** **

**SECURITIESAND EXCHANGE COMMISSION**

** **

**Washington, D.C. 20549**

** **

**FORM 10-Q**

 

ý            **QUARTERLY REPORT PURSUANT TO SECTION13 or 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

##### **Forthe quarterly period ended September 29, 2001**

 

**OR**

   o              **TRANSITION REPORT PURSUANT TO SECTION13 or 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe transition period from _________ to ____________**

** **

**CommissionFile 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, MN55113-2528**

(Address of principal executive offices)

**(651)697-4000**

(Registrant's telephone number)

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days

Yes         ý            No           o

The number of shares outstanding of theRegistrant's Common Stock, as of November 2, 2001 was 14,074,365.

 

 

**MICROCOMPONENT TECHNOLOGY, INC**.

 

FORM 10-Q

 

TABLE OF CONTENTS

 

 

** **
| **PART I - FINANCIAL  INFORMATION**  |                                                                                        |   |
|--------------------------------------|---------------------------------------------------------------------------------------------|--------|
|                                 |                                                                                        |   |   |
| **ITEM 1.**                          | **FINANCIAL STATEMENTS**                                                                    |   |   |
|                                 |                                                                                        |   |   |
|                                 | **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 |   |   |
|                                 |                                                                                        |   |   |
| **ITEM  3.**                         | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                             |   |   |
|                                 |                                                                                        |   |   |
|                                 |                                                                                        |   |   |
| **PART II.  OTHER INFORMATION** |                                                                                        |   |
|                                 |                                                                                        |   |   |
| ITEM 5.                         | OTHER INFORMATION                                                                           |   |   |
|                                 |                                                                                        |   |   |
| **ITEM 6.  **                   | **REPORTS ON  FORM 8-K**                                                                    |   |   |
|                                 |                                                                                        |   |   |
| **SIGNATURES**                       |                                                                                        |   |

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CONSOLIDATEDBALANCE SHEETS

(in thousands except share and per sharedata)

(Unaudited)

 
|                                                                                                  |   | **September 29,  2001** |          | **December 31,2000** |          |
|-------------------------------------------------------------------------------------------------------|--------|-------------------------|---------------|----------------------|---------------|
|                                                                                                  |   |                    |          |                 |          |
| Cash  and cash equivalents                                                                            |   | $                       | 3,035         |                 | $             | 12,047 |   |
| Accounts receivable, less allowance for  doubtful accounts of $200 and $200, respectively             |   | 4,916                   |          | 11,905               |          |
| Inventories:                                                                                          |   |                    |          |                 |          |
| Raw                                                                                                   |   | 2,991                   |          | 5,229                |          |
| Work  in process                                                                                      |   | 2,031                   |          | 6,380                |          |
| Finished  goods                                                                                       |   | 898                     |          | 1,809                |          |
| Other                                                                                                 |   | 418                     |          | 371                  |          |
| Total  current assets                                                                                 |   | 14,289                  |          | 37,741               |          |
|                                                                                                  |   |                    |          |                 |          |
| Property,  plant and equipment, net                                                                   |   | 845                     |          | 1,286                |          |
| Goodwill  and other intangible assets, net                                                            |   | -                       |          | 11,920               |          |
| Other  assets                                                                                         |   | 77                      |          | 76                   |          |
|                                                                                                  |   |                    |          |                 |          |
| Total  assets                                                                                         |   | $                       | 15,211        |                 | $             | 51,023 |   |
|                                                                                                  |   |                    |          |                 |          |
|                                                                                                  |   |                    |          |                 |          |
|                                                                                                  |   |                    |          |                 |          |
| **Liabilities  and Stockholders’ Equity**                                                        |   |                    |          |                 |          |
| Current  liabilities:                                                                                 |   |                    |          |                 |          |
| Accounts  payable                                                                                     |   | $                       | 1,740         |                 | $             | 6,956 |   |
| Deferred  profit                                                                                      |   | 1,548                   |          | 3,333                |          |
| Accrued  warranty                                                                                     |   | 735                     |          | 777                  |          |
| Other  accrued liabilities                                                                            |   | 3,192                   |          | 4,297                |          |
| Current  portion of accrued restructuring costs                                                       |   | 677                     |          | -                    |          |
| Current  portion of long-term debt                                                                    |   | 28                      |          | 31                   |          |
| Total  current liabilities                                                                            |   | 7,920                   |          | 15,394               |          |
|                                                                                                  |   |                    |          |                 |          |
| Long-term  debt                                                                                       |   | 20                      |          | 37                   |          |
| Long-term  portion of accrued restructuring costs                                                     |   | 445                     |          | -                    |          |
|                                                                                                  |   |                    |          |                 |          |
| Commitments  and contingencies                                                                        |   | -                       |          | -                    |          |
|                                                                                                  |   |                    |          |                 |          |
| Stockholders’  equity:                                                                           |   |                    |          |                 |          |
| Preferred stock,  $.01 par value, 1,000,000 authorized, none issued and outstanding                   |   | -                       |     | -                    |     |
| Common stock,  $.01 par value, 20,000,000 authorized, 14,074,240 and 13,949,974 issued,  respectively |   | 141                     |     | 139                  |     |
| Additional  paid-in capital                                                                           |   | 88,144                  |          | 87,942               |          |
| Cumulative  other comprehensive loss                                                                  |   | (69                     | )             | (69                  | )             |
| Accumulated  deficit                                                                                  |   | (81,390                 | )             | (52,420              | )             |
| Total  stockholders’ equity                                                                      |   | 6,826                   |          | 35,592               |          |
|                                                                                                  |   |                    |          |                 |          |
| Total  liabilities and stockholders’ equity                                                      |   | $                       | 15,211        |                 | $             | 51,023 |   |
|                                                                                                  |   |                    | ** **    |                 | ** **    |

 

See notes to unaudited condensed consolidatedfinancial statements**MICROCOMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTS OF OPERATIONS

## (In thousands, except per share data)

(Unaudited)

 
|                                                             |   | **Three Months Ended** |       | **Nine Months Ended** |       |
|------------------------------------------------------------------|--------|------------------------|------------|-----------------------|------------|
|                                                             |   | **Sept. 29,  2001**    | ** ** | **Sept. 30,  2000**   | ** ** | **Sept. 29,  2001** | ** ** | **Sept. 30,  2000** | ** ** |
|                                                             |   |                   | ** ** |                  | ** ** |   | ** ** |   | ** ** |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Net  sales                                                       |   | $                      | 4,386      |                  | $          | 14,320 |   | $ | 21,119 |   | $ | 36,953 |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Cost  of sales:                                                  |   |                   |       |                  |       |   |   |   |   |
| Products                                                         |   | 3,013                  |       | 7,923                 |       | 12,903 |   | 19,374 |   |
| Inventory  revaluation                                           |   | 8,092                  |       | -                     |       | 8,092 |   | - |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Total  cost of sales                                             |   | 11,105                 |       | 7,923                 |       | 20,995 |   | 19,374 |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Gross  (loss) profit                                             |   | (6,719                 | )          | 6,397                 |       | 124 |   | 17,579 |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Operating  expenses:                                             |   |                   |       |                  |       |   |   |   |   |
| Selling,  general and administrative                             |   | 2,347                  |       | 4,263                 |       | 8,504 |   | 11,758 |   |
| Research  and development                                        |   | 1,459                  |       | 2,545                 |       | 6,362 |   | 6,658 |   |
| Amortization  of intangible assets                               |   | 874                    |       | 1,175                 |       | 2,632 |   | 3,133 |   |
| Write-down  of impaired intangible assets                        |   | 9,298                  |       | -                     |       | 9,298 |   | - |   |
| Restructuring  charge                                            |   | 113                    |       | -                     |       | 2,444 |   | - |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Total  operating expenses                                        |   | 14,091                 |       | 7,983                 |       | 29,240 |   | 21,549 |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Loss  from operations                                            |   | (20,810                | )          | (1,586                | )          | (29,116 | ) | (3,970 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Interest  income                                                 |   | 10                     |       | 115                   |       | 163 |   | 159 |   |
| Interest  expense                                                |   | (1                     | )          | (133                  | )          | (5 | ) | (292 | ) |
| Other,  net                                                      |   | 1                      |       | (9                    | )          | (12 | ) | (51 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Total  interest and other                                        |   | 10                     |       | (27                   | )          | 146 |   | (184 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Loss  before cumulative effect of change in accounting principle |   | (20,800                | )          | (1,613                | )          | (28,970 | ) | (4,154 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Cumulative  effect of change in accounting principle             |   | -                      |       | -                     |       | - |   | (1,264 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Net  loss                                                        |   | $                      | (20,800    | )                     | $          | (1,613 | ) | $ | (28,970 | ) | $ | (5,418 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Net  loss per share, basic and diluted:                          |   |                   |       |                  |       |   |   |   |   |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Continuing  operations                                           |   | $                      | (1.48      | )                     | $          | (0.13 | ) | $ | (2.07 | ) | $ | (0.38 | ) |
| Cumulative  effect of change in accounting principle             |   | –                 |       | -                     |       | - |   | (0.12 | ) |
| Net  loss                                                        |   | $                      | (1.48      | )                     | $          | (0.13 | ) | $ | (2.07 | ) | $ | (0.50 | ) |
|                                                             |   |                   |       |                  |       |   |   |   |   |
| Weighted  average common and equivalent shares outstanding:      |   |                   |       |                  |       |   |   |   |   |
| Basic  and diluted                                               |   | 14,062                 |       | 12,082                |       | 14,011 |   | 10,765 |   |

 

                                              Seenotes to unaudited condensed consolidated financial statements

 

 

**MICROCOMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTS OF CASH FLOWS

## (Inthousands)

(Unaudited)

 
|                                                                         |   | **Nine Months Ended** |       |
|------------------------------------------------------------------------------|--------|-----------------------|------------|
|                                                                         |   | **Sept. 29,  2001**   | ** ** | **Sept. 30,  2000** | ** ** |
|                                                                         |   |                  | ** ** |   | ** ** |
|                                                                         |   |                  |       |   |   |
| Cash flows from operating activities:                                        |   |                  |       |   |   |
| Net loss                                                                     |   | $                     | (28,970    | ) | $ | (5,418 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |   |                  |       |   |   |
| Depreciation                                                                 |   | 552                   |       | 661 |   |
| Amortization                                                                 |   | 2,632                 |       | 3,133 |   |
| Write-down  of impaired intangible assets                                    |   | 9,298                 |       | - |   |
| Non-cash  charge related to inventory revaluation                            |   | 8,092                 |       | - |   |
| Changes  in assets and liabilities:                                          |   |                  |       |   |   |
| Accounts  receivable                                                         |   | 6,989                 |       | (5,994 | ) |
| Inventories                                                                  |   | (594                  | )          | (4,912 | ) |
| Other  current assets                                                        |   | (58                   | )          | 326 |   |
| Accounts  payable                                                            |   | (5,216                | )          | 3,106 |   |
| Accrued  restructuring costs                                                 |   | 1,163                 |       | - |   |
| Other  accrued liabilities                                                   |   | (2,932                | )          | 4,742 |   |
|                                                                         |   |                  |       |   |   |
| Net  cash used in operating activities                                       |   | (9,044                | )          | (4,356 | ) |
|                                                                         |   |                  |       |   |   |
| Cash  flow from investing activities:                                        |   |                  |       |   |   |
| Additions  to property, plant and equipment                                  |   | (152                  | )          | (283 | ) |
| Payment  for acquisitions, net cash acquired                                 |   | -                     |       | (407 | ) |
|                                                                         |   |                  |       |   |   |
| Net  cash used in investing activities                                       |   | (152                  | )          | (690 | ) |
|                                                                         |   |                  |       |   |   |
| Cash  flows from financing activities:                                       |   |                  |       |   |   |
| Payments  of long-term debt                                                  |   | (20                   | )          | (51 | ) |
| Increase  in line of credit                                                  |   | -                     |       | 314 |   |
| Proceeds  from issuance of stock, net                                        |   | 204                   |       | 20,613 |   |
|                                                                         |   |                  |       |   |   |
| Net  cash provided by financing activities                                   |   | 184                   |       | 20,876 |   |
|                                                                         |   |                  |       |   |   |
| Net  increase (decrease) in cash and cash equivalents                        |   | (9,012                | )          | 15,830 |   |
|                                                                         |   |                  |       |   |   |
| Cash  and cash equivalents at beginning of period                            |   | 12,047                |       | 1,045 |   |
|                                                                         |   |                  |       |   |   |
| Cash  and cash equivalents at end of period                                  |   | $                     | 3,035      |   | $ | 16,875 |   |
|                                                                         |   |                  |       |   |   |
| Supplemental  disclosure:                                                    |   |                  |       |   |   |
| Non-cash  investing and financing activities:                                |   |                  |       |   |   |
| Stock  issued for acquisition of Aseco Corporation                           |   | $                     | -          |   | $ | 23,200 |   |

 

See notes to unaudited condensed consolidatedfinancial statements

**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

** **

**1.         INTERIMFINANCIAL STATEMENTS**

** **

**           **The accompanyingunaudited condensed consolidated financial statements as of September 29, 2001and for the three and nine months ended September 29, 2001 have been preparedin accordance with the instructions for Form 10-Q and, accordingly, do notinclude all disclosures required by generally accepted accounting principlesfor complete financial statements.  Inour opinion, all adjustments, consisting of normal recurring accruals considerednecessary for a fair presentation, have been included.

 

            Interim unaudited financial results should beread in conjunction with the audited financial statements included in ourAnnual Report on Form 10-K, for the year ended December 31, 2000.

 

            The results of operations for the three andnine-months ended September 29, 2001 are not necessarily indicative of theoperating results to be expected for the full year.

 

**2.         CUMULATIVE EFFECT OF CHANGE INACCOUNTING PRINCIPLE**

 

In December 1999, the Securities and Exchange Commission (SEC) staffissued Staff Accounting Bulletin No. 101 (SAB 101), *Revenue Recognition in FinancialStatements*, which, among other things, establishes the SEC’sinterpretation that if uncertainty exists about customer acceptance of aproduct, revenue should not be recognized until acceptance occurs.  Customer acceptance provisions may beincluded in a contract to enforce a customer’s right to (1) test the deliveredproduct, (2) require the seller to perform additional services subsequent todelivery of an initial product or performance of an initial service, such as aseller is required to install or activate delivered equipment, or (3) identifyother work necessary to be done before accepting the product.  The SEC presumes that such contractualcustomer acceptance provisions are substantive, bargained-for terms of anarrangement.  Accordingly, when suchcontractual customer acceptance provisions exist, the SEC generally believesthat the seller should not recognize revenue until customer acceptance occursor the acceptance provisions lapse.

 

In the fourth quarter of 2000 we changed the method of recognizingrevenue to comply with SAB 101.  As aresult of this change, we reported a change in accounting principle inaccordance with APB Opinion No. 20 (APB 20),*Accounting Changes*, by a cumulativeeffect adjustment.  Because we are acalendar year entity that adopted SAB 101 in the fourth quarter of 2000, thecumulative effect of the change was included in the first quarter of 2000pursuant to APB 20 which requires that the change be made as of the beginningof the year (January 1, 2000) and that financial information for pre-changeinterim periods be restated by applying SAB 101 to those periods.  Accordingly, the results for the three andnine months ended September 30, 2000 have been restated pursuant to theadoption of SAB 101.

 

**3.      EARNINGS PER SHARE**

** **

            Earnings per share are computed inaccordance with Statement of Financial Accounting Standards (SFAS) No. 128, *Earnings perShare*.  Basic earnings pershare are computed using the weighted average number of common sharesoutstanding during each period.  Dilutedearnings per share include the dilutive effect of common shares potentiallyissuable upon the exercise of stock options outstanding.  The following table reconciles the denominatorsused in computing basic and diluted earnings per share:

 
| **(in thousands)**                             |   | **Three Months Ended** |       | **Nine Months Ended**  |       |
|------------------------------------------------|--------|------------------------|------------|------------------------|------------|
|                                           |   | **Sept. 29,  2001(1)** | ** ** | **Sept. 30,  2000(1)** | ** ** | **Sept. 29,  2001(1)** | ** ** | **Sept. 30,  2000(1)** | ** ** |
|                                           |   |                   | ** ** |                   | ** ** |   | ** ** |   | ** ** |
| Weighted  average common shares outstanding    |   | 14,062                 |       | 12,082                 |       | 14,011 |   | 10,765 |   |
| Effect  of dilutive stock options and warrants |   | -                      |       | -                      |       | - |   | - |   |
|                                           |   |                   |       |                   |       |   |   |   |   |
|                                           |   | 14,062                 |       | 12,082                 |       | 14,011 |   | 10,765 |   |

 

 

----

(1) We reported aloss for the periods indicated.  Noadjustments were made for the effect of stock options, which totaled 2,296,540shares at September 29, 2001 and 2,177,550 shares at September 30, 2000, as theeffect is antidiliutive.

 

**4.         REPORTINGOF COMPREHENSIVE NET INCOME  (LOSS)**

 

**           **In 1997, theFinancial Accounting Standards Board issued Statement of Financial AccountingStandards (SFAS) No. 130, *Reporting Comprehensive Income,* whichestablishes standards for the reporting and display of comprehensive income(loss) and its components in a full set of general-purpose financialstatements.  Under this standard,certain revenues, expenses, gains, and losses recognized during the period areincluded in comprehensive income (loss), regardless of whether they areconsidered to be results of operations of the period.  During the three-month periods ended September 29, 2001 andSeptember 30, 2000 and the nine month periods ended September 29, 2001 andSeptember 30, 2000, total comprehensive loss equaled net loss as reported onthe Consolidated Statements of Operations.

 

**5.         RESTRUCTURING COSTS AND OTHER SPECIALCHARGES AND PROVISION FOR INVENTORY**

 

Workforce and manufacturing costreductions

** **

**           **On February 21,2001, in response to the downturn in the semiconductor capital equipmentindustry, we announced plans to consolidate the manufacturing and operationfunctions performed in our Marlborough, Massachusetts facility to our St. Paul,Minnesota facility, resulting in reductions in headcount, as well as otherreduction initiatives which would result in a restructuring charge in the firstquarter of 2001.  This plan was lateradjusted to transfer the manufacturing functions to our Penang, Malaysiafacility.

 

            The restructuringcharge resulting from the consolidation of operations and cost reductionmeasures initiated in the first quarter of 2001 totaled approximately$2.3 million.  This charge principallyrepresents employee separation costs and costs related to idle facilities overthe remaining lease term, which runs through April  2003.  This restructuringaffected approximately 25% of our workforce comprising a total of 73 employeesprincipally in the areas of manufacturing and administration.

 

During the third quarter of 2001,due to the continued and prolonged downturn in the semiconductor capitalequipment market, we reduced our workforce across all functional areas byapproximately 17%, resulting in a restructuring charge of $113,000.  This charge reflects severance and otherbenefit costs associated with this reduction. This workforce reduction affectedan additional 31 employees. All of these costs were incurred and paid duringthe quarter ended September 29, 2001.   The following table summarizes the charges related to workforceand manufacturing cost reductions:

 

 
| **(in thousands)**                                                           |   | **Employee  SeparationCosts** |           | **Idle Facility  Costs** |       | **Total** |           |
|------------------------------------------------------------------------------|--------|-------------------------------|----------------|--------------------------|------------|-----------|----------------|
|                                                                         |   |                          | ** **     |                     | ** ** |      | ** **     |
| Restructuring  charge incurred in the first quarter ended March 31, 2001     |   | $                             | 1,011          |                | $          | 1,320     |      | $ | 2,331 |     |
|                                                                         |   |                          |           |                     |       |      |           |
| Utilization for the quarter ended March 31,  2001                            |   | (276                          | )              | -                        |       | (276      | )              |
|                                                                         |   |                          |           |                     |       |      |           |
| Utilization for the quarter ended June 30,  2001                             |   | (616                          | )              | (98                      | )          | (714      | )              |
|                                                                         |   |                          |           |                     |       |      |           |
| Restructuring charge incurred in the third  quarter ended September 29, 2001 |   | 113                           |      | -                        |       | 113       |      |
|                                                                         |   |                          |           |                     |       |      |           |
| Utilization for the quarter ended September  29, 2001                        |   | (165                          | )              | (167                     | )          | (332      | )              |
|                                                                         |   |                          |           |                     |       |      |           |
| Accrued restructuring costs at September  29, 2001                           |   | $                             | 67             |                     | $          | 1,055     |           | $ | 1,122 |   |

 

 

            Impairment of goodwill andpurchased intangible assets

 

            Due to the deep and protracted downturn in the semiconductor capitalequipment industry, we have shifted product strategy and focused our resourceson profit contribution in high growth markets. As a result, we recorded acharge of approximately $9.3 million in the third quarter of 2001, related tothe impairment of goodwill and purchased intangible assets, measured as theamount by which the carrying values exceeded the present value of the estimatedfuture cash flows for goodwill and purchased intangible assets.  These impairments fully relate to theJanuary 30, 2000 Aseco Corporation acquisition and reduce the carrying value ofgoodwill and purchased intangibles to zero as of September 29, 2001.

 

            Provision for Inventory

 

            We recorded a provision for inventory totaling approximately $8.1million in the third quarter of 2001, of which approximately $1.9 millionrepresents discontinued products and approximately $0.6 million representsobsolete components resulting from a shift in product focus.  The remaining charge of approximately $5.6million relates to excess inventory due to the protracted downturn in thesemiconductor capital equipment industry. This additional excess inventory charge was due to a prolonged andsignificant decrease in forecasted revenue and was calculated in accordancewith our policy, which is based on inventory levels in excess of anticipated12-month demand for each specific product type.

 

 

**6.         ACQUISITION**

 

            On January 31,2000, we completed the acquisition of Aseco Corporation (“Aseco”), aMassachusetts-based manufacturer of singulated handling equipment for theback-end of the semiconductor manufacturing process.  The acquisition was structured as a stock-for-stock purchaseresulting in Aseco becoming a wholly owned subsidiary of MCT.  The purchase price totaled $24.0 million,consisting of 2.6 million shares of our commonstock valued at $22.5 million issued to former Aseco shareholders and $1.5million of acquisition-related costs.

 

The acquisitionwas accounted for using the purchase method of accounting.  The results of operations of Aseco areincluded in our consolidated financial statements beginning January 31, 2000.  The purchase price has been allocated basedon the estimated fair values of net assets acquired at the date ofacquisition.  The excess of purchaseprice over net assets acquired, amounting to $9.7 million, was allocated togoodwill, and was being amortized using a straight-line method over theestimated useful life of five years. Other intangible assets, including established workforce, customer list,and core and developed technology, totaling $9.9 million, were being amortizedusing the straight-line method over the estimated useful lives of two to fiveyears.

 

As a result of theindustry downturn in the fourth quarter of 2000, we reduced the carrying valuesof goodwill by $2.5 million and purchased intangible assets by $0.9 million,due to impairment of these assets. In the third quarter of 2001, due to thecontinuing industry downturn and a shift in product strategy, we reduced theremaining carrying values of goodwill and purchased intangible assets by $4.4million and $4.9 million, respectively. This impairment charge reduced all amounts of goodwill and purchasedintangible assets associated with the Aseco acquisition to zero at September29, 2001.

 

            The following unauditedpro forma information presents a summary of combined results of operations ofMCT and Aseco as if the acquisition had occurred at the beginning of the prioryear period presented, along with certain pro forma adjustments to give effectto amortization of goodwill and other intangible assets as well as the adoptionof SAB 101 discussed in Note 2.  The proforma information does not attempt to show how we would have actually performedon a combined basis had the companies been combined throughout thisperiod.  The following pro formainformation, therefore, although helpful in illustrating the financialcharacteristics of our combined company under one set of assumptions, does notattempt to predict or suggest future results.

 

 
| **(In  thousands, except per share data)** |   | **Three  Months  Ended****Sept. 30, 2000** |   | **Nine  Months  Ended  Sept. 30, 2000** |   |
|--------------------------------------------|--------|--------------------------------------------|--------|-----------------------------------------|--------|
|                                       |   |                                       |   |                                    |   |
| Net revenues                               |   | $                                          | 14,320 |                                    | $      | 37,308 |   |
|                                       |   |                                       |   |                                    |   |
| Net loss                                   |   | $                                          | (1,613 | )                                       | $      | (7,523 | ) |
|                                       |   |                                       |   |                                    |   |
| Net loss per share, basic and diluted      |   | $                                          | (0.13  | )                                       | $      | (0.70 | ) |
|                                       |   |                                       |   |                                    |   |

 

 

**7.         RECENT ACCOUNTING PRONOUNCEMENTS**

** **

InJune 2001, the Financial Accounting Standards Board issued Statement onFinancial Accounting Standards (SFAS) No. 141, *BusinessCombinations*, and SFAS No. 142, *Goodwilland Other Intangible Assets*. SFAS No. 141 eliminates the pooling-of-interests method of accountingfor business combinations after June 30, 2001. SFAS No. 142 establishes new standards for accounting for goodwill andintangible assets and will be adopted on January 1, 2002.  As a result of reducing all goodwill andpurchased intangible assets to zero at September 29, 2001 (see Note 5), weanticipate that there will not be an impact to our financial position orresults of operations due to the adoption of SFAS No. 142 on January 1, 2002.

 

On January 1, 2001, we adopted SFAS No. 133, *Accounting for Derivative Instrumentsand Hedging Activities*, as amended by SFAS No. 138, *Accountingfor Certain Derivative Instruments and Certain Hedging Activities*.  SFAS No. 133 establishes accounting andreporting standards for derivative instruments and for hedging activities.  It requires that all derivatives, includingthose embedded in other contracts, be recognized as either assets orliabilities and that those financial instruments be measured at fairvalue.  The accounting for changes inthe fair value of derivatives depends on their intended use and designation.Management has reviewed the requirements of SFAS No. 133 and has determinedthat we have no free-standing or embedded derivatives.  All contracts that contain provisionsmeeting the definition of a derivative also meet the requirements of, and havebeen designated as, normal purchases or sales. Our policy is to not use free-standing derivatives and to not enter intocontracts with terms that cannot be designated as normal purchases or sales.

**MICRO COMPONENTTECHNOLOGY, INC.**

FORM 10-Q

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

## RESULTS OFOPERATIONS AND FINANCIAL CONDITION

** **

*The following discussion of our results ofoperations and financial condition should be read together with the otherfinancial information and condensed consolidated financial statements includedin this document.  This discussioncontains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materiallyfrom those anticipated in the forward-looking statements as a result of avariety of factors, including those discussed in “Risk Factors” and elsewherein this document.*

 

Overview

 

We supply automation solutionsfor the global semiconductor test and assembly manufacturing market.  Our solutions include automated test handlers,factory automation software and our new integrated Smart Solutions productline.  We believe that our products cansignificantly improve the productivity, yield and throughput of the back-end,or to the post-wafer manufacturing process, including assembling, packaging,testing and singulating semiconductor devices.

 

The demand for our products and services is dependentupon growth in the semiconductor industry and the increasing automation needsof semiconductor manufacturers and independent test and assemblyfacilities.  In the fourth quarter of2000, the semiconductor industry went into a sharp downturn, which intensifiedthroughout the first three quarters of 2001, resulting in a significant adverseimpact on our business. Although worldwide semiconductor bookings are showingsigns of stabilization, the return to market growth is not expected in the nearterm. As disclosed in our Form 10-K for the year ended December 31, 2000 andeach of our Forms 10-Q for the first two quarters of 2001, a continued or intensifiedmarket downturn might result in significant losses, charges for inventoryrevaluation, or asset impairment or restructuring charges. Consequently, as aresult of this downturn, we have examined our operations and taken thefollowing actions during 2001.

 

*Workforce andmanufacturing cost reductions*

** **

**           **On February 21,2001, in response to the downturn in the semiconductor capital equipmentindustry, we announced plans to consolidate the manufacturing and operationfunctions performed in our Marlborough, Massachusetts facility to our St. Paul,Minnesota facility, resulting in reductions in headcount, as well as otherreduction initiatives which would result in a restructuring charge in the firstquarter of 2001.  This plan was lateradjusted to transfer the manufacturing functions to our Penang, Malaysiafacility.

 

The restructuring charge resulting from theconsolidation of operations and cost reduction measures initiated in the firstquarter of 2001 totaled approximately $2.3 million.  This charge principally represents employee separation costs andcosts related to idle facilities over the remaining lease term, which runsthrough April 2003.  This restructuringaffected approximately 25% of our workforce comprising a total of 73 employeesprincipally in the areas of manufacturing and administration.

 

 

During the third quarter of 2001,due to the continued and prolonged downturn in the semiconductor capitalequipment market, we reduced our workforce across all functional areas byapproximately 17%, resulting in a restructuring charge of $113,000.  This charge reflects severance and otherbenefit costs associated with this reduction. This workforce reduction affectedan additional 31 employees. All of these costs were incurred and paid duringthe quarter ended September 29, 2001.

 

            *Impairment of goodwill and purchased intangible assets*

 

            Due to the deep and protracted downturn in the semiconductor capitalequipment industry, we have shifted product strategy and focused our resourceson profit contribution in high growth markets. As a result, we recorded acharge of approximately $9.3 million in the third quarter of 2001, related tothe impairment of goodwill and purchased intangible assets, measured as theamount by which the carrying values exceeded the present value of the estimatedfuture cash flows for goodwill and purchased intangible assets.  These impairments fully relate to theJanuary 30, 2000 Aseco Corporation acquisition and reduce the carrying value ofgoodwill and purchased intangibles to zero as of September 29, 2001.

 

            *Provision for Inventory*

 

            We recorded a provision for inventory totaling approximately $8.1million in the third quarter of 2001, of which approximately $1.9 millionrepresents discontinued products and approximately $0.6 million representsobsolete components resulting from a shift in product focus.  The remaining charge of approximately $5.6million relates to excess inventory due to the protracted downturn in thesemiconductor capital equipment industry. This additional excess inventory charge was due to a prolonged andsignificant decrease in forecasted revenue and was calculated in accordancewith our policy, which is based on inventory levels in excess of anticipated12-month demand for each specific product type.

 

Most industry forecasts do notpredict capacity-driven purchases of capital equipment to recover before late2002 or early 2003.  Therefore, we willcontinue to examine opportunities to further reduce our costs through theconsolidation of operations, limiting capital expenditures, monitoringinventory purchases or additional strategic restructuring initiatives.  Certain of these types of actions have thepotential for further charges in future periods.

 

Acquisitionof Aseco Corporation

 

On January 31, 2000, we completedthe acquisition of Aseco Corporation (“Aseco”), a Massachusetts-based manufacturerof singulated handling equipment for the back-end of the semiconductormanufacturing process.  The acquisitionwas structured as a stock-for-stock purchase resulting in Aseco becoming awholly owned subsidiary of MCT.  Thepurchase price totaled $24.0 million, consisting of 2.6 million shares of ourcommonstock valued at $22.5 million issued to former Aseco shareholders and $1.5million of acquisition-related costs.

 

The acquisitionwas accounted for using the purchase method of accounting.  The results of operations of Aseco areincluded in our consolidated financial statements beginning January 31, 2000.  The purchase price has been allocated basedon the estimated fair values of net assets acquired at the date ofacquisition.  The excess of purchaseprice over net assets acquired, amounting to $9.7 million, was allocated togoodwill, and was being amortized using a straight-line method over theestimated useful life of five years. Other intangible assets, including established workforce, customer list,and core and developed technology, totaling $9.9 million, were being amortizedusing the straight-line method over the estimated useful lives of two to fiveyears.

 

As a result of theindustry downturn in the fourth quarter of 2000, we reduced the carrying valuesof goodwill by $2.5 million and purchased intangible assets by $0.9 million,due to impairment of these assets. In the third quarter of 2001, due to the continuingindustry downturn and a shift in product strategy, we reduced the remainingcarrying values of goodwill and purchased intangible assets by $4.4 million and$4.9 million, respectively.  Thisimpairment charge reduced all amounts of goodwill and purchased intangibleassets associated with the Aseco acquisition to zero at September 29, 2001.

** **

###### **Results of Operations for the Three Months EndedSeptember 29, 2001 and September 30, 2000**

###### ** **

Net sales for the three monthsended September 29, 2001 decreased $9.9 million or 69.2% to $4.4 millioncompared to $14.3 million for the three months ended September 30, 2000.  Product acceptance requirements related toproduct and customer mix caused a portion of the revenue related to thirdquarter 2000 shipments to be deferred into future periods.  Current quarter product revenues, especiallycapacity related singulated device handler products, were severely impacted bythe downturn in the semiconductor capital equipment market.  We expect net sales to continue to be adverselyimpacted by the market downturn.

 

Gross profit for the third quarter of 2001, inclusiveof the inventory revaluation charge, decreased by $13.1 million to a negative($6.7) million, from $6.4 million, or 44.7% of net sales, for the comparableperiod in the prior year.  Exclusive ofthe inventory revaluation charge, gross profit decreased by $5.0 million to$1.4 million or 31.8% of net sales. The decrease in gross margin in the current  period primarily resulted from the continuedunabsorbed excess production costs associated with the industry downturn and inparticular excess production costs related to our singulated products.  We expect gross margins to continue to beadversely impacted by the market downturn, partially offset by the benefits ofthe consolidation of manufacturing operations and workforce reductionsinitiated in the first and third quarter of 2001.

 

Selling, general andadministrative expense in the third quarter of 2001 was $2.3 million, or 52.3%of net sales, compared to $4.3 million, or 30.1% of net sales for the thirdquarter of 2000. The decrease in expense for the current quarter is a result ofthe cost reduction measures initiated in the first and third quarters of 2001.The increase in selling, general and administrative expense as a percentage ofnet sales in the current quarter is primarily attributed to the decreased salesbase.

 

Research and development expense for the third quarterof 2001 was $1.5 million, or 34.1% of net sales, compared to $2.5 million, or17.5% of net sales in the third quarter of 2000.  The decrease in expense for the current quarter is a result ofthe cost reduction measures initiated in the first and third quarters of 2001.The increase in research and development as a percentage of net sales in the currentquarter is primarily attributed to the decreased sales base.

 

Amortization expense totaled$0.9 million, or 20.5% of net sales for the third quarter of 2001, versus $1.2million, or 8.4% of net sales in the third quarter of 2000.  The absolute decrease is attributed to thereductions in carrying values of intangible assets and goodwill, which wereidentified in the fourth quarter of 2000 due to the industry downturn.

 

In the third quarter of 2001,we recorded a charge relating to the impairment of intangible assets totaling$9.3 million or 211.4% of net sales. This charge resulted from the impairment of goodwill and purchasedintangible assets related to the Aseco acquisition resulting from the continuedmarket downturn and  shift in productstrategy.

 

The restructuring chargesresulting from workforce reduction totaled $0.1 million for the third quarterof 2001.  This charge representsemployee separation costs which were incurred and paid during the third quarterof 2001.

 

Interest income for the thirdquarter of 2001 was $10,000 compared to $115,000 in the third quarter of2000.  This decrease resulted from lowerinvestments amounts in interest-bearing accounts and the decline of relativecash balances.  Interest expense totaled$1,000 in the current  quarter, comparedto $133,000 for the comparable period in the prior year.  The decrease in interest expense isattributed to decreased borrowings under the lines of credit.

 

Net loss for the quarter endedSeptember 29, 2001 was $20.8 million or $1.48 per share, as compared to a netloss of $1.6 million, or $0.13 per share in the prior  period.

 

 

###### **Results of Operations for the Nine Months EndedSeptember 29, 2001 and September 30, 2000**

 

Net sales for the nine monthsended September 29, 2001, decreased $15.9 million or 43.0% to $21.1 millioncompared to $37.0 million for the nine months ended September 30, 2000.  Product acceptance requirements related toproduct and customer mix resulted in a net increase to revenues over shipmentsfor the 2001 nine month period while these same factors caused a largepercentage of the revenue in the nine month period of 2000 from shipments to bedeferred into future periods. Current year product sales, especiallycapacity-related singulated device handler products, continue to be severelyimpacted by the downturn in the semiconductor capital equipment market. Salesof our Tapestry and Smart Solutions strip-based products increased  $3.3 million over the prior year period,while sales of singulated device handler products decreased $19.2 million fromthe comparable prior year period.  Weexpect net sales to continue to be adversely impacted by the market downturn.

 

Gross profit for the first nine months of 2001,inclusive of the inventory revaluation charge, decreased by $17.5 million to$0.1 million, or 0.6% of net sales, from $17.6 million, or 47.6% of net sales,for the comparable period in the prior year. Exclusive of the inventory revaluation charge, gross profit decreased by$9.4 million to $8.2 million or 38.9% of net sales. The decrease in grossmargin in the current  period primarilyresulted from the continued unabsorbed excess production costs associated withthe industry downturn and in particular excess production costs related to oursingulated products. Gross margin contribution improved on our Tapestry andSmart Solutions products as a result of their increased sales levels over theprior year period.  We expect overallgross margins to continue to be adversely impacted by the market downturn,partially offset by the benefits of the consolidation of manufacturingoperations and workforce reduction initiated in the first and third quarter of2001.

 

Selling, general andadministrative expense for the first nine months of 2001 was $8.5 million, or40.3% of net sales, compared to $11.8 million, or 31.9% of net sales for thefirst nine months of 2000. The decrease in expense for the current period is aresult of the cost reduction measures initiated in the first and third quartersof 2001. The increase in selling, general and administrative expense as apercentage of net sales in the current period is primarily attributed to thedecreased sales base.

 

Research and development expense for the first ninemonths of 2001 was $6.4 million, or 30.3 % of net sales, compared to $6.7million, or 18.1% of net sales for the first nine months of 2000.  The increase in research and development asa percentage of net sales in the current period is primarily attributed to thedecreased sales base.

 

Amortization expense totaled$2.6 million, or 12.3% of net sales for the nine months ended September 29,2001, versus $3.1 million, or 8.4% of sales in the prior year period.  The absolute decrease is attributed to thereduction in carrying values of intangible assets and goodwill which were identifiedin the fourth quarter of 2000 due to the industry downturn.

 

Impairment of intangible assetstotaled $9.3 million or 44.1% of sales for the nine months ended September 29,2001. This charge resulted from the identification of impaired goodwill andpurchased intangible assets related to the Aseco acquisition and due to thecontinuing market downturn and  shift inproduct strategy.

 

Restructuring charges from theconsolidation of operations and cost reduction measures initiated in the firstquarter of 2001 totaled $2.3 million and $0.1 million in the third quarter of2001. The first quarter 2001 charges principally represent employee separationcosts and costs related to idle facilities over the remaining lease term, whichruns through April 2003.   The third quarter 2001 charges representemployee separations costs, which were incurred and paid during the thirdquarter of 2001.

 

Interest income for the firstnine months of 2001 was $163,000 compared to $159,000 in the first nine monthsof 2000.  This increase resulted fromhigher available cash balances invested in interest-bearing accounts in thecurrent period versus the prior year comparable period. Interest expensetotaled $5,000 in the first nine months of 2001, compared to $292,000 for thecomparable period in the prior year. The decrease in interest expense is attributed to decreased borrowingsunder the lines of credit during the current year.

 

The cumulative effect of  change in accounting principle resulted fromthe adoption of Staff Accounting Bulletin 101 (“SAB101”) totaling $1.3 millionor $0.12 per share in the prior year period.

 

Net loss for the nine-monthperiod ended September 29, 2001 was $29.0 million or $2.07 per share, ascompared to a net loss of $5.4 million, or $0.50 per share in the prior yearperiod.

 

 

**Liquidity and Capital Resources**

 

Thenet loss, exclusive of the write-down of impaired intangible assets and thenon-cash charge related to inventories, and reductions in accounts payable andother accrued liabilites were the primary uses of cash for the nine monthperiod ended September 29, 2001.  Thenet loss and increases in working capital assets to support the business growthwere the primary uses of cash in the first nine months of 2000.  Cash used in operations was $9.0 million forthe nine month period ended September 29, 2001 and $4.4 million in thecomparable prior year period.

 

Capital expenditures totaled $152,000 during the ninemonths ended September 29, 2001, versus $283,000 in the comparable period of2000.  Capital purchases were forspecialized manufacturing and computer equipment in the current year period andprimarily for computer equipment in the prior year period.

 

Cash used in the acquisition of Aseco was $0.4 millionin the nine month period ended September 30, 2000.

 

In August 2000, we sold 3,000,000 shares of our commonstock in a public offering, and in September 2000, we sold 290,000 pursuant tothe underwriters’ over-allotment option. Our proceeds were approximately $19.7 million, net of expenses associatedwith the offering.

 

At September29, 2001, we had cash and cash equivalents of $3.0 million, a current ratio of1.8 and working capital of $6.4 million. At December 31, 2000, we had cash and cash equivalents of $12.0 million,a current ratio of 2.5 and working capital of $22.3 million.

 

At September 29, 2001 we maintained an unused $1.0million secured line of credit with a bank. Interest on the line, at our election, is based on either the bank’sprime rate or Eurodollar rate.  Theamount available for borrowing is calculated as a percentage of eligibleaccounts receivable of Aseco, and borrowings are secured by a certificate ofdeposit with the bank.

 

Our anticipated capitalneeds for the next twelve months are expected to be less than $1.0 million andconcentrated in development of additional products and upgrading our managementinformation systems.  As previouslydiscussed, the market we service is experiencing a significant and protracteddownturn, which has caused us to incur significant losses and has reduced ourcash and working capital position.  Wehave and will continue to implement cost reduction measures, limit capitalexpenditures, monitor inventory purchases and restructure our operations in responseto this downturn to minimize the impact to our working capital position. Webelieve that cash and cash equivalents on hand at September 29, 2001, fundsavailable through our existing bank line and establishing additional lines ofcredit or other debt instruments, if necessary, will be sufficient to financeour continuing operations at the significantly reduced levels, for theforeseeable future, but that unforeseen changes in market conditions oradditional business acquisitions could cause us to seek additional financingsooner.  There can be no assurances thatsuch financing will be available or be available on terms acceptable to us. Wemay acquire other companies, product lines or technologies that arecomplementary to our business and our working capital needs may change as aresult of such acquisitions.

** **

**IMPACT OF ACCOUNTING STANDARDS**

 

In June 2001, the Financial AccountingStandards Board issued Statement on Financial Accounting Standards (SFAS) No.141, *Business Combinations*, andSFAS No. 142, *Goodwill and Other IntangibleAssets*.  SFAS No. 141eliminates the pooling-of-interests method of accounting for businesscombinations after June 30, 2001.  SFASNo. 142 establishes new standards for accounting for goodwill and intangibleassets and will be adopted on January 1, 2002. As a result of reducing allgoodwill and purchased intangible assets to zero at September 29, 2001, weanticipate that there will not be an impact to our financial position orresults of operations due to the adoption of SFAS No. 142 on January 1, 2002.

 

On January 1,2001, we adopted SFAS No. 133, *Accounting for Derivative Instruments and Hedging Activities*,as amended by SFAS No. 138, *Accounting for Certain Derivative Instruments andCertain Hedging Activities*. SFAS No. 133 establishes accounting and reporting standards forderivative instruments and for hedging activities.  It requires that all derivatives, including those embedded inother contracts, be recognized as either assets or liabilities and that thosefinancial instruments be measured at fair value.  The accounting for changes in the fair value of derivativesdepends on their intended use and designation. Management has reviewed the requirementsof SFAS No. 133 and has determined that we have no free-standing or embeddedderivatives.  All contracts that containprovisions meeting the definition of a derivative also meet the requirementsof, and have been designated as, normal purchases or sales.  Our policy is to not use free-standingderivatives and to not enter into contracts with terms that cannot be designatedas normal purchases or sales.

 

 

**RISK FACTORS**

 

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 Act of 1995.  These “forward-looking statements” involvecertain risks and uncertainties, including, but not limited to, the following:(1) the prolonged or intensified downturn in the semiconductor market whichoften has had a disproportionately negative impact on manufacturers ofsemiconductor capital equipment, and which could cause us to continue to incursignificant cash losses decreasing our cash and exposing us to potentialfurther charges for restructuring, excess and obsolete inventory and/orimpairment of assets; (2) rapid changes in technology and in tester and handlerproducts, which we must respond to successfully in order for our products toavoid becoming noncompetitive or obsolete; (3) customer acceptance of our newproducts, including the strip-based Tapestry handling systems and SmartSolutions products, which we have invested significant amounts of inventory;(4) possible loss of any of our key customers, who account for a substantialpercentage of our business; (5) the possible adverse impact of competition inmarkets which are highly competitive; (6) the possible adverse impact ofeconomic or political changes in markets we serve; and (7) other factorsdetailed from time to time in our SEC reports, including but not limited to thediscussion in the Management’s Discussion & Analysis included in Form 10-Kfor the year ended December 31, 2000. All forecasts and projections in this report are “forward-lookingstatements,” and are based on our current expectations of our near-termresults, based on current information available pertaining to us, includingrisk factors discussed above.  Actualresults could differ materially.

 

 

**Item3.**   **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.  Our bank line of credit carriesa variable interest rate.  At September29, 2001, we had no borrowings on our credit line; however, the need to borrowin the future could expose us to interest rate risk.  At September 29, 2001, all of our outstanding long-term debtcarries interest at a fixed rate. There is no material market risk relating toour bank lines or long-term debt.

 

 

 

**MICROCOMPONENT TECHNOLOGY, INC.**

## FORM10-Q

## PART II.  OTHERINFORMATION

** **

### **Item 5.  OtherInformation**

 

Workforce and manufacturing costreductions

** **

**           **On February 21,2001, in response to the downturn in the semiconductor capital equipmentindustry, we announced plans to consolidate the manufacturing and operationfunctions performed in our Marlborough, Massachusetts facility to our St. Paul,Minnesota facility, resulting in reductions in headcount, as well as otherreduction initiatives which would result in a restructuring charge in the firstquarter of 2001.  This plan was later adjustedto transfer the manufacturing functions to our Penang, Malaysia facility.

 

The restructuring charge resulting from theconsolidation of operations and cost reduction measures initiated in the firstquarter of 2001 totaled approximately $2.3 million.  This charge principally represents employee separation costs andcosts related to idle facilities over the remaining lease term, which runsthrough April  2003.  This restructuring affected approximately25% of our workforce comprising a total of 73 employees principally in theareas of manufacturing and administration.

 

During the third quarter of 2001,due to the continued and prolonged downturn in the semiconductor capitalequipment market, we reduced our workforce across all functional areas byapproximately 17%, resulting in a restructuring charge of $113,000.  This charge reflects severance and otherbenefit costs associated with this reduction. All of these costs were incurred and paid during the quarter endedSeptember 29, 2001.

 

            Impairment of goodwill andpurchased intangible assets

 

            Due to the deep and protracted downturn in the semiconductor capitalequipment industry, we have shifted product strategy and focused our resourceson profit contribution in high growth markets. As a result, we recorded acharge of approximately $9.3 million in the third quarter of 2001, related tothe impairment of goodwill and purchased intangible assets, measured as theamount by which the carrying values exceeded the present value of the estimatedfuture cash flows for goodwill and purchased intangible assets.  These impairments fully relate to theJanuary 30, 2000 Aseco Corporation acquisition and reduce the carrying value ofgoodwill and purchased intangibles to zero as of September 29, 2001.

 

            Provision for Inventory

 

            We recorded a provision for inventory totaling approximately $8.1million in the third quarter of 2001, of which approximately $1.9 millionrepresents discontinued products and approximately $0.6 million representsobsolete components resulting from a shift in product focus.  The remaining charge of approximately $5.6million relates to excess inventory due to the protracted downturn in thesemiconductor capital equipment industry. This additional excess inventory charge was due to a prolonged andsignificant decrease in forecasted revenue and was calculated in accordancewith our policy, which is based on inventory levels in excess of anticipated12-month demand for each specific product type.

 

Acquisition of Aseco Corporation

On January 31, 2000, we completed the acquisition of Aseco Corporation(“Aseco”), a Massachusetts-based manufacturer of singulated handling equipmentfor the back-end of the semiconductor manufacturing process.  The acquisition was structured as astock-for-stock purchase resulting in Aseco becoming a wholly owned subsidiaryof MCT.  The purchase price totaled$24.0 million, consisting of 2.6 million shares of ourcommon stock valued at $22.5million issued to former Aseco shareholders and $1.5 million ofacquisition-related costs.

 

The acquisitionwas accounted for using the purchase method of accounting.  The results of operations of Aseco areincluded in our consolidated financial statements beginning January 31,2000.  The purchase price has beenallocated based on the estimated fair values of net assets acquired at the dateof acquisition.  The excess of purchaseprice over net assets acquired, amounting to $9.7 million, was allocated togoodwill, and was being amortized using a straight-line method over theestimated useful life of five years. Other intangible assets, including established workforce, customer list,and core and developed technology, totaling $9.9 million, were being amortizedusing the straight-line method over the estimated useful lives of two to fiveyears.

As a result of theindustry downturn in the fourth quarter of 2000, we reduced the carrying valuesof goodwill by $2.5 million and purchased intangible assets by $0.9 million,due to impairment of these assets. In the third quarter of 2001, due to thecontinuing industry downturn and a shift in product strategy, we reduced theremaining carrying values of goodwill and purchased intangibles assets by $4.4million and $4.9 million, respectively. This impairment charge reduced all amounts of goodwill and purchasedintangible assets associated with the Aseco acquisition to zero at September29, 2001.

 

 

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

 

(a) Reports on Form 8-K

          No reports on Form 8-K were filedduring the quarter ended September 29, 2001.

 

**MICROCOMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## SIGNATURES

 

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|                          | Micro  Component Technology, Inc. |
|-------------------------------|-----------------------------------|
|                          | Registrant                        |
|                          |                              |   |
|                          |                              |   |
| Dated:  November 2, 2001 | By:                               | /s/ Roger E.  Gower |
|                          |                              | Roger E.  Gower |
|                          |                              | President  and Chief Executive Officer |
|                          |                              |   |
|                          |                              |   |
|                          |                              | And |
|                          |                              |   |
|                          |                              |   |
| Dated:  November 2, 2001 | By:                               | /s/ Jeffrey  S. Mathiesen |
|                          |                              | Jeffrey S.  Mathiesen |
|                          |                              | Chief  Financial Officer |
|                          |                              | Chief Accounting  Officer |