** **

**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 September 28, 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 November 12, 2002 was 14,152,092.                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                        |

 

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**MICRO COMPONENT 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 |
|                                  |   |   |
|                                  | ITEM 4.  | EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES |
|                                  |   |   |
| **PART II.   OTHER INFORMATION** |
|                                  |   |   |
|                                  | ITEM 5.  | OTHER INFORMATION |
|                                  |   |   |
|                                  | **ITEM 6. ** | **EXHIBITS AND REPORTS ON FORM 8-K** |
|                                  |   |   |
|                                  | **SIGNATURES** |
|                                  |   |   |
|                                  | CERTIFICATIONS |

 

 

2

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**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

# PART I.  FINANCIAL INFORMATION

## ITEM 1. FINANCIAL STATEMENTS

## CONSOLIDATED BALANCE SHEETS

(In thousands,except share and per share data)

(Unaudited)
|                                                                                                  |   | **September  28,** |   | **December 31,** |   |
|-------------------------------------------------------------------------------------------------------|--------|--------------------|--------|------------------|--------|
|                                                                                                  |   | **2002**           |   | **2001**         |   |
| **Assets**                                                                                            |   |               |   |             |   |
| Current assets                                                                                        |   |               |   |             |   |
| Cash and cash  equivalents                                                                            |   | $                  | 3,805  |             | $      | 11,086 |   |
| Accounts  receivable, less allowance for doubtful accounts of $319 and $425,  respectively            |   | 2,081              |   | 3,136            |   |
|                                                                                                  |   |               |   |             |   |
| Inventories                                                                                           |   | 4,840              |   | 5,084            |   |
| Other                                                                                                 |   | 298                |   | 254              |   |
| Total current  assets                                                                                 |   | 11,024             |   | 19,560           |   |
|                                                                                                  |   |               |   |             |   |
| Property, plant  and equipment, net                                                                   |   | 656                |   | 878              |   |
| Debt issuance  costs, net                                                                             |   | 707                |   | 836              |   |
| Other assets                                                                                          |   | 75                 |   | 67               |   |
|                                                                                                  |   |               |   |             |   |
| Total assets                                                                                          |   | $                  | 12,462 |             | $      | 21,341 |   |
|                                                                                                  |   |               |   |             |   |
| **Liabilities and Stockholders’  (Deficit) Equity**                                              |   |               |   |             |   |
| Current  liabilities:                                                                                 |   |               |   |             |   |
| Current portion  of long-term debt                                                                    |   | $                  | 40     |             | $      | 42 |   |
| Current portion  of accrued restructuring costs                                                       |   | 416                |   | 678              |   |
| Accounts payable                                                                                      |   | 1,522              |   | 1,536            |   |
| Accrued warranty                                                                                      |   | 340                |   | 400              |   |
| Deferred revenue  in excess of costs incurred                                                         |   | 41                 |   | 1,133            |   |
| Other accrued  liabilities                                                                            |   | 2,818              |   | 2,864            |   |
| Total current  liabilities                                                                            |   | 5,177              |   | 6,653            |   |
|                                                                                                  |   |               |   |             |   |
| Long-term debt                                                                                        |   | 4                  |   | 33               |   |
| Long-term  portion of accrued restructuring costs                                                     |   | —             |   | 278              |   |
| 10% senior  subordinated convertible debt                                                             |   | 10,000             |   | 10,000           |   |
|                                                                                                  |   |               |   |             |   |
| Stockholders’  (deficit) equity:                                                                 |   |               |   |             |   |
| Preferred stock,  $.01 par value, 1,000,000 authorized, none issued and outstanding                   |   | —             |   | —           |   |
| Common stock,  $.01 par value, 40,000,000 authorized, 14,152,092 and 14,074,365 issued,  respectively |   | 142                |   | 141              |   |
| Additional  paid-in capital                                                                           |   | 88,302             |   | 88,144           |   |
| Cumulative other  comprehensive loss                                                                  |   | (69                | )      | (69              | )      |
| Accumulated  deficit                                                                                  |   | (91,094            | )      | (83,839          | )      |
| Total  stockholders’ (deficit) equity                                                            |   | (2,719             | )      | 4,377            |   |
|                                                                                                  |   |               |   |             |   |
| Total  liabilities and stockholders’ (deficit) equity                                            |   | $                  | 12,462 |             | $      | 21,341 |   |

 

 

See notes tounaudited condensed consolidated financial statements

 

3

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**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTSOF OPERATIONS

(In thousands,except per share data)

(Unaudited)

 
|                                                        |   | **Three  Months Ended** |   | **Nine  Months Ended** |   |
|-------------------------------------------------------------|--------|-------------------------|--------|------------------------|--------|
|                                                        |   | **Sept. 28,**           |   | **Sept. 29,**          |   | **Sept. 28,** |   | **Sept. 29,** |   |
|                                                        |   | **2002**                |   | **2001**               |   | **2002** |   | **2001** |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Net sales                                                   |   | $                       | 2,732  |                   | $      | 4,386 |   | $ | 10,074 |   | $ | 21,119 |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Cost of sales                                               |   |                    |   |                   |   |   |   |   |   |
| Products                                                    |   | 1,558                   |   | 3,013                  |   | 6,199 |   | 12,903 |   |
| Inventory  revaluation                                      |   | —                  |   | 8,092                  |   | — |   | 8,092 |   |
| Total cost of  sales                                        |   | 1,558                   |   | 11,105                 |   | 6,199 |   | 20,995 |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Gross profit  (loss)                                        |   | 1,174                   |   | (6,719                 | )      | 3,875 |   | 124 |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Operating expenses:                                         |   |                    |   |                   |   |   |   |   |   |
| Selling, general  and administrative                        |   | 2,092                   |   | 2,347                  |   | 6,796 |   | 8,504 |   |
| Research and  development                                   |   | 1,012                   |   | 1,459                  |   | 3,368 |   | 6,362 |   |
| Amortization of  intangible assets                          |   | —                  |   | 874                    |   | — |   | 2,632 |   |
| Write-down of  impaired intangible assets                   |   | —                  |   | 9,298                  |   | — |   | 9,298 |   |
| Restructuring  charge                                       |   | 345                     |   | 113                    |   | 193 |   | 2,444 |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Total operating  expenses                                   |   | 3,449                   |   | 14,091                 |   | 10,357 |   | 29,240 |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Loss from  operations                                       |   | (2,275                  | )      | (20,810                | )      | (6,482 | ) | (29,116 | ) |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Interest income                                             |   | 25                      |   | 10                     |   | 101 |   | 163 |   |
| Interest expense  and other, net                            |   | (289                    | )      | —                 |   | (874 | ) | (17 | ) |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Total interest  and other                                   |   | (264                    | )      | 10                     |   | (773 | ) | 146 |   |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Net loss                                                    |   | $                       | (2,539 | )                      | $      | (20,800 | ) | $ | (7,255 | ) | $ | (28,970 | ) |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Net loss per  share, basic and diluted:                     |   | $                       | (0.18  | )                      | $      | (1.48 | ) | $ | (0.51 | ) | $ | (2.07 | ) |
|                                                        |   |                    |   |                   |   |   |   |   |   |
| Weighted average  common and equivalent shares outstanding: |   |                    |   |                   |   |   |   |   |   |
| Basic and  diluted                                          |   | 14,152                  |   | 14,062                 |   | 14,115 |   | 14,011 |   |

 

 

See notes tounaudited condensed consolidated financial statements

 

4

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**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)
|                                                                         |   | **Nine  Months Ended** |   |
|------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                         |   | **Sept. 28,**          |   | **Sept. 29,** |   |
|                                                                         |   | **2002**               |   | **2001** |   |
|                                                                         |   |                   |   |   |   |
| Cash flows from  operating activities:                                       |   |                   |   |   |   |
| Net loss                                                                     |   | $                      | (7,255 | ) | $ | (28,970 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |                   |   |   |   |
| Depreciation                                                                 |   | 317                    |   | 552 |   |
| Amortization                                                                 |   | —                 |   | 2,632 |   |
| Write-down of  impaired intangible assets                                    |   | —                 |   | 9,298 |   |
| Non-cash charge  related to inventory revaluation                            |   | —                 |   | 8,092 |   |
| Loss on disposal  of property                                                |   | 4                      |   | — |   |
| Changes in  assets and liabilities:                                          |   |                   |   |   |   |
| Accounts  receivable                                                         |   | 1,055                  |   | 6,989 |   |
| Inventories                                                                  |   | 244                    |   | (594 | ) |
| Other assets,  net                                                           |   | (39                    | )      | (58 | ) |
| Accounts payable                                                             |   | (14                    | )      | (5,216 | ) |
| Accrued  restructuring costs                                                 |   | (540                   | )      | 1,163 |   |
| Other accrued  liabilities                                                   |   | (1,198                 | )      | (2,932 | ) |
|                                                                         |   |                   |   |   |   |
| Net cash used in  operating activities                                       |   | (7,426                 | )      | (9,044 | ) |
|                                                                         |   |                   |   |   |   |
| Cash flows from  investing activities:                                       |   |                   |   |   |   |
| Additions to  property, plant and equipment                                  |   | (149                   | )      | (152 | ) |
| Proceeds from  disposition of property                                       |   | 37                     |   | — |   |
|                                                                         |   |                   |   |   |   |
| Net cash used in  investing activities                                       |   | (112                   | )      | (152 | ) |
|                                                                         |   |                   |   |   |   |
| Cash flows from  financing activities:                                       |   |                   |   |   |   |
| Payments of  long-term debt                                                  |   | (31                    | )      | (20 | ) |
| Amortization of  debt issuance costs                                         |   | 129                    |   | — |   |
| Proceeds from  issuance of stock, net                                        |   | 159                    |   | 204 |   |
|                                                                         |   |                   |   |   |   |
| Net cash  provided by financing activities                                   |   | 257                    |   | 184 |   |
|                                                                         |   |                   |   |   |   |
| Net decrease in  cash and cash equivalents                                   |   | (7,281                 | )      | (9,012 | ) |
|                                                                         |   |                   |   |   |   |
| Cash and cash  equivalents at beginning of period                            |   | 11,086                 |   | 12,047 |   |
|                                                                         |   |                   |   |   |   |
| Cash and cash  equivalents at end of period                                  |   | $                      | 3,805  |   | $ | 3,035 |   |

 

 

See notes tounaudited condensed consolidated financial statements

 

5

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**MICRO COMPONENT TECHNOLOGY, INC.**

**FORM 10-Q**

## NOTES TOUNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

**1.****                         ****INTERIM FINANCIAL STATEMENTS**

 

**                                   **The accompanying unaudited condensedconsolidated financial statements for the three and nine months ended September28, 2002 have been prepared in accordance with the instructions for SEC Form10-Q and, accordingly, do not include all disclosures required by generallyaccepted accounting principles for complete financial statements.  In our opinion, all adjustments, consistingof normal recurring accruals considered necessary for a fair presentation, havebeen included.

 

                                    Interim unaudited financial results should be read inconjunction with the audited financial statements included in the SEC Report onForm 10-K, for the period ended December 31, 2001.

 

                                    The results of operations for the three and nine monthperiod ended September 28, 2002 are not necessarily indicative of the operatingresults to be expected for the full year.

 

 

**2.      EARNINGS PER SHARE**

 

                                    Basic earnings per share are computedusing the weighted average number of common shares outstanding during eachperiod.  Diluted earnings per shareinclude the dilutive effect of common shares potentially issuable upon theexercise of stock options outstanding. The following table reconciles the denominators used in computing basicand diluted earnings per share:

 
| **(in  thousands)**                            |   | **Three  Months Ended** |   | **Six Months  Ended** |   |
|------------------------------------------------|--------|-------------------------|--------|-----------------------|--------|
|                                           |   | **Sept. 28,**           |   | **Sept. 29,**         |   | **Sept. 28,** |   | **Sept. 29,** |   |
|                                           |   | **2002 (1)**            |   | **2001(1)**           |   | **2002(1)** |   | **2001(1)** |   |
| Weighted average  common shares outstanding    |   | 14,152                  |   | 14,062                |   | 14,115 |   | 14,011 |   |
| Effect of  dilutive stock options and warrants |   | —                  |   | —                |   | — |   | — |   |
|                                           |   |                    |   |                  |   |   |   |   |   |
|                                           |   | 14,152                  |   | 14,062                |   | 14,115 |   | 14,011 |   |

 

----

(1) We reported anet loss for the periods indicated.  Noadjustments were made for the effect of stock options, which totaled 2,546,515shares at September 28, 2002 and 2,296,540 shares at September 29, 2001, as theeffect is antidiliutive.

 

 

**3.****                         ****COMPREHENSIVE NET INCOME OR (LOSS)**

 

**                                   **During the three and nine-month periodsended September 28, 2002 and September 29, 2001 total comprehensive lossequaled net loss as reported on the Consolidated Statements of Operations.

 

6

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**4.**                          **RESTRUCTURING CHARGES**

 

**2001 Restructuring Charges**

 

                                    In 2001, in response to the continued and prolongeddownturn in the semiconductor capital equipment industry, we took the followingactions:

 

During the firstquarter, 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 other reductioninitiatives which resulted  in arestructuring charge in the first quarter of 2001.  This plan was later adjusted to transfer the manufacturingfunctions to our Penang, Malaysia facility.

 

                                    The restructuring charge resulting fromthe consolidation of operations and cost reduction measures initiated in thefirst quarter of 2001 totaled approximately $2.3 million.  This charge principally represented employeeseparation costs and costs related to idle facilities over the remaining leaseterm, which ran through April 2003.  This restructuringaffected approximately 25% of our workforce at the time and comprised a totalof 73 employees principally in the areas of manufacturing andadministration.  Idle facility costsincluded in the charge represented a percentage of the remaining rent payments,utilities and insurance costs ($1.28 million) and the impairment of certainleasehold improvements ($0.04 million).

 

During the thirdquarter, we reduced our workforce across all functional areas by approximately17% at the time, resulting in a restructuring charge of $113,000.  This charge reflected severance and otherbenefit costs associated with this reduction. This workforce reduction affectedan additional 31 employees, principally in the areas of manufacturing andengineering.  All of these costs wereincurred and paid during the quarter ended September 29, 2001.

 

 

**2002 Restructuring Charges**

 

                                    In 2002, in response to the continued and prolongeddownturn in the semiconductor capital equipment industry, we took the followingactions:

 

Duringthe first quarter, we further reduced our workforce across all functional areasby approximately 25% at the time, resulting in a restructuring charge of$323,000.  This charge reflectedseverance and other benefits costs associated with this reduction.  This workforce reduction affected anadditional 44 employees, principally in the areas of manufacturing, sales andmarketing and engineering.

 

Inthe second quarter of 2002, we further reduced our workforce by 7% at the time,resulting in a restructuring charge of $199,000.  This charge reflected severance and other benefit costsassociated with the reduction, which affected 9 employees across all functionalareas.

 

Duringthe second quarter, we completed a lease settlement agreement related to ourMarlborough, Massachusetts’ facility. This agreement requires us to pay $450,000 or approximately 35% of theoutstanding lease obligation, which was to run through April 2003.  As 

 

7

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ofSeptember 28, 2002, $250,000 remains due, which is required to be paid in fullby December 15, 2002 and is included in other accrued liabilities.  As a result of this settlement, theremaining idle facility charge of $674,000 was eliminated in the quarter ended June 29, 2002.

 

Duringthe third quarter, as a result of the on going transfer of our coremanufacturing operations to our Penang, Malaysia facility, we incurred arestructuring charge of $345,000, representing severance and other benefitcosts associated with further reductions to our workforce.  This reduction will be implemented in thethird and fourth quarters of 2002 and affects a total of 38 employees or30%  of our present workforce across allfunctional areas.

 

 The following table summarizes these chargesrelated 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      | )      |
|                                                                 |   |           |   |               |   |      |   |
| Restructuring  charge (recovery) for the quarter ended June 29, 2002 |   | 199            |   | (674               | )      | (475      | )      |
|                                                                 |   |           |   |               |   |      |   |
| Utilization for  the quarter ended June 29, 2002                     |   | (126           | )      | (49                | )      | (175      | )      |
|                                                                 |   |           |   |               |   |      |   |
| Restructuring  charge for the quarter ended September 28, 2002       |   | 345            |   | —             |   | 345       |   |
|                                                                 |   |           |   |               |   |      |   |
| Utilization for  the quarter ended September 28, 2002                |   | (119           | )      | —             |   | (119      | )      |
|                                                                 |   |           |   |               |   |      |   |
| Accrued  restructuring costs at September 28, 2002                   |   | $              | 416    |               | $      | —    |   | $ | 416 |   |

 

 

** **

**5.     SUBSEQUENT EVENT**

 

On May 20, 2002, The NASDAQ Stock Market, Inc.(“Nasdaq”) notified us that we failed to meet the standards for continuedlisting of our common stock on the Nasdaq National Market.  On August 8, 2002, we had a hearing before Nasdaqat which we presented a plan to meet those standards and requested Nasdaq tosuspend its action to give us time to complete the plan.  On September 5, 2002, in response to thismeeting, Nasdaq notified us of its decision to transfer the listing of oursecurities to the Nasdaq SmallCap Market effective with the open of business onSeptember 10, 2002.  Further, certainfinancial covenants with respect to equity maintenance were 

 

8

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set forth that were required to be met by October 31,2002 to maintain the Nasdaq SmallCap Market listing.  We were unable to meet these requirements.  On November 6, 2002, Nasdaq notified us thateffective November 7, 2002 our securities would be de-listed from the NasdaqSmallCap Market and would begin trading on the OTC Bulletin Board under thesymbol MCTI.

 

 

**6.**         **RECENTACCOUNTING 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 SFAS No. 141, *BusinessCombinations*, and SFAS 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.

 

*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

 

*SFAS 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 nine-month period ended September 28, 2002.

 

*SFAS No. 145 - Rescission of FASBstatements NO. 4, 44, and 64, Amendment of FASB**Statement No. 13,and Technical Corrections.)* In April 2002, the FASB issued SFAS No. 145, *Rescission  of FASB StatementsNo. 4, 44, AND 64, Amendment of  FASBStatement No. 13, and**TechnicalCorrections*. SFAS No. 145 was adopted by us on July 1, 2002. Theadoption of the technical corrections contained in SFAS No. 145 did not have animpact on our financial position

 

9

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or results of operations.

 

*SFAS No. 146 — Accounting for CostsAssociated with Exit or Disposal Activities.*  In June 2002,the FASB issued SFAS No. 146, *Accounting forCosts Associated with Exit or Disposal Activities*. SFAS No. 146addresses financial accounting and reporting for costs associated with exit ordisposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.94-3, *Liability Recognition for CertainEmployee Termination Benefits and Other Costs to Exit an Activity*(*Including**CertainCosts Incurred in a Restructuring).* SFAS No. 146 requires that aliability for a cost associated with an exit or disposal activity be recognizedwhen the liability is incurred. Under EITF 94-3, a liability for an exit costwas recognized at the date of an entity’s commitment to an exit plan. SFAS No.146 will be effective for exit or disposal activities that are initiated by theCompany after December 31, 2002.

 

 

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**MICRO COMPONENT TECHNOLOGY, INC.**

**FORM 10-Q**

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

## RESULTSOF OPERATIONS AND FINANCIAL 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 and has continued into 2002, resulting in a significantadverse impact on our business. Although worldwide semiconductor bookings are beginning to show signs ofstabilization, the return to market growth is not expected in the nearterm.  As disclosed in our Form 10-K forthe year ended December 31, 2001, a continued or intensified market downturnmight result in significant losses, charges for inventory revaluation, or assetimpairment or restructuring charges. Consequently, as a result of this downturn, in the first three quartersof 2002, we further reduced our workforce across all functional areas.  The following table summarizes these actionswith respect to our workforce and the related charges.

 
| **2002 Quarter** |   | **Number of   employees affected** |   | **Percentage of workforce** |   | **Charge related to   reduction** |   |
|------------------|--------|------------------------------------|--------|----------------------------------|--------|-----------------------------------|--------|
|             |   |                               |   |                             |   |                              |   |
| First  Quarter   |   | 44                                 |   | 25%                              |   | $323,000                          |   |
|             |   |                               |   |                             |   |                              |   |
| Second  Quarter  |   | 9                                  |   | 7%                               |   | $199,000                          |   |
|             |   |                               |   |                             |   |                              |   |
| Third  Quarter   |   | 38                                 |   | 30%                              |   | $345,000                          |   |
|             |   |                               |   |                             |   |                              |   |

 

On May 20, 2002,The NASDAQ Stock Market, Inc. (“Nasdaq”) notified us that we failed to meet thestandards for continued listing of our common stock on the Nasdaq NationalMarket.  On August 8, 2002, we had ahearing before Nasdaq at which we presented a plan to meet those standards andrequested Nasdaq to suspend its action to give us time to complete theplan.  On September 5, 2002, in responseto this meeting, Nasdaq notified us of its decision to transfer the listing of oursecurities to the 

 

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Nasdaq SmallCapMarket effective with the open of business on September 10, 2002.  Further, certain financial covenants withrespect to equity maintenance were set forth that were required to be met byOctober 31, 2002 to maintain the Nasdaq SmallCap Market listing.  We were unable to meet theserequirements.  On November 6, 2002,Nasdaq notified us that effective November 7, 2002 our securities would bede-listed from the Nasdaq SmallCap Market and would begin trading on the OTCBulletin Board under the symbol MCTI.

 

 

**CriticalAccounting Policies**

** **

Revenue Recognition

 

In December 1999, the Securities and Exchange Commission (SEC) staffissued Staff Accounting Bulletin No. 101 (SAB 101) — *Revenue Recognition in Financial Statements. *  SAB 101 establishes the SEC’s interpretation that if uncertaintyexists about customer acceptance of a product, revenue should not be recognizeduntil acceptance occurs.  In SAB 101,the SEC stated that customer acceptance provisions may be included in a contractto enforce a customer’s right to (1) test the delivered product, (2) requirethe seller to perform additional services subsequent to delivery of an initialproduct or performance of an initial service, such as a seller is required to installor activate delivered equipment, or (3) identify other work necessary to bedone before accepting the product.  TheSEC presumes that such contractual customer acceptance provisions aresubstantive, bargained-for terms of an arrangement.  Accordingly, when such contractual customer acceptance provisionsexist, the SEC generally believes that the seller should not recognize revenueuntil customer acceptance occurs or the acceptance provisions lapse.

 

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 couldrecognize revenues related to shipments made in prior periods.  Consequently, if these conditions exist, wemay report revenue levels that 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.

 

 

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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 demand for each specificproduct type.  Significant assumptionswith respect to market trends and customer product acceptance are utilized toformulate our demand schedule.  Suddenor continuing downward changes in the semiconductor capital equipment marketmay cause us to record additional inventory revaluation charges in futureperiods.

 

 

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 EndedSeptember 28, 2002 and September 29, 2001**

###### ** **

Net sales for the three months ended September 28, 2002, decreased $1.7million or 37.7% to $2.7 million compared to $4.4 million for the three monthsended September 29, 2001.  Productacceptance requirements related to product and customer mix resulted in anincrease of $0.5 million to revenues over shipments in third quarter of 2002,while these same factors caused a $0.2 million net increase to revenues overshipments in the third quarter of 2001. Current year product revenues, especially capacity related singulateddevice handler products, were severely impacted by the downturn in thesemiconductor capital equipment market. We expect net sales to continue to beadversely impacted by the market downturn into the foreseeable future.

 

Gross profit for the third quarter of 2002 increasedby $7.9 million to $1.2 million, or 43.0% of net sales, from a gross loss of$6.7 million for the comparable period in the prior year.  Included in the third quarter of 2001 was acharge for inventory revaluation of $8.1 million.  Exclusive of this charge, gross profit for the third quarter of2002 decreased $0.2 million from a gross profit of $1.4 million, or 

 

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31.3% of sales, for the comparable period in the prioryear. The decrease in gross margin dollars is directly related to the decreasein sales, while the improvement in the gross margin percentage is related tothe cost reduction initiatives taken in the prior and current year.  We expect gross margins to continue to beadversely impacted by the market downturn, partially offset by the benefits ofthe restructuring actions we initiated in the first quarter of 2001 andcontinuing into 2002.

 

Selling, general and administrative expense in the third quarter of2002 was $2.1 million, or 76.6% of net sales, compared to $2.3 million, or 53.5%of net sales for the third quarter of 2001. The decrease in expense for thecurrent year period is a result of the cost reduction measures initiated in2001 and 2002, and a decrease in direct selling costs related to the decreasein sales. The increase in selling, general and administrative expense as apercentage of net sales in the current year is primarily attributed to thedecreased sales base in the current year period.

 

Research and development expense for the third quarterof 2002 was $1.0 million, or 37.0% of net sales compared to $1.5 million, or33.3% of net sales in the third quarter of 2001.  The decrease in expense for the current year period is a resultof the cost reduction measures initiated in 2001and 2002.

 

Amortization expense totaled $0.9 million, or 19.9% ofnet sales for the three months ended September 29, 2001, versus none for thethird quarter of 2002.  This decrease ofamortization expense in the current year quarter is directly attributable tothe write-off of impaired goodwill and other intangible assets, which wererecorded in the third quarter of 2001.

 

In the third quarter of 2001, we recorded a charge relating to theimpairment of intangible assets totaling $9.3 million or 211.9% of netsales.  This charge resulted from theimpairment of goodwill and purchased intangible assets related to the Asecoacquisition resulting from the continued market downturn and a shift in productstrategy.

 

Therestructuring charges resulting from workforce reductions totaled $0.3 millionfor the third quarter of 2002 and $0.1 million for the third quarter of2001.  These charges represent employeeseverance and benefit costs associated with certain workforce reductions.  The 2002 current quarter actions will beimplemented in the third and fourth quarter of 2002 while the actions taken in2001 were incurred and paid during the third quarter of 2001.

 

Interest income for the third quarter of 2002 was $25,000 compared to$10,000 in the third quarter of 2001. This increase resulted from the increase in investment ininterest-bearing cash and equivalents. Interest expense and other totaled $289,000 in the current year’squarter, compared to none for the comparable period in the prior year.  The increase in interest expense resultedfrom the coupon rate associated with our 10% Senior Subordinated Notes, whichwere issued in December 2001, and the amortization of debt issuance costsassociated with the note offering.

 

Net loss for the quarter ended September 28, 2002 was $2.5 million or$0.18 per share, as compared to a net loss of $20.8 million, or $1.48 per sharein the prior year period.

 

 

###### **Results of Operations for the Nine Months EndedSeptember 28, 2002 and September 29, 2001**

 

Net sales for the nine months ended September 28, 2002, decreased $11.0million or 52.3% to $10.1 million compared to $21.1 million for the nine monthsended September 29, 2001.  Productacceptance 

 

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requirements related to product and customer mix resulted in a netincrease to revenues of $2.6 million over shipments for the 2002 nine monthperiod compared to a net increase to revenues of $5.1 million over shipmentsfor the comparable prior year period. Current year product revenues, especially capacity related singulated devicehandler products, were severely impacted by the downturn in the semiconductorcapital equipment market.  We expect netsales to continue to be adversely impacted by the market downturn into theforeseeable future.

 

Gross profit for the first nine months of 2002increased by $3.8 million to $3.9 million, or 38.5% of net sales, from $0.1million, or 0.6% of net sales, for the comparable period in the prioryear.  Included in the 2001 nine-monthperiod was a charge for inventory revaluation of $8.1 million.  Exclusive of this charge, gross profit forthe third quarter of 2002 decreased $4.3 million from a gross profit of $8.2million, or 38.9% of sales, for the comparable period in the prior year. Thedecrease in gross margin dollars is directly related to the decrease in sales,while the maintaining of the gross margin percentage is related to the costreduction initiatives taken in the current year.  We expect gross margins to continue to be adversely impacted bythe market downturn, partially offset by the benefits of the restructuringactions we initiated in the first quarter of 2001 and continuing into 2002.

 

Selling, general and administrative expense for the first nine monthsof 2002 was $6.8 million, or 67.5% of net sales, compared to $8.5 million, or40.3% of net sales for the first nine months of 2001. The decrease in expensefor the current year period is a result of the cost reduction measuresinitiated in 2001 and 2002, and a decrease in direct selling costs related tothe decrease in sales. The increase in selling, general and administrativeexpense as a percentage of net sales in the current year is primarilyattributed to the decreased sales base in the current year period.

 

Research and development expense for the first ninemonths of 2002 was $3.4 million, or 33.4% of net sales, compared to $6.4million, or 30.1% of net sales for the first nine months of 2001.   The decrease in expense for the currentyear period is a result of the cost reduction measures initiated in 2001and2002.

 

Amortization expense totaled $2.6 million, or 12.5% ofnet sales for the nine months ended September 29, 2001, versus none million forthe first nine months of 2002.  Thisdecrease of amortization expense for the first nine months of 2002 is directlyattributable to the write-downs of impaired goodwill and other intangibleassets, which were recorded in the third quarter of 2001.

 

Impairment of intangible assets totaled $9.3 million or 44.0% of salesfor the nine months ended September 29, 2001. This charge resulted from theidentification of impaired goodwill and purchased intangible assets related tothe Aseco acquisition and due to the continuing market downturn and a shift inproduct strategy.

 

Therestructuring charges resulting from workforce reductions totaled $0.2 million,or 0.2% of sales, for the first nine-months of 2002 compared to $2.4 million,or 11.6% of sales,  in the comparableprior year period. These charges represent employee severance and benefit costsassociated with the workforce reductions. Included in the 2002 restructuring charge is a benefit which resultedfrom a lease settlement agreement which was reached during the second quarterof 2002.  This agreement allowed us toexit the existing lease at our Marlborough, Massachusetts facility. As a resultof this agreement, the remaining idle facility charges accrued for this leasewere eliminated in the second quarter of 2002.

 

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Interest income for the first nine months of 2002 was $101,000 comparedto $163,000 for the comparable period in the prior year.  This decrease resulted from the decrease ininvestment in interest-bearing cash and equivalents.  Interest expense and other totaled $874,000 in the current year’squarter, compared to $17,000 for the comparable period in the prior year.  The increase in interest expense resultedfrom the coupon rate associated with our 10% Senior Subordinated Notes, whichwere issued in December 2001, and the amortization of debt issuance costsassociated with the note offering.

 

Net loss for the nine-month period ended September 28, 2002 was $7.3million or $0.51 per share, as compared to a net loss of $29.0 million, or$2.07 per share in the prior year period.

 

**Liquidityand Capital Resources**

 

Thenet loss and reductions in accrued restructuring costs and other accruedliabilities were the primary uses of cash for the nine month period endedSeptember 28, 2002.  The net loss andreductions in accounts payable and other accrued liabilities were the primaryuses of cash in first nine months of the prior year.  Cash used in operations was $7.4 million for the nine monthperiod ended September 28, 2002 and $9.0 million in the comparable prior yearperiod.

 

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

 

Capital expenditures totaled $149,000 in the ninemonths ended September 28, 2002, versus $152,000 in the comparable period of2001.  Capital purchases were primarilyfor software and computer equipment in both the current and prior year periods.

 

At September 28, 2002, we had cash and cashequivalents of $3.8 million, a current ratio of 2.1 and working capital of $5.9million.  At December 31, 2001, we hadcash and cash equivalents of $11.1 million, a current ratio of 2.9 and workingcapital of $12.9 million.

 

Our anticipated capitalexpenditure needs are expected to be minimal for the remainder of 2002.  We believe that cash and cash equivalents onhand at September 28, 2002 are sufficient to finance and sustain our continuingoperations 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 ifrequired, but no assurance can be made that such financing will be available ifneeded.  We may acquire other companies,product lines or technologies that are complementary to our business, and ourworking capital needs may change as a result of such acquisitions.

 

On May 20, 2002,The NASDAQ Stock Market, Inc. (“Nasdaq”) notified us that we failed to meet thestandards for continued listing of our common stock on the Nasdaq NationalMarket.  On August 8, 2002, we had ahearing before Nasdaq at which we presented a plan to meet those standards andrequested Nasdaq to suspend its action to give us time to complete theplan.  On September 5, 2002 in responseto this meeting, Nasdaq notified us of its decision to transfer the listing ofour securities to the Nasdaq SmallCap Market effective with the open ofbusiness on September 10, 2002. Further, certain 

 

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financialcovenants with respect to equity maintenance were set forth that were requiredto be met by October 31, 2002 to maintain the Nasdaq SmallCap Marketlisting.  We were unable to meet theserequirements. On November 6, 2002, Nasdaq notified us that effective November7, 2002 our securities would be de-listed from the Nasdaq SmallCap Market andwould begin trading on the OTC Bulletin Board under the symbol MCTI.** **TheNote Purchase Agreement between us and the purchasers of the our 10% SeniorSubordinated Convertible Notes, which was filed as Exhibit 10W to the Company’s2001 Form 10-K, contains a covenant requiring us to take all action necessaryto continue the listing of our Common Stock on the Nasdaq National Market orany relevant market or system.  Webelieve that we remain in compliance with this covenant.

 

 

**IMPACTOF ACCOUNTING STANDARDS**

 

*Statementof Financial Accounting Standards (SFAS) No. 141 — Business Combinations andSFAS**No. 142 —Goodwill and Other Intangible Assets.* In June 2001, the FinancialAccounting Standards Board  (FASB) issuedSFAS No. 141, *Business Combinations*, and SFAS No. 142, *Goodwill andOther Intangible Assets*. SFAS No. 141 eliminated 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.  We adopted SFAS NO.142 on January 1, 2002 and there was no impact to our financial position orresults of operations due to this adoption.

 

*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

 

*SFAS 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 nine-month period ended September 28, 2002.

 

SFAS No. 145 - *Rescission of FASB statements NO. 4, 44, and 64,Amendment of FASB Statement No. 13, and Technical Corrections.)*  In April 2002, the FASB issued SFAS No. 145,*Rescission of FASB Statements No. 4, 44, AND 64, Amendment of  FASB Statement No. 13, and TechnicalCorrections.*

 

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SFAS No. 145 wasadopted by us on July 1, 2002. The adoption of the technical correctionscontained in SFAS No. 145 did not have an impact on our financial position orresults of operations.

 

*SFASNo. 146 — Accounting for Costs Associated with Exit or Disposal Activities.* In June 2002, the FASB issued SFAS No. 146, *Accounting for Costs Associated with Exit or Disposal Activities*.SFAS No. 146 addresses financial accounting and reporting for costs associatedwith exit or disposal activities and nullifies Emerging Issues Task Force(EITF) Issue No. 94-3, *Liability Recognitionfor Certain Employee Termination Benefits and Other Costs to Exit an Activity(Including**Certain Costs Incurredin a Restructuring).* SFAS No. 146 requires that a liability for acost associated with an exit or disposal activity be recognized when theliability is incurred. Under EITF 94-3, a liability for an exit cost wasrecognized at the date of an entity’s commitment to an exit plan. SFAS No. 146will be effective for exit or disposal activities that are initiated by theCompany after December 31, 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 Act of1995.  These “forward-lookingstatements” involve certain risks and uncertainties, including, but not limitedto, the following: (1) the prolonged or intensified downturn in thesemiconductor market which often has a disproportionately negative impact onmanufacturers of semiconductor capital equipment, and which could cause us tocontinue to incur significant cash losses decreasing our cash and expose us topotential further charges for restructuring, excess and obsolete inventoryand/or impairment of assets; (2) the market for our products is highlycompetitive throughout the world, primarily from manufacturers in the UnitedStates, Europe and Asia, and many of our competitors are considerably largerand have considerably greater financial resources than we do, which may allowthem to develop superior or lower priced products; (3) rapid changes intechnology and in tester and handler products, which we must respond tosuccessfully in order for our products to avoid becoming noncompetitive orobsolete; (4) customer acceptance of our new products, including thestrip-based Tapestry handling systems and Smart Solutions products, and othersingulated device handler products in which we have invested significantamounts of inventory; (5) possible loss of any of our key customers, who accountfor a substantial percentage of our business; (6) the possible adverse impactof competition in markets which are highly competitive; (7) the possibleadverse impact of economic or political changes in markets we serve;  (8) our inability to obtain  financing to fund continuing operations; (9)the potential impact on the liquidity of our securities due to the delistingaction from the Nasdaq SmallCap Market; (10) other factors detailed from time to time in our SEC reports,including but not limited to the discussion in the Management’s Discussion& Analysis included 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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**ITEM3****. QUANTITATIVE AND 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 September 28, 2002, all ofour outstanding long-term debt carries interest at a fixed rate. There is nomaterial market risk relating to our long-term debt.

 

 

**ITEM4****. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES**

 

(a)          Evaluation of disclosure controls and procedures.

 

Under the supervision and with theparticipation of our management, including the Company’s Chief ExecutiveOfficer and Chief Financial Officer, we evaluated the effectiveness of thedesign and operation of our disclosure controls and procedures (as defined inRule 13a-14(c) under the Exchange Act) as of a date (the “EvaluationDate”) within 90 days prior to the filing date of this report. Based uponthat evaluation, the Chief Executive Officer and Chief Financial Officerconcluded that, as of the Evaluation Date, our disclosure controls andprocedures are effective in timely alerting them to the material informationrelating to us (or our consolidated subsidiaries) required to be included inour periodic SEC filings.

 

(b)         Changes in internal controls.

 

There were no significant changesmade in our internal controls or, to our knowledge, in other factors that couldsignificantly affect these controls, subsequent to the date of theirevaluation.

 

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##  

 

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM10-Q

# PART II.  OTHER INFORMATION

 

 

### **Item 5**. Other Information

 

***Restructuring Charges***

 

In 2002, inresponse to the continued and prolonged downturn in the semiconductor capitalequipment industry, we took the following actions:

 

Duringthe first quarter, we further reduced our workforce across all functional areasby approximately 25% at the time, resulting in a restructuring charge of$323,000.  This charge reflectedseverance and other benefits costs associated with this reduction.  This workforce reduction affected anadditional 44 employees, principally in the areas of manufacturing, sales andmarketing and engineering.

 

Inthe second quarter of 2002, we further reduced our workforce by 7% at the time,resulting in a restructuring charge of $199,000.  This charge reflected severance and other benefit costsassociated with the reduction, which affected 9 employees across all functionalareas.

 

Duringthe second quarter, we completed a lease settlement agreement related to ourMarlborough, Massachusetts’ facility. This agreement requires us to pay $450,000 or approximately 35% of theoutstanding lease obligation, which was to run through April 2003.  As of September 28, 2002, $250,000 remainsdue, which is required to be paid in full by December 15, 2002 and is includedin other accrued liabilities.  As aresult of this settlement, the remaining idle facility charge of  $674,000 was eliminated in the quarter endedJune 29, 2002.

 

Duringthe third quarter, as a result of the on going transfer of our coremanufacturing operations to our Penang, Malaysia facility, we incurred arestructuring charge of $345,000, representing severance and other benefitcosts associated with further reductions to our workforce.  This reduction will be implemented in thethird and fourth quarters of 2002 and affects a total of 38 employees or 30%  of our present workforce across allfunctional areas.

 

 

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

 

(b)          Reports on Form 8-K

 

      Noreports on Form 8-K were filed during the quarter ended September 28, 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: | November 12, 2002 | By:                              | /s/ Roger E. Gower |
|   |              |                             | Roger E. Gower |
|   |              |                             | President and Chief Executive Officer |
|   |              |                             |   |
|   |              |                             |   |
|   |              | And                              |
|   |              |                             |   |
|   |              |                             |   |
| Dated: | November 12, 2002 | By:                              | /s/  Thomas  P. Maun |
|   |              |                             | Thomas P. Maun |
|   |              |                             | Chief Financial Officer |
|   |              |                             | Chief Accounting Officer |

 

 

# CERTIFICATION

 

The undersignedhereby certify that this report complies with the requirements of Section 13(a)or 15(d) of the Securities Exchange Act of 1934, and that the informationcontained in this report fairly presents, in all material respects, the financialcondition and results of operations of the Company.

 

 
| Dated:   November 12, 2002 | By:    | /s/ Roger E. Gower                    |
|---------------------------------|--------|---------------------------------------|
|                            |   | Roger E. Gower                        |
|                            |   | President and Chief Executive Officer |

 
| Dated:   November 12, 2002 | By:    | /s/ Thomas P. Maun       |
|---------------------------------|--------|--------------------------|
|                            |   | Thomas P. Maun           |
|                            |   | Chief Financial Officer  |
|                            |   | Chief Accounting Officer |

 

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## **CERTIFICATION**

##  

## I, Roger E. Gower, certify that:

1. I have reviewedthis quarterly report on Form 10-Q of Micro Component Technology, Inc.:

2. Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3. Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

4. The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-14 and 15d-14) for the registrant and we have:

a)designed such disclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this quarterly report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls andprocedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c)presented in this quarterly report our conclusions about the effectiveness ofthe disclosure controls and procedures based on our evaluation as of theEvaluation Date;

5. The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

a)all significant deficiencies in the design or operation of internal controlswhich could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’sauditors any material weaknesses in internal controls; and

b)any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant’s internal controls; and

6. The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.
| Dated:   November 12, 2002 | By:    | /s/ Roger E. Gower                    |
|---------------------------------|--------|---------------------------------------|
|                            |   | Roger E. Gower                        |
|                            |   | President and Chief Executive Officer |

 

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**CERTIFICATION**

I, Thomas P. Maun,certify that:

1. I have reviewedthis quarterly report on Form 10-Q of Micro Component Technology, Inc.:

2. Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3. Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

4. The registrant’sother certifying officer’s and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

a)designed such disclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries,is made known to us by others within those entities, particularly during theperiod in which this quarterly report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls andprocedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c)presented in this quarterly report our conclusions about the effectiveness ofthe disclosure controls and procedures based on our evaluation as of theEvaluation Date;

5. The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

a)all significant deficiencies in the design or operation of internal controlswhich could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’sauditors any material weaknesses in internal controls; and

b)any fraud, whether or not material, that involves management or other employeeswho have a significant role in the registrant’s internal controls; and

6. The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.
| Dated:   November 12, 2002 | By:    | /s/ Thomas P. Maun       |
|---------------------------------|--------|--------------------------|
|                            |   | Thomas P. Maun           |
|                            |   | Chief Financial Officer  |
|                            |   | Chief Accounting Officer |

 

 

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