That increase dragged down cash in the quarter. The A/R DSO, at 74 days, was within budget, which is generally 75 DSO. The company will have a heavy installation schedule in Q1.

SG&A around 15% will be made up of 10% in marketing and sales and 5% of general and administrative. The company expects to see R&D increase, as detailed above. The CEO commented that they see an acceleration of 300 mm. spending in the market and that they will accelerate their commitments to stay competitive. 300 mm. spending will increase in the US and in Asia.

The Rockwell pushout was taken out of revenues, but that order may well end up in another Rockwell facility (this order was taken from Rockwell's Colorado fab cancellation). Total backlog exposure on Rockwell is $5 million. There are no other material pushouts that the company can see at the moment.

The company expects the tax rate to come in at 34% in 1997, though that may change due to upcoming planning sessions.

The company sees sequential growth to continue beyond Q1.

The company is looking at its 30 mm. R&D requirements in an absolute manner of budgeting rather than as a percentage of revenue manner. They will increase personnel in that department if they see more visibility in the market, but 16%+ is the guideline that was repeated for that expense line. 300 mm. fabs will require full interbay and intrabay automation. The intrabay automation opportunity level in 300 mm. is somewhere near twice the interbay level. The company believes that it will see the first pilot fabs coming up in late 1998-1999, representing significant sales opportunities. The company does see increasing sales in interbay in 8 inch fabs and expects to be able to offer broader solutions in intrabay for 8 inch Asian fabs. The real intrabay opportunities come when the 300 mm. fabs start to come on line and they want to be ready for that. The 300 mm. automation market is projected to be much larger than the current market.

In reticle management for lithography, PRI has $2.5 million in orders for seven units going to four customers, two of which are new to PRI. The company continues to see this as a growth area. The average selling price for TransNet software is $300-500,000. Market acceptance has exceeded expectations as customer are increasingly demanding a single-source supplier for hardware and software.

The company has benefited somewhat from the industry slowdown as companies are able to evaluate PRI's products more fully than they would be able to in a frenzied building environment. TI-Acer is a good example of this sort of win -- the company may not have seen that order, but that now leads to recurring revenue opportunities or other contract wins.

The focus in hiring has been on customer support rather than in general and administrative support.

Lead-time right now is 7-9 months, depending on the level of customization the customer requires.

Last quarter, intrabay was under 5% of revenues. Intrabay backlog has grown to 10% and is holding there. PRI has seen more requests-for-quotation on intrabay systems as well as requests for interbay layouts that take into account the possible addition of intrabay systems in the future. They definitely see increasing interest in intrabay in Asian facilities.

The industry slowdown hasn't worsened, from the company's perspective and they have begun to see more quote activity. Europe looks to be slow in the near-term; in the US, the company expects to see additional activity in the next couple quarters; and in Asia, the company is seeing robust interest as companies plan for the next upturn.

The yen has not had an impact on PRI even though Japanese competitors have come at them in terms of price.

As the company's initial product order was for an intertool buffer, they see more 300 mm. revenues coming from an environment where fabs will have an increased number of tools, and not necessarily from an environment where they'll be placing product in a higher number of fabs. In 1998-99, the company might serve only 5% of the fabs in the world, but those fabs may have 300-400 tools apiece. For 1998, the company revenues may be comprised 10-15% of 300 mm. revenues. It is still quite early to pinpoint those numbers.

The CEO stated that they might see a pickup in gross margin in late 1997.

The company believes that it has strong market share in the US and Europe and is doing well, holding its down, in Asia. In intertool buffers, Asyst and a European company are PRI's comepitors. In intrabay, PRI and Daihuko are the main competitors providing full interbay and intrabay systems.

The company has added 80,000 square feet since late 1995 and is looking at expansion in tall fabrication floor space. As in the area of hiring, the company is being quite careful in adding to fixed expenses. There is ample room for adding second and third shifts to fulfill additional demand if it comes about.

The company does see sequential growth in earnings even given some of the operational changes outlined above. The company is very bottom line-oriented, so the are cautious about taking on expense structure changes and in their general outlook even though business has progressed apace throughout the industry's slowdown.

Automation lends itself to a cautious environment since a company can add to an existing fab without taking down the existing equipment. Therefore, those companies that are going slowly with additions, or are planning smaller commitments right now, are demanding automation capabilities to help manage their current situations vis-a-vis their planned capacities.

Engineering for 300 mm. fabs will become easier for PRI as that process requires more uniformity in the specifications currently being drawn up by tool-makers.

Gross margin will probably not go any lower than 44.5%. About 4-5 of the orders in backlog are for DRAM fabs and those are for non-commodity DRAM devices such as 256 Mbit. All of the DRAM fabs PRI is automating are 64 Mbit and up and 0.35-0.25 micron.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.