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 March 25, 2000
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 May 5,
2000 was 11,047,736.
Page 1 of 20 pages
Exhibit index on page 19
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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 10
PART II - OTHER INFORMATION
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
EXHIBITS AND REPORTS 19
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 25, June 26,
ASSETS 2000 1999
- -------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,875 $ 1,927
Accounts receivable, less allowance for doubtful accounts
of $516 and $146, respectively 10,934 3,596
Inventories:
Raw materials 5,517 1,129
Work in process 2,757 1,485
Finished goods 1,325 1,002
Other 369 131
------------ ------------
Total current assets 22,777 9,270
Property, plant and equipment 4,984 3709
Less accumulated depreciation (3,408) (3,306)
------------ ------------
Property, plant and equipment, net 1,576 673
Goodwill and other intangible assets, net 18,926 47
------------ ------------
Total assets $ 43,279 $ 9,990
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 3,128 $ -
Current portion of long-term debt 46 51
Accounts payable 4,691 1,548
Other accrued liabilities 4,196 1,406
------------ ------------
Total current liabilities 12,061 3,005
Long-term debt and financing obligations 58 33
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 authorized,
11,046,579 and 7,394,300 issued, respectively 110 74
Additional paid-in-capital 68,171 44,035
Cumulative translation adjustment (69) (69)
Accumulated deficit (37,052) (37,088)
------------ ------------
Total stockholders' equity 31,160 6,952
------------ ------------
Total liabilities and stockholders' equity $ 43,279 $ 9,990
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements
3
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ---------------------------
Mar. 25, Mar. 27, Mar. 25, Mar. 27,
2000 1999 2000 1999
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Net sales $ 11,417 $ 4,028 $ 22,750 $ 10,716
Cost of sales 5,702 2,032 11,140 5,538
--------- --------- --------- ---------
Gross profit 5,715 1,996 11,610 5,178
Operating expenses:
Selling, general and administrative 3,279 1,417 7,548 4,569
Research and development 1,820 708 3,310 2,140
Amortization of intangible assets 686 - 696 -
--------- --------- --------- ---------
Total operating expenses 5,785 2,125 11,554 6,709
--------- --------- --------- ---------
Profit (loss) from operations (70) (129) 56 (1,531)
Interest income 20 19 48 67
Interest expense (38) (1) (43) (6)
Other, net (21) (14) (25) (50)
--------- --------- --------- ---------
Total interest and other (39) 4 (20) 11
--------- --------- --------- ---------
Net income (loss) $ (109) $ (125) $ 36 $ (1,520)
========= ========= ========= =========
Net income (loss) per share:
Basic $ (0.01) $ (0.02) $ 0.00 $ (0.21)
========= ========= ========= =========
Diluted $ (0.01) $ (0.02) $ 0.00 $ (0.21)
========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding:
Basic 9,635 7,394 8,193 7,394
========= ========= ========= =========
Diluted 9,635 7,394 9,370 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>
Nine Months Ended
----------------------------------------------
Mar 25, Mar 27,
2000 1999
-------------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 36 $ (1,520)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 1,119 367
Changes in assets and liabilities:
Accounts receivable (3,015) 275
Inventories (77) 425
Other and other current assets (108) (24)
Accounts payable 166 (90)
Other accrued liabilities 300 (280)
------------ ------------
Net cash used in operating activities (1,579) (847)
Cash flows from investing activities:
Additions to property, plant and equipment (109) (45)
Payment for acquisitions (620) -
------------ ------------
Net cash used in investing activities (729) (45)
Cash flows from financing activities:
Payments of long-term debt (50) (37)
Increase in working line of credit 1,334 -
Proceeds from issuance of stock 972 -
------------ ------------
Net cash provided by (used in) financing activities 2,256 (37)
------------ ------------
Net decrease in cash and cash equivalents (52) (929)
Cash and cash equivalents at beginning of period 1,927 2,532
------------ ------------
Cash and cash equivalents at end of period $ 1,875 $ 1,603
============ ============
Supplemental disclosure:
Noncash investing and financing activities:
Equipment acquired by capital lease $ 70 -
Notes payable for acquisition 48 -
Stock issued for acquisition of Aseco Corporation 23,200 -
Stock issued in cashless option and warrant exercises 627 -
Stock redeemed in cashless option and warrant exercises (627) -
</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 and nine month periods ended March 25, 2000 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/A, for the fiscal year ended June 26, 1999.
The results of operations for the three and nine months ended March 25,
2000 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:
<TABLE>
<CAPTION>
Three months ended Nine months ended
--------------------------------------- ------------------------------------
March 25, March 27, March 25, March 27,
(in thousands) 2000 (1) 1999 (1) 2000 1999 (1)
------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 9,635 7,394 8,193 7,394
Effect of dilutive stock
options and warrants - - 1,177 -
------------------- ------------------- ----------------- ------------------
9,635 7,394 9,370 7,394
=================== =================== ================= ==================
</TABLE>
(1) The Company reported a loss for the periods indicated. No adjustment
made for the effect of stock options or warrants, as effect is
anti-dilutive.
6
<PAGE>
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 periods ended March 25, 2000 and March 27, 1999 total
comprehensive income (loss) equaled net income (loss) as reported on the
Consolidated Statements of Operations.
4. ACQUISITIONS
INFINITY SYSTEMS ACQUISITION
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.
ASECO CORPORATION ACQUISITION
On January 31, 2000, the Company completed its acquisition of Aseco
Corporation, a Massachusetts based manufacturer of handling equipment.
The acquisition was structured as a stock for stock purchase. The
purchase price totaled $24.0 million, consisting of 2.9 million shares of
MCT common stock valued at $22.5 million issued to former Aseco
shareholders and $1.5 million of acquisition-related costs.
The acquisition was accounted for using the purchase method of
accounting. The results of operations of Aseco Corporation have been
included in the Company's consolidated financial statements since January
31, 2000. The purchase price has been allocated based on the estimated
fair values of net assets acquired at the date of acquisition. The excess
of purchase price over tangible net assets acquired has been
preliminarily allocated to goodwill in the amount of $9.6 million (which
is being amortized using a straight line method over the estimated useful
life of five years), and other intangible assets in the amount of $9.9
million (which are being amortized using the straight-line method over
the estimated useful lives of two to five years). In accordance with
generally accepted accounting principals, this initial allocation may be
adjusted in future quarters as valuations of certain accounts, including
inventory and accrued liabilities are finalized.
The following unaudited pro forma information presents a summary of
combined results of operations of MCT and Aseco as if the acquisition had
occurred at the beginning of the periods presented, along with certain
pro forma adjustments to give effect to amortization of goodwill and
other adjustments. The pro forma information also does not attempt to
show
7
<PAGE>
how the combined company would actually have performed had the companies
been combined throughout these periods. The pro forma information,
therefore, although helpful in illustrating the financial characteristics
of the combined company under one set of assumptions, does not attempt to
predict or suggest future results.
<TABLE>
<CAPTION>
(in thousands, except per share data) Nine months ended Nine months ended
March 25, 2000 March 27, 1999
------------------ ------------------
<S> <C> <C>
Net revenues $ 34,313 $ 23,304
Net income (loss) (6,236) (17,579)
Net income (loss) per share:
Basic and diluted (0.60) (1.70)
</TABLE>
5. NEW ACCOUNTING PRONOUNCEMENTS
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
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.
In December 1999, the Securities and Exchange Commission staff (the
Staff) issued "Staff Accounting Bulletin No. 101-Revenue Recognition in
Financial Statements" (SAB 101). SAB 101 establishes the Staff's
preference that if uncertainty exists about customer acceptance, revenue
should not be recognized until acceptance occurs. Customer acceptance
provisions may be included in a contract, among other reasons, to enforce
a customer's right to (1) test the delivered product, (2) require the
seller to perform additional services subsequent to delivery of an
initial product or performance of an initial service (e.g., a seller is
required to install or activate delivered equipment), or (3) identify
other work necessary to be done before accepting the product. The Staff
presumes that such contractual customer acceptance provisions are
substantive, bargained-for terms of an arrangement. Accordingly, when
such contractual customer acceptance provisions exist, the staff
generally believes that the seller should not recognize revenue until
customer acceptance occurs or the acceptance provisions lapse.
A seller should substantially complete or fulfill the terms specified in
the arrangement in order for delivery or performance to have occurred.
When applying the substantially complete notion, the Staff believes that
only inconsequential or perfunctory actions may remain incomplete such
that the failure to complete the actions would not result in the customer
receiving a refund or rejecting the delivered products or services
performed to date. In addition, the seller should have a demonstrated
history of completing the remaining tasks in a timely manner and reliably
estimating the remaining costs. If revenue is recognized
8
<PAGE>
upon substantial completion of the arrangement, all remaining costs of
performance or delivery should be accrued.
Consistent with industry standards, the Company has historically
recognized revenue at product shipment, unless acceptance criteria were
significant. The Staff's preference, as explained above, will create a
timing difference in when the Company recognizes revenue. The accounting
change will be effective for the Company's quarter ended July 1, 2000.
The cumulative effect of the change, representing the deferral of
previously recognized revenue and related costs for product with
acceptance criteria or installation occurring after shipment, is still
being evaluated by management.
6. SUBSEQUENT EVENT
On April 11, 2000, the Company's Board of Directors elected to change its
fiscal year end to a year ending on December 31, effective December 31,
1999. Accordingly, the Company will be filing a report on Form 10-K with
respect to the transitional period created by this change no later than
July 11, 2000. The Company's interim thirteen-week quarters will each end
on a Saturday, with the first quarter of the new fiscal year ended on
April 1, 2000.
9
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company operates in the semiconductor capital equipment market, which went
into a significant downturn beginning in early fiscal 1998 and intensified
throughout fiscal 1998 and into early fiscal 1999, before beginning to recover
toward the end of fiscal 1999. The downturn was accompanied by the economic
crisis in Southeast Asia, where much of the Company's equipment is used. These
market and economic conditions have adversely impacted the Company's net sales
and operating results for the fiscal 1999 reporting periods. Beginning in late
fiscal 1999, the market began to stabilize and show signs of a gradual recovery,
which management believes will facilitate improved sales and operating results
in fiscal 2000.
On January 31, 2000, the Company completed its acquisition of Aseco Corporation
(Aseco), a Massachusetts based manufacturer of handling equipment. The
acquisition was structured as a stock for stock purchase, and has been accounted
for under the purchase method of accounting. The purchase price totaled $24.0
million, consisting of 2.9 million shares of Company common stock valued at
$22.5 million issued to former Aseco shareholders and $1.5 million of
acquisition-related costs.
The purchase price has been allocated based on the estimated fair values of net
assets acquired at the date of acquisition. The excess of purchase price over
tangible net assets acquired has been preliminarily allocated to goodwill in the
amount of $9.6 million (which is being amortized using a straight line method
over the estimated useful life of five years), and other intangible assets in
the amount of $9.9 million (which are being amortized using the straight-line
method over the estimated useful lives of two to five years). In accordance with
generally accepted accounting principals, this initial allocation may be
adjusted in future quarters as valuations of certain accounts, including
inventory and accrued liabilities are finalized.
The Company's operating results include the results of Aseco's operations since
January 31, 2000. Aseco's sales have traditionally been more heavily
concentrated toward the end of each quarter. Approximately 90% of Aseco's
quarterly sales but only two months of Aseco's operating expenses were included
in the combined operating results for the three and nine-month periods ended
March 25, 2000.
The acquisition approximately doubled the Company's sales and employee base. The
acquisition also expanded the Company's customer base, enhanced the
technological capabilities and resources, and increased product offerings.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 25, 2000
Net sales for the third quarter of fiscal 2000, ended March 25, 2000, increased
$7.4 million or 183.4% to $11.4 million compared to $4.0 million for the same
period the previous year. Sales of Aseco products accounted for approximately
$5.6 million of the sales increase, with sales of the Company's more mature
products (the MCT 4610 and MCT 3600 handlers and the MCT 2000
10
<PAGE>
testers) increasing by $1.5 million over the same period a year ago. The
increase in the mature products over the prior year quarter is attributed to
customers' increased capacity requirements associated with the improvement in
the semiconductor market. Sales of MCT's newest products, the MCT 5100, MCT 7632
and MCT Tapestry handling systems and automation software represented
approximately 22% of total net sales in the current quarter compared to
approximately 65% of sales in the comparable quarter of the prior year.
Gross profit for the third quarter of fiscal 2000 increased by $3.7 million to
$5.7 million, or 50.1% of sales, from $2.0 million, or 49.6% of sales, for the
third quarter of fiscal 1999. Increased margins, primarily from changes in
product mix of MCT products during the current year quarter more than offset
lower gross margins on the Aseco products, which had ranged from approximately
40% to 43% in recent quarters immediately prior to the acquisition.
Selling, general and administrative expense in the third quarter of fiscal 2000
was $3.3 million, or 28.8% of sales, compared to $1.4 million, or 35.2% of sales
for the same quarter in fiscal 1999. The addition of the Aseco operations
accounted for approximately $1.0 million of the increase, with increased direct
selling costs related to increased sales revenues contributing $0.5 million of
the increase. The remainder primarily relates to increased personnel and travel
expenses to support the sales growth during the third quarter. The decrease as a
percentage of sales in the current year is primarily attributed to the
disproportionately lower additional selling, general and administrative expense
incurred versus the corresponding additional revenues of Aseco since the
acquisition date, due to inclusion of two months of Aseco's results for the
quarter, as described above. Accordingly, the Company expects selling, general
and administrative expense to increase as a percentage of sales in subsequent
quarters when the revenues and expenses of Aseco for the entire period are
included.
Research and development expense for the third quarter of fiscal 2000 was $1.8
million, or 15.9% of sales, compared to $0.7 million, or 17.6% of sales in the
previous year. The acquisition of Aseco accounted for approximately $0.7 million
of the increase in the current year. The remainder of the expense increase, of
which $0.3 million was increased personnel and contract labor costs, resulted
from increased spending requirements for R&D projects initiated during the
current year quarter. These initiatives are expected to result in the
introduction of several new products in May 2000. The decrease as a percentage
of sales in the current year is primarily attributed to the disproportionately
lower additional R&D expense incurred versus the corresponding additional
revenues of Aseco since the acquisition date, due to inclusion of two months of
Aseco's results for the quarter, as described above. Accordingly, the Company
expects R&D expense to increase as a percentage of sales in subsequent quarters
when the revenues and expenses of Aseco for the entire period are included.
Amortization expense totaled $0.7 million, or 6.0% of sales, during the third
quarter of fiscal 2000, versus $0 in the prior year, and is primarily attributed
to the intangible assets and goodwill generated by the acquisition of Aseco.
Interest income for the third quarter of fiscal 2000 was $20,000 compared to
$19,000 in the previous year. Interest expense totaled $38,000, in the current
year quarter, compared to $1,000 for the prior year comparable period. The
increase in interest expense is attributed to increased borrowings under the
lines of credit during the current year.
11
<PAGE>
Net loss for the third quarter of fiscal 2000 was $109,000 or $0.01 per share as
compared to a net loss of $125,000, or $0.02 per share for the third quarter of
fiscal 1999.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 25, 1999
Net sales for the first nine months of fiscal 2000 increased $12.0 million or
112.3% to $22.8 million compared to $10.7 million for the same period the prior
year. Sales of the Company's newest products, the MCT 5100, MCT 7632 and MCT
Tapestry handling systems and automation software increased $4.4 million or
82.8% over the levels in the prior year period. Sales of these new products
represented 42.5% of total net sales for the first nine months compared to 49.3%
in the prior period. Sales of the Company's more mature products, the MCT 4610,
MCT 3600 and MCT 2000 tester products, increased by $0.9 million or 15.8% over
the same period a year ago. Approximately $5.6 million of the sales increase for
the first nine months of fiscal 2000 is attributed to the acquisition of Aseco
Corporation.
Gross profit for the first nine months of fiscal 2000 increased $6.4 million to
$11.6 million or 51.0% of sales, from $5.2 million or 48.3% of sales for the
same period a year ago. The increase in gross margin is primarily attributed to
a shift in product mix to higher margin products and increased manufacturing
efficiencies and utilization of overhead costs in the current period. Gross
margins are expected to be comparable to current quarter levels, depending on
product mix, in the foreseeable future periods.
Selling, general and administrative expense in the first nine months of fiscal
2000 was $7.6 million, or 33.2% of sales, compared to $4.6 million, or 42.6% of
sales for the same period in fiscal 1999. In addition to the $1.0 million
increase in expense resulting from the acquisition of Aseco, the increase in
current year spending compared to fiscal 1999 is attributed to approximately
$1.0 million in direct selling costs related to increased sales revenues and
increased commissions of $0.3 million resulting from a shift in customer mix to
a higher level of customers served by commissioned independent sales
representatives. The remainder relates to increased expenses, primarily
personnel expenses, in supporting the sales growth. The decrease as a percentage
of sales in the current year is primarily attributed to the disproportionately
lower additional selling, general and administrative expense incurred versus the
corresponding additional revenues of Aseco since the acquisition date, as
previously described, and increased sales levels in the current year.
Research and development expense for the first nine months of fiscal 2000 was
$3.3 million, or 14.5% of sales, compared to $2.1 million, or 20.0% of sales in
the same period in the previous year. The acquisition of Aseco accounted for
approximately $0.7 million of the increase in the current year. The remainder of
the increase was primarily comprised of a $0.4 million increase in personnel and
contract labor expenses to support R&D projects in process and initiated during
this period. These initiatives are expected to result in the introduction of
several new products in May 2000. The decrease as a percentage of sales in the
current year is primarily attributed to the disproportionately lower additional
R&D expense incurred versus the corresponding additional revenues of Aseco since
the acquisition date, as previously described.
12
<PAGE>
Amortization expense totaled $0.7 million, or 3.0% of sales, during first nine
months of fiscal 2000, versus none in the prior year, and is primarily
attributed to the intangible assets and goodwill generated by the acquisition of
Aseco.
The Company generated interest income during the current year of $48,000
compared to $67,000 in the previous year. The reduction in net interest income
is due to decreased holdings of interest bearing cash equivalents. Interest
expense increased to $43,000 in the current year, as compared to $6,000 for the
same period of fiscal 1999, due to increased borrowing under the lines of
credit.
Net income for the first nine months of fiscal 2000 was $36,000 or $0.00 per
share as compared to a net loss of $1.5 million or $0.21 per share for the third
quarter fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
On March 25, 2000, the Company had cash and cash equivalents of $1.9 million
compared to $1.9 million at June 26, 1999. Cash used in operations was $1.6
million during the first nine months of the current year, versus $847,000 used
in the same period of the previous year. Cash used to increase working capital
assets to support the growth in sales more than offset net income during the
current year period. In the prior year the net loss more than offset the cash
provided by a reduction in working capital assets associated with the downturn
in the semiconductor capital equipment market.
Net cash used in investing activities during the first nine months of fiscal
2000 was $0.7 million compared to $45,000 in the previous year. The Company used
approximately $0.3 million, net of cash received, for acquisition expenses
associated with the acquisition of Aseco in January 2000, and approximately $0.3
million to acquire certain fixed and intangible assets related to the formation
of the Infinity Systems Division of the Company. Cash used for capital
expenditures totaled $0.1 million during the first nine months of fiscal 2000,
as compared to $45,000 in the same period of the prior year.
At March 25, 2000, the Company maintained two separate secured lines of credit;
one for $5 million and the other for $3 million, at two separate banks.
Borrowings on the $5 million line, which totaled $1.0 million at March 25, 2000,
bear interest at 1.5% over the bank's prime rate, which was 9.0% at March 25,
2000, for a borrowing rate of 10.5%. The line was unused at June 26, 1999. The
amount available for borrowing on the line is calculated as a percentage of
eligible accounts receivable and inventory of the Company, excluding Aseco, and
amounted to approximately $3.7 million at March 25, 2000.
Borrowings on the $3 million line, which totaled $2.1 million at March 25, 2000,
bear interest at 1.5% over the bank's prime rate of 9.0% at March 25, 2000, for
a borrowing rate of 10.5%. The line of credit was acquired with the acquisition
of Aseco on January 31, 2000. The amount available for borrowing on the line is
calculated as a percentage of eligible accounts receivable and inventory of
Aseco, and amounted to approximately $2.8 million at March 25, 2000. As a result
of purchase accounting adjustments related to the acquisition of Aseco, the
Company was in default of certain financial covenants of the line of credit
related to tangible net worth at March 25, 2000. The bank has subsequently
provided a waiver of these covenants for the measurement period.
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<PAGE>
Management expects to establish new financial covenants on this line of credit
prior to the next quarterly measurement date on June 24, 2000.
Current assets at March 25, 2000 were $22.8 million, the current ratio was 1.9
and working capital was $10.7 million, versus $9.3 million, 3.1 and $6.3
million, respectively, at June 26, 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. Management believes that cash and cash
equivalents on hand at March 25, 2000, 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 at least the next twelve
months, but that one or more additional business acquisitions or unforeseen
changes in market conditions could cause the Company to seek additional
financing. 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.
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 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.
In December 1999, the Securities and Exchange Commission staff (the Staff)
issued "Staff Accounting Bulletin No. 101-Revenue Recognition in Financial
Statements" (SAB 101). SAB 101 establishes the Staff's preference that if
uncertainty exists about customer acceptance, revenue should not be recognized
until acceptance occurs. Customer acceptance provisions may be included in a
contract, among other reasons, to enforce a customer's right to (1) test the
delivered product, (2) require the seller to perform additional services
subsequent to delivery of an initial product or performance of an initial
service (e.g., a seller is required to install or activate delivered equipment),
or (3) identify other work necessary to be done before accepting the product.
The Staff presumes that such contractual customer acceptance provisions are
substantive, bargained-for terms of an arrangement. Accordingly, when such
contractual customer acceptance provisions exist, the staff generally believes
that the seller should not recognize revenue until customer acceptance occurs or
the acceptance provisions lapse.
A seller should substantially complete or fulfill the terms specified in the
arrangement in order for delivery or performance to have occurred. When applying
the substantially complete notion, the Staff believes that only inconsequential
or perfunctory actions may remain incomplete such that
14
<PAGE>
the failure to complete the actions would not result in the customer receiving a
refund or rejecting the delivered products or services performed to date. In
addition, the seller should have a demonstrated history of completing the
remaining tasks in a timely manner and reliably estimating the remaining costs.
If revenue is recognized upon substantial completion of the arrangement, all
remaining costs of performance or delivery should be accrued.
Consistent with industry standards, the Company has historically recognized
revenue at product shipment, unless acceptance criteria were significant. The
Staff's preference, as explained above, will create a timing difference in when
the Company recognizes revenue. The accounting change will be effective for the
Company's quarter ended July 1, 2000.
The cumulative effect of the change, representing the deferral of previously
recognized revenue and related costs for product with acceptance criteria or
installation occurring after shipment, is still being evaluated by management.
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 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 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; (7) failure to
realize the expected benefits of the merger; and, (8) 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/A for the year ended June 26, 1999 and the discussion of
risk factors included in the Joint Proxy/Prospectus on Form S-4 dated December
30, 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.
15
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended March 25, 2000, the Company issued the following
unregistered securities:
Effective December 29, 1999, the Company issued 9,000 shares of common stock
pursuant to the excercise of 9,000 warrants. The proceeds from the exercise
totaled $36,000. The shares were issued to Guaranty Finance Management
Corporation. The Company paid no discounts or commissions.
Effective December 31, 1999, the Company issued 30,696 shares of common stock
pursuant to the exercise of 139,865 warrants. There were no proceeds from the
conversion of the warrants to common stock as it was a cashless transaction. The
shares were issued to the Hambrecht & Quist Group. The Company paid no discounts
or commissions.
The securities issued are exempt from registration pursuant to section 4(2) of
the Securities Act of 1933 because the exercise was limited to two sophisticated
investors having access to current information about the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of stockholders was held on January 31,
2000.
(b) The following persons were elected directors of the Company to serve for
a term of one year:
Roger Gower D.James Guzy Donald J. Kramer
David M. Sugishita Donald R. VanLuvanee Patrick Verderico
(c) The shareholders also voted to:
o Approve and adopt the merger agreement among Aseco, MCT and MCT
Acquisition, Inc., a wholly owned subsidiary of MCT. (4,660,157
affirmative votes; 39,091 negative votes; 24,384 abstention votes;
2,605,988 Broker non-vote)
o Approve an amendment to the Incentive Stock Option Plan to
increase the number of shares reserved for issuance under the Plan
from 1,250,000 shares to 1,500,000 shares, or, if the merger is
approved, to increase the number to 2,300,000 shares. (4,493,042
affirmative votes; 174,806 negative votes; 55,784 abstention
votes; 2,605,988 Broker non-vote)
16
<PAGE>
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 January 31, 2000, the Company completed its acquisition of Aseco Corporation
(Aseco), a Massachusetts based manufacturer of handling equipment. The
acquisition was structured as a stock for stock purchase, and has been accounted
for under the purchase method of accounting. The purchase price totaled $24.0
million, consisting of 2.9 million shares of Company common stock valued at
$22.5 million issued to former Aseco shareholders and $1.5 million of
acquisition-related costs.
The purchase price has been allocated based on the estimated fair values of net
assets acquired at the date of acquisition. The excess of purchase price over
tangible net assets acquired has been preliminarily allocated to goodwill in the
amount of $9.6 million (which is being amortized using a straight line method
over the estimated useful life of five years), and other intangible assets in
the amount of $9.9 million (which are being amortized using the straight-line
method over the estimated useful lives of two to five years). In accordance with
generally accepted accounting principals, this initial allocation may be
adjusted in future quarters as valuations of certain accounts, including
inventory and accrued liabilities are finalized.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27 Financial Data Schedule
(b) Reports on Form 8-K
I. On February 4, 2000, the Company filed a Current Report on Form 8-K under
Item 2 and Item 7 regarding its acquisition of Aseco Corporation.
II. On April 24, 2000, the Company filed a Current Report on Form 8-K under
Item 8 regarding its change in fiscal year.
17
<PAGE>
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: May 9, 2000 By: /s/Roger E. Gower
------------------
Roger E. Gower
President and Chief Executive Officer
And
Dated: May 9, 2000 By: /s/ Jeffrey S. Mathiesen
-------------------------
Jeffrey S. Mathiesen
Chief Financial Officer
Chief Accounting Officer
18
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit
Number Page
27 Financial Data Schedule 20
19
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MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
EX-27
FINANCIAL DATA SCHEDULE
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-24-2000
<PERIOD-END> MAR-25-2000
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<COMMON> 110
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<TOTAL-LIABILITY-AND-EQUITY> 31,159
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