** **

**SECURITIESAND EXCHANGE COMMISSION**

 

**Washington, D.C. 20549**

 

**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 March 30, 2002**                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                        | **OR**                                                                                                                                                                                 |
| **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 No. 0-22384**                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                        | **MICRO COMPONENT TECHNOLOGY, INC.**

(Exact name of  registrant as specified in its charter)                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                        | **Minnesota**                                                                                                                                                                          |   | **41-0985960** |
|                                                                                                                                                                                                                                                                                                                                                        | (State or other  jurisdiction of

incorporation or  organization)                                                                                                                      |   | (I.R.S. Employer

Identification  No.) |
|                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                        | **2340  West County Road C, St. Paul, MN 55113-2528**                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                        | (Address of  principal executive offices)                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                        | **(651)  697-4000**                                                                                                                                                                    |   |
|                                                                                                                                                                                                                                                                                                                                                        | (Registrant’s  telephone number)                                                                                                                                                  |   |
| Indicate by check mark whether the Registrant (1)  has filed all reports required to be filed by Section 13 or 15(d) of the  Securities Exchange Act of 1934 during the preceding 12 months (or for such  shorter period that the Registrant was required to file such reports), and  (2) has been subject to such filing requirements for the past 90 days |
| Yes     ý                   No     o                                                                                                                                                                                 |
| The number of shares  outstanding of the Registrant’s Common Stock, as of May 3, 2002 was  14,098,014                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                        |  |  |  |  |  |  |

 

Page 1 of 17 pages

 

 

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**MICRO COMPONENT TECHNOLOGY, INC**.

 

FORM 10-Q

 

TABLE OF CONTENTS

 
| **PART I - FINANCIAL  INFORMATION**  |           |                                                                                        |
|--------------------------------------|----------------|---------------------------------------------------------------------------------------------|
|                                 | **ITEM 1.**    | **FINANCIAL STATMENTS**                                                                     |   |   |
|                                 |           | **CONSOLIDATED BALANCE SHEETS**                                                             |   |   |
|                                 |           | **CONSOLIDATED  STATEMENTS OF OPERATIONS**                                                  |   |   |
|                                 |           | **CONSOLIDATED  STATEMENTS OF CASH FLOWS**                                                  |   |   |
|                                 |           | **NOTES  TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**                         |   |   |
|                                 | **ITEM  2.**   | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION |   |   |
| **PART II.  OTHER INFORMATION** |           |                                                                                        |
|                                 | ITEM  4.       | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS**                                    |   |   |
|                                 | ITEM 5.        | OTHER INFORMATION                                                                           |   |   |
|                                 | **ITEM 6.**    | **REPORTS ON  FORM 8-K**                                                                    |   |   |
|                                 | **SIGNATURES** |                                                                                        |   |
|                                      |                |                                                                                             |  |  |  |

 

 

 

2

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**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

# PART I.  FINANCIAL INFORMATION

## ITEM 1. FINANCIAL STATEMENTS

## CONSOLIDATED BALANCE SHEETS

(in thousandsexcept share and per share data)

(Unaudited)
|                                                                                                  |   | **March 30,** |   | **December  31,** |   |
|-------------------------------------------------------------------------------------------------------|--------|---------------|--------|-------------------|--------|
|                                                                                                  |   | **2002**      |   | **2001**          |   |
| **Assets**                                                                                            |   |          |   |              |   |
| Current  assets                                                                                       |   |          |   |              |   |
| Cash  and cash equivalents                                                                            |   | $             | 8,487  |              | $      | 11,086 |   |
| Accounts  receivable, less allowance for doubtful accounts of $425 and $425,  respectively            |   | 2,169         |   | 3,136             |   |
| Inventories                                                                                           |   | 5,150         |   | 5,084             |   |
| Other                                                                                                 |   | 283           |   | 254               |   |
| Total  current assets                                                                                 |   | 16,089        |   | 19,560            |   |
|                                                                                                  |   |          |   |              |   |
| Property,  plant and equipment, net                                                                   |   | 745           |   | 878               |   |
| Debt  issuance costs, net                                                                             |   | 791           |   | 836               |   |
| Other  assets                                                                                         |   | 81            |   | 67                |   |
|                                                                                                  |   |          |   |              |   |
| Total  assets                                                                                         |   | $             | 17,706 |              | $      | 21,341 |   |
|                                                                                                  |   |          |   |              |   |
| **Liabilities  and Stockholders’ Equity**                                                        |   |          |   |              |   |
| Current  liabilities:                                                                                 |   |          |   |              |   |
| Current  portion of long-term debt                                                                    |   | $             | 42     |              | $      | 42 |   |
| Current  portion of accrued restructuring costs                                                       |   | 729           |   | 678               |   |
| Accounts  payable                                                                                     |   | 1,593         |   | 1,536             |   |
| Accrued  warranty                                                                                     |   | 378           |   | 400               |   |
| Deferred  revenue in excess of costs incurred                                                         |   | 310           |   | 1,133             |   |
| Other  accrued liabilities                                                                            |   | 3,002         |   | 2,864             |   |
| Total  current liabilities                                                                            |   | 6,054         |   | 6,653             |   |
|                                                                                                  |   |          |   |              |   |
| Long-term  debt                                                                                       |   | 23            |   | 33                |   |
| Long-term  portion of accrued restructuring costs                                                     |   | 111           |   | 278               |   |
| 10%  senior subordinated convertible debt                                                             |   | 10,000        |   | 10,000            |   |
|                                                                                                  |   |          |   |              |   |
| Commitments  and contingencies                                                                        |   |          |   |              |   |
|                                                                                                  |   |          |   |              |   |
| Stockholders’  equity:                                                                           |   |          |   |              |   |
| Preferred stock,  $.01 par value, 1,000,000 authorized, none issued and outstanding                   |   | —        |   | —            |   |
| Common stock,  $.01 par value, 40,000,000 authorized, 14,080,014 and 14,074,365 issued,  respectively |   | 141           |   | 141               |   |
| Additional  paid-in capital                                                                           |   | 88,152        |   | 88,144            |   |
| Cumulative  other comprehensive loss                                                                  |   | (69           | )      | (69               | )      |
| Accumulated  deficit                                                                                  |   | (86,706       | )      | (83,839           | )      |
| Total  stockholders’ equity                                                                      |   | 1,518         |   | 4,377             |   |
| Total  liabilities and stockholders’ equity                                                      |   | $             | 17,706 |              | $      | 21,341 |   |

 

 

See notes tounaudited condensed consolidated financial statements

 

 

3

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**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands,except per share data)

(Unaudited)

 
|                                                        |   | **Three Months  Ended** |   |
|-------------------------------------------------------------|--------|-------------------------|--------|
|                                                        |   | **March 30,**           |   | **March 31,** |   |
|                                                        |   | **2002**                |   | **2001** |   |
| Net  sales                                                  |   | $                       | 3,463  |   | $ | 9,329 |   |
| Cost of sales                                               |   | 2,187                   |   | 5,670 |   |
|                                                        |   |                    |   |   |   |
| Gross  profit                                               |   | 1,276                   |   | 3,659 |   |
|                                                        |   |                    |   |   |   |
| Operating  expenses:                                        |   |                    |   |   |   |
| Selling,  general and administrative                        |   | 2,266                   |   | 3,294 |   |
| Research  and development                                   |   | 1,306                   |   | 2,888 |   |
| Amortization of  intangible assets                          |   | —                  |   | 879 |   |
| Restructuring  charge                                       |   | 323                     |   | 2,331 |   |
|                                                        |   |                    |   |   |   |
| Total operating  expenses                                   |   | 3,895                   |   | 9,392 |   |
|                                                        |   |                    |   |   |   |
| Loss  from operations                                       |   | (2,619                  | )      | (5,733 | ) |
|                                                        |   |                    |   |   |   |
| Interest  income                                            |   | 45                      |   | 112 |   |
| Interest expense  and other                                 |   | (293                    | )      | (13 | ) |
|                                                        |   |                    |   |   |   |
| Total interest  and other                                   |   | (248                    | )      | 99 |   |
|                                                        |   |                    |   |   |   |
| Net loss                                                    |   | $                       | (2,867 | ) | $ | (5,634 | ) |
|                                                        |   |                    |   |   |   |
| Net loss per  share, basic and diluted:                     |   |                    |   |   |   |
|                                                        |   |                    |   |   |   |
| Net loss                                                    |   | $                       | (0.20  | ) | $ | (0.40 | ) |
|                                                        |   |                    |   |   |   |
| Weighted average  common and equivalent shares outstanding: |   |                    |   |   |   |
| Basic and  diluted                                          |   | 14,077                  |   | 13,952 |   |
|                                                        |   |                    |   |   |   |

 

 

See notes tounaudited condensed consolidated financial statements

 

 

 

4

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**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTSOF CASH FLOWS

(In thousands)

(Unaudited)

 
|                                                                         |   | **Three  Months Ended** |   |
|------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                         |   | **March 30,**           |   |   | **March 31,** |   |
|                                                                         |   | **2002**                |   |   | **2001** |   |
|                                                                         |   |                    |   |   |   |   |
| Cash flows from  operating activities:                                       |   |                    |   |   |   |   |
| Net loss                                                                     |   | $                       | (2,867 | ) |   | $ | (5,634 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |                    |   |   |   |   |
| Depreciation                                                                 |   | 120                     |   |   | 193 |   |
| Amortization                                                                 |   | —                  |   |   | 879 |   |
| Other,  net                                                                  |   | (11                     | )      |   | — |   |
| Loss  on disposal of property                                                |   | 4                       |   |   | — |   |
| Changes  in assets and liabilities:                                          |   |                    |   |   |   |   |
| Accounts  receivable                                                         |   | 967                     |   |   | 2,599 |   |
| Inventories                                                                  |   | (66                     | )      |   | (1,576 | ) |
| Other  current assets                                                        |   | (29                     | )      |   | 29 |   |
| Accounts  payable                                                            |   | 57                      |   |   | (2,758 | ) |
| Accrued  restructuring costs                                                 |   | (116                    | )      |   | 2,055 |   |
| Other  accrued liabilities                                                   |   | (707                    | )      |   | (302 | ) |
|                                                                         |   |                    |   |   |   |   |
| Net  cash used in operating activities                                       |   | (2,648                  | )      |   | (4,515 | ) |
|                                                                         |   |                    |   |   |   |   |
| Cash  flow from investing activities:                                        |   |                    |   |   |   |   |
| Additions  to property, plant and equipment                                  |   | (28                     | )      |   | (123 | ) |
| Proceeds  from disposition of property                                       |   | 37                      |   |   | — |   |
|                                                                         |   |                    |   |   |   |   |
| Net  cash used in investing activities                                       |   | 9                       |   |   | (123 | ) |
|                                                                         |   |                    |   |   |   |   |
| Cash  flows from financing activities:                                       |   |                    |   |   |   |   |
| Payments  of long-term debt                                                  |   | (10                     | )      |   | (10 | ) |
| Amortization  of debt issuance costs                                         |   | 42                      |   |   | — |   |
| Proceeds  from issuance of stock, net                                        |   | 8                       |   |   | 18 |   |
|                                                                         |   |                    |   |   |   |   |
| Net  cash provided by financing activities                                   |   | 40                      |   |   | 8 |   |
|                                                                         |   |                    |   |   |   |   |
| Net  decrease in cash and cash equivalents                                   |   | (2,599                  | )      |   | (4,630 | ) |
|                                                                         |   |                    |   |   |   |   |
| Cash  and cash equivalents at beginning of period                            |   | 11,086                  |   |   | 12,047 |   |
|                                                                         |   |                    |   |   |   |   |
| Cash  and cash equivalents at end of period                                  |   | $                       | 8,487  |   |   | $ | 7,417 |   |

 

 

See notes tounaudited condensed consolidated financial statements

 

 

5

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**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 
| **1.** |   | **INTERIM  FINANCIAL STATEMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | The accompanying unaudited condensed consolidated  financial statements for the three months ended March 30, 2002 have been  prepared in accordance with the instructions for SEC Form 10-Q and,  accordingly, do not include all disclosures required by generally accepted  accounting principles for complete financial statements.  In our opinion, all adjustments,  consisting of normal recurring accruals considered necessary for a fair  presentation, have been included.                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | Interim unaudited financial results should be read  in conjunction with the audited financial statements included in the SEC  Report on Form 10-K, for the period ended December 31, 2001.                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | The results of operations for the three-month period  ended March 30, 2002 are not necessarily indicative of the operating results  to be expected for the full year.                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **2.** |   | **EARNINGS  PER SHARE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | Earnings per share are computed in accordance with  Statement of Financial Accounting Standards (SFAS) No. 128, *Earnings per Share*.  Basic earnings per share are computed  using the weighted average number of common shares outstanding during each  period.  Diluted earnings per share  include the dilutive effect of common shares potentially issuable upon the  exercise of stock options outstanding.   The following table reconciles the denominators used in computing  basic and diluted earnings per share: |

 
| **(in thousands)**                             |   | **Three  Months Ended** |   |
|------------------------------------------------|--------|-------------------------|--------|
|                                           |   | **March 30,**           |   | **March 31,** |   |
|                                           |   | **2002 (1)**            |   | **2001 (1)** |   |
| Weighted  average common shares outstanding    |   | 14,077                  |   | 13,952 |   |
| Effect  of dilutive stock options and warrants |   | —                  |   | — |   |
|                                           |   |                    |   |   |   |
|                                           |   | 14,077                  |   | 13,952 |   |

----

                    (1)We reported a loss for the periods indicated. No adjustments were made for the effect of stock options, which totaled2,450,566 shares at March 30, 2002 and 2,105,693 shares at March 31, 2001, asthe effect is antidilutive.

 

 

6

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| **3.** |   | **REPORTING  OF COMPREHENSIVE NET INCOME OR (LOSS)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | In 1997, the Financial Accounting Standards Board  issued Statement of Financial Accounting Standards (SFAS), No. 130 *Reporting  Comprehensive Income* which establishes standards for the reporting  and display of comprehensive income (loss) and its components in a full set  of general-purpose financial statements.   Under this standard, certain revenues, expenses, gains, and losses  recognized during the period are included in comprehensive income (loss),  regardless of whether they are considered to be results of operations of the  period.  During the three-month  periods ended March 30, 2002 and March 31, 2001, total comprehensive loss  equaled net loss as reported on the Consolidated Statements of Operations.           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **4.** |   | **RESTRUCTURING  CHARGES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | **2001  Restructuring Charges**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | In 2001, in response to the continued and prolonged  downturn in the semiconductor capital equipment industry, we took the  following actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | During the first quarter, we announced plans to  consolidate the manufacturing and operation functions performed in our  Marlborough, Massachusetts facility to our St. Paul, Minnesota facility,  resulting in reductions in headcount, as well as other reduction initiatives which  would result in a restructuring charge in the first quarter of 2001.  This plan was later adjusted to transfer  the manufacturing functions to our Penang, Malaysia facility.                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | The restructuring charge resulting from the  consolidation of operations and cost reduction measures initiated in the  first quarter of 2001 totaled approximately $2.3 million.  This charge principally represents employee  separation costs and costs related to idle facilities over the remaining  lease term, which runs through April   2003.  This restructuring  affected approximately 25% of our workforce comprising a total of 73  employees principally in the areas of manufacturing and administration.  Idle facility costs included in the charge  represent a percentage of the remaining rent payments, utilities and  insurance costs ($1.28 million) and the impairment of certain leasehold  improvements ($0.04 million). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | During the third quarter we reduced our workforce  across all functional areas by approximately 17%, resulting in a restructuring  charge of $113,000.  This charge  reflects severance and other benefit costs associated with this reduction.  This workforce reduction affected an additional 31 employees, principally in  the areas of manufacturing and engineering.   All of these costs were incurred and paid during the quarter ended  September 29, 2001.                                                                                                                                                                                                                                                                                         |

 
|   |   | **2002  Restructuring Charges**                                                                                                                                                           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                      |
|   |   | During the first  quarter of 2002, we further reduced our workforce across all functional areas  by approximately 25%, resulting in a restructuring charge of $323,000.  This charge |

 

 

 

7

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|   |   | reflects severance and  other benefits costs associated with this reduction.  This workforce reduction affected an  additional 44 employees, principally in the areas of manufacturing, sales and  marketing and engineering. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                               |
|   |   | The following table summarizes these charges related  to workforce and manufacturing cost reductions (in thousands):                                                                                                               |

 
|                                                         |   | **Employee**   |   |              |   |      |   |
|--------------------------------------------------------------|--------|----------------|--------|-------------------|--------|-----------|--------|
|                                                         |   | **Separation** |   | **Idle Facility** |   |      |   |
|                                                         |   | **Costs**      |   | **Costs**         |   | **Total** |   |
|                                                         |   |           |   |              |   |      |   |
| Accrued  restructuring costs at December 31, 2001            |   | $              | 66     |              | $      | 890       |   | $ | 956 |   |
|                                                         |   |           |   |              |   |      |   |
| Restructuring  charge for the quarter ended   March 30, 2002 |   | 323            |   | —            |   | 323       |   |
|                                                         |   |           |   |              |   |      |   |
| Utilization for  the quarter ended March 30, 2002            |   | (272           | )      | (167              | )      | (439      | )      |
|                                                         |   |           |   |              |   |      |   |
| Accrued  restructuring costs at March 30, 2002               |   | $              | 117    |              | $      | 723       |   | $ | 840 |   |

 

** **
| **5.** |   | **RECENT  ACCOUNTING PRONOUNCEMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | *Statement  of Financial Accounting Standards (SFAS) No. 141 — Business Combinations and  SFAS**No. 142 —  Goodwill and Other Intangible Assets.* In June 2001, the Financial  Accounting Standards Board  (FASB) issued  Statement of Financial Accounting Standards (SFAS) No. 141, *Business  Combinations*, and SFAS No. 142, *Goodwill and Other Intangible Assets*.  SFAS No. 141 eliminated the  pooling-of-interests method of accounting for business combinations after  June 30, 2001.  SFAS No. 142  establishes new standards for accounting for goodwill and intangible  assets.  We adopted SFAS NO. 142 on  January 1, 2002 and there was no impact to our financial position or results  of operations due to this adoption.                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | *Statement of Financial Accounting Standards (SFAS) No. 143 — Accounting for Asset Retirement Obligations*.  In June 2001, the FASB issued SFAS No. 143, *Accounting for Asset Retirement Obligations*.  SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  SFAS No. 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees.  SFAS No. 143 amends SFAS No. 19, *Financial Accounting and Reporting by Oil and Gas Producing Companies*.  SFAS is effective for us on January 1, 2003.  We are currently assessing what impact, if any, SFAS No. 143 will have on our financial position or results of operations. |

 

 

 

8

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|   |   | *Statement of Financial Accounting Standards (SFAS) No. 144 — Accounting for the Impairment or**Disposal of Long-Lived Assets*.  In August 2001, the FASB issued SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets*.  SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, *Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,* and the accounting and reporting provisions of APB Opinion No. 30, *Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,* for the disposal of a segment of a business (as previously defined in that Opinion).  SFAS No. 144 also amends ARB No. 51, *Consolidated Financial Statements,* to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary.  SFAS No. 144 was effective for us on January 1, 2002 and did not have a material effect on our financial position or results of operations for the quarter ended March 30, 2002. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

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**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF

## RESULTS OF OPERATIONS ANDFINANCIAL CONDITION

 

*Thefollowing discussion of our results of operations and financial conditionshould be read together with the other financial information and condensedconsolidated financial statements included in this document.  This discussion contains forward-lookingstatements that involve risks and uncertainties.  Our actual results could differ materially from those anticipatedin the forward-looking statements as a result of a variety of factors,including those discussed in “Risk Factors” and elsewhere in this document.*

 

Overview

 

We supply automation solutions for the global semiconductor test andassembly manufacturing market.  Oursolutions include automated test handlers, factory automation software and ournew integrated Smart Solutions product line. We believe that our products can significantly improve the productivity,yield and throughput of the back-end, or to the post-wafer manufacturingprocess, including assembling, packaging, testing and singulating semiconductordevices.

 

Thedemand for our products and services is dependent upon growth in thesemiconductor industry and the increasing automation needs of semiconductormanufacturers and independent test and assembly facilities.  In the fourth quarter of 2000, thesemiconductor industry went into a sharp downturn, which intensified and continuedthroughout all of 2001, resulting in a significant adverse impact on ourbusiness.  Although worldwidesemiconductor bookings are showing signs of stabilization, the return to marketgrowth is not expected in the near term. As disclosed in our Form 10-K for the year ended December 31, 2001, acontinued or intensified market downturn might result in significant losses,charges for inventory revaluation, or asset impairment or restructuringcharges.  Consequently, as a result ofthis downturn, in the first quarter of 2002, we further reduced our workforceacross all functional areas by approximately 25%, resulting in a restructuringcharge of $323,000.  This chargereflects severance and other benefits costs associated with thisreduction.  This workforce reductionaffected an additional 44 employees, principally in the areas of manufacturing,sales and marketing and engineering.

 

 

**CriticalAccounting Policies**

 

Revenue Recognition

 

In December 1999, the Securities and Exchange Commission (SEC) staffissued Staff Accounting Bulletin No. 101 (SAB 101) — *Revenue Recognition in FinancialStatements. *  SAB 101 establishes the SEC’s interpretationthat if uncertainty exists about customer acceptance of a product, revenueshould not be recognized until acceptance occurs.  In SAB 101, the SEC stated that customer acceptance provisionsmay be included in a contract to enforce a customer’s right to (1) test thedelivered product, (2) require the seller to perform additional servicessubsequent to delivery of an initial product or performance of an initialservice, such as a seller is required to install or activate deliveredequipment, or (3) identify other work necessary to be done before accepting theproduct.  The SEC presumes that suchcontractual customer acceptance provisions 

 

 

 

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are substantive, bargained-for terms of an arrangement.  Accordingly, when such contractual customeracceptance provisions exist, the SEC generally believes that the seller shouldnot recognize revenue until customer acceptance occurs or the acceptance provisionslapse.

 

We adopted SAB 101 in the fourth quarter of 2000.  Under SAB 101, we recognize revenue upon shipment,as our terms are FOB shipping point, for established equipment products thathave previously satisfied existing customer’s performance specifications andthat provide for full payment tied to shipment.  Revenue for products that have not previously satisfied customerperformance specifications or from sales where all or a portion of customerpayment is based upon acceptance are only recognized upon customeracceptance.  As such, in periods ofincreasing shipments, revenues will be deferred if the shipments are for newcustomers, new products or the payment terms are tied to acceptancecriteria.  Consequently, if theseconditions exist, we may report revenue levels that are not reflective ofactual shipment growth rates.  Conversely,in periods of decreasing shipments, we potentially could recognize revenuesrelated to shipments made in prior periods. Consequently, if these conditions exist, we may report revenue levelsthat are greater than actual shipments.

 

 

Allowance for DoubtfulAccounts

 

We record a provisionfor doubtful accounts based on specific identification of our accountsreceivable. This involves a degree of judgement based on discussion with ourinternal sales and marketing groups, our customer base and the examination ofthe financial stability of our customers. There can be no assurance that our estimates will match actual amountsultimately written off.  During periodsof downturn in the market for semiconductor capital equipment  or economic recession, a greater degree ofrisk exists concerning the ultimate collectability of our accounts receivabledue to the impact that these conditions might have on our customer base.

 

 

Valuation of Inventories

 

Our inventories are stated at the lower of cost ormarket.  Cost is determined by the first–in,first–out (“FIFO”) method.  Wemaintain a standard costing system for our inventories.  Assumptions with respect to direct laborutilization, standard direct and indirect cost rates, vendor pricing andutilization of factory capacities are formulated in the development of ourstandard costing system.  Sudden orcontinuing changes in the semiconductor capital equipment market affecting ourshipments can result in significant production variances from our standardrates. These variances directly impact our gross profit performance and maycause variability in gross profits results from reporting period to reportingperiod.  Our labor and overhead ratesare set for production rates that match typical market conditions.  Production variances are charged to cost ofsales each quarter as incurred. Material standards are based upon normalpurchase volumes.  Purchase pricevariances are charged to costs of sales each quarter as incurred.

 

Provisions to reduce inventories to the lower of costor market are made based on a review of excess and obsolete inventories,estimates of future sales and the related value of component parts, which isbased on inventory levels in excess of anticipated 12-month demand for eachspecific product type.  Significantassumptions with respect to market trends and customer 

 

 

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product acceptance are utilized to formulate our12-month demand schedule.  Sudden orcontinuing downward changes in the semiconductor capital equipment market maycause us to record additional inventory revaluation charges in future periods.

 

Accrued Warranties

 

We provide a standardthirteen month warranty program for our equipment products. We recordprovisions for warranty claims for these products based upon historical claimperformance.  This approach has beenapplied since the inception of the warranty program and involves a degree ofsubjectivity in that historical performance is used to estimate future warrantyclaims.  Therefore, there can be noassurance that our estimates will match the actual amount of future claims.

 

 

###### **Results of Operations for the Three Months Ended March30, 2002 and March 31, 2001**

###### ** **

Net sales for the three months ended March 30, 2002,decreased $5.9 million or 62.9% to $3.5 million compared to $9.3 million forthe three months ended March 31, 2001. Product acceptance requirements related to product and customer mixresulted in a net increase to revenues of $2.1 million over shipments for thequarter ended March 30, 2002, while these same factors caused a net increase torevenues of $1.0 million for the first quarter of 2001.  Current quarter product sales continue to beseverely impacted by the continued downturn in the semiconductor capitalequipment market.  We expect net salesto continue to be adversely impacted by the market downturn.

 

Gross profit for the first quarter of 2002 decreased by $2.4 million to$1.3 million, or 36.8% of net sales, from $3.7 million, or 39.2% of net sales,for the comparable period in the prior year. The decrease in gross margin in the current year period primarilyresulted from unabsorbed excess production costs associated with the industrydownturn, and, in particular, excess production costs related to our singulatedproducts.  We expect gross margins tocontinue to be adversely impacted by the market downturn, partially offset bythe benefits of the restructuring steps we initiated in the first quarter of2001 and continuing into the first quarter of 2002.

 

Selling, general and administrative expense in the first quarter of2002 was $2.3 million, or 65.4% of net sales, compared to $3.3 million, or35.3% of net sales for the first quarter of 2001. The decrease in expense forthe current year period is a result of the cost reduction measures initiated in2001 and a decrease in direct selling costs related to the decrease in sales.The increase in selling, general and administrative expense as a percentage ofnet sales in the current year is primarily attributed to the decreased salesbase in the current year period.

 

Research and development expense for the first quarterof 2002 was $1.3 million, or 37.7% of net sales compared to $2.9 million, or31.0% of net sales in the first quarter of 2001.  The decrease in expense for the current year period is a resultof the cost reduction measures initiated in 2001.  The increase in research and development expense as a percentageof net sales in the current year is primarily attributed to the decreased salesbase in the current year period.

 

Amortization expense totaled $0.9 million, or 9.4% ofnet sales for the three months ended March 31, 2001, versus $0.0 million forthe first quarter of 2002.  Thisdecrease of amortization 

 

 

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expense in the current year quarter is directlyattributable to the write-downs of impaired goodwill and other intangibleassets, which were recorded in the third quarter of 2001.

 

Therestructuring charge totaled $323,000 or 9.3% of net sales.  This charge resulted from reductions of ourworkforce across all functional areas in the first quarter of 2002.  This charge reflects severance and otherbenefits costs associated with this reduction. This workforce reduction affected 44 employees, principally in the areasof manufacturing, sales and marketing and engineering.

 

Interest income for the first quarter of 2002 was $45,000 compared to$112,000 in the first quarter of 2001. This decrease resulted from the decrease in investment ininterest-bearing cash and equivalents. Interest expense and other totaled $293,000 in the current year’squarter, compared to ($13,000) for the comparable period in the prioryear.  The increase in interest expenseresulted from the coupon rate associated with our 10% Senior SubordinatedNotes, which were issued in December of 2001, and the amortization of debtissuance costs associated with the note offering.

 

Net loss for the quarter ended March 30, 2002 was $2.9 million or $0.20per share, as compared to a net loss of $5.6 million, or $0.40 per share in theprior year period.

 

**Liquidityand Capital Resources**

 

Thenet loss and reductions in other accrued liabilities were the primary uses ofcash in the first quarter of 2002.  Thenet loss and increases in working capital assets to support new products werethe primary uses of cash in the first quarter of the prior year.  Cash used in operations was $2.6 million inthe first quarter of 2002 and $4.5 million in the first quarter 2001.

 

We record provisions fordoubtful accounts based on specific identification of our accountsreceivable.  We did not record anyprovisions for doubtful accounts for the first quarters of 2001 or 2002.

 

Capital expenditures totaled less than $0.1 millionduring the three months ended March 30, 2002, versus $0.1 million in thecomparable period of 2001.  Capitalpurchases were for specialized manufacturing and computer equipment in thecurrent year period and primarily for computer equipment in the prior yearperiod.

 

At March 30, 2002, we had cash and cash equivalents of$8.5 million, a current ratio of 2.7 and working capital of $10.0 million.  At December 31, 2001, we had cash and cashequivalents of $11.1 million, a current ratio of 2.9 and working capital of $12.9million.

 

Our anticipated capitalexpenditure needs for 2002 are expected to be less than $1.0 million and concentratedin development of additional products and upgrading our management informationsystems.  We believe that cash and cashequivalents on hand at March 30, 2002 are sufficient to finance and sustain ourcontinuing operations at the projected level through at least 2002.  However, the impact of the continuation ofthe severe downturn in the semiconductor capital equipment market, one or moreadditional business acquisitions, or unforeseen changes in market conditionscould cause us to seek additional financing sooner.  We believe that we will be able to raise additional capitaland/or negotiate a working capital line of credit at terms acceptable to us 

 

 

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if required, but noassurance can be made that such financing will be available if needed.  We may acquire other companies, productlines or technologies that are complementary to our business and our workingcapital needs may change as a result of such acquisitions.

 

 

**QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The vast majority of our transactions are denominatedin U.S. dollars; as such, fluctuations in foreign currency exchange rates havehistorically had little impact on us. Inflation has not been a significant factor in our operations in any ofthe periods presented, and it is not expected to affect operations in thefuture.  At March 30, 2002, all of ouroutstanding long-term debt carries interest at a fixed rate. There is nomaterial market risk relating to our long-term debt.

 

**IMPACTOF ACCOUNTING STANDARDS**

 

 In June 2001, the FinancialAccounting Standards Board issued SFAS No. 141, *Business Combinations*, andSFAS No. 142, *Goodwill and Other Intangible Assets*.  SFAS No. 141 eliminated thepooling-of-interests method of accounting for business combinations after June30, 2001.  SFAS No. 142 establishes newstandards for accounting for goodwill and intangible assets.  We adopted SFAS No. 142 on January 1, 2002and there was no impact to our financial position or results of operations dueto this adoption.

 

In June 2001, the FASB issued SFAS No. 143, *Accounting for Asset Retirement Obligations*.  SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  SFAS No. 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees.  SFAS No. 143 amends SFAS No. 19, *Financial Accounting and Reporting by Oil and Gas Producing Companies*.  SFAS No. 143 is effective for us on January 1, 2003.  We are currently assessing what impact, if any, SFAS No. 143 will have on our financial position or results of operations.

 

In August 2001, the FASB issued SFAS No. 144,  *Accounting for the Impairment or Disposal of Long-Lived Assets*.  SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, *Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,* and the accounting and reporting provisions of APB Opinion No. 30, *Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,* for the disposal of a segment of a business (as previously defined in that Opinion).  SFAS No. 144 also amends ARB No. 51, *Consolidated Financial Statements,* to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary.  SFAS No. 144 was effective for us on January 1, 2002 and did not have a material effect on our financial position or results of operations for the quarter ended March 30, 2002.

 

**RISKFACTORS**

 

Except for the historical information containedherein, certain of the matters discussed in this report are “forward-lookingstatements” as defined in the Private Securities Litigation Reform 

 

 

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Act of 1995. These “forward-looking statements” involve certain risks anduncertainties, including, but not limited to, the following: (1) the prolongedor intensified downturn in the semiconductor market which often has adisproportionately negative impact on manufacturers of semiconductor capitalequipment, and which could cause us to continue to incur significant cashlosses decreasing our cash and expose us to potential further charges forrestructuring, excess and obsolete inventory and/or impairment of assets; (2)the market for our products is highly competitive throughout the world,primarily from manufacturers in the United States, Europe and Asia, and many ofour competitors are considerably larger and have considerably greater financialresources than we do which may allow them to develop superior or lower pricedproducts; (3) rapid changes in technology and in tester and handler products,which we must respond to successfully in order for our products to avoidbecoming noncompetitive or obsolete; (4) customer acceptance of our newproducts, including the strip-based Tapestry handling systems and SmartSolutions products, and other singulated device handler products in which wehave invested significant amounts of inventory; (5) possible loss of any of ourkey customers, who account for a substantial percentage of our business; (6)the possible adverse impact of competition in markets which are highlycompetitive; (7) the possible adverse impact of economic or political changesin markets we serve;  and (8) otherfactors detailed from time to time in our SEC reports, including but notlimited to the discussion in the Management’s Discussion & Analysisincluded in Form 10-K for the year ended December 31, 2001.  All forecasts and projections in this reportare “forward-looking statements,” and are based on our current expectations ofour near-term results, based on current information available pertaining to us,including risk factors discussed above. Actual results could differ materially.

 

 

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**MICRO COMPONENT TECHNOLOGY, INC.**

## FORM10-Q

# PART II.  OTHERINFORMATION

 

 
| **Item 4. Submission Of Matters To A Vote Of Security  Holders** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                             | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | A special meeting of the  Company’s shareholders was held on March 14, 2002. |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |
|                                                             | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | The shareholders voted to: |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | • | Approve an amendment to the  Company’s Articles of Incorporation to increase the number of shares of  common stock authorized for issuance from 20,000,000 to 40,000,000 shares.  (13,155,269 affirmative votes; 210,846 negative votes; 59,618 abstention  votes; zero broker non-votes). |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
| **Item 5. Other Information**                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |
|                                                             | ***Restructuring Charge.***  During the first quarter of 2002, in  response to the continued and prolonged downturn in the semiconductor capital  equipment industry, we further reduced our workforce across all functional  areas by approximately 25%, resulting in a restructuring charge of  $323,000.  This charge reflects  severance and other benefits costs associated with this reduction.  This workforce reduction affected an  additional 44 employees, principally in the areas of manufacturing, sales and  marketing and engineering. |   |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |
| **Item  6. Exhibits and Reports on Form 8-K**                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                             | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | **Reports  on Form 8-K** |   |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | No reports on Form 8-K were filed during the quarter  ended March 30, 2002. |   |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

 

 

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**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## SIGNATURES

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 

 

 
|                      | **Micro Component Technology, Inc.**                                     |
|---------------------------|--------------------------------------------------------------------------|
|                      | Registrant                                                               |
|                      |                                                                     |   |
| Dated:  May  3, 2002 | By:                                                                      | /s/ Roger E. Gower |
|                      | Roger E. Gower

President and Chief Executive Officer                    |
|                      |                                                                     |
|                      |                                                                     | And |
|                      |                                                                     |   |
| Dated:  May  3, 2002 | By:                                                                      | /s/ Jeffrey S. Mathiesen |
|                      | Jeffrey S. Mathiesen

Chief Financial Officer   Chief Accounting Officer |

 

 

 

 

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