SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-22384
MICRO COMPONENT TECHNOLOGY, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0985960
- ---------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2340 West County Road C, St. Paul, MN 55113-2528
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(651) 697-4000
-------------------------------------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes ___X___ No _______
The number of shares outstanding of the Registrant's Common Stock, as of October
22, 1999 was 7,476,922.
Page 1 of 15 pages
Exhibit index on page 14
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF OPERATIONS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION 8
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
EXHIBITS AND REPORTS 14
2
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 25, June 26,
ASSETS 1999 1999
- -------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,664 $ 1,927
Accounts receivable, less allowance for doubtful accounts
of $136 and $146, respectively 4,356 3,596
Inventories:
Raw materials 855 1,129
Work in process 1,374 1,485
Finished goods 1,212 1,002
Other 343 131
------------ ------------
Total current assets 9,804 9,270
Property, plant and equipment 4,070 3,709
Less accumulated depreciation (3,117) (3,036)
------------ ------------
Property, plant and equipment, net 953 673
Other assets, net 85 47
------------ ------------
Total assets $ 10,842 $ 9,990
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------
Current liabilities:
Current portion of long term debt $ 52 $ 51
Accounts payable 1,877 1,548
Other accrued liabilities 1,598 1,406
------------ ------------
Total current liabilities 3,527 3,005
Long-term debt and financing obligations 86 33
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 authorized,
7,476,922 and 7,416,922 issued, respectively 75 74
Additional paid-in capital 44,181 44,035
Cumulative translation adjustment (69) (69)
Accumulated deficit (36,958) (37,088)
------------ ------------
Total stockholders' equity 7,229 6,952
------------ ------------
Total liabilities and stockholders' equity $ 10,842 $ 9,990
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements
3
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
September 25, September 26,
1999 1998
------------- -------------
<S> <C> <C>
Net sales $ 5,745 $ 3,668
Cost of sales 2,832 1,935
---------- ----------
Gross profit 2,913 1,733
Operating expenses:
Selling, general and administrative 2,127 1,721
Research and development 675 836
---------- ----------
Total operating expenses 2,802 2,557
---------- ----------
Profit (loss) from operations 111 (824)
Interest income, net 11 17
Other income (expense) 8 (12)
---------- ----------
Total interest and other 19 5
---------- ----------
Net income (loss) $ 130 $ (819)
========== ==========
Net income (loss) per share:
Basic $ 0.02 $ (0.11)
========== ==========
Diluted $ 0.02 $ (0.11)
========== ==========
Weighted average common and common
equivalent shares outstanding:
Basic 7,460 7,394
========== ==========
Diluted 8,131 7,394
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements
4
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
September 25, September 26,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 130 $ (819)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 124 128
Changes in assets and liabilities:
Accounts receivable (760) 1,387
Inventories 175 10
Other assets (212) (7)
Accounts payable 329 (222)
Other accrued liabilities 97 (301)
---------- ----------
Net cash used in operating activities (117) (176)
Cash flows from investing activities:
Additions to property, plant and equipment (39) (13)
Payment for acquisition (238) --
---------- ----------
Net cash used in investing activities (277) (13)
Cash flows from financing activities:
Payments of long-term debt (16) (12)
Proceeds from issuance of stock 147 --
---------- ----------
Net cash provided by (used in) financing activities 131 (12)
---------- ----------
Net increase (decrease) in cash and cash equivalents (263) 151
Cash and cash equivalents at beginning of period 1,927 2,532
---------- ----------
Cash and cash equivalents at end of period $ 1,664 $ 2,683
========== ==========
Supplemental Disclosure:
Noncash investing and financing activities:
Equipment acquired by capital lease $ 70 --
Note payable for acquisition 95 --
</TABLE>
See notes to unaudited condensed consolidated financial statements
5
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, condensed, consolidated financial
statements for the three month periods ended September 25, 1999 have
been prepared in accordance with the instructions for SEC Form 10-Q
and, accordingly, do not include all disclosures required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting of normal
recurring accruals considered necessary for a fair presentation, have
been included.
Interim unaudited financial results should be read in conjunction with
the audited financial statements included in the SEC Annual Report,
Form 10-K, for the fiscal year ended June 26, 1999.
The results of operations for the three months ended September 25, 1999
are not necessarily indicative of the operating results to be expected
for the full year.
2. EARNINGS PER SHARE
Earnings per share are computed in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share."
Basic earnings per share are computed using the weighted average number
of common shares outstanding during each period. Diluted earnings per
share include the dilutive effect of common shares potentially issuable
upon the exercise of stock options and warrants outstanding. The
following table reconciles the denominators used in computing basic and
diluted earnings per share:
Three months ended
-----------------------------
September 25, September 26,
(in thousands) 1999 1998(1)
-----------------------------
Weighted average common
shares outstanding 7,460 7,394
Effect of dilutive stock
options and warrants 671 --
-----------------------------
8,131 7,394
=============================
(1) The Company reported a loss for the period. No adjustment made for
the effect of stock options or warrants as effect is anti-dilutive.
6
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3. REPORTING OF COMPREHENSIVE NET INCOME OR (LOSS)
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS), No. 130 "Reporting Comprehensive
Income" which establishes standards for the reporting and display of
comprehensive income (loss) and its components in a full set of
general-purpose financial statements. Under this standard, certain
revenues, expenses, gains, and losses recognized during the period are
included in comprehensive income (loss), regardless of whether they are
considered to be results of operations of the period. During the three
month period ended September 25, 1999 and September 26, 1998 total
comprehensive income (loss) equaled net income (loss) as reported on
the Consolidated Statements of Operations.
4. ACQUISITIONS
On June 29, 1999, the Company acquired certain assets and assumed
certain liabilities of the Systems Integration unit of FICO America,
Inc., forming the Infinity Systems Division of the Company to develop
and implement Manufacturing Execution Systems ("MES") and factory
control systems to customers in the semiconductor industry. The
acquisition was accounted for as a purchase, and accordingly, the net
assets acquired were recorded at their estimated fair market value at
the effective date of the acquisition. The purchase price and the pro
forma impact on fiscal 1999 results were not material to the company.
On September 18, 1999, the Company entered into a definitive merger
agreement to acquire Aseco Corporation, a Massachusetts based
manufacturer of handling equipment. The acquisition, currently valued
at $16.3 million, subject to adjustment under certain terms of the
agreement, is structured as a stock for stock purchase and is expected
to close in December 1999. The agreement has been approved by the Board
of Directors of both companies and is subject to approval by the
shareholders of each company and regulatory agencies.
7
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 25, 1999
Net sales for the first quarter fiscal 2000, ended September 25, 1999, increased
$2.1 million or 56.6% to $5.7 million compared to $3.7 million for the same
period the previous year. The increase in sales in the current year is
attributed to the general improvement in the semiconductor capital equipment
market, which was in a significant downturn in the prior year. Current year
sales of the Company's newest products, the MCT 5100, MCT 7632 and MCT Tapestry
handling systems were all above prior year levels and accounted for a
substantial portion of the increase. The Company expects these products to
continue to account for a significant portion of the Company's total revenues in
the future.
Gross profit for the first quarter fiscal 2000 increased by $1.2 million to $2.9
million, or 50.7% of sales, from $1.7 million, or 47.2% of sales, for the first
quarter fiscal 1999. The increase in gross margin is primarily attributed to
changes in product mix and increased absorption of overhead costs in the current
year. Gross margins are expected to be comparable to first quarter levels,
depending on product mix, in the foreseeable future periods.
Selling, general and administrative expense in the first quarter fiscal 2000 was
$2.1 million, or 37.0% of sales, compared to $1.7 million, or 46.9% of sales for
the same quarter in fiscal 1999. The reduction as a percentage of sales is the
result of cost reduction initiatives implemented by the Company in fiscal 1998
and early fiscal 1999. The increase in absolute spending is attributed to
increased direct selling costs related to increased sales revenues, increased
commissions resulting from a shift in customer mix to a higher level of
customers served by commissioned independent sales representatives, and the
addition of the Infinity Systems division operations beginning in the first
quarter fiscal 2000.
Research and development expense for the first quarter fiscal 2000 was $0.7
million, or 11.7% of sales, compared to $0.8 million, or 22.8% of sales in the
previous year. The decrease in spending in the current year resulted from
reduced spending requirements related to R&D projects in process during this
period. The Company expects to continue to invest in new product development at
levels near or slightly above current quarter levels, based upon the projected
needs of current and anticipated development projects.
The Company generated net interest and other income during the quarter of
$19,000 as compared to $5,000 for the same period one year ago.
Net income for the first quarter fiscal 2000 was $130,000 or $0.02 per share as
compared to a net loss of $819,000, or $0.11 per share for the first quarter
fiscal 1999.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 25, 1999, the Company had cash and cash equivalents of $1.7
million compared to $1.9 million at June 26, 1999. Cash used in operations was
$117,000 during the first quarter fiscal 2000, versus $176,000 used in the first
quarter the previous year. The increase in accounts receivable resulting from
the increased sales during the current year more than offset cash provided by
net income and increases in trade payables and accrued liabilities.
Current assets at September 25, 1999 were $9.8 million, the current ratio was
2.8 and working capital was $6.3 million, versus $9.3 million, 3.1 and $6.3
million, respectively, at June 26, 1999.
Net cash used in investing activities during the first quarter fiscal 2000 was
$0.3 million compared to $13,000 the same quarter in the previous year. The
Company used $238,000 to acquire certain fixed and intangible assets related to
the formation of the Infinity Systems Division of the Company.
The Company maintains a $5 million secured line of credit with a bank, which was
unused at September 25, 1999 and June 26, 1999. The amount available for
borrowing is calculated as a percentage of eligible accounts receivable and
inventory, and amounted to approximately $2.9 million at September 25, 1999.
The Company's capital needs for the remainder of fiscal 2000, prior to
acquisitions, are expected to be comparable to prior year levels and
concentrated in development of additional handler products and upgrading its
management information systems. The Company has used and expects to use funds
for the business acquisitions described in Item 5. Management believes that cash
and cash equivalents on hand at September 25, 1999, and funds available through
its bank line of credit are sufficient to finance such acquisitions and sustain
the Company's continuing operations at the projected level for the foreseeable
future. Management believes that it will be able to raise additional capital
and/or negotiate an increase to its bank line of credit at terms acceptable to
the Company if required, but no assurance can be made that such financing will
be available if needed. The Company may acquire other companies, product lines
or technologies that are complementary to the Company's business and the
Company's working capital needs may change as a result of such acquisitions.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. When year 2000 begins,
these computers may interpret "00" as the year 1900 and could either stop
processing date related computations or could process them incorrectly.
Beginning in the year 2000, these date code fields will need to accept
four-digit entries to distinguish 21st century dates from 20th century dates to
be year 2000 compliant.
The Company completed a review of its internal information systems and
determined that most of the application software and internal information
systems, other than the Company's primary manufacturing and accounting system:
(1) are year 2000 compliant; (2) can be upgraded to be year 2000 compliant
without significant cost or effort; or, (3) do not pose a significant issue to
the Company if left uncorrected. With regard to the Company's primary
manufacturing and
9
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accounting system, the Company contracted with the software vendor and related
hardware supplier to bring these systems year 2000 compliant. The upgrade was
completed in the second quarter of fiscal 1999. All other significant
application software, hardware and internal information systems which were
identified as not year 2000 compliant have been upgraded or replaced. Total
costs to upgrade the Company's internal information systems, most of which have
been paid, are not material to the operations of the Company, and are expected
to be less than $100,000.
The Company has completed an assessment of non-IT systems within the Company to
determine if they are year 2000 compliant. The Company has upgraded or replaced
all significant non-IT systems that were identified as not year 2000 compliant.
Although the Company is not aware of any material operational issues or costs
associated with preparing its internal systems for the year 2000, there can be
no assurance that the Company will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in the
technology used in its internal operating systems, which are composed
predominately of third party software and hardware technology.
The Company is in the process of determining the impact that third parties
suppliers and vendors that are not year 2000 compliant may have on the
operations of the Company. Non-compliance by any of the Company's major
distributors, suppliers, customers, vendors, or financial organizations could
result in business disruptions that could have a material adverse affect on the
Company's results of operations, liquidity and financial condition. To date, the
Company is not aware of any such third parties with year 2000 issues that would
materially impact the Company's results of operations, liquidity or financial
condition. The Company is in the process of developing a contingency plan which
is expected to be completed by November 30, 1999. The contingency plan will be
developed to minimize the Company's exposure to work slowdowns or business
disruptions and any adverse affects on the Company's results of operations.
The Company completed an assessment and test of the software components of its
products for year 2000 compliance, and determined that no significant
modifications are required to products currently offered or actively marketed
within the past five years. The Company does not believe that its products
contain undetected errors or defects associated with year 2000 date functions
that may result in material costs to the Company, including repair costs and
costs incurred in litigation due to any such defects; however, there can be no
assurance that such errors or defects do not exist. Many commentators have
stated that a significant amount of litigation will arise out of year 2000
compliance issues. Because of the unprecedented nature of such litigation, there
can be no assurance that the Company will not be materially adversely affected
by claims related to year 2000 compliance.
IMPACT OF ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS No. 133 establishes a new model for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing accounting standards. SFAS No. 133 requires that all derivatives be
recognized in the balance sheet at their fair market value, and the
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such
10
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derivative. Management has not yet completed an assessment of the impact of
adopting the provisions of SFAS No. 133 on the Company's financial statements.
The standard is effective for the Company in fiscal 2001.
RISK FACTORS
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. These "forward-looking
statements" involve certain risks and uncertainties, including, but not limited
to, the following: (1) fluctuations and periodic downturns in the semiconductor
market, as currently being experienced, which often have had a
disproportionately negative effect on manufacturers of semiconductor capital
equipment; (2) rapid changes in technology and in tester and handler products,
which the Company must respond to successfully in order for its products to
avoid becoming noncompetitive or obsolete; (3) customer acceptance of the
Company's new products, including the MCT 5100, MCT 5200, MCT 7632 and Tapestry
handling systems, in which the Company has invested significant amounts of
inventory; (4) possible loss of any of the Company's key customers, who account
for a substantial percentage of the Company's business; (5) the possible adverse
impact of competition in markets which are highly competitive, including
increased pressure on pricing and payment terms which may adversely affect net
sales and gross margins and increase the Company's exposure to credit risk; (6)
the possible adverse impact of economic or political changes in markets the
Company serves, including the uncertain economic situation currently facing
Southeast Asia; (7) the possible adverse impact on the Company's operations or
material costs which may be incurred by the Company due to undetected errors or
defects in preparing its internal operating systems for the year 2000; (8) the
possible adverse impact on the Company's operations or material costs which may
be incurred by the Company arising from year 2000 related repair costs or
litigation due to undetected errors or defects in its products which use
software; and, (9) other factors detailed from time to time in the Company's SEC
reports, including but not limited to the discussion in the Management's
Discussion & Analysis included in the Annual Report on Form 10-K for the year
ended June 26, 1999. All forecasts and projections in this report are
"forward-looking statements," and are based on management's current expectations
of the Company's near-term results, based on current information available
pertaining to the Company, including risk factors discussed above.
Actual results could differ materially.
11
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On June 29, 1999, the Company acquired certain assets and assumed certain
liabilities of the Systems Integration unit of FICO America, Inc., forming the
Infinity Systems Division of the Company to develop and implement Manufacturing
Execution Systems ("MES") and factory control systems to customers in the
semiconductor industry. The acquisition was accounted for as a purchase, and
accordingly, the net assets acquired were recorded at their estimated fair
market value at the effective date of the acquisition. The purchase price and
pro forma impact on fiscal 1999 results were not material to the company.
On September 18, 1999, the Company entered into a definitive merger agreement to
acquire Aseco Corporation, a Massachusetts based manufacturer of handling
equipment. The acquisition, currently valued at $16.3 million, subject to
adjustment under certain terms of the agreement, is structured as a stock for
stock purchase and is expected to close in December 1999. The agreement has been
approved by the Board of Directors of both companies and is subject to approval
by the shareholders of each company and regulatory agencies.
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
12
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Micro Component Technology, Inc.
--------------------------------
Registrant
Dated: November 5, 1999 By: /s/Roger E. Gower
-------------------------------------
Roger E. Gower
President and Chief Executive Officer
And
Dated: November 5, 1999 By: /s/ Jeffrey S. Mathiesen
-------------------------------------
Jeffrey S. Mathiesen
Chief Financial Officer
Chief Accounting Officer
13
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit
Number Page
27 Financial Data Schedule 15
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-24-2000
<PERIOD-END> SEP-25-1999
<CASH> 1,664
<SECURITIES> 0
<RECEIVABLES> 4,492
<ALLOWANCES> (136)
<INVENTORY> 3,441
<CURRENT-ASSETS> 9,804
<PP&E> 4,070
<DEPRECIATION> (3,117)
<TOTAL-ASSETS> 10,842
<CURRENT-LIABILITIES> 3,527
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 7,154
<TOTAL-LIABILITY-AND-EQUITY> 10,842
<SALES> 5,745
<TOTAL-REVENUES> 5,745
<CGS> 2,832
<TOTAL-COSTS> 2,832
<OTHER-EXPENSES> 2,802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 130
<INCOME-TAX> 0
<INCOME-CONTINUING> 130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
