** **

**SECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

 

**FORM 10-Q / A**

 

**ý****        QUARTERLYREPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

** **

**For thequarterly period ended September 29, 2001**

** **

**OR**

** **

 

**o****        TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**Forthe transition period from                                       to                                         **

 

##### **CommissionFile No. 0-22384**

 

**MICRO COMPONENT TECHNOLOGY, INC.**

(Exact name ofregistrant as specified in its charter)

 

| **Minnesota**                                                    | ** ** | **41-0985960**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**2340West County Road C, St. Paul, MN 55113-2528**

(Address ofprincipal executive offices)

 

**(651) 697-4000**

(Registrant'stelephone number)

 

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days

 

                                                                Yes   ý                                  No   o

The number ofshares outstanding of the Registrant's Common Stock as of November 2, 2001 was14,074,365.

 

 

 

**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** |
|                                 |   |   |
| **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

## CONSOLIDATED BALANCE SHEETS

(in thousandsexcept share and per share data)

(Unaudited)
|                                                                                                  |   | **September 29,** |          | **December 31,** |          |
|-------------------------------------------------------------------------------------------------------|--------|-------------------|---------------|------------------|---------------|
|                                                                                                  |   | **2001**          |          | **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 tounaudited condensed consolidated financial statements

 

**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATEDSTATEMENTS OF OPERATIONS

(In thousands,except per share data)

(Unaudited)

 
|                                                             |   | **Three Months Ended** |    | **Nine Months Ended** |   |
|------------------------------------------------------------------|--------|------------------------|---------|-----------------------|--------|
|                                                             |   | **Sept. 29,**          |    | **Sept. 30,**         |   | **Sept. 29,** |   | **Sept. 30,** |   |
|                                                             |   | **2001**               |    | **2000**              |   | **2001** |   | **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 |   |

 

See notes tounaudited condensed consolidated financial statements

 

 

**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
|                                                                         |   | **Nine Months Ended** |          |
|------------------------------------------------------------------------------|--------|-----------------------|---------------|
|                                                                         |   | **Sept. 29,**         |          | **Sept. 30,** |   |
|                                                                         |   | **2001**              |          | **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 tounaudited condensed consolidated financial statements

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

 

**1.         INTERIM FINANCIAL 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 accrualsconsidered necessary for a fair presentation, have been included.

Interim unauditedfinancial results should be read in conjunction with the audited financialstatements included in our Annual Report on Form 10-K, for the year endedDecember 31, 2000.

The results ofoperations for the three and nine-months ended September 29, 2001 are notnecessarily indicative of the operating results to be expected for the fullyear.

 

**2.         CUMULATIVEEFFECT OF CHANGE IN ACCOUNTING PRINCIPLE**

 

In December 1999, theSecurities and Exchange Commission (SEC) staff issued Staff Accounting BulletinNo. 101 (SAB 101), *Revenue Recognition in Financial Statements*,which, among other things, establishes the SEC’s interpretation that if uncertaintyexists about customer acceptance of a product, revenue should not be recognizeduntil acceptance occurs.  Customeracceptance provisions may be included in a contract to enforce a customer’sright to (1) test the delivered product, (2) require the seller to performadditional services subsequent to delivery of an initial product or performanceof an initial service, such as a seller is required to install or activatedelivered equipment, or (3) identify other work necessary to be done before acceptingthe product.  The SEC presumes that suchcontractual customer acceptance provisions are substantive, bargained-for termsof an arrangement.  Accordingly, whensuch contractual customer acceptance provisions exist, the SEC generallybelieves that the seller should not recognize revenue until customer acceptanceoccurs or the acceptance provisions lapse.

In the fourth quarter of 2000 we changed the method ofrecognizing revenue to comply with SAB 101. As a result of this change, we reported a change in accounting principlein accordance with APB Opinion No. 20 (APB 20),*Accounting Changes*, by acumulative effect adjustment.  Becausewe are a calendar year entity that adopted SAB 101 in the fourth quarter of2000, the cumulative effect of the change was included in the first quarter of2000 pursuant to APB 20 which requires that the change be made as of thebeginning of the year (January 1, 2000) and that financial information forpre-change interim 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 shareare computed in accordance with Statement of Financial Accounting Standards(SFAS) No. 128, *Earnings per*Share. Basic earnings per share are computed using the weighted average numberof common shares outstanding during each period.  Diluted earnings per share include the dilutive effect of commonshares potentially issuable upon the exercise of stock optionsoutstanding.  The following tablereconciles the denominators used in computing basic and diluted earnings pershare:

 

| **(in  thousands)**                            |   | **Three Months Ended** |   | **Nine Months Ended** |   |
|------------------------------------------------|--------|------------------------|--------|-----------------------|--------|
|                                           |   | **Sept. 29,**          |   | **Sept. 30,**         |   | **Sept. 29,** |   | **Sept. 30,** |   |
|                                           |   | **2001 (1)**           |   | **2000(1)**           |   | **2001(1)** |   | **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.         REPORTING OF COMPREHENSIVE NETINCOME  (LOSS)**

 

In 1997, the Financial Accounting Standards Boardissued Statement of Financial Accounting Standards (SFAS) No. 130, *ReportingComprehensive Income,* which establishes standards for the reportingand display of comprehensive income (loss) and its components in a full set ofgeneral-purpose financial statements. Under this standard, certain revenues, expenses, gains, and lossesrecognized during the period are included in comprehensive income (loss),regardless of whether they are considered to be results of operations of theperiod.  During the three-month periodsended September 29, 2001 and September 30, 2000 and the nine month periodsended September 29, 2001 and September 30, 2000, total comprehensive lossequaled net loss as reported on the Consolidated Statements of Operations.

 

**5.         RESTRUCTURINGCOSTS AND OTHER SPECIAL CHARGES AND PROVISION FOR INVENTORY**

 

Workforce and manufacturing cost reductions

 

On February 21, 2001, in response to the downturn inthe semiconductor capital equipment industry, we announced plans to consolidatethe manufacturing and operation functions performed in our Marlborough,Massachusetts facility to our St. Paul, Minnesota facility, resulting inreductions in headcount, as well as other reduction initiatives which wouldresult in a restructuring charge in the first quarter of 2001.  This plan was later adjusted to transfer themanufacturing 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 runs throughApril  2003.  This restructuring affected approximately 25% of our workforcecomprising a total of 73 employees principally in the areas of manufacturingand administration.  Idle facility costsincluded in the charge represent 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 third quarter of 2001, due to the continued and prolongeddownturn in the semiconductor capital equipment market, we reduced ourworkforce across all functional areas by approximately 17%, resulting in arestructuring charge of $113,000.  Thischarge reflects severance and other benefit costs associated with this reduction.This workforce reduction affected an additional 31 employees, principally inthe areas of manufacturing and engineering. All of these costs were incurred and paid during the quarter endedSeptember 29, 2001.   Thefollowing table summarizes the charges related to workforce and manufacturingcost reductions:

 

 

 
|                                    |   | **Employee**   |   |               |   |      |   |
|-----------------------------------------|--------|----------------|--------|--------------------|--------|-----------|--------|
| **(in thousands)**                      |   | **Separation** |   | **Idle  Facility** |   |      |   |
|                                    |   | **Costs**      |   | **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 thesemiconductor capital equipment industry, we have shifted product strategy andfocused our resources on profit contribution in high growth markets. These highcontribution markets directly relate to the company’s new strip testing technology and suite ofautomated equipment solutions. We will continue to market and manufacturecertain of our older singulated products. However, the financial contributionof these products will continue to represent a lower percentage of our overallresults.  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, associated primarily with our singulatedproducts, measured as the amount by which the carrying values exceeded thepresent value of the estimated future cash flows for goodwill and purchasedintangible assets.  These impairmentsfully relate to the January 30, 2000 Aseco Corporation acquisition and reducethe carrying value of goodwill and purchased intangibles to zero as ofSeptember 29, 2001.

 

Provision for Inventory

 

We recorded a provision for inventory totalingapproximately $8.1 million in the third quarter of 2001, of which approximately$1.9 million represents discontinued products and approximately $0.6 millionrepresents obsolete components resulting from a shift in product focus.  The remaining charge of approximately $5.6million relates to excess inventory, principally in our older singulatedproducts,   due to the protracteddownturn in the semiconductor capital equipment industry.  This additional excess inventory charge wasdue to a prolonged and significant decrease in forecasted revenue and wascalculated in accordance with our policy, which is based on inventory levels inexcess of anticipated 12-month demand for each specific product type.  We will be physically disposing of allinventory that is considered to be obsolete.

 

 

**6.         ACQUISITION**

 

On January 31, 2000, we completed the acquisition ofAseco Corporation (“Aseco”), a Massachusetts-based manufacturer of singulatedhandling equipment for the back-end of the semiconductor manufacturingprocess.  The acquisition was structuredas a stock-for-stock purchase resulting in Aseco becoming a wholly ownedsubsidiary of MCT.  The purchase pricetotaled $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.

 

The following unaudited pro forma information presentsa summary of combined results of operations of MCT and Aseco as if theacquisition had occurred at the beginning of the prior year period presented,along with certain pro forma adjustments to give effect to amortization ofgoodwill and other intangible assets as well as the adoption of SAB 101discussed in Note 2.  The pro formainformation does not attempt to show how we would have actually performed on acombined basis had the companies been combined throughout this period.  The following pro forma information,therefore, although helpful in illustrating the financial characteristics ofour combined company under one set of assumptions, does not attempt to predictor suggest future results.

 

 
| **(In thousands, except per share data)** |   | **Three  Months**  |   | **Nine  Months**   |   |
|-------------------------------------------|--------|--------------------|--------|--------------------|--------|
|                                      |   | **Ended**          |   | **Ended**          |   |
|                                      |   | **Sept. 30, 2000** |   | **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.         RECENTACCOUNTING 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 or resultsof operations due to the adoption of SFAS No. 142 on January 1, 2002.

 

On January 1, 2001, weadopted 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 bedesignated as normal purchases or sales.

 

In June 2001, the FASBissued SFAS No. 143, “*Accounting for AssetRetirement Obligations”*. SFAS No. 143 addresses financial accounting and reporting forobligations associated with the retirement of tangible long-lived assets andthe associated asset retirement costs. SFAS No. 143 applies to legal obligations associated with the retirementof long-lived assets that result from the acquisition, construction,development and/or the normal operation of a long-lived asset, except forcertain obligations of lessees.  SFASNo. 143 amends SFAS No. 19, *FinancialAccounting and Reporting by Oil and Gas Producing Companies*.  SFAS is effective for fiscal years beginningafter June 15, 2002.  We do not expectthis statement to have a material effect on our financial position or resultsof operations.

 

In August 2001, the FASBissued SFAS No. 144, *"Accounting forthe Impairment or Disposal of Long-Lived Assets*".  SFAS No. 144 addresses financial accountingand reporting for the impairment or disposal of long-lived assets andsupersedes SFAS No. 121, *Accounting forthe Impairment of Long-Lived Assets and for Long-Lived Assets to Be DisposedOf,* and the accounting and reporting provisions of APBOpinion No. 30, *Reporting theResults of Operations-Reporting the Effects of Disposal of a*Segment*of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions,* for the disposal ofa segment of a business (as previously defined in that Opinion).  SFAS No. 144 also amends ARB No. 51, *Consolidated Financial Statements,* toeliminate the exception to consolidation for a subsidiary for which control islikely to be temporary.  SFAS No. 144 iseffective for fiscal years beginning after December 15, 2001.  We do not expect this statement to have amaterial effect on our financial position or results of operations.

 

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

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

## RESULTS OF 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.

 

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 orintensified market downturn might result in significant losses, charges forinventory revaluation, or asset impairment or restructuring charges.Consequently, as a result of this downturn, we have examined our operations andtaken the following actions during 2001.

 

*Workforce and manufacturing cost reductions*

 

On February 21, 2001, in response to the downturn inthe semiconductor capital equipment industry, we announced plans to consolidatethe manufacturing and operation functions performed in our Marlborough,Massachusetts facility to our St. Paul, Minnesota facility, resulting inreductions in headcount, as well as other reduction initiatives which wouldresult in a restructuring charge in the first quarter of 2001.  This plan was later adjusted to transfer themanufacturing functions to our Penang, Malaysia facility.

 

The restructuringcharge resulting from the consolidation of operations and cost reductionmeasures initiated in the first quarter of 2001 totaled approximately $2.3million.  This charge principallyrepresents employee separation costs and costs related to idle facilities overthe remaining lease term, which runs through April 2003.  This restructuring affected approximately25% of our workforce comprising a total of 73 employees principally in theareas of manufacturing and administration. Idle facility costs included in the charge represent a percentage of theremaining rent payments, utilities and insurance costs ($1.28 million) and theimpairment of certain leasehold improvements ($0.04 million).

 

During the third quarter of 2001, due to the continued and prolongeddownturn in the semiconductor capital equipment market, we reduced ourworkforce across all functional areas by approximately 17%, resulting in arestructuring charge of $113,000.  Thischarge reflects severance and other benefit costs associated with thisreduction. This workforce reduction affected an additional 31 employees,principally in the areas of manufacturing and engineering. All of these costswere incurred and paid during the quarter ended September 29, 2001.

 

*Impairmentof goodwill and purchased intangible assets*

* *

Due to the deep and protracted downturn in thesemiconductor capital equipment industry, we have shifted product strategy andfocused our resources on profit contribution in high growth markets. These highcontribution markets directly relate to the company’s new strip testing technology and suite ofautomated equipment solutions. We will continue to market and manufacturecertain of our older singulated products. However, the financial contributionof these products will continue to represent a lower percentage of our overallresults.  As a result, we recorded acharge of approximately $9.3 million in the third quarter of 2001, related to theimpairment of goodwill and purchased intangible assets, associated primarily with our singulatedproducts, measured as the amount by which the carrying values exceeded thepresent value of the estimated future cash flows for goodwill and purchasedintangible assets.  These impairmentsfully relate to the January 30, 2000 Aseco Corporation acquisition and reducethe carrying value of goodwill and purchased intangibles to zero as ofSeptember 29, 2001.

 

*Provisionfor Inventory*

* *

We recorded a provision for inventory totalingapproximately $8.1 million in the third quarter of 2001, of which approximately$1.9 million represents discontinued products and approximately $0.6 millionrepresents obsolete components resulting from a shift in product focus.  The remaining charge of approximately $5.6million relates to excess inventory, principally in our older singulatedproducts,   due to the protracteddownturn in the semiconductor capital equipment industry.  This additional excess inventory charge wasdue to a prolonged and significant decrease in forecasted revenue and wascalculated in accordance with our policy, which is based on inventory levels inexcess of anticipated 12-month demand for each specific product type.  We will be physically disposing of all inventorythat is considered to be obsolete.

Most industry forecasts do not predict capacity-drivenpurchases of capital equipment to recover before late 2002 or early 2003.  Therefore, we will continue to examineopportunities to further reduce our costs through the consolidation ofoperations, limiting capital expenditures, monitoring inventory purchases oradditional strategic restructuring initiatives.  Certain of these types of actions have the potential for furthercharges in future periods.

 

Acquisitionof 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 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.

 

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

###### ** **

Net sales for the three months ended September 29, 2001 decreased $9.9million or 69.2% to $4.4 million compared to $14.3 million for the three monthsended September 30, 2000.  Productacceptance requirements related to product and customer mix caused a portion ofthe revenue related to third quarter 2000 shipments to be deferred into futureperiods.  Current quarter productrevenues, especially capacity related singulated device handler products, wereseverely impacted by the downturn in the semiconductor capital equipment market.  We expect net sales to continue to beadversely impacted 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 and administrative expense in the third quarter of2001 was $2.3 million, or 52.3% of net sales, compared to $4.3 million, or30.1% of net sales for the third quarter of 2000. The decrease in expense forthe current quarter is a result of the cost reduction measures initiated in thefirst and third quarters of 2001. The increase in selling, general andadministrative expense as a percentage of net sales in the current quarter isprimarily attributed to the decreased sales base.

 

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 thecurrent quarter is primarily attributed to the decreased sales base.

 

Amortization expense totaled $0.9 million, or 20.5% of net sales forthe third quarter of 2001, versus $1.2 million, or 8.4% of net sales in thethird quarter of 2000.  The absolutedecrease is attributed to the reductions in carrying values of intangibleassets and goodwill, which were identified in the fourth quarter of 2000 due tothe industry downturn.

 

In the third quarter of 2001, we recorded a charge relating to theimpairment of intangible assets totaling $9.3 million or 211.4% of netsales.  This charge resulted from theimpairment of goodwill and purchased intangible assets related to the Asecoacquisition resulting from the continued market downturn and  shift in product strategy.

 

The restructuring charges resulting from workforce reduction totaled$0.1 million for the third quarter of 2001. This charge represents employee separation costs, which were incurredand paid during the third quarter of 2001.

 

Interest income for the third quarter of 2001 was $10,000 compared to$115,000 in the third quarter of 2000. This decrease resulted from lower investments amounts ininterest-bearing accounts and the decline of relative cash balances.  Interest expense totaled $1,000 in thecurrent  quarter, compared to $133,000for the comparable period in the prior year. The decrease in interest expense is attributed to decreased borrowingsunder the lines of credit.

 

Net loss for the quarter ended September 29, 2001 was $20.8 million or$1.48 per share, as compared to a net loss of $1.6 million, or $0.13 per sharein the prior  period.

** **

**Results of Operations for the NineMonths Ended September 29, 2001 and September 30, 2000**

 

Net sales for the nine months ended September 29, 2001, decreased $15.9million or 43.0% to $21.1 million compared to $37.0 million for the nine monthsended September 30, 2000.  Productacceptance requirements related to product and customer mix resulted in a netincrease to revenues over shipments for the 2001 nine month period while thesesame factors caused a large percentage of the revenue in the nine month periodof 2000 from shipments to be deferred into future periods. Current year productsales, especially capacity-related singulated device handler products, continueto be severely impacted by the downturn in the semiconductor capital equipmentmarket. Sales of our Tapestry and Smart Solutions strip-based productsincreased  $3.3 million over the prioryear period, while sales of singulated device handler products decreased $19.2million from the comparable prior year period. We expect net sales to continue to be adversely impacted by the marketdownturn.

 

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 and administrative expense for the first nine monthsof 2001 was $8.5 million, or 40.3% of net sales, compared to $11.8 million, or31.9% of net sales for the first nine months of 2000. The decrease in expensefor the current period is a result of the cost reduction measures initiated inthe first and third quarters of 2001. The increase in selling, general andadministrative expense as a percentage of net sales in the current period isprimarily attributed to the decreased 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 forthe nine months ended September 29, 2001, versus $3.1 million, or 8.4% of salesin the prior year period.  The absolutedecrease is attributed to the reduction in carrying values of intangible assetsand goodwill which were identified in the fourth quarter of 2000 due to theindustry downturn.

 

Impairment of intangible assets totaled $9.3 million or 44.1% 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  shift in product strategy.

 

Restructuring charges from the consolidation of operations and costreduction measures initiated in the first quarter of 2001 totaled $2.3 millionand $0.1 million in the third quarter of 2001. The first quarter 2001 chargesprincipally represent employee separation costs and costs related to idlefacilities over the remaining lease term, which runs 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 first nine months of 2001 was $163,000 comparedto $159,000 in the first nine months of 2000. This increase resulted from higher available cash balances invested ininterest-bearing accounts in the current period versus the prior yearcomparable period. Interest expense totaled $5,000 in the first nine months of2001, compared to $292,000 for the comparable period in the prior year.  The decrease in interest expense isattributed to decreased borrowings under the lines of credit during the currentyear.

 

The cumulative effect of  changein accounting principle resulted from the adoption of Staff Accounting Bulletin101 (“SAB101”) totaling $1.3 million or $0.12 per share in the prior yearperiod.

 

Net loss for the nine-month period ended September 29, 2001 was $29.0million or $2.07 per share, as compared to a net loss of $5.4 million, or $0.50per share in the prior year period.

 

**Liquidityand 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 expensesassociated with the offering.

 

At September 29, 2001, we had cash and cashequivalents of $3.0 million, a current ratio of 1.8 and working capital of $6.4million.  At December 31, 2000, we hadcash and cash equivalents of $12.0 million, a current ratio of 2.5 and workingcapital 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 inresponse to this downturn to minimize the impact to our working capitalposition. We believe that cash and cash equivalents on hand at September 29,2001, funds available through our existing bank line and establishingadditional lines of credit or other debt instruments, if necessary, will besufficient to finance our continuing operations at the significantly reducedlevels, for the foreseeable future, but that unforeseen changes in marketconditions or additional business acquisitions could cause us to seekadditional financing sooner.  There canbe no assurances that such financing will be available or be available on termsacceptable to us. We may acquire other companies, product lines or technologiesthat are complementary to our business and our working capital needs may changeas a result of such acquisitions.

 

**IMPACTOF 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, *Accountingfor Derivative Instruments and Hedging Activities*, as amended bySFAS No. 138, *Accounting for 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 fair value.  The accounting for changes in the fair valueof derivatives depends on their intended use and designation. Management hasreviewed the requirements of SFAS No. 133 and has determined that we have nofree-standing or embedded derivatives. All contracts that contain provisions meeting the definition of aderivative also meet the requirements of, and have been designated as, normalpurchases or sales.  Our policy is tonot use free-standing derivatives and to not enter into contracts with termsthat cannot be designated as normal purchases or sales.

 

In June 2001, the FASB issued SFAS No. 143, “*Accounting for Asset Retirement Obligations”*.SFAS No. 143 addresses financial accounting and reporting for obligationsassociated with the retirement of tangible long-lived assets and the associatedasset retirement costs.  SFAS No. 143applies to legal obligations associated with the retirement of long-livedassets that result from the acquisition, construction, development and/or thenormal operation of a long-lived asset, except for certain obligations oflessees.  SFAS No. 143 amends SFAS No.19, *Financial Accounting and Reporting byOil and Gas Producing Companies.* SFAS is effective for fiscal years beginning after June 15, 2002.  We do not expect this statement to have amaterial effect on our financial position or results of operations.

 

In August 2001, the FASB issued SFAS No. 144, *"Accounting for the Impairment or Disposal ofLong-Lived Assets".* SFAS No. 144 addresses financial accounting and reporting for theimpairment or disposal of long-lived assets and supersedes SFAS No. 121, *Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to Be Disposed Of,* and the accounting andreporting provisions of APB Opinion No. 30, *Reporting the Results of Operations-Reporting theEffects of Disposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions,* for the disposal ofa segment of a business (as previously defined in that Opinion).  SFAS No. 144 also amends ARB No. 51, *Consolidated Financial Statements,* toeliminate the exception to consolidation for a subsidiary for which control islikely to be temporary.  SFAS No. 144 iseffective for fiscal years beginning after December 15, 2001.  We do not expect this statement to have amaterial effect on our financial position or results of operations.

 

**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 had a disproportionately negative impacton manufacturers of semiconductor capital equipment, and which could cause usto continue to incur significant cash losses decreasing our cash and exposingus to potential further charges for restructuring, excess and obsoleteinventory and/or impairment of assets; (2) rapid changes in technology and intester and handler products, which we must respond to successfully in order forour products to avoid becoming noncompetitive or obsolete; (3) customeracceptance of our new products, including the strip-based Tapestry handlingsystems and Smart Solutions products, which we have invested significantamounts of inventory; (4) possible loss of any of our key customers, whoaccount for a substantial percentage of our business; (5) the possible adverseimpact of competition in markets which are highly competitive; (6) the possibleadverse impact of economic or political changes in markets we serve; and (7)other factors detailed from time to time in our SEC reports, including but notlimited to the discussion in the Management’s Discussion & Analysisincluded in Form 10-K for the year ended December 31, 2000.  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.

 

**Item 3.**   **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.  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.

 

**MICRO COMPONENT TECHNOLOGY, INC.**

## FORM10-Q

## PART II.  OTHERINFORMATION

 

### **Item 5.  OtherInformation**

 

Workforce and manufacturing 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 restructuringcharge resulting from the consolidation of operations and cost reductionmeasures initiated in the first quarter of 2001 totaled approximately $2.3million.  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.  Idle facility costs included in the chargerepresent a percentage of the remaining rent payments, utilities and insurancecosts ($1.28 million) and the impairment of certain leasehold improvements($0.04 million).

 

During the third quarter of 2001, due to the continued and prolongeddownturn in the semiconductor capital equipment market, we reduced ourworkforce across all functional areas by approximately 17%, resulting in arestructuring charge of $113,000.  Thischarge reflects severance and other benefit costs associated with thisreduction. This workforce reduction affected an additional 31 employees,principally in the areas of manufacturing and engineering. All of these costswere incurred and paid during the quarter ended September 29, 2001.

 

Impairment ofgoodwill and purchased intangible assets

 

Due to the deepand protracted downturn in the semiconductor capital equipment industry, wehave shifted product strategy and focused our resources on profit contributionin high growth markets. These high contribution markets directly relate to thecompany’s new strip testing technology andsuite of automated equipment solutions. We will continue to market andmanufacture certain of our older singulated products. However, the financialcontribution of these products will continue to represent a lower percentage ofour overall results.  As a result, werecorded a charge of approximately $9.3 million in the third quarter of 2001,related to the impairment of goodwill and purchased intangible assets, associated primarily withour singulated products, measured as the amount by which the carrying valuesexceeded the present value of the estimated future cash flows for goodwill andpurchased intangible assets.  Theseimpairments fully relate to the January 30, 2000 Aseco Corporation acquisitionand reduce the carrying value of goodwill and purchased intangibles to zero asof September 29, 2001.

 

Provision forInventory

 

We recorded aprovision for inventory totaling approximately $8.1 million in the thirdquarter of 2001, of which approximately $1.9 million represents discontinuedproducts and approximately $0.6 million represents obsolete componentsresulting from a shift in product focus. The remaining charge of approximately $5.6 million relates to excessinventory, principally in our older singulated products,   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.  We will be physically disposing of all inventory that isconsidered to be obsolete.

 

 

Acquisition of Aseco Corporation

 

On January 31, 2000, wecompleted the acquisition of Aseco Corporation (“Aseco”), a Massachusetts-basedmanufacturer of singulated handling equipment for the back-end of thesemiconductor manufacturing process. The acquisition was structured as a stock-for-stock purchase resultingin Aseco becoming a wholly owned subsidiary of MCT.  The purchase price totaled $24.0 million, consisting of 2.6million shares of ourcommon stock valued at $22.5 millionissued to former Aseco shareholders and $1.5 million of acquisition-relatedcosts.

 

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.

 

**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:   January 22, 2002 | By:                                   | /s/ Roger E. Gower       |   |
|                           | Roger E. Gower                        |                     |
|                           | President and Chief Executive Officer |                     |
|                           |                                  |                     |
|                           |                                  | And                      |
|                           |                                  |                     |
| Dated:   January 22, 2002 | By:                                   | /s/ Jeffrey S. Mathiesen |   |
|                           | Jeffrey S. Mathiesen             |
|                           | Chief Financial Officer               |
|                           | Chief Accounting Officer              |
|                           |                                  |
|                                |                                       |                          |  |  |  |