** **

**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 June 29, 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 ofregistrant 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 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 August 13, 2002 was14,152,092.

 

 

----

 

**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** |
|                                 |   |
|                                 |   |
| **PART II.  OTHER INFORMATION** |
|                                 |   |
|                                 | ITEM  4. | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS |
|                                 |   |   |
|                                 | ITEM 5. | OTHER INFORMATION |
|                                 |   |   |
|                                 | **ITEM 6.** | **REPORTS ON  FORM 8-K** |
|                                 |   |   |
|                                 | **SIGNATURES** |
|                                 |   |   |
|                                 | CERTIFICATION |
|                                      |  |  |  |  |  |

 

2

----

** **

**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)

 
|                                                                                                  |   | **June 29,  2002** |   | **December  31,  2001** |   |
|-------------------------------------------------------------------------------------------------------|--------|--------------------|--------|-------------------------|--------|
| **Assets**                                                                                            |   |               |   |                    |   |
| Current  assets                                                                                       |   |               |   |                    |   |
| Cash  and cash equivalents                                                                            |   | $                  | 6,323  |                    | $      | 11,086 |   |
| Accounts  receivable, less allowance for doubtful accounts of $321 and $425,  respectively            |   | 3,148              |   | 3,136                   |   |
|                                                                                                  |   |               |   |                    |   |
| Inventories                                                                                           |   | 4,385              |   | 5,084                   |   |
| Other                                                                                                 |   | 272                |   | 254                     |   |
| Total  current assets                                                                                 |   | 14,128             |   | 19,560                  |   |
|                                                                                                  |   |               |   |                    |   |
| Property,  plant and equipment, net                                                                   |   | 670                |   | 878                     |   |
| Debt  issuance costs, net                                                                             |   | 749                |   | 836                     |   |
| Other  assets                                                                                         |   | 86                 |   | 67                      |   |
|                                                                                                  |   |               |   |                    |   |
| Total  assets                                                                                         |   | $                  | 15,633 |                    | $      | 21,341 |   |
|                                                                                                  |   |               |   |                    |   |
| **Liabilities  and Stockholders’ Equity**                                                        |   |               |   |                    |   |
| Current  liabilities:                                                                                 |   |               |   |                    |   |
| Current  portion of long-term debt                                                                    |   | $                  | 42     |                    | $      | 42 |   |
| Current  portion of accrued restructuring charge                                                      |   | 190                |   | 678                     |   |
| Accounts  payable                                                                                     |   | 1,631              |   | 1,536                   |   |
| Accrued  warranty                                                                                     |   | 360                |   | 400                     |   |
| Deferred  revenue in excess of costs incurred                                                         |   | 320                |   | 1,133                   |   |
| Other  accrued liabilities                                                                            |   | 3,258              |   | 2,864                   |   |
| Total  current liabilities                                                                            |   | 5,801              |   | 6,653                   |   |
|                                                                                                  |   |               |   |                    |   |
| Long-term  debt                                                                                       |   | 12                 |   | 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                                                                                  |   | (88,555            | )      | (83,839                 | )      |
| Total  stockholders’ (deficit) equity                                                            |   | (180               | )      | 4,377                   |   |
|                                                                                                  |   |               |   |                    |   |
| Total  liabilities and stockholders’ (deficit) equity                                            |   | $                  | 15,633 |                    | $      | 21,341 |   |

 

See notes tounaudited condensed consolidated financial statements

 

3

----

 

**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATEDSTATEMENTS OF OPERATIONS

(In thousands,except per share data)

(Unaudited)

 
|                                                        |   | **Three  Months Ended** |   | **Six Months  Ended** |   |
|-------------------------------------------------------------|--------|-------------------------|--------|-----------------------|--------|
|                                                        |   | **June 29,  2002**      |   | **June 30,  2001**    |   | **June 29,  2002** |   | **June 30,  2001** |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Net  sales                                                  |   | $                       | 3,879  |                  | $      | 7,404 |   | $ | 7,342 |   | $ | 16,733 |   |
| Cost  of sales                                              |   | 2,454                   |   | 4,220                 |   | 4,641 |   | 9,890 |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Gross  profit                                               |   | 1,425                   |   | 3,184                 |   | 2,701 |   | 6,843 |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Operating  expenses:                                        |   |                    |   |                  |   |   |   |   |   |
| Selling,  general and administrative                        |   | 2,438                   |   | 2,863                 |   | 4,704 |   | 6,157 |   |
| Research  and development                                   |   | 1,049                   |   | 2,015                 |   | 2,355 |   | 4,903 |   |
| Amortization  of intangible assets                          |   | —                  |   | 879                   |   | — |   | 1,758 |   |
| Restructuring  charge                                       |   | (475                    | )      | —                |   | (152 | ) | 2,331 |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Total  operating expenses                                   |   | 3,012                   |   | 5,757                 |   | 6,907 |   | 15,149 |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Loss  from operations                                       |   | (1,587                  | )      | (2,573                | )      | (4,206 | ) | (8,306 | ) |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Interest  income                                            |   | 31                      |   | 41                    |   | 76 |   | 153 |   |
| Interest  expense and other, net                            |   | (293                    | )      | (4                    | )      | (586 | ) | (17 | ) |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Total  interest and other                                   |   | (262                    | )      | 37                    |   | (510 | ) | 136 |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Net  loss                                                   |   | $                       | (1,849 | )                     | $      | (2,536 | ) | $ | (4,716 | ) | $ | (8,170 | ) |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Net  loss per share, basic and diluted:                     |   |                    |   |                  |   |   |   |   |   |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Net  loss                                                   |   | $                       | (0.13  | )                     | $      | (0.18 | ) | $ | (0.33 | ) | $ | (0.58 | ) |
|                                                        |   |                    |   |                  |   |   |   |   |   |
| Weighted  average common and equivalent shares outstanding: |   |                    |   |                  |   |   |   |   |   |
| Basic  and diluted                                          |   | 14,115                  |   | 14,018                |   | 14,096 |   | 13,985 |   |

 

See notes tounaudited condensed consolidated financial statements

 

4

----

 

**MICRO COMPONENT TECHNOLOGY, INC.**

## CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
|                                                                         |   | **Six Months  Ended** |   |
|------------------------------------------------------------------------------|--------|-----------------------|--------|
|                                                                         |   | **June 29,  2002**    |   | **June 30,  2001** |   |
|                                                                         |   |                  |   |   |   |
| Cash flows from  operating activities:                                       |   |                  |   |   |   |
| Net loss                                                                     |   | $                     | (4,716 | ) | $ | (8,170 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |   |                  |   |   |   |
| Depreciation                                                                 |   | 240                   |   | 405 |   |
| Amortization                                                                 |   | —                |   | 1,758 |   |
| Loss  on disposal of property                                                |   | 4                     |   | — |   |
| Changes  in assets and liabilities:                                          |   |                  |   |   |   |
| Accounts  receivable                                                         |   | (12                   | )      | 4,730 |   |
| Inventories                                                                  |   | 699                   |   | (1,913 | ) |
| Other  assets                                                                |   | (37                   | )      | (146 | ) |
| Accounts  payable                                                            |   | 95                    |   | (5,401 | ) |
| Accrued  restructuring costs                                                 |   | (766                  | )      | 1,381 |   |
| Other  accrued liabilities                                                   |   | (459                  | )      | (2,383 | ) |
|                                                                         |   |                  |   |   |   |
| Net  cash used in operating activities                                       |   | (4,952                | )      | (9,739 | ) |
|                                                                         |   |                  |   |   |   |
| Cash  flows from investing activities:                                       |   |                  |   |   |   |
| Additions  to property, plant and equipment                                  |   | (73                   | )      | (134 | ) |
| Proceeds  from disposition of property                                       |   | 37                    |   | — |   |
|                                                                         |   |                  |   |   |   |
| Net  cash used in investing activities                                       |   | (36                   | )      | (134 | ) |
|                                                                         |   |                  |   |   |   |
| Cash  flows from financing activities:                                       |   |                  |   |   |   |
| Payments  of long-term debt                                                  |   | (21                   | )      | (13 | ) |
| Amortization  of debt issuance costs                                         |   | 87                    |   | — |   |
| Proceeds  from issuance of stock, net                                        |   | 159                   |   | 183 |   |
|                                                                         |   |                  |   |   |   |
| Net  cash provided by financing activities                                   |   | 225                   |   | 170 |   |
|                                                                         |   |                  |   |   |   |
| Net  decrease in cash and cash equivalents                                   |   | (4,763                | )      | (9,703 | ) |
|                                                                         |   |                  |   |   |   |
| Cash  and cash equivalents at beginning of period                            |   | 11,086                |   | 12,047 |   |
|                                                                         |   |                  |   |   |   |
| Cash  and cash equivalents at end of period                                  |   | $                     | 6,323  |   | $ | 2,344 |   |

 

See notes tounaudited condensed consolidated financial statements

 

5

----

 

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

## NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

 

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

 

The accompanyingunaudited condensed consolidated financial statements for the three and sixmonths ended June 29, 2002 have been prepared in accordance with theinstructions for SEC Form 10-Q and, accordingly, do not include all disclosuresrequired by generally accepted accounting principles for complete financialstatements.  In our opinion, alladjustments, consisting of normal recurring accruals considered necessary for afair presentation, have been included.

 

Interim unauditedfinancial results should be read in conjunction with the audited financialstatements included in the SEC Report on Form 10-K, for the period endedDecember 31, 2001.

 

The results ofoperations for the three and six month period ended June 29, 2002 are notnecessarily indicative of the operating results to be expected for the fullyear.

 

**2.****                              EARNINGS PER SHARE**

 

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

 
| **(in thousands)**                             |   | **Three  Months Ended** |   | **Six Months  Ended** |   |
|------------------------------------------------|--------|-------------------------|--------|-----------------------|--------|
|                                           |   | **June 29,  2002 (1)**  |   | **June 30,  2001(1)** |   | **June 29,  2002(1)** |   | **June 30,  2001(1)** |   |
| Weighted  average common shares outstanding    |   | 14,115                  |   | 14,018                |   | 14,096 |   | 13,985 |   |
| Effect  of dilutive stock options and warrants |   | —                  |   | —                |   | — |   | — |   |
|                                           |   |                    |   |                  |   |   |   |   |   |
|                                           |   | 14,115                  |   | 14,018                |   | 14,096 |   | 13,985 |   |

 

----

(1)          We reported a loss forthe periods indicated.  No adjustmentswere made for the effect of stock options, which totaled 2,479,827 shares atJune 29, 2002 and 2,149,761 shares at June 30, 2001, as the effect isantidiliutive.

 

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

 

In 1997, the FinancialAccounting Standards Board issued Statement of Financial Accounting Standards(SFAS), No. 130 *Reporting Comprehensive Income* which establishes standardsfor the reporting and display of comprehensive income (loss) and its

 

6

----

 

components in afull set of general-purpose financial statements.  Under this standard, certain revenues, expenses, gains, andlosses recognized during the period are included in comprehensive income(loss), regardless of whether they are considered to be results of operationsof the period.  During the three andsix-month periods ended June 29, 2002 and June 30, 2001 total comprehensiveloss equaled net loss as reported on the Consolidated Statements of Operations.

 

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

 

**2001 Restructuring Charges**

 

In 2001, inresponse to the continued and prolonged downturn in the semiconductor capitalequipment industry, we took the following actions:

 

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 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 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 thirdquarter we reduced our workforce across all functional areas by approximately17%, resulting in a restructuring charge of $113,000.  This charge reflects severance and other benefit costs associatedwith this reduction. This workforce reduction affected an additional 31employees, principally in the areas of manufacturing and engineering.  All of these costs were incurred and paid duringthe quarter ended September 29, 2001.

 

**2002 Restructuring Charges**

 

During the firstquarter of 2002, we further reduced our workforce across all functional areasby approximately 25%, resulting in a restructuring charge of $323,000.  This charge reflects severance and otherbenefits costs associated with this reduction. This workforce reduction affected an additional 44 employees,principally in the areas of manufacturing, sales and marketing and engineering.

 

In the secondquarter of 2002, in continuing response to the downturn in the semiconductorcapital equipment industry, we further reduced our workforce by 7%, resultingin a

 

7

----

 

restructuringcharge of $199,000.  This chargereflects severance and other benefit costs associated with the reduction, whichaffected 9 employees across all functional areas.

 

During the secondquarter of 2002, 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 of 2003.  As of June 29, 2002, $350,000 remains due,which is required to be paid in full by December 15, 2002 and is included inother accrued liabilities.  As a resultof this settlement, the remaining idle facility charge of  $674,000 was eliminated in the quarter endedJune 29, 2002.

 

The followingtable summarizes these charges related to workforce and manufacturing costreductions (in thousands):

 
|                                                       |   | **Employee  Separation  Costs** |   | **Idle Facility  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 for the quarter ended June 29, 2002  |   | 199                             |   | (674                     | )      | (475      | )      |
|                                                       |   |                            |   |                     |   |      |   |
| Utilization for  the quarter ended June 29, 2002           |   | (126                            | )      | (49                      | )      | (175      | )      |
|                                                       |   |                            |   |                     |   |      |   |
| Accrued  restructuring costs at June 29, 2002              |   | $                               | 190    |                     | $      | —    |   | $ | 190 |   |

 

**5.**                              **RECENT ACCOUNTING PRONOUNCEMENTS**

* *

*Statement of Financial AccountingStandards (SFAS) No. 141 – Business Combinations and SFAS**No. 142 –Goodwill and Other Intangible Assets.* In June 2001, the FinancialAccounting Standards Board  (FASB) issuedStatement of Financial Accounting Standards (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.

 

8

----

 

*Statement of Financial AccountingStandards (SFAS) No. 143 – Accounting for Asset Retirement Obligations*.  In June 2001, the FASB issued SFAS No. 143, *Accountingfor Asset Retirement 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, *Financial Accounting and Reporting by Oil and GasProducing Companies*.  SFAS iseffective for us on January 1, 2003.  Weare currently assessing what impact, if any, SFAS No. 143 will have on ourfinancial position or results of operations.

 

*Statement of Financial AccountingStandards (SFAS) No. 144 – Accounting for the Impairment or**Disposal ofLong-Lived Assets*.  In August2001, the FASB issued SFAS No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets*.  SFAS No.144 addresses financial accounting and reporting for the impairment or disposalof long-lived assets and supersedes SFAS No. 121, *Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to Be Disposed Of,* andthe accounting and reporting provisions of APB Opinion No. 30, *Reportingthe Results of Operations-Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions,* for the disposal of a segment of a business (aspreviously 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. 144was effective for us on January 1, 2002 and did not have a material effect onour financial position or results of operations for the six month period endedJune 29, 2002.

 

9

----

 

**MICRO COMPONENT TECHNOLOGY, INC.**

FORM 10-Q

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

## RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

*The following*discussion*of ourresults of operations and financial condition should be read together with theother financial information and condensed consolidated financial statementsincluded in this document.  Thisdiscussion contains forward-looking statements that involve risks anduncertainties.  Our actual results coulddiffer materially from those anticipated in the forward-looking statements as aresult of a variety of factors, including those discussed in “Risk Factors” andelsewhere in this document.*

 

Overview

 

We supplyautomation solutions for the global semiconductor test and assemblymanufacturing market.  Our solutionsinclude automated test handlers, factory automation software and our newintegrated 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 ourproducts and services is dependent upon growth in the semiconductor industryand the increasing automation needs of semiconductor manufacturers andindependent test and assembly facilities. In the fourth quarter of 2000, the semiconductor industry went into asharp downturn, which intensified and continued throughout all of 2001 and hascontinued into 2002, resulting in a significant adverse impact on ourbusiness.  Although worldwidesemiconductor bookings are beginning to show signs of stabilization, the returnto market growth is not expected in the near term.  As disclosed in our Form 10-K for the year ended December 31,2001, a continued or intensified market downturn might result in significantlosses, charges for inventory revaluation, or asset impairment or restructuringcharges.  Consequently, as a result ofthis downturn, in the first and second quarters of 2002, we further reduced ourworkforces across all functional areas. This reduction affected approximately 25% of our workforce in the firstquarter of 2002 and 7% of our workforce in the second quarter of 2002.  These actions resulted in restructuringcharges of $323,000 in the first quarter of 2002 and $199,000 in the secondquarter of 2002.  These charges reflectseverance and other benefits costs associated with this reduction.  This workforce reduction affected  44 employees in the first quarter and 9employees in the second quarter, principally in the areas of manufacturing,sales and marketing and engineering.

 

**Critical Accounting Policies**

 

RevenueRecognition

 

In December 1999,the Securities and Exchange Commission (SEC) staff issued Staff Accounting BulletinNo. 101 (SAB 101) – *Revenue Recognition in Financial Statements.* SAB 101 establishes the SEC’s interpretationthat if uncertainty exists about customer acceptance of a product, revenueshould not be recognized until acceptance occurs.  In SAB 101, the SEC stated that customer acceptance provisionsmay be included in a contract to enforce a customer’s right to (1) test thedelivered product, (2) require the seller to perform additional servicessubsequent to delivery of an initial product or performance of an initialservice, such as a seller is required to

 

10

----

 

install oractivate delivered equipment, or (3) identify other work necessary to be donebefore accepting the product.  The SECpresumes that such contractual customer acceptance provisions are substantive,bargained-for terms of an arrangement. Accordingly, when such contractual customer acceptance provisions exist,the SEC generally believes that the seller should not recognize revenue untilcustomer acceptance occurs or the acceptance provisions lapse.

 

We adopted SAB 101in the fourth quarter of 2000.  UnderSAB 101, we recognize revenue upon shipment, as our terms are FOB shippingpoint, for established equipment products that have previously satisfiedexisting customer’s performance specifications and that provide for fullpayment tied to shipment.  Revenue forproducts that have not previously satisfied customer performance specificationsor from sales where all or a portion of customer payment is based upon acceptanceare only recognized upon customer acceptance. As such, in periods of increasing shipments, revenues will be deferredif the shipments are for new customers, new products or the payment terms aretied to acceptance criteria. Consequently, if these conditions exist, we may report revenue levelsthat are not reflective of actual shipment growth rates.  Conversely, in periods of decreasingshipments, we potentially could recognize revenues related to shipments made inprior periods.  Consequently, if theseconditions exist, we may report revenue levels that are greater than actual shipments.

 

Allowance forDoubtful Accounts

 

We record aprovision for doubtful accounts based on specific identification of ouraccounts receivable. This involves a degree of judgement based on discussionwith our internal sales and marketing groups, our customer base and theexamination of the financial stability of our customers.  There can be no assurance that our estimateswill match actual amounts ultimately written off.  During periods of downturn in the market for semiconductorcapital equipment  or economicrecession, a greater degree of risk exists concerning the ultimatecollectability of our accounts receivable due to the impact that theseconditions might have on our customer base.

 

Valuation ofInventories

 

Our inventoriesare stated at the lower of cost or market. Cost is determined by the first-in, first-out (“FIFO”) method.  We maintain a standard costing system forour inventories.  Assumptions withrespect to direct labor utilization, standard direct and indirect cost rates,vendor pricing and utilization of factory capacities are formulated in thedevelopment of our standard costing system. Sudden or continuing changes in the semiconductor capital equipmentmarket affecting our shipments can result in significant production variancesfrom our standard rates. These variances directly impact our gross profitperformance and may cause variability in gross profits results from reportingperiod to reporting period.  Our laborand overhead rates are set for production rates that match typical marketconditions.  Production variances arecharged to cost of sales each quarter as incurred. Material standards are basedupon normal purchase volumes.  Purchaseprice variances are charged to costs of sales each quarter as incurred.

 

Provisions toreduce inventories to the lower of cost or market are made based on a review ofexcess and obsolete inventories, estimates of future sales and the relatedvalue of component

 

11

----

 

parts, which isbased on inventory levels in excess of anticipated 12-month demand for eachspecific product type.  Significantassumptions with respect to market trends and customer product acceptance areutilized to formulate our 12-month demand schedule.  Sudden or continuing downward changes in the semiconductorcapital equipment market may cause us to record additional inventoryrevaluation charges in future periods.

 

Accrued Warranties

 

We provide astandard thirteen 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.

 

**Resultsof Operations for the Three Months Ended June 29, 2002 and June 30, 2001**

###### ** **

Net sales for thethree months ended June 29, 2002, decreased $3.5 million or 47.6% to $3.9 millioncompared to $7.4 million for the three months ended June 30, 2001.  Product acceptance requirements related toproduct and customer mix resulted in a minor net decrease to revenues overshipments in second quarter of 2002, while these same factors caused a $3.7million increase to revenues over shipments in the second quarter 2001.  Current year product revenues, especiallycapacity related singulated device handler products, were severely impacted bythe downturn in the semiconductor capital equipment market. Sales of ourTapestry and Smart Solutions strip-based products increased  9% or $0.2 million over the prior yearperiod, while sales of singulated device handler products decreased $4.4million. We expect net sales to continue to be adversely impacted by the marketdownturn into the foreseeable future.

 

Gross profit forthe second quarter of 2002 decreased by $1.8 million to $1.4 million, or 36.7%of net sales, from $3.2 million, or 43.0% of net sales, for the comparableperiod in the prior year.  The decreasein gross margin in the current year period primarily resulted from unabsorbedexcess 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 restructuring steps we initiated in the first quarter of 2001 andcontinuing into the first and second quarters of 2002.

 

Selling, generaland administrative expense in the second quarter of 2002 was $2.4 million, or62.9% of net sales, compared to $2.9 million, or 38.7% of net sales for thesecond quarter of 2001. The decrease in expense for the current year period isa result of the cost reduction measures initiated in 2001 and 2002, and adecrease in direct selling costs related to the decrease in sales. The increasein selling, general and administrative expense as a percentage of net sales inthe current year is primarily attributed to the decreased sales base in thecurrent year period.

 

Research anddevelopment expense for the second quarter of 2002 was $1.0 million, or 27.0%of net sales compared to $2.0 million, or 27.2% of net sales in the secondquarter of 2001.  The

 

12

----

 

decrease inexpense for the current year period is a result of the cost reduction measuresinitiated in 2001and 2002.

 

Amortizationexpense totaled $0.9 million, or 11.9% of net sales for the three months endedJune 30, 2001, versus $0.0 million for the second quarter of 2002.  This decrease of amortization expense in thecurrent year quarter is directly attributable to the write-off of impairedgoodwill and other intangible assets, which were recorded in the third quarterof 2001.

 

The restructuringbenefit totaled $0.5 million or 12.2% of net sales.  This net benefit resulted from a lease settlement agreement whichwas reached during the second quarter of 2002. This agreement allows us to exit the existing lease at our Marlborough,Massachusetts facility. As a result of this agreement, the remaining idlefacility charges of $674,000 related to this lease have been eliminated.  This benefit was patially offset by a$199,000 charge related to a 7% reduction of our workforce across allfunctional areas in the second quarter of 2002, reflecting severance and otherbenefits costs associated with this reduction. This workforce reduction affected 9 employees, principally in the areasof manufacturing, sales and marketing and engineering.

 

Interest incomefor the first quarter of 2002 was $31,000 compared to $41,000 in the firstquarter of 2001.  This decrease resultedfrom the decrease in investment in interest-bearing cash and equivalents.  Interest expense and other totaled $293,000in the current year’s quarter, compared to ($4,000) for the comparable periodin the prior year.  The increase ininterest expense resulted from the coupon rate associated with our 10% SeniorSubordinated Notes, which were issued in December of 2001, and the amortizationof debt issuance costs associated with the note offering.

 

Net loss for thequarter ended June 29, 2002 was $1.8 million or $0.13 per share, as compared toa net loss of $2.5 million, or $0.18 per share in the prior year period.

 

**Resultsof Operations for the Six Months Ended June 29, 2002 and June 30, 2001**

 

Net sales for thesix months ended June 29, 2002, decreased $9.4 million or 56.1% to $7.3 millioncompared to $16.7 million for the six months ended June 30, 2001.  Product acceptance requirements related toproduct and customer mix resulted in a net increase to revenues of $2.1 millionover shipments for the 2002 six month period compared to a net increase to revenues of $4.9 million over shipments forthe comparable prior year period.  Currentyear product revenues, especially capacity related singulated device handlerproducts, were severely impacted by the downturn in the semiconductor capitalequipment market.  We expect net salesto continue to be adversely impacted by the market downturn into theforeseeable future

 

Gross profit forthe first six months of 2002 decreased by $4.1 million to $2.7 million, or36.8% of net sales, from $6.8 million, or 40.9% of net sales, for thecomparable period in the prior year. The decrease in gross margin in the current year period primarilyresulted from unabsorbed excess production costs associated with the industrydownturn, and, in particular, excess production costs related to our singulatedproducts.  We expect gross margins tocontinue to be adversely impacted by the market downturn, partially offset bythe benefits of the restructuring steps we initiated in the first quarter of2001 and continuing into the first and second quarters of 2002.

 

13

----

 

Selling, generaland administrative expense for the first six months of 2002 was $4.7 million,or 64.1% of net sales, compared to $6.2 million, or 36.8% of net sales for thefirst six months of 2001. The decrease in expense for the current year periodis a result of the cost reduction measures initiated in 2001 and 2002, and adecrease in direct selling costs related to the decrease in sales. The increasein selling, general and administrative expense as a percentage of net sales inthe current year is primarily attributed to the decreased sales base in thecurrent year period.

 

Research anddevelopment expense for the first six months of 2002 was $2.4 million, or 32.1%of net sales, compared to $4.9 million, or 29.3% of net sales for the first sixmonths of 2001.   The decrease inexpense for the current year period is a result of the cost reduction measuresinitiated in 2001and 2002.

 

Amortizationexpense totaled $1.8 million, or 10.5% of net sales for the six months endedJune 30, 2001, versus $0.0 million for the first six months of 2002.  This decrease of amortization expense forthe first six months of 2002 is directly attributable to the write-downs ofimpaired goodwill and other intangible assets, which were recorded in the thirdquarter of 2001.

 

The restructuringbenefit totaled $0.2 million or 2.1% of net sales.  This net benefit resulted from a lease settlement agreement whichwas reached during the second quarter of 2002. This agreement allows us to exit the existing lease at our Marlborough,Massachusetts facility. As a result of this agreement, the remaining idlefacility charges related to this lease, have been eliminated. This benefit wasoffset by a charge related to a 7% reduction of our workforce across allfunctional areas in the second quarter of 2002 and a 25% reduction of ourworkforce in the first quarter of 2002, reflecting severance and other benefitscosts associated with these reductions. This workforce reduction affected 9 employees in the second quarter of2002 and 44 employees in the first quarter of 2002, principally in the areas ofmanufacturing, sales and marketing and engineering.

 

Interest incomefor the first six months of 2002 was $76,000 compared to $153,000 for thecomparable in the  prior year.  This decrease resulted from the decrease ininvestment in interest-bearing cash and equivalents.  Interest expense and other totaled $586,000 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 of 2001, and the amortization of debt issuance costsassociated with the note offering.

 

Net loss for thesix-month period ended June 29, 2002 was $4.7 million or $0.33 per share, ascompared to a net loss of $8.2 million, or $0.58 per share in the prior yearperiod.

 

**Liquidity and Capital Resources**

 

The net loss andreductions in other accrued liabilities were the primary uses of cash for thesix month period ended June 29, 2002. The net loss and reductions in accounts payable and other accruedliabilities were the primary uses of cash in first six months of the prioryear.  Cash used in operations was $5.0million for the six month period ended June 29, 2002 and $9.7 million in thecomparable prior year period.

 

14

----

 

We recordprovisions for doubtful accounts based on specific identification of ouraccounts receivable.  We did not recordany provisions for doubtful accounts in the second quarters of 2001 or 2002.

 

Capitalexpenditures totaled $73,000 in the six months ended June 29, 2002, versus$134,000 in the comparable period of 2001. Capital purchases were for primarily for software and computer equipmentin both the current and prior year periods.

 

At June 29, 2002,we had cash and cash equivalents of $6.3 million, a current ratio of 2.4 andworking capital of $8.3 million.  AtDecember 31, 2001, we had cash and cash equivalents of $11.1 million, a currentratio of 2.9 and working capital of $12.9 million.

 

Our anticipatedcapital expenditure needs for the remainder of 2002 are expected to be lessthan $0.5 million and concentrated in development of additional products andupgrading our management information systems. We believe that cash and cash equivalents on hand at June 29, 2002 aresufficient to finance and sustain our continuing operations at the projectedlevel through at least 2002.  However,the impact of the continuation of the severe downturn in the semiconductorcapital equipment market, one or more additional business acquisitions, orunforeseen changes in market conditions could cause us to seek additionalfinancing sooner.  We believe that wewill be able to raise additional capital and/or negotiate a working capitalline of credit at terms acceptable to us if required, but no assurance can bemade that such financing will be available if needed.  We may acquire other companies, product lines or technologiesthat are complementary to our business, and our working capital needs maychange as a result of such acquisitions.

 

On May 20, 2002,the Company was notified by Nasdaq that it failed to meet the standards forcontinued listing of the Company’s Common Stock on the Nasdaq National Market.  On August 8, 2002, the Company had a hearingbefore Nasdaq at which it presented a plan to meet those standards, andrequested Nasdaq to suspend its action to give the Company time to complete itsplan.  Nasdaq is considering the requestand is expected to respond in approximately two weeks after the hearing.  If the Common Stock loses its NationalMarket designation, Nasdaq can designate the Common Stock for trading on theSmallCap Market or the Common Stock will trade on the OTC Bulletin Board. The Note Purchase Agreement between the Company and the purchasers ofthe Company’s 10% Senior Subordinated Convertible Notes, which was filed asExhibit 10W to the Company’s 2001 Form 10-K, contains a covenant requiring theCompany to take all action necessary to continue the listing of the CommonStock on the Nasdaq National Market or any relevant market or system.  Regardless of the action taken by Nasdaq,management believes that the Company will remain in compliance with thiscovenant.

 

**QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

The vast majorityof our transactions are denominated in U.S. dollars; as such, fluctuations inforeign currency exchange rates have historically had little impact on us.  Inflation has not been a significant factorin our operations in any of the periods presented, and it is not expected toaffect operations in the future.  AtJune 29, 2002, all of our outstanding long-term debt carries interest at afixed rate. There is no material market risk relating to our long-term debt.

 

**IMPACT OF ACCOUNTING STANDARDS**

 

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

 

In June 2001, theFASB issued SFAS No. 143, *Accounting for Asset Retirement Obligations*.  SFAS No. 143 addresses financial accountingand reporting for obligations associated with the retirement of tangiblelong-lived assets and the associated asset retirement costs.  SFAS No. 143 applies to legal obligationsassociated with the retirement of long-lived assets that result from theacquisition, construction, development and/or the normal operation of along-lived asset, except

 

15

----

 

for certainobligations of lessees.  SFAS No. 143amends SFAS No. 19, *Financial Accounting and Reporting by Oil and GasProducing Companies*.  SFASNo. 143 is effective for us on January 1, 2003.  We are currently assessing what impact, if any, SFAS No. 143 willhave on our financial position or results of operations.

 

In August 2001,the FASB issued SFAS No. 144,  *Accountingfor the 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 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 ofOperations-Reporting the Effects of Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events and Transactions,*for the disposal of a segment of a business (as previously defined in thatOpinion).  SFAS No. 144 also amends ARBNo. 51, *ConsolidatedFinancial Statements,* to eliminate the exception to consolidationfor a subsidiary for which control is likely to be temporary.  SFAS No. 144 was effective for us on January1, 2002 and did not have a material effect on our financial position or resultsof operations for the six month period ended June 29, 2002.

 

**RISK FACTORS**

 

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

 

16

----

 

**MICRO COMPONENT TECHNOLOGY, INC.**

## FORM10-Q

# PART II.  OTHERINFORMATION

 

### **Item4.  Submission Of Matters To A Vote OfSecurity Holders**

 

(a)     The Company’s annual meeting of stockholders was held on June27, 2002.

 

(b)     The following persons were elected directors of the Company toserve for a term of one year:

 
| Roger  Gower         | D. James Guzy        | Donald Kramer      |
|----------------------|----------------------|--------------------|
| David  M. Sugishita  | Donald  R VanLuvanee | Patrick  Verderico |
| Dr.  Sheldon Buckler |                 |               |

 

### **Item 5.  OtherInformation**

 

***Restructuring Charges***

 

During the firstquarter of 2002, in response to the continued and prolonged downturn in thesemiconductor capital equipment industry, we reduced our workforce across allfunctional areas by approximately 25%, resulting in a restructuring charge of$323,000.  This charge reflectsseverance and other benefits costs associated with this reduction.  This workforce reduction affected 44employees, principally in the areas of manufacturing, sales and marketing andengineering.

 

During the secondquarter of 2002, we further reduced our workforce by 9 positions or 7% acrossall functional areas resulting in a restructuring charge of $199,000.  This charge reflects severance and otherbenefits costs associated with this reduction.

 

During the secondquarter of 2002, we completed a lease settlement agreement related to ourMarlborough, Massachusetts’s facility. This agreement requires us to pay $450,000 or approximately 35% of theoutstanding lease obligation, which was to run through April of 2003.  As of June 29, 2002, $350,000 remains due,which is required to be paid in full by December 15, 2002 and is included inother accrued liabilities.  As a resultof this settlement, the remaining idle facility charge of  $674,000 was eliminated in the quarter endedJune 29, 2002.

 

 

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

 

(a)          Reports on Form 8-K

 

No reports on Form8-K were filed during the quarter ended June 29, 2002.

 

17

----

 

**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:    August 13, 2002 | By:                                   | /s/ Roger E. Gower |   |
|                                | Roger E. Gower                        |
|                                | President and Chief Executive Officer |
|                                |                                  |
|                                |                                  |
|                                | And                                   |
|                                |                                  |
|                                |                                  |
| Dated:    August 13, 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, thefinancial condition and results of operations of the Company.

 
| Dated:    August 13, 2002 | By:                                   | /s/ Roger E. Gower |   |
|-------------------------------------|---------------------------------------|--------------------|--------|
|                                | Roger E. Gower                        |
|                                | President and Chief Executive Officer |
|                                |                                  |
|                                |                                  |
|                                | And                                   |
|                                |                                  |
|                                |                                  |
| Dated:    August 13, 2002 | By:                                   | /s/ Thomas P. Maun |   |
|                                | Thomas P. Maun                        |
|                                | Chief Financial Officer               |
|                                | Chief Accounting Officer              |

 

18

----