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**SECURITIES AND EXCHANGE COMMISSION****Washington,DC 20549**

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**FORM 10-Q**

 
| ý | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------|---------------------------------------------------------------------------------------------------|

**For the Quarterly Period Ended July 1,2001OR**

 
| o | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|----------------------------------------------------------------------------------------------------|

**For the transition period from              to             **

**Commission file number 0-24934**

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**PRI AUTOMATION, INC.**(Exact name ofregistrant as specified in its charter)

| **Massachusetts**                               | **04–2495703**                   |
|-------------------------------------------------|---------------------------------------|
| (State  or other jurisdiction of incorporation) | (I.R.S.  Employer Identification No.) |
|                                            |                                  |
| **805 Middlesex Turnpike****Billerica, MA**     | **01821–3986**                   |
| (Address  of principal executive offices)       | (Zip  Code)                           |
|                                            |                                  |

Registrant'stelephone number: **(978) 670-4270**

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             Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes ý  No o

             Thenumber of shares outstanding of each of the issuer's classes of common stock asof July 1, 2001:

 

| **Class**                     | **Number of Shares Outstanding** |
|-------------------------------|----------------------------------|
| ****                          | ****                             |
| Common  Stock, $.01 par value | 25,397,507                       |
|                          |                             |

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**PRIAUTOMATION, INC.INDEX**

 

| **Part I.**  | **Financial Information** |                                                                                                                    |
|--------------|---------------------------|-------------------------------------------------------------------------------------------------------------------------|
|         | Item 1.                   | Financial Statements                                                                                                    |   |
|         |                      | Consolidated Balance Sheets  as of July 1, 2001 and September 30, 2000                                                  |   |
|         |                      | Consolidated  Statements of Operations for the Three and Nine Months Ended July 1, 2001 and  July 2, 2000               |   |
|         |                      | Consolidated  Statements of Cash Flows for the Nine Months Ended July 1, 2001 and July 2,  2000                         |   |
|         |                      | Consolidated  Statements of Comprehensive Operations for the Three and Nine Months Ended  July 1, 2001 and July 2, 2000 |   |
|         |                      | Notes  to Consolidated Financial Statements                                                                             |   |
|         | Item  2.                  | Management's  Discussion and Analysis of Financial Condition and Results of Operations                                  |   |
|         | Item  3.                  | Quantitative  and Qualitative Disclosures About Market Risk                                                             |   |
| **Part II.** | **Other Information**     |                                                                                                                    |
|         | Item 1.                   | Legal Proceedings                                                                                                       |   |
|         | Item  2.                  | Recent  Sales of Unregistered Securities                                                                                |   |
|         | Item 3.                   | Defaults upon  Senior Securities                                                                                        |   |
|         | Item  4                   | Submission  of Matters to Vote of Security Holders                                                                      |   |
|         | Item  5.                  | Other  Information                                                                                                      |   |
|         | Item 6.                   | Exhibits  and Reports on Form 8–K                                                                                  |   |
|         | SIGNATURE                 |                                                                                                                    |   |
|         | Exhibit Index             |                                                                                                                    |   |
|         |                      |                                                                                                                    |   |

**PART I. FINANCIAL INFORMATION**

**Item 1. *Financial Statements***

**PRI AUTOMATION, INC.CONSOLIDATED BALANCE SHEETS**(In thousands,except share data)(Unaudited)

|                                     |                                                                                                                                                                |    |                         |    |
|------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|------------------------------|---------|
|                                     | **July 1,  2001**                                                                                                                                                   |    | **September 30,  2000** |    |
| **ASSETS**                               |                                                                                                                                                                     |    |                              |    |
| Current assets:                          |                                                                                                                                                                |    |                         |    |
|                                     | Cash and cash equivalents                                                                                                                                           | $       | 62,864                       |    | $ | 92,484 |   |
|                                     | Trade accounts receivable, less allowance for doubtful  accounts of  $2,173 at July 1, 2001  and $2,881 at September 30, 2000                                  | 70,032  |                         | 73,019  |   |
|                                     | Contracts in progress                                                                                                                                               | 4,778   |                         | 23,668  |   |
|                                     | Inventories                                                                                                                                                         | 63,652  |                         | 59,104  |   |
|                                     | Other current assets                                                                                                                                                | 2,950   |                         | 2,686   |   |
|                                     |                                                                                                                                                                     |    |                              |    |
|                                     | Total current assets                                                                                                                                                | 204,276 |                         | 250,961 |   |
| Property and equipment, net              | 21,637                                                                                                                                                              |    | 24,065                       |    |
| Investment in affiliate                  | 11,538                                                                                                                                                              |    | —                       |    |
| Other assets, net                        | 3,275                                                                                                                                                               |    | 1,898                        |    |
|                                     |                                                                                                                                                                     |    |                              |    |
|                                     | Total assets                                                                                                                                                        | $       | 240,726                      |    | $ | 276,924 |   |
|                                     |                                                                                                                                                                     |    |                              |    |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |                                                                                                                                                                |    |                         |    |
| Current liabilities:                     |                                                                                                                                                                |    |                         |    |
|                                     | Accounts payable                                                                                                                                                    | $       | 21,690                       |    | $ | 28,536 |   |
|                                     | Accrued expenses and other liabilities                                                                                                                              | 28,821  |                         | 32,479  |   |
|                                     | Accrued legal and restructuring costs                                                                                                                               | 5,850   |                         | —  |   |
|                                     | Current portion of obligation under capital lease                                                                                                                   | 103     |                         | 330     |   |
|                                     | Billings in excess of revenues and customer advances                                                                                                                | 14,852  |                         | 11,986  |   |
|                                     |                                                                                                                                                                     |    |                              |    |
|                                     | Total current liabilities                                                                                                                                           | 71,316  |                         | 73,331  |   |
| Obligation under capital lease           | —                                                                                                                                                              |    | 125                          |    |
| Other non–current liabilities       | 634                                                                                                                                                                 |    | 671                          |    |
|                                     |                                                                                                                                                                |    |                         |    |
| Minority interest                        | 219                                                                                                                                                                 |    | 150                          |    |
| Stockholders' equity:                    |                                                                                                                                                                |    |                         |    |
|                                     | Preferred stock, 400,000 shares authorized; none  outstanding                                                                                                       | —  |                         | —  |   |
|                                     | Common stock, $.01 par value; 75,000,000 shares  authorized; 25,397,507 and 25,011,938 issued and outstanding at July 1, 2001  and September 30, 2000, respectively | 254     |                         | 250     |   |
|                                     | Additional paid–in capital                                                                                                                                     | 258,214 |                         | 252,542 |   |
|                                     | Accumulated deficit                                                                                                                                                 | (89,114 | )                            | (50,145 | ) |
|                                     | Accumulated other comprehensive loss                                                                                                                                | (797    | )                            | —  |   |
|                                     |                                                                                                                                                                     |    |                              |    |
|                                     | Total stockholders' equity                                                                                                                                          | 168,557 |                         | 202,647 |   |
|                                     |                                                                                                                                                                |         |                         |         |   |
|                                     | Total liabilities and stockholders' equity                                                                                                                          | $       | 240,726                      |    | $ | 276,924 |   |
|                                     |                                                                                                                                                                     |    |                              |    |
|                                          |                                                                                                                                                                     |         |                              |         |  |  |  |  |  |  |

The accompanying notes are an integral part of theconsolidated financial statements

**PRI AUTOMATION, INC.****CONSOLIDATED STATEMENTS OFOPERATIONS******(In thousands, except per sharedata)(Unaudited)

|                                           | **Three months ended**              |    | **Nine months ended** |   |
|------------------------------------------------|-------------------------------------|---------|-----------------------|--------|
|                                           | ****                                |    | ****                  |   |
|                                           | **July 1,  2001**                   |    | **July 2,  2000**     |   | **July 1,  2001** |   | **July 2,  2000** |   |
|                                           |                                     |    |                       |   |  |   |  |   |
| Net  revenue:                                  |                                |    |                  |   |   |   |   |   |
|                                           | Product  and equipment              | $       | 61,955                |   | $ | 78,360 |   | $ | 223,751 |   | $ | 194,064 |   |
|                                           | Services and maintenance            | 13,235  |                  | 10,513 |   | 37,482 |   | 30,171 |   |
|                                           |                                |         |                  |        |   |  |   |  |   |
|                                           | Total net revenue                   | 75,190  |                  | 88,873 |   | 261,233 |   | 224,235 |   |
|                                           |                                |    |                  |   |   |   |   |   |
| Cost of revenue:                               |                                |    |                  |   |   |   |   |   |
|                                           | Product and equipment               | 54,007  |                  | 44,884 |   | 177,065 |   | 115,818 |   |
|                                           | Services and maintenance            | 8,382   |                  | 7,545  |   | 25,094 |   | 20,545 |   |
|                                           |                                |         |                  |        |   |  |   |  |   |
|                                           | Total cost of revenue:              | 62,389  |                  | 52,429 |   | 202,159 |   | 136,363 |   |
|                                           |                                |         |                  |        |   |  |   |  |   |
|                                           |                                |    |                  |   |   |   |   |   |
| Gross profit                                   | 12,801                              |    | 36,444                |   | 59,074 |   | 87,872 |   |
| Operating expenses:                            |                                |    |                  |   |   |   |   |   |
|                                           | Research and development            | 15,305  |                  | 14,061 |   | 46,456 |   | 38,956 |   |
|                                           | Selling, general and administrative | 11,465  |                  | 13,152 |   | 41,054 |   | 33,767 |   |
|                                           | Restructuring and other costs       | —  |                  | — |   | 11,888 |   | — |   |
|                                           |                                |         |                  |        |   |  |   |  |   |
|                                           | Total operating expenses            | 26,770  |                  | 27,213 |   | 99,398 |   | 72,723 |   |
|                                           |                                     |    |                       |   |  |   |  |   |
| Operating profit (loss)                        | (13,969                             | )       | 9,231                 |   | (40,324 | ) | 15,149 |   |
| Other income, net                              | 580                                 |    | 1,017                 |   | 1,900 |   | 1,509 |   |
| Gain on investment in affiliate                | —                              |    | —                |   | 868 |   | — |   |
|                                           |                                     |    |                       |   |  |   |  |   |
| Income (loss) before income taxes              | (13,389                             | )       | 10,248                |   | (37,556 | ) | 16,658 |   |
| Provision for income taxes                     | 788                                 |    | 417                   |   | 1,413 |   | 727 |   |
|                                           |                                     |    |                       |   |  |   |  |   |
| Net income (loss)                              | $                                   | (14,177 | )                     | $      | 9,831 |   | $ | (38,969 | ) | $ | 15,931 |   |
|                                           |                                     |    |                       |   |  |   |  |   |
|                                           |                                |    |                  |   |   |   |   |   |
| Net income (loss) per common share:            |                                |    |                  |   |   |   |   |   |
|                                           | Basic                               | $       | (0.56                 | )      | $ | 0.41 |   | $ | (1.54 | ) | $ | 0.69 |   |
|                                           | Diluted                             | $       | (0.56                 | )      | $ | 0.38 |   | $ | (1.54 | ) | $ | 0.63 |   |
| Weighted average number of shares outstanding: |                                |    |                  |   |   |   |   |   |
|                                           | Basic                               | 25,384  |                  | 24,158 |   | 25,230 |   | 23,235 |   |
|                                           | Diluted                             | 25,384  |                  | 26,079 |   | 25,230 |   | 25,305 |   |
|                                                |                                     |         |                       |        |  |  |  |  |  |  |  |  |  |  |  |  |

The accompanying notes are an integral part of theconsolidated financial statements.

**PRI AUTOMATION, INC.****CONSOLIDATED STATEMENTS OF CASHFLOWS******(In thousands)(Unaudited)

|                                                                                  | **Nine  months ended**                                                    |    |
|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------|---------|
|                                                                                  | ****                                                                      |    |
|                                                                                  | **July 1, 2001**                                                          |    | **July 2, 2000** |   |
|                                                                                  |                                                                           |    |  |   |
| Cash flows from operating activities:                                                 |                                                                      |    |   |   |
|                                                                                  | Net  income (loss)                                                        | $       | (38,969 | ) | $ | 15,931 |   |
| Adjustments to reconcile net income (loss) to net cash  used in operating activities: |                                                                      |    |   |   |
|                                                                                  | Depreciation and amortization                                             | 9,777   |   | 7,081 |   |
|                                                                                  | Write-down of assets                                                      | 3,785   |   | — |   |
|                                                                                  | Provision for write-down of inventories                                   | 5,275   |   | 950 |   |
|                                                                                  | Gain on investment in affiliate                                           | (868    | ) | — |   |
|                                                                                  | Other, net                                                                | 638     |   | 651 |   |
|                                                                                  | Changes in operating assets and liabilities:                              |    |   |   |   |
|                                                                                  | Trade accounts receivable                                                 | 1,758   |   | (31,431 | ) |
|                                                                                  | Contracts in progress                                                     | 18,890  |   | (21,192 | ) |
|                                                                                  | Inventories                                                               | (10,414 | ) | (33,622 | ) |
|                                                                                  | Other assets                                                              | (326    | ) | 3,555 |   |
|                                                                                  | Accounts payable                                                          | (6,791  | ) | 15,796 |   |
|                                                                                  | Accrued expenses and other liabilities                                    | (2,847  | ) | 5,870 |   |
|                                                                                  | Accrued legal and restructuring costs                                     | 5,850   |   | — |   |
|                                                                                  | Billings in excess of revenue and customer advances                       | 2,862   |   | 1,081 |   |
|                                                                                  |                                                                           |    |  |   |
| Net cash used in operating activities                                                 | (11,380                                                                   | )       | (35,330 | ) |
|                                                                                  |                                                                      |    |   |   |
| Cash flows from investing activities:                                                 |                                                                      |    |   |   |
|                                                                                  | Investment in affiliate                                                   | (11,467 | ) | — |   |
|                                                                                  | Purchases of property and equipment                                       | (10,096 | ) | (10,710 | ) |
|                                                                                  | Cash paid for contingent consideration                                    | (224    | ) | (88 | ) |
|                                                                                  |                                                                           |    |  |   |
| Net cash used in investing activities                                                 | (21,787                                                                   | )       | (10,798 | ) |
|                                                                                  |                                                                      |    |   |   |
| Cash flows from financing activities:                                                 |                                                                      |    |   |   |
|                                                                                  | Repayment of capital lease obligations                                    | (303    | ) | (465 | ) |
|                                                                                  | Proceeds from common stock offering, net                                  | —  |   | 90,002 |   |
|                                                                                  | Proceeds from exercise of stock options and Employee  Stock Purchase Plan | 3,947   |   | 18,419 |   |
|                                                                                  |                                                                           |    |  |   |
| Net cash provided by financing activities                                             | 3,644                                                                     |    | 107,956 |   |
|                                                                                  |                                                                      |    |   |   |
| Effect of changes in exchange rates on cash                                           | (97                                                                       | )       | (763 | ) |
|                                                                                  |                                                                           |    |  |   |
| Net (decrease) increase in cash and cash equivalents                                  | (29,620                                                                   | )       | 61,065 |   |
|                                                                                  |                                                                      |    |   |   |
| Cash and cash equivalents at beginning of period                                      | 92,484                                                                    |    | 51,865 |   |
|                                                                                  |                                                                           |    |  |   |
| Cash  and cash equivalents at end of period                                           | $                                                                         | 62,864  |   | $ | 112,930 |   |
|                                                                                  |                                                                           |    |  |   |
| Supplemental disclosure of cash flow information:                                     |                                                                      |    |   |   |
|                                                                                  | Non–cash transactions:                                               |    |   |   |   |
|                                                                                  | Acquisition of Commotion Technologies                                     | $       | 2,002 |   | $ | — |   |
|                                                                                       |                                                                           |         |  |  |  |  |  |  |  |  |  |

The accompanying notes are an integral part of theconsolidated financial statements.

**PRI AUTOMATION, INC.****CONSOLIDATEDSTATEMENTS OF COMPREHENSIVE OPERATIONS******(In thousands)(Unaudited)

 

|                                    | **Three months ended**               |    | **Nine  months ended** |   |
|-----------------------------------------|--------------------------------------|---------|-----------------------------|--------|
|                                    | ****                                 |    | ****                        |   |
|                                    | **July 1,  2001**                    |    | **July 2,  2000**           |   | **July 1,  2001** |   | **July 2,  2000** |   |
|                                    |                                      |    |                             |   |  |   |  |   |
|                                    |                                 |    |                        |   |   |   |   |   |
| Net income (loss)                       | $                                    | (14,177 | )                           | $      | 9,831 |   | $ | (38,969 | ) | $ | 15,931 |   |
|                                    |                                 |    |                        |   |   |   |   |   |
| Other comprehensive income (loss):      |                                 |    |                        |   |   |   |   |   |
|                                    | Unrealized gain (loss) on securities | 54      |                        | -      |   | (797 | ) | - |   |
|                                    |                                      |    |                             |   |  |   |  |   |
| Total other comprehensive income (loss) | 54                                   |    | -                           |   | (797 | ) | - |   |
|                                    |                                      |    |                             |   |  |   |  |   |
| Comprehensive income (loss)             | $                                    | (14,123 | )                           | $      | 9,831 |   | $ | (39,766 | ) | $ | 15,931 |   |
|                                    |                                      |    |                             |   |  |   |  |   |
|                                         |                                      |         |                             |        |  |  |  |  |  |  |  |  |  |  |  |

The accompanying notes are an integral part of theconsolidated financial statements.

**PRI AUTOMATION, INC.NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**(Unaudited)

**A.  Accounting Policies**

*Basis ofPresentation*

             Thecondensed consolidated financial statements include the accounts of PRIAutomation, Inc., its wholly–owned domestic subsidiaries and itswholly–owned and majority–owned foreign subsidiaries (collectively,the "Company"). All significant intercompany transactions andbalances have been eliminated.

*Preparationof Financial Statements*

             Theinterim financial data as of July 1, 2001 and for the three and nine monthsended July 1, 2001 and July 2, 2000  areunaudited. In the opinion of the Company, the interim data includes alladjustments, consisting only of normal recurring adjustments, necessary for afair statement of the results for the interim periods. The results for interimperiods are not necessarily indicative of the results for the entire year. Thecondensed consolidated financial statements should be read in conjunction withthe audited consolidated financial statements of PRI Automation, Inc. forthe year ended September 30, 2000 included in its Annual Report onForm 10-K, filed with the Securities and Exchange Commission.

             Forinterim reporting purposes, the Company closes its first three fiscal quarterson 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**

|                      | **July 1,  2001**  |   | **September 30,  2000** |   |
|---------------------------|--------------------|--------|-------------------------|--------|
|                      | ****               |   | ****                    |   |
|                      | **(in thousands)** |   |
|                      |               |   |                    |   |
| Raw materials             | $                  | 35,337 |                    | $      | 43,981 |   |
| Work–in–process | 15,344             |   | 6,248                   |   |
| Finished goods            | 12,971             |   | 8,875                   |   |
|                      |                    |   |                         |   |
|                      | $                  | 63,652 |                    | $      | 59,104 |   |
|                      |                    |   |                         |   |

**C.  Investment in Affiliate**

             OnDecember 1, 2000, the Company signed a strategic alliance agreement withShinsung Engineering Co. Ltd. ("Shinsung"), a South Koreanmanufacturer of semiconductor cleanroom equipment and other industrial systemsto assemble the Company's automated storage and retrieval systems. As part ofthe strategic alliance, the Company made a minority investment of $11,467,000in Shinsung in exchange for 3,109,091 common shares and warrants to purchase anadditional 3,866,900 common shares. The 3,109,091 common shares representedapproximately 11% of the outstanding common shares at the time of theinvestment. The cost of the investment was allocated to the common shares andwarrants based on their respective fair values at the time of the investment.

             Thecommon shares are being accounted for in accordance with SFAS No. 115,“Accounting for Certain Investments in Debt and Equity Securities” and areincluded in investment in affiliate on the consolidated balance sheet at theirfair market value.  The change in thefair market value of the common shares resulted in an unrealizedgain of $47,000 for the three and nine months ended July 1, 2001, and isincluded in other comprehensive operations.

             OnFebruary 23, 2001, the Company amended the warrant agreement with Shinsung torestrict the transfer of the warrants and the underlying shares upon thewarrants’ exercise causing the warrants to no longer fall within the scope ofSFAS No. 133, “Accounting for Derivative Instruments and HedgingActivities.” The change in the fair value of the warrants between the beginningof the fiscal year 2001 and the date of the amendment resulted in an unrealizedgain of $868,000 which is included in the consolidated statement of operationsfor the nine months ended July 1, 2001. The change in the fair value of the warrants after February 23, 2001resulted in an unrealized gain (loss) of $7,000 and ($844,000) for the threeand nine months ended July 1, 2001, respectively, and is included in othercomprehensive operations. The warrants are included in investment in affiliateon the consolidated balance sheet at their fair value.

**D.  Accrued Expenses and Other Liabilities**

|                                | **July  1,  2001** |   | **September  30,  2000** |   |
|-------------------------------------|--------------------|--------|--------------------------|--------|
|                                | ****               |   | ****                     |   |
|                                | **(in thousands)** |   |
|                                |               |   |                     |   |
| Accrued expenses                    | $                  | 8,249  |                     | $      | 9,385 |   |
| Accrued compensation                | 6,492              |   | 9,910                    |   |
| Warranty and contract loss reserves | 14,080             |   | 13,184                   |   |
|                                |                    |   |                          |   |
|                                | $                  | 28,821 |                     | $      | 32,479 |   |
|                                |                    |   |                          |   |
|                                     |                    |        |                          |        |  |  |  |

**E.**  **Other Income, Net**

|                                        | **Three  months ended** |   | **Nine  months ended** |   |
|---------------------------------------------|-------------------------|--------|------------------------|--------|
|                                        | ****                    |   | ****                   |   |
|                                        | **July 1,  2001**       |   | **July 2,  2000**      |   | **July 1,  2001** |   | **July 2,  2000** |   |
|                                        | ****                    |   | ****                   |   | **** |   | **** |   |
|                                        | **(in thousands)**      |   |
|                                        |                    |   |                   |   |   |   |   |   |
| Interest income, net                        | $                       | 931    |                   | $      | 1,012 |   | $ | 2,531 |   | $ | 2,012 |   |
| Net translation and foreign exchange losses | (572                    | )      | (39                    | )      | (1,040 | ) | (453 | ) |
| Other                                       | 221                     |   | 44                     |   | 409 |   | (50 | ) |
|                                        |                         |   |                        |   |  |   |  |   |
|                                        | $                       | 580    |                   | $      | 1,017 |   | $ | 1,900 |   | $ | 1,509 |   |
|                                        |                         |   |                        |   |  |   |  |   |
|                                             |                         |        |                        |        |  |  |  |  |  |  |  |  |  |

**F.  Net Income (Loss) Per Share**

             Basicnet income (loss) per common share is computed based on the weighted averagenumber of common shares outstanding during the period. Diluted net income(loss) per common share gives effect to all dilutive potential common sharesoutstanding during the period. A reconciliation between basic and diluted netincome (loss) per common share is as follows:

** **

|                                        | **Three months ended** |    | **Nine months ended** |   |
|---------------------------------------------|------------------------|---------|-----------------------|--------|
|                                        | ****                   |    | ****                  |   |
| **(in  thousands, except per share data)**  | **July  1,  2001**     |    | **July  2,  2000**    |   | **July  1,****2001** |   | **July  2,  2000** |   |
|                                        |                        |    |                       |   |  |   |  |   |
| Net income (loss)                           | $                      | (14,177 | )                     | $      | 9,831 |   | $ | (38,969 | ) | $ | 15,931 |   |
|                                        |                        |    |                       |   |  |   |  |   |
| Shares used in computation:                 |                   |    |                  |   |   |   |   |   |
| Weighted average common shares outstanding. | 25,384                 |    | 24,158                |   | 25,230 |   | 23,235 |   |
| Dilutive effect of stock options            | -                      |    | 1,921                 |   | - |   | 2,070 |   |
|                                        |                        |    |                       |   |  |   |  |   |
| Weighted average diluted shares outstanding | 25,384                 |    | 26,079                |   | 25,230 |   | 25,305 |   |
|                                        |                        |    |                       |   |  |   |  |   |
| Basic net income (loss) per common share    | $                      | (0.56   | )                     | $      | 0.41 |   | $ | (1.54 | ) | $ | 0.69 |   |
| Diluted net income (loss) per common share  | $                      | (0.56   | )                     | $      | 0.38 |   | $ | (1.54 | ) | $ | 0.63 |   |

             Optionsto purchase 194,455 and 493,186 shares of common stock outstanding during thethree and nine month periods ended July 1, 2001, respectively, were notincluded in the computation of diluted net loss per common share because theCompany was in a loss position and the inclusion of such shares would have beenanti-dilutive.  In addition, options topurchase 3,945,167 and 2,608,837 shares of common stock outstanding during thethree and nine month periods ended July 1, 2001, respectively, were notincluded in the computation of diluted net loss per share because the options' exercise prices were greaterthan the average market price of the common shares, and the options, therefore,would be anti-dilutive under the treasury stock method.

             Optionsto purchase 175,523 and 164,182 shares of common stock outstanding during thethree and nine month periods ended July 2, 2000, respectively, were notincluded in the computation of diluted net income per common share because theoptions' exercise prices were greater than the average market price of thecommon shares, and the options therefore, would be anti-dilutive under thetreasury stock method.

**G.  Special Charges**

             * *Duringthe three months ended April 1, 2001, the Company recorded special charges of$16.4 million related principally to cost reduction and restructuring chargesof which $11.9 million was charged to restructuring and other costs inoperating expenses, and $4.5 million was charged to cost of product andequipment revenue. The charge of $11.9 million to operating expenses consistedof the following: $4.1 million for employee severance costs, $3.0 million for areserve for legal costs to defend against a pending shareholder class actionlawsuit, $2.9 million for write-downs of impaired assets, and $1.9 million forother costs including product discontinuance. The charge of $4.5 million to cost of product and equipment revenue wasfor inventory write-offs and costs associated with order cancellations at theFactory Systems division.  In March2001, the Company initiated a series of cost-cutting programs including areduction in its worldwide workforce of approximately 370 people, or 20%,consisting of both temporary and regular full-time employees. Annualizedsavings associated with the workforce reduction are anticipated to beapproximately $20 million.  The Companyanticipates that all actions required in the cost-cutting programs will besubstantially complete by September 30, 2001.**             **Rollforward of Restructuring and Other Costs:**
 **Balance  Sheet**  ****    **Valuation  Allowances** **Accrued  Legal and Restructuring Costs**    **** **** **(in thousands)****Restructuring  and Other Costs Provision** **Fixed  Assets** **Employee  Costs** **Legal  Costs** **Exit  and Product Discontinuance**** Costs**  **** **** **** **** ****            Q2 FY 01 Charge$11,888 $2,944 $4,093 $2,980 $1,871 FY 01 Payments/  Disposals  (2,944)(1,319)(225)(1,550)      July 1, 2001 Balance$11,888 $— $2,774 $2,755 $321       
**H. OtherComprehensive Income (Loss)**

             SFASNo. 130 requires enterprises to report comprehensive income and its componentsin general-purpose financial statements. Accordingly, the Company has prepared Consolidated Statements ofComprehensive Operations for the three and nine month periods ended July 1,2001 and July 2, 2000.  Accumulatedother comprehensive loss as of July 1, 2001 consists of the unrealized loss of$797,000 on the Shinsung investment.

**I.  Segment Reporting**

             TheCompany operates in three primary segments, all within the semiconductormanufacturing capital equipment industry, which serve both domestic andinternational markets. These reportable operating segments consist of FactorySystems, OEM Systems, and Software Systems. Each of the Company's operatingsegments includes a product and service component and have no significantintersegment revenues and expenses as all segments' revenues are generated fromsales to unaffiliated customers.

             Operatingsegment information for the three and nine months ended July 1, 2001 and July2, 2000  is as follows:
 **Three Months Ended** **Nine Months Ended**  **** **** **(in thousands)****July 1,  2001** **July 2,  2000** **July 1,  2001*** **July 2,  2000**      **Total net revenue to unaffiliated customers:**         Factory Systems$52,216 $40,681 $148,662 $113,687  OEM Systems18,558 33,898 92,584 82,978  Software Systems4,416 14,294 19,987 27,570      Total net revenue$75,190 $88,873 $261,233 $224,235      **Segment operating profit (loss):**         Factory Systems$(6,867)$(2,632)$(33,770)$(4,236) OEM Systems(174)9,826 16,349 22,716  Software Systems(3,055)6,757 (5,062)7,762  Corporate and other expenses(3,873)(4,720)(17,841)(11,093)     Operating profit (loss)(13,969)9,231 (40,324)15,149 Other income, net580 1,017 2,768 1,509      Income (loss) before income taxes$(13,389)$10,248 $(37,556)$16,658      
* Segment operating profit (loss) includes specialcharges of $10.5 million, $0.2 million, $1.8 million and $ 3.9 million forFactory Systems, OEM Systems, Software Systems and Corporate, respectively.

**J.  Recent Accounting Pronouncements**

             InDecember 1999, the Securities and Exchange Commission ("SEC")issued Staff Accounting Bulletin No. 101, "Revenue Recognition inFinancial Statements" ("SAB 101"). SAB 101 summarizes thestaff's view in applying generally accepted accounting principles to selectedrevenue recognition issues. The application of the guidance in SAB 101 isrequired to be adopted no later than the Company's fourth quarter of fiscalyear 2001. The effects of applying this guidance will be reported as a cumulativeeffect adjustment resulting from a change in accounting principle. The Companyis still evaluating SAB 101 and its potential impact**, **However, it is expected that SAB 101 will require the Companyto change certain aspects of its current revenue recognition policy,  including the treatment of  amounts due upon final customer acceptance.**             In July 2001, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial AccountingStandards No. 141 (“SFAS No. 141”), “Business Combinations” and SFAS No.142, “Goodwill and Other Intangible Assets."  SFAS No. 141 requires that all business combinations be accountedfor under the purchase method only, eliminating the pooling-of-interests methodand that certain acquired intangible assets in a business combination berecognized as assets apart from goodwill. “SFAS No. 142” requires, among other things, the discontinuance ofgoodwill amortization, which is replaced with periodic tests of the goodwill'simpairment, and that intangible assets other than goodwill be amortized overtheir useful lives.  In addition, thestandard includes provisions for the reclassification of certain existingrecognized intangibles as goodwill, reassessment of the useful lives of existingrecognized intangibles, reclassification of certain intangibles out ofpreviously reported goodwill and the identification of reporting units forpurposes of assessing potential future impairments of goodwill. SFAS No. 142also requires the Company to complete a transitional goodwill impairment testsix months from the date of adoption. SFAS No. 141 is effective for allbusiness combinations initiated after June 30, 2001 and for all businesscombinations accounted for by the purchase method for which the date ofacquisition is after June 30, 2001. The provisions of SFAS No. 142 will beeffective for fiscal years beginning after December 15, 2001, however earlyadoption is permitted for companies with a fiscal year beginning after March15, 2001 and may be adopted by the Company on October 1, 2001. The Company iscurrently assessing but has not yet determined the impact of SFAS No. 141 andSFAS No. 142 on its financial position and results of operations.

**K.  Legal Proceedings**

             OnNovember 20, 2000, November 22, 2000, December 28, 2000 andDecember 29, 2000, the Company and three of its directors were named asdefendants in virtually identical lawsuits filed in the United States DistrictCourt for the District of Massachusetts: (i) *Kai Chan On Behalf of Himself and AllOthers Similarly Situated vs.**PRI Automation, Inc., Amram Rasiel, Mitchell G. Tysonand Mordechai Wiesler*, CivilAction No. 00-123958-REK; (ii) *Jacob J. Siegal On Behalf of Himself and All OthersSimilarly Situated vs. PRI Automation, Inc., Amram Rasiel, Mitchell G.Tyson and Mordechai Wiesler*, Civil Action No. 00-12414-REK;(iii) *PhillipFriedman On Behalf of Himself and All Others Similarly Situated vs. PRIAutomation, Inc., Amram Rasiel, Mitchell G. Tyson and Mordechai Wiesler*,Civil Action No. 00-12628-REK; and (iv) *Howard B. Fisher On Behalf of Himselfand All Others Similarly Situated vs. PRI Automation, Inc., Amram Rasiel,Mitchell G. Tyson and Mordechai Wiesler*, Civil ActionNo. 00-12637-REK. The named plaintiff in each action purports to bring thecomplaint on behalf of a class consisting of all purchasers of the Company'sstock during the period January 27, 2000 through September 11, 2000.The plaintiffs claim that the defendants violated Sections 10(b) and 20(a) ofthe Securities Exchange Act of 1934, and SEC Rule 10b-5, by virtue ofstatements and omissions that the plaintiffs claim were materially false ormisleading. The plaintiffs each seek certification as a class, damages,pre-judgment and post-judgment interest, costs, and attorneys' fees. The courthas appointed lead plaintiff in the case. The Company strongly believes thatthe lawsuits lack merit and it intends to defend against the claims vigorously.During the second quarter of fiscal 2001 the Company accrued $3.0 million forexpected legal costs related to the defense of the above litigation. TheCompany cannot predict the outcome of the lawsuits at this time, and there canbe no assurance that the litigation will not have a material adverse impact onits financial condition or results of operations.

             Fromtime to time the Company has been, and expects to continue to be, subject tolegal proceedings and claims in the ordinary course of its business. Suchclaims, even if not meritorious, could result in the expenditure of significantfinancial and managerial resources.
             **Item 2. **            ***Management's Discussion and Analysisof Financial Condition and Results of Operations***

**Resultsof Operations**

TheCompany continued to experience a deterioration in market conditions during thethird quarter of fiscal year 2001 as a result of the semiconductor capitalequipment industry downturn.  TheCompany’s third quarter operating loss of $14.0 million was $2.0 million higherthan the previous quarter, excluding special charges, as all three operatingsegments incurred losses.  Factory Systemsincurred an operating loss of $6.9 million principally due to manufacturinginefficiencies attributable to excess manufacturing capacity and unfavorablechanges in product mix.  The Company’sOEM Systems and Software Systems operating segments incurred operating lossesof $0.2 million and $3.1 million, respectively, due principally to lower turnsbusiness in the third quarter. Turnsbusiness is comprised of orders that are received and shipped in the samequarter and have historically accounted for a major portion of OEM Systems andSoftware Systems revenue.

Asa result of the long sales cycle for some of its products and the semiconductorcapital equipment industry downturn, the Company does not expect to be able toquickly replace orders that its customers may cancel, reduce or postpone.  Total backlog declined by 22% to $139million at July 1, 2001, compared with $179 million at April 1, 2001. TheCompany expects to continue to be adversely affected during the downturn cycleand report lower revenues and an operating loss for the fourth quarter.  The Company’s ongoing cost reductionprograms may be insufficient to offset fixed costs associated with excessmanufacturing capacity, unfavorable changes in product mix and other fixedoperating expenses.

***Three months endedJuly 1, 2001 versus three months ended July 2, 2000***

The following table sets forth thepercentage of net revenues and the yearly percentage in certain financial datafor the periods indicated:
 Items  as a percentage of net revenues Percent  changes  year to year    Three months endedJuly  1, 2001 July  2, 2000 July  1, 2001 /July 2, 2000    Revenue       Factory Systems69.4%45.8%28.4% OEM Systems24.7 38.1 (45.3) Software Systems5.9 16.1 (69.1)    Total revenue100.0%100%(15.4)%       Cost of revenue83.0 59.0 19.0     Gross profit17.0%41.0%(64.9)%Operating expenses:       Research & development20.4 15.8 8.8  Selling, general & administrative15.2 14.8 (12.8)    Total operating expenses35.6%30.6%(1.6)%    Operating profit (loss)(18.6)%10.4%(251.3)%Other income, net0.8%1.1%(43.0)%    Income (loss) before income taxes(17.8)%11.5%(230.6)%Tax provision1.1 0.4 89.0     Net income (loss)(18.9)%11.1%(244.2)%
*Totalnet revenue:*  Net revenue for the three months ended July1, 2001 decreased 15.4% to $75.2 million, compared with $88.9 million for the corresponding period in fiscal year2000. Revenue increased at Factory Systems and decreased at OEM Systems andSoftware Systems in the third quarter compared to the previous year. FactorySystems net revenue increased by 28.4% over the prior year primarily due tohigher unit sales of product and equipment as the Company continued to fulfillits backlog requirements booked prior to the downturn. Conversely, net revenuefor OEM Systems and Software Systems decreased by 45.3% and 69.1%,respectively, as compared with the corresponding three-month period of fiscalyear 2000. The decline in total net revenue was primarily due to the continuedsemiconductor capital equipment industry downturn which negatively impactedbusiness for the quarter.

             Internationalrevenues for the three months ended July 1, 2001 were $24.1 million, or32.0% of total net revenue. This compares with $31.9 million, or 35.9% oftotal net revenue, for the corresponding period in fiscal year 2000. Thedecrease in international sales for the three months ended July 1, 2001 was aresult of order cancellations and delays from several foreign customers duringthe second quarter of fiscal year 2001.

*Grossprofit:*Gross profit for the three months ended July 1, 2001 was $12.8 million.This compares with $36.4 million for the corresponding period in fiscalyear 2000. The gross profit as a percentage of revenues for the three monthsended July 1, 2001 was 17.0%, compared with 41.0% for the corresponding periodin the prior year. The gross profit percentage decline occurred across allthree of the Company’s operating segments. Gross profit at Factory Systemsdeclined principally due to manufacturing inefficiencies attributable to excessmanufacturing capacity, an unfavorable change in product mix, and higherwarranty costs on new products.  Inaddition, the Company’s OEM Systems and Software Systems operating segmentsreported lower gross profit principally due to lower turns business resultingfrom the current industry downturn.

*Researchand development:*  Research and development expenses for thethree months ended July 1, 2001 were $15.3 million, representing 20.4% oftotal net revenue. This compares to $14.1 million, or 15.8% of total netrevenue for the corresponding period in fiscal year 2000. The increase of $1.2 millionin the third quarter compared with the corresponding period in fiscal year 2000is principally due to the Company's investments in next-generation automationsystem products, including inter-floor transport systems, automated storage andretrieval systems, bare reticle stockers, and robotic wafer handling systems inthe Factory Systems and OEM Systems operating segments, as well as in its newsoftware products, including manufacturing execution systems.

*Selling,general and administrative:*  Selling, general and administrative expensesfor the three months ended July 1, 2001 were $11.5 million, representing15.2% of total net revenue. This compares to $13.2 million, or 14.8% oftotal net revenue for the corresponding period in fiscal year 2000. Selling,general and administrative expenses decreased by $1.7 million compared to theprior year’s third quarter principally due to the Company’s cost reductionefforts to date and decreased expenses associated with lower sales volume.

*Operating profit (loss):*  As a result ofthe decline in gross profit, the operating loss for the three months ended July1, 2001 was $14.0 million, or 18.6% of total net revenue. This compares tooperating profit of $9.2 million, or 10.4% of total net revenue for thecorresponding period in fiscal year 2000.

*Netincome (loss):*  Net loss for the three months ended July 1,2001 was $14.2 million or $0.56 per diluted share compared with net income of$9.8 million or $0.38 per diluted share for the corresponding period in fiscalyear 2000.
******Nine months endedJuly 1, 2001 versus nine months ended July 2, 2000***

The following table sets forth thepercentage of net revenues and the yearly percentage in certain financial datafor the periods indicated:
 Items  as a percentage of net revenues Percent  changes year to year    Nine months endedPro  forma  July 1,  2001* July  1,  2001 July  2,  2000 Pro  formaJuly 1, 2001 /  July 2, 2000* July  1, 2001 /  July 2, 2000      Revenue           Factory Systems56.9%56.9%50.7%30.8%30.8% OEM Systems35.4 35.4 37.0 11.6 11.6  Software Systems7.7 7.7 12.3 (27.5)(27.5)      Total revenue100.0%100.0%100.0%16.5%16.5%           Cost of revenue75.7%77.4%60.8%45.0%48.3%      Gross profit24.3%22.6%39.2%(27.7)%(32.8)%Operating expenses:           Research & development17.8 17.8 17.4 19.3 19.3  Selling, general & administrative15.7 15.7 15.0 21.6 21.6  Restructuring and other costs- 4.5 - - 100.0       Total operating expenses33.5%38.0%32.4%20.3%36.7%      Operating profit (loss)(9.2)%(15.4)%6.8%(258.0)%(366.2)%Other income, net1.1 1.0 0.6 83.4 83.4       Income (loss) before income taxes(8.1)%(14.4)%7.4%(227.1)%(325.5)%Tax provision0.5 0.5 0.3 94.4 94.4       Net income (loss)(8.6)%(14.9)%7.1%(241.8)%(344.6)%           
* Pro forma results exclude special charges

*Totalnet revenue:*  Net revenue for the nine months ended July1, 2001 increased 16.5% to $261.2 million,  compared with $224.2 million for the corresponding period infiscal year 2000. Revenue increased at the Factory Systems and OEM Systemsoperating segments and decreased at the Software Systems operating segmentcompared to the previous year. Contributing to this revenue growth, FactorySystems net revenue increased by 30.8% and OEM Systems net revenue increased by11.6% as compared with the corresponding nine-month period of fiscal year 2000.The improvement in net revenue at Factory Systems and OEM Systems was primarilydue to increases in unit sales of product and equipment during the first halfof fiscal year 2001 slightly offset by a decrease in the third quarter offiscal year 2001.  Conversely, netrevenue for Software Systems decreased by 27.5% as compared with thecorresponding nine-month period of fiscal year 2000 due principally to the continuedsemiconductor capital equipment industry downturn.

             Internationalrevenues for the nine months ended July 1, 2001 were $91.9 million, or35.2% of total net revenue. This compares with $88.2 million, or 39.3% oftotal net revenue, for the corresponding period in fiscal year 2000. The overalldecrease in the percentage of international sales compared to total revenue forthe nine months ended July 1, 2001 was a result of order cancellations anddelays from several foreign customers during the second quarter of fiscal year2001.

*Grossprofit:*  Pro forma gross profit, excluding specialcharges of $4.5 million, for the nine months ended July 1, 2001 was$63.6 million. This compares with $87.9 million for the correspondingperiod in fiscal year 2000. The pro forma gross profit as a percentage ofrevenues for the nine months ended July 1, 2001 was 24.3% compared with 39.2%for the corresponding period in the prior year. The gross profit percentagedecline occurred across all three of the Company’s operating segments. Grossprofit at Factory Systems declined principally due to manufacturinginefficiencies attributable to excess manufacturing capacity, an unfavorablechange in product mix, and higher warranty costs on new products.  In addition, the Company’s OEM Systems andSoftware Systems operating segments reported lower gross profit principally dueto lower turns business resulting from the current industry downturn.

*Researchand development:*  Research and development expenses for thenine months ended July 1, 2001 were $46.5 million, representing 17.8% oftotal net revenue. This compares with $39.0 million, or 17.4% of total netrevenue for the corresponding period in fiscal year 2000. The increase of $7.5million in 2001 spending compared with the corresponding period in fiscal year2000 is principally due to the Company's investments in next-generationautomation system products, including inter-floor transport systems, automatedstorage and retrieval systems, bare reticle stockers, and robotic waferhandling systems in the Factory Systems and OEM Systems operating segments, aswell as in its new software products, including manufacturing executionsystems.

*Selling,general and administrative:*  Selling, general and administrative expensesfor the nine months ended July 1, 2001 were $41.1 million, or 15.7% oftotal net revenue. This compares with $33.8 million, or 15.0% of total netrevenue for the corresponding period in fiscal year 2000. Selling, general andadministrative expenses increased by $7.3 million compared to the prior yeardue to increased marketing efforts and the expenses associated with highersales volume during the first half of fiscal year 2001.

*Special Charges: *Forthe nine months ended July 1, 2001, the Company recorded special charges of$16.4 million related principally to cost reduction and restructuring chargesof which $11.9 million was charged to restructuring and other costs inoperating expenses, and $4.5 million was charged to cost of product andequipment revenue.

*Operatingprofit (loss):*  As a result of the previously mentionedincreases in operating expenses, the pro forma operating loss, before specialcharges, for the nine months ended July 1, 2001 was $23.9 million, or 9.2%of total net revenue. This compares with operating profit of $15.1 million, or6.8% of total net revenue for the corresponding period in fiscal year 2000.

*Gain oninvestment in affiliate:*The change in the fair value of the Shinsung warrants for the nine months endedJuly 1, 2001 was $868,000.

*Netincome (loss):*  Net loss for the nine months ended July 1,2001 was $39.0 million, or $1.54 per diluted share, compared with net income of$15.9 million or $0.63 per diluted share for the corresponding period in fiscalyear 2000. Excluding special charges, net loss for the nine months ended July1, 2001 would have been $22.6 million or $0.90 per diluted share.

**FinancialCondition**

             ***Liquidity and Capital Resources***             Net cash used in operatingactivities for the nine months ended July 1, 2001 was $11.4 million,compared to $35.3 million of net cash used in operating activities for thecorresponding period in fiscal 2000. Net cash used in operating activities wasprimarily attributable to the net loss of $39.0 million, increases toinventories of $10.4 million, and decreases in accrued expenses of $2.8 millionand accounts payable of $6.8 million. These uses of cash were partially offsetby the decreases to contracts in progress of $18.9 million, accountsreceivable of $1.8 million and increases to accrued legal and restructuringcosts of $5.9 million, and deferred revenue and customer deposits of $2.9million. Due to the continued industry downturn, the Company anticipates thatits working capital requirements will decrease for the remainder of the currentfiscal year.

             Netcash used in investing activities for the nine months ended July 1, 2001 was$21.8 million, compared to $10.8 million for the corresponding periodin fiscal year 2000. The increase is principally attributable to the Company's$11.5 million minority investment in Shinsung Eng. Co. Ltd., to supportits strategic alliance with the Korean company.
             Netcash provided by financing activities for the nine months ended July 1, 2001was $3.6 million, compared to $108.0 million for the corresponding period offiscal year 2000. This decrease is principally related to the proceeds from theCompany’s common stock offering completed in the third quarter of fiscal year2000 and, to a lesser extent, from greater proceeds from the exercise of stockoptions during the prior year.

             OnDecember 14, 2000, the Company entered into an amended revolving creditfacility agreement with Chase Manhattan Bank (the "Bank") whichexpired on March 31, 2001. The revolving credit facility allowed theCompany to borrow up to $20,000,000 on an unsecured basis.

             TheCompany believes its existing cash balances and access to future financing willbe sufficient for at least the next twelve months. However, there can be noassurance that adequate financing will be available or at terms acceptable tothe Company.

             ***Changes in Financial Condition***             As of July 1, 2001 theCompany had working capital of $133.0 million, including cash and cashequivalents of $62.9 million, compared to working capital of$177.6 million including cash and cash equivalents of $92.5 millionas of September 30, 2000.  Theratio of current assets to current liabilities was 2.86 : 1 at July 1, 2001compared with 3.42 : 1 at September 30, 2000.

             Accountsreceivable and contracts in progress at July 1, 2001 decreased by $21.9 millionfrom the beginning of the fiscal year primarily due to the lower sales volumeduring the third quarter of fiscal year 2001. Receivable days sales outstanding were 84 days in the third quarter offiscal year 2001 compared with 90 days for the second quarter of fiscal year2001.  Inventories at July 1, 2001increased by $4.5 million from the beginning of the fiscal year but declined by$ 8.6 million in the third quarter.  Theyear to date increase was primarily due to the Company’s significant order backlogat the beginning of the second quarter. Accrued legal and restructuring costs increased by $5.9 million from thebeginning of the fiscal year due to the special charges the Company incurredduring the second quarter.

**RecentAccounting Pronouncements**             InDecember 1999, the Securities and Exchange Commission ("SEC")issued Staff Accounting Bulletin No. 101, "Revenue Recognition inFinancial Statements" ("SAB 101"). SAB 101 summarizes thestaff's view in applying generally accepted accounting principles to selectedrevenue recognition issues. The application of the guidance in SAB 101 isrequired to be adopted no later than the Company's fourth quarter of fiscalyear 2001. The effects of applying this guidance, if any, will be reported as acumulative effect adjustment resulting from a change in accounting principleThe Company is still evaluating SAB 101 and its potential impact. However, itis expected that SAB 101 will require the Company to change certain aspects ofits current revenue recognition policy, including the treatment of amounts dueupon final customer acceptance.

             InJuly 2001, the Financial Accounting Standards Board (“FASB”) issued Statementof Financial Accounting Standards No. 141 (“SFAS No. 141”), “BusinessCombinations” and SFAS No. 142, “Goodwill and Other Intangible Assets."  SFAS No. 141 requires that all businesscombinations be accounted for under the purchase method only, eliminating thepooling-of-interests method and that certain acquired intangible assets in abusiness combination be recognized as assets apart from goodwill.  “SFAS No. 142” requires, among other things,the discontinuance of goodwill amortization, which is replaced with periodictests of the goodwill's impairment and that intangible assets other thangoodwill be amortized over their useful lives. In addition, the standard includes provisions for the reclassificationof certain existing recognized intangibles as goodwill, reassessment of theuseful lives of existing recognized intangibles, reclassification of certainintangibles out of previously reported goodwill and the identification ofreporting units for purposes of assessing potential future impairments ofgoodwill. SFAS No. 142 also requires the Company to complete a transitionalgoodwill impairment test six months from the date of adoption. SFAS No. 141 iseffective for all business combinations initiated after June 30, 2001 and forall business combinations accounted for by the purchase method for which thedate of acquisition is after June 30, 2001. The provisions of SFAS No. 142 willbe effective for fiscal years beginning after December 15, 2001, however earlyadoption is permitted for companies with a fiscal year beginning after March15, 2001 and may be adopted by the Company on October 1, 2001. The Company iscurrently assessing but has not yet determined the impact of SFAS No. 141 andSFAS No. 142 on its financial position and results of operations.

**CertainFactors That May Affect Future Results**             Fromtime to time, information provided by the Company, statements made by itsemployees or information included in its filings with the Securities andExchange Commission may contain statements which are not historical facts butwhich are "forward–looking statements" involving risks anduncertainties. In particular, statements in "Management's Discussion andAnalysis of Financial Condition and Results of Operations" relating to theCompany's expectations concerning its future results of operations and thesufficiency of capital to meet working capital and capital expenditurerequirements are forward–looking statements. The words"expect," "anticipate," "internal,""plan," "believe," "seek," "estimate"and similar expressions are intended to identify such forward–lookingstatements. Such statements are not guarantees of future performance andinvolve certain risks, uncertainties and assumptions that could cause theCompany's future results to differ materially from those expressed in anyforward–looking statements made by or on behalf of the Company. Many ofthese factors are beyond the Company's ability to control or predict. Readersare accordingly cautioned not to place undue reliance on forward–lookingstatements. The Company disclaims any intent or obligation to update publiclyany forward–looking statements, whether in response to new information orfuture events or otherwise. Important factors that may cause the Company'sactual results to differ from such forward–looking statements include,but are not limited to the factors discussed in the Company's RegistrationStatement on Form S-3, file No. 333-60180, filed with the Securities andExchange Commission as of May 3, 2001, and the other factors discussed below.

             TheCompany's future results face the following risks and uncertainties: thesemiconductor industry has historically experienced downturns that adverselyaffected the Company's operating results, and reduced demand for semiconductorsin the future could jeopardize the Company's plans; the Company may havedifficulty managing its operations in response to fluctuating demand; and theCompany has significant fixed costs, which are not easily reduced during adownturn.

             Inaddition to the foregoing, the following additional factors could causematerial fluctuations in the Company's future operating results on a quarterlyor annual basis, which could materially adversely affect its business,financial condition, operating results and stock price; oversupply in thesemiconductor market may in the future reduce demand for capital equipment,including for the Company's systems; the Company's lengthy sales cycle makes itdifficult to anticipate sales; the Company's operating results fluctuatesignificantly, and its stock price could fall if its operating results arebelow the expectations of analysts or investors; delay in the Company'sshipment of a single system could substantially decrease its sales for aperiod; new accounting guidance under SAB 101 could result in delayedrecognition of the Company's revenues; the Company typically charges a fixedprice for a system, which leaves it vulnerable to cost overruns; the Companymay experience capacity constraints during high growth periods which may limitthe Company's ability to take advantage of business opportunities during suchperiods; the Company may have difficulty resolving manufacturing problemsrelated to new products, such as the TurboStocker; the Company may experienceadverse changes in its product mix which could impact its gross profit marginpercentage;  the Company may havedifficulty converting its backlog of orders to revenue in a timely andprofitable manner; the Company maintains inventory to support production which,due to the evolution of products and the cyclical nature of demand, may berendered obsolete; in order to continually improve its technology to remaincompetitive, the Company must expend substantial resources on research anddevelopment, even in periods during industry downturns; the Company has alimited number of customers, and the loss, cancellation or delay of any orderby these customers could harm its business; the Company does not have long-termpurchase agreements with its customers, and as a result its customers couldstop purchasing its products and services at any time; demand for lessexpensive semiconductors is increasing pressure to reduce prices in the Company'sindustry; industry consolidation and outsourcing of the manufacture ofsemiconductors to foundries could reduce the number of available customers; theCompany has invested heavily in 300mm wafer technology, which is being adoptedmore slowly than expected, and competition for early 300mm orders may beintense; it is difficult to hire and retain the managerial and technicalemployees that the Company needs; the Company's international operations createspecial risks; the volatility of the Company's investment in its affiliate,Shinsung Engineering Co. Ltd., could result in significant gains orlosses in future periods; the Company faces significant competition from otherautomation companies, especially in the Asia-Pacific market, which may limitthe prices the Company can charge for its systems and may cause it to losesales; the Company must continually improve its technology to remaincompetitive; the Company may experience delays in product development andtechnical difficulties that could delay new product introductions; futureacquisitions may disrupt the Company's operations; the Company depends onsubcontractors and one or a few suppliers for some components and manufacturingprocesses; the Company depends on Mordechai Wiesler and Mitchell G. Tyson; theCompany's software products may contain errors or defects that could result inlost revenue, delayed or limited market acceptance or product liability claimswith substantial litigation costs; the Company may be unable to protect itsproprietary technology; claims by others that the Company infringes theirproprietary technology could harm the Company's business; the market price ofthe Company's common stock is volatile, which could result in substantiallosses for investors purchasing shares; the Company may need additionalfinancing, which could be difficult to obtain; provisions of the Company'scharter and by-laws and Massachusetts law make a takeover of the Company moredifficult.

**Item3.  *Quantitative and Qualitative Disclosures about MarketRisk***

             The Company has a minorityinvestment in Shinsung, the common stock of which trades on the Korean StockExchange. This investment consists of common stock and warrants to purchasecommon stock denominated in Korean won. Accordingly the Company is exposed to market risk attributable toadverse movements in both the Korean stock market as well as the Korean won.There have been no other significant changes in the Company's exposure tomarket risks since September 30, 2000. For more information please readthe consolidated financial statements and notes thereto included in theCompany's Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2000.

**PART II. OTHER INFORMATION**

**Item 1.* Legal Proceedings***

             OnNovember 20, 2000, November 22, 2000, December 28, 2000 andDecember 29, 2000, the Company and three of its directors were named asdefendants in virtually identical lawsuits filed in the United States DistrictCourt for the District of Massachusetts: (i) Kai Chan On Behalf of Himselfand All Others Similarly Situated vs. PRI Automation, Inc., Amram Rasiel,Mitchell G. Tyson and Mordechai Wiesler, Civil Action No. 00–123958–REK;(ii) Jacob J. Siegal On Behalf of Himself and All Others SimilarlySituated vs. PRI Automation, Inc., Amram Rasiel, Mitchell G. Tyson andMordechai Wiesler, Civil Action No. 00–12414–REK;(iii) Phillip Friedman On Behalf of Himself and All Others SimilarlySituated vs. PRI Automation, Inc., Amram Rasiel, Mitchell G. Tyson andMordechai Wiesler, Civil Action No. 00–12628–REK; and(iv) Howard B. Fisher On Behalf of Himself and All Others SimilarlySituated vs. PRI Automation, Inc., Amram Rasiel, Mitchell G. Tyson andMordechai Wiesler, Civil Action No. 00–12637–REK. The namedplaintiff in each action purports to bring the complaint on behalf of a classconsisting of all purchasers of the Company's stock during the January 27,2000 through September 11, 2000. The plaintiffs claim that the defendantsviolated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SECRule 10b–5, by virtue of statements and omissions that theplaintiffs claim were materially false or misleading. The plaintiffs each seekcertification as a class, damages, pre–judgment and post–judgmentinterest, costs, and attorneys' fees. The court has appointed lead plaintiff inthe case. The Company strongly believes that the lawsuits lack merit and itintends to defend against the claims vigorously. Accordingly, during the secondquarter of fiscal 2001 the Company accrued $3.0 million for expected legalcosts related to the defense of the above litigation. The Company cannotpredict the outcome of the lawsuits at this time, and there can be no assurancethat the litigation will not have a material adverse impact on its financialcondition or results of operations.

             Fromtime to time the Company has been, and expects to continue to be, subject tolegal proceedings and claims in the ordinary course of its business. Suchclaims, even if not meritorious, could result in the expenditure of significantfinancial and managerial resources.

**Item 2.  *RecentSales of Unregistered Securities***

             None

**Item 3.  *Defaults upon Senior Securities***

             NotApplicable

**Item4.  *Submission of Matters to a Vote of Security Holders***

             None

**Item 5. *Other Information***

             None

**Item 6. *Exhibits and Reports on Form 8-K***

             a)          Exhibits
**Exhibit  Number** **Description** 3.1 Restated Articles of  Organization and amendments thereto (filed as Exhibit 3.1 to the Company's  Annual Report on Form 10–K for Year Ended September 30, 2000 and  incorporated herein by reference).3.2 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).   
             b)          Reports on Form 8-K

None

**SIGNATURE**

             Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
  PRI  AUTOMATION, INC.Date: August 9, 2001By: /s/ Cosmo S. Trapani    Cosmo S. Trapani  Duly Authorized Officer and   Principal Financial  Officer
**EXHIBIT INDEX**
   **Exhibit  Number** **Description** 3.1 Restated Articles of  Organization and amendments thereto (filed as Exhibit 3.1 to the Company's  Annual Report on Form 10–K for Year Ended September 30, 2000 and  incorporated herein by reference).3.2 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).   *******