<PAGE>
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 30, 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
----------------------------------------
(State or other jurisdiction of
incorporation or organization)
41-0985960
----------------------------------------
(I.R.S. Employer
Identification No.)
2340 West County Road C, St. Paul, MN 55113-2528
-------------------------------------------------------
(Address of principal executive offices)
(651) 697-4000
-----------------------------------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
-------------- --------------
The number of shares outstanding of the Registrant's Common Stock, as of October
31, 2000 was 13,949,554.
Page 1 of pages
Exhibit index on page 14
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
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 9
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
EXHIBITS 18
</TABLE>
2
<PAGE>
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 30, December 31,
ASSETS 2000 1999
------------------------------------------------------------------------ ----------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $16,875 $ 1,045
Accounts receivable, less allowance for doubtful accounts
of $192 and $136, respectively 14,404 4,087
Inventories:
Raw materials 8,518 1,545
Work in process 3,941 980
Finished goods 2,007 1,123
Other 369 604
-------- --------
Total current assets 46,114 9,384
Property, plant and equipment: 5,219 4,089
Less accumulated depreciation (3,876) (3,224)
-------- --------
Property, plant and equipment, net 1,343 865
Goodwill and other intangible assets, net 16,428 32
Other assets 86 43
-------- --------
Total assets $ 63,971 $ 10,324
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
------------------------------------------------------------------------
Current liabilities:
Line of credit $2,108 $ -
Current portion of long-term debt 19 51
Accounts payable 7,315 1,232
Other accrued liabilities 5,019 1,715
-------- --------
Total current liabilities 14,461 2,998
Long-term debt and financing obligations 51 70
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 authorized, 13,947,980
and 7,540,647 issued, respectively 139 75
Additional paid-in capital 87,966 44,217
Cumulative translation adjustment (69) (69)
Accumulated deficit (38,577) (36,967)
-------- --------
Total stockholders' equity 49,459 7,256
-------- --------
Total liabilities and stockholders' equity $ 63,971 $ 10,324
======== ========
</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
-------------------------------- ---------------------------------
Sep. 30, Sep. 25, Sep. 30, Sep. 25,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 16,617 $ 5,745 $ 43,584 $ 14,228
Cost of sales 9,111 2,832 23,233 6,865
----- ----- ------ -----
Gross profit 7,506 2,913 20,351 7,363
Operating expenses:
Selling, general and administrative 4,142 2,122 11,986 5,249
Research and development 2,545 675 6,658 2,043
Amortization of intangible assets 1,175 5 3,133 5
----- ----- ------ -----
Total operating expenses 7,862 2,802 21,777 7,297
----- ----- ------ -----
Profit (loss) from operations (356) 111 (1,426) 66
Interest and other:
Interest income 115 14 159 42
Interest expense (133) (3) (292) (7)
Other, net (9) 8 (51) (42)
----- ----- ----- -----
Total interest and other (27) 19 (184) (7)
-------- -------- -------- --------
Net income (loss) $ (383) $ 130 $ (1,610) $ 59
-------- -------- -------- --------
Net income (loss) per share:
Basic $ (0.03) $ 0.02 $ (0.15) $ 0.01
========= ======== ========= =========
Diluted $ (0.03) $ 0.02 $ (0.15) $ 0.01
========= ======== ========= =========
Weighted average common and common
equivalent shares outstanding:
Basic 12,082 7,460 10,765 7,418
========= ======== ========= =========
Diluted 12,082 8,131 10,765 7,845
========= ======== ========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statement
4
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------
September 30, September 25,
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,610) $ 59
Adjustments to reconcile net income (loss) to net cash
Used in operating activities:
Depreciation and amortization 3,794 299
Changes in operating assets and liabilities:
Accounts receivable (5,994) (1,783)
Inventories (4,912) (177)
Other and other current assets 326 (201)
Accounts payable 3,106 1,078
Other accrued liabilities 934 312
------ ----
Net cash used in operating activities (4,356) (413)
Cash flows from investing activities:
Additions to property, plant and equipment (283) (70)
Payment for acquisitions, net of cash acquired (407) (238)
------ -----
Net cash used in investing activities (690) (308)
Cash flows from financing activities:
Payments of long-term debt (51) (40)
Increase in working line of credit 314 -
Proceeds from issuance of stock 20,613 170
------ ---
Net cash provided by financing activities 20,876 130
------ ---
Effects of exchange rate changes - (5)
------ ---
Net increase (decrease) in cash and cash equivalents 15,830 (596)
Cash and cash equivalents at beginning of period 1,045 2,260
------ -----
Cash and cash equivalents at end of period $16,875 $1,664
======= ======
Supplemental disclosure of noncash investing and financing
activities:
Stock issued for acquisition of Aseco Corporation $23,200 -
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 and nine month periods ended September 30, 2000 and
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 our opinion, 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 Transition Report on
Form 10-K, for the transition period ended December 31, 1999.
The results of operations for the three and nine month periods ended
September 30, 2000 are not necessarily indicative of the operating
results to be expected for the full year.
2. STOCKHOLDERS' EQUITY
On August 21, 2000, we sold 3,000,000 shares of our common stock at a
price of $6.50 per share in a public stock offering. The net proceeds
from the offering, after deducting the underwriting discounts and
offering expenses, was approximately $17.9 million.
On September 18, 2000, the managing underwriters exercised their over
allotment option to purchase 290,000 shares of common stock at the same
price to the public and with the same underwriting discount as the public
stock offering. We received, in the aggregate, net proceeds of
approximately $1.8 million from the exercise of the over allotment
option.
3. 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:
6
<PAGE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
-----------------------------------------------------------------------------
September 30, September 25, September 30, September 25,
(in thousands) 2000(1) 1999 2000(1) 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 12,082 7,460 10,765 7,418
Effect of dilutive stock
options and warrants - 671 - 427
--------------------------------------------------------- -------------------
12,082 8,131 10,765 7,845
=============================================================================
</TABLE>
(1) We reported a loss for the periods indicated. No adjustment was
made for the effect of stock options or warrants, which totaled
2,177,550 at September 30, 2000, as the effect was anti-dilutive.
4. 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
and nine month periods ended September 30, 2000 and September 25, 1999,
total comprehensive income (loss) equaled net income (loss) as reported
on the Consolidated Statements of Operations.
5. ACQUISITION
On January 31, 2000, we completed the acquisition of Aseco Corporation, a
Massachusetts-based manufacturer of singulated handling equipment for the
back-end of the semiconductor manufacturing process. The acquisition was
structured as a stock-for-stock purchase and Aseco is now a wholly-owned
subsidiary of MCT. The purchase price totaled $24.0 million, comprising a
total of 2.9 million shares of our common stock issued to former Aseco
shareholders or reserved for issuance under existing Aseco stock option
agreements valued at $22.5 million 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 are included in our
consolidated financial statements beginning 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 net assets acquired, amounting to $9.6 million, has been
preliminarily allocated to goodwill, and is being amortized using a
straight-line method over the estimated useful life of five years. Other
intangible assets, including established workforce, customer list, and
core and developed technology, totaling $9.9 million are being amortized
using the straight-line method over the estimated useful lives of two to
five years. In accordance with generally accepted accounting principles,
this initial allocation may be adjusted in future quarters as valuations
of certain accounts, including inventory and accrued liabilities are
finalized.
7
<PAGE>
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 intangible assets. The pro forma information also does not attempt
to show how we would actually have performed on a combined basis had the
companies been combined throughout these periods. The following pro forma
information, therefore, although helpful in illustrating the financial
characteristics of our combined company under one set of assumptions,
does not attempt to predict or suggest future results.
<TABLE>
<CAPTION>
Actual Pro forma Pro forma
------- --------- ----------------
(in thousands, except per share data) Three months ended Nine months ended
9/30/00 9/25/99 9/30/00 9/25/99
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues $16,617 $11,397 $43,939 $28,502
Net income (loss) (383) (1,482) (3,715) (11,861)
Net income (loss) per share:
Basic and diluted (0.03) (0.14) (0.33) (1.15)
</TABLE>
6. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES" - Issued in June 1998, 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. We believe adopting the provisions of SFAS No. 133 will not
have a material impact on our financial statements. The standard is
effective for us in 2001.
STAFF ACCOUNTING BULLETIN NO. 101-REVENUE RECOGNITION IN FINANCIAL
STATEMENTS (SAB 101) - In December 1999, the Securities and Exchange
Commission staff issued SAB 101, which, among other things, establishes
the SEC's interpretation that if uncertainty exists about customer
acceptance of a product, revenue should not be recognized until
acceptance occurs. The implementation date of SAB 101 has been delayed
until no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. We are currently evaluating, and have not
determined the effect, if any, SAB 101 will have on our financial
position and results of operations.
8
<PAGE>
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 OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SHOULD BE READ TOGETHER WITH THE OTHER FINANCIAL INFORMATION AND CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THIS DOCUMENT. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY OF FACTORS, INCLUDING THOSE
DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS DOCUMENT.
OVERVIEW
We supply automation solutions for the global semiconductor test and assembly
manufacturing market. Our solutions include automated test handlers, factory
automation software and our new integrated Smart Solutions product line. We
believe that our products can significantly improve the productivity, yield and
throughput of the back-end, or the post-wafer manufacturing process, including
assembling, packaging, testing and singulating semiconductor devices.
The demand for our products and services is dependent upon growth in the
semiconductor industry and the increasing automation needs of semiconductor
manufacturers and independent test and assembly facilities. The semiconductor
capital equipment market was in a significant downturn in 1999, that was
accompanied by the economic crisis in Asia, where approximately 65% of our
products were sold during the six-month transition period ended December 1999.
These industry and economic conditions adversely affected our net sales and
operating results in 1999. Beginning mid-year calendar 1999, the industry began
to stabilize and show signs of a gradual recovery, which has resulted in
improved sales and operating results for our fiscal year 2000. No assurance can
be made, however, that such improvement will continue to occur.
Beginning in 1999, we broadened our strategy from that of a test handler
manufacturer to becoming a provider of comprehensive automation solutions for
the back-end of the semiconductor manufacturing process. First, we developed and
introduced in February 1999 our TapestryTM strip handler. Tapestry combines
strip handling capability with robotics, machine vision technology and critical
software, enabling the testing and tracking of semiconductor devices in strip
form and the generation of critical process data throughout the test process.
Second, in June 1999 we acquired the Infinity Systems division of Fico BV.
Infinity Systems has been involved in the development of factory automation
software for the semiconductor manufacturing industry. Infinity System's
software expertise was integral to the development of our integrated Smart
Solutions(TM) product line, introduced in May 2000. Together with a third party
tester, our Smart Solutions products including our Tapestry handler enable
complete automation of the test, laser mark, mark inspect, singulation, sort and
packaging for shipment processes.
ACQUISITION OF ASECO CORPORATION. On January 31, 2000, we completed the
acquisition of Aseco Corporation, a Massachusetts-based manufacturer of
singulated handling equipment for the back-end of the semiconductor
manufacturing process. The acquisition was structured as a stock-for-stock
purchase and Aseco is now a wholly-owned subsidiary of MCT. The purchase
9
<PAGE>
price totaled $24.0 million, comprising a total of 2.9 million shares of our
common stock issued to former Aseco shareholders or reserved for issuance under
existing Aseco stock option agreements valued at $22.5 million 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 are included in our consolidated financial
statements beginning 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 net assets acquired, amounting to
$9.6 million, has been preliminarily allocated to goodwill, and is being
amortized using a straight-line method over the estimated useful life of five
years. Other intangible assets, including established workforce, customer list,
and core and developed technology, totaling $9.9 million, are being amortized
using the straight line method over the estimated useful lives of two to five
years. In accordance with generally accepted accounting principles, this initial
allocation may be adjusted in future quarters as valuations of certain accounts,
including inventory and accrued liabilities, are finalized.
In each of the three quarters immediately prior to the acquisition, Aseco
reported net sales comparable to ours, ranging from $4.7 million to $5.7
million. Aseco's gross margins ranged from approximately 40% to 43%, compared to
approximately 51% to 55% for MCT. Selling, general and administrative expenses
for Aseco ranged from approximately 29% to 34% of net sales, compared to
approximately 37% to 39% for MCT, and research and development expenses ranged
from approximately 15% to 18% of net sales, compared to approximately 12% to 15%
for MCT.
In Aseco's most recent fiscal year ended March 28, 1999, Aseco reported net
sales of $19.2 million and a net loss of $13.7 million. The net loss included
$2.2 million in charges related to the closing of its operations based in
England and the discontinuation of several mature product models, a $5.0 million
write-down of excess inventory and approximately $1.2 million of various
restructuring related charges.
Prior to inclusion of other considerations discussed below, we expect that as we
combine our operations with Aseco, our revenue base should approximately double.
We believe that we will be able to sustain existing customers of Aseco and will
have opportunities for incremental sales through introduction of our products to
Aseco customers and vice versa. The termination of Aseco's relationship as a
distributor for a foreign manufacturer is expected to allow improvement in gross
margins in 2001 as compared to our first nine months of 2000. Our selling,
general and administrative expenses are expected to decrease as a percentage of
net sales, as we blend the businesses and eliminate redundant costs. Research
and development expense increased as a percentage of net sales, as we continued
development efforts underway at Aseco at the time of the acquisition, and
accelerate some of our development projects. We will also continue to evaluate
opportunities for reduction in operating and manufacturing expense through
consolidation of duplicate processes of the two companies. Aseco is
headquartered in a 61,000 square foot facility in Marlborough, Massachusetts,
with approximately 110 employees.
10
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,2000 AND
SEPTEMBER 25,1999
Net sales for the three months ended September 30, 2000, increased $10.9 million
or 189.2% to $16.6 million compared to $5.7 million for the three months ended
September 25, 1999. Sales of Aseco products accounted for approximately $6.9
million of the net sales increase. Sales of our newer handler products, the MCT
5100 and MCT 7632, Smart Solutions products and automation software combined to
contribute approximately $3.4 million of the increase in net sales over the
comparable period in the prior year. Due to the inclusion of Aseco sales in the
current year period, sales of our newer products, the MCT 5100, MCT 7632, Smart
Solutions products and automation software, decreased to approximately 46% of
total net sales in the current period compared to approximately 74% in the prior
year period.
Gross profit for the third quarter of 2000 increased by $4.6 million to $7.5
million, or 45.2% of net sales, from $2.9 million, or 50.7% of net sales, for
the comparable period in the prior year. The decrease in gross margin in the
current year period primarily resulted from the inclusion of the lower margin
Aseco products, and increased product costs associated with the launch of the
new Smart Solutions and MCT 5115 products.
Selling, general and administrative expense in the third quarter of 2000 was
$4.1 million, or 24.9% of net sales, compared to $2.1 million, or 36.9% of net
sales for the comparable period in 1999. The addition of the Aseco operations
accounted for approximately $1.3 million of the increase, with increased direct
selling costs related to increased sales revenues contributing $0.2 million of
the increase. The remainder primarily related to increased personnel and travel
expenses to support the sales growth. The decrease in selling, general and
administrative expense as a percentage of net sales in the current year is
primarily attributed to the increased sales in the current year period.
Research and development expense for the third quarter of 2000 was $2.5 million,
or 15.3% of net sales, compared to $0.7 million, or 11.7% of net sales in the
comparable period of the prior year. The acquisition of Aseco accounted for
approximately $0.9 million of the increase in the current year. The remainder of
the increase, of which $0.4 million was increased personnel and contract labor
costs, resulted from increased spending requirements for research and
development projects initiated during the current year's quarter. These
initiatives resulted in the introduction of several new products in 2000.
Amortization expense totaled $1.2 million, or 7.1% of net sales, during the
three months ended September 30, 2000, versus $5,000, or 0.1% of sales in the
prior year. The increase is attributed to the intangible assets and goodwill
generated by the acquisition of Aseco.
Interest income for the third quarter of 2000 was $115,000 compared to $14,000
in the previous year's quarter. Increase in interest income relates to the
excess cash investment generated from issuance of stock. Interest expense
totaled $133,000 in the current year's quarter, compared to $3,000 for the
comparable period in the prior year. 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 quarter ended September 30, 2000 was $0.4 million or $0.03 per
share, as compared to a net income of $0.1 million or $0.02 per share in the
prior year period.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
SEPTEMBER 25, 1999
Net sales for the nine months ended September 30, 2000, increased $29.4 million
or 206.3% to $43.6 million compared to $14.2 million for the comparable period
ended September 25, 1999. Sales of Aseco products accounted for approximately
$20.7 million of the sales increase. Sales of our newer handler products, the
MCT 5100 and MCT 7632, Smart Solutions products and automation software combined
to contribute approximately $6.4 million of the increase in net sales over the
comparable period in the prior year, with the balance of the increase in net
sales derived from sales and refurbishments of our more mature products. Due to
the inclusion of Aseco sales for the first time, sales of our newer products,
the MCT 5100, MCT 7632, Smart Solutions products and automation software,
decreased to approximately 36.3% of total net sales in the current period
compared to approximately 66.6% in the prior year period.
Gross profit for the first nine months of 2000 increased by $13.0 million to
$20.4 million, or 46.7% of net sales, from $7.4 million, or 51.8% of net sales,
for the comparable period in the prior year. The decrease in gross margin in the
current year period resulted from the inclusion of the lower margin Aseco
products, and increased product costs associated with the launch of the new
Smart Solutions and MCT 5115 products.
Selling, general and administrative expense in the first nine months of 2000 was
$12.0 million, or 27.5% of net sales, compared to $5.2 million, or 36.9% of net
sales for the comparable period in 1999. The addition of the Aseco operations
accounted for approximately $4.1 million of the increase, with increased direct
selling costs related to increased sales revenues contributing $1.1 million of
the increase. The remainder primarily related to increased personnel and travel
expenses to support the sales growth. The decrease in selling, general and
administrative expense as a percentage of net sales in the current year is
primarily due to the increased sales in the current period.
Research and development expense for the first nine months of 2000 was $6.7
million, or 15.3% of net sales, compared to $2.0 million, or 14.4% of net sales
in the previous year. The acquisition of Aseco accounted for approximately $2.7
million of the increase in the current year The remainder of the increase, of
which $1.5 million was increased personnel and contract labor costs, resulted
from increased spending requirements for research and development projects
initiated during the current year. These initiatives resulted in the
introduction of several new products in 2000.
Amortization expense totaled $3.1 million, or 7.2% of net sales, during the nine
months ended September 30, 2000, versus $5,000, or 0.0% of net sales in the
prior year. The increase is attributed to the intangible assets and goodwill
generated by the acquisition of Aseco.
Interest income for the nine months ended September 30, 2000 was $159,000
compared to $42,000 in the comparable period in the prior year. Increase in
interest income relates to the excess cash investment generated from issuance of
stock. Interest expense totaled $292,000 in the current year period, compared to
$7,000 for the comparable period in the prior year. The
12
<PAGE>
increase in interest expense is attributed to increased borrowings under the
lines of credit during the current year.
Net loss for the nine months ended September 30, 2000 was $1.6 million or $0.15
per share, as compared to a net income of $59,000, or $0.01 per share in the
prior year's period.
LIQUIDITY AND CAPITAL RESOURCES
In August 2000, we sold 3,000,000 shares of our common stock in a public
offering, and in September 2000, we sold 290,000 pursuant to the underwriters'
over-allotment option. Our proceeds were approximately $19.7 million, net of
expenses associated with the offering. We used approximately $3.6 million of the
proceeds to repay the outstanding indebtedness under our revolving credit
agreement. The remaining balance is being used for general corporate purposes,
including working capital.
At September 30, 2000, we had cash and cash equivalents of $16.9 million,
compared to $1.0 million at December 31, 1999. The current ratio was 3.2 and
working capital totaled $31.7 million at September 30, 2000, compared to 3.1 and
$6.4 million, respectively, at December 31, 1999.
We used $4.4 million of cash in operations in the nine months ended September
30, 2000, versus $0.4 million in the comparable period in 1999. Increases in
accounts receivable and inventories to support the increased revenues were the
primary uses of cash in both periods.
Capital expenditures totaled $0.3 million during the nine months ended September
30, 2000, and $0.1 million in the nine months ended September 25, 1999. Capital
purchases in both periods have been primarily for computer equipment. We used
$0.4 million of cash during the nine months ended September 30, 2000 primarily
for Aseco Corporation acquisition expenses and $0.2 million in the prior year to
acquire certain fixed and intangible assets related to the formation of the
Infinity Systems Division of the Company.
Cash provided by financing activities of $20.9 million for the nine months ended
September 30, 2000, was primarily comprised of cash provided from issuance of
common stock. Cash provided by financing activities for the nine months ended
September 25, 1999 was $0.1 million.
At September 30, 2000, we maintained two separate secured lines of credit at two
separate banks, one for $5.0 million and the other for $3.0 million. Borrowings
on the $5.0 million line, which was unused at September 30, 2000, accrue
interest at 1.5% over the bank's prime rate, which was 9.5% at September 30,
2000, for a borrowing rate of 11.0%. The amount available for borrowing on the
line is calculated as a percentage of our eligible accounts receivable and
inventory, excluding Aseco, and amounted to approximately $5.0 million at
September 30, 2000. As a result of net loss from amortization of intangible
assets related to the acquisition of Aseco, we were in default of certain
financial covenants of the line of credit related to quarterly net income at
September 30, 2000. The bank has waived noncompliance with these covenants
through September 30, 2000. We intend to negotiate new financial covenants on
the line of credit. Although we cannot assure you that we will be successful in
negotiating such financial covenants, we believe our cash and cash
equivalents on hand at September 30, 2000, are sufficient to fund our
operating requirements without use of the line of credit through its
expiration.
13
<PAGE>
Borrowings on the $3 million line, which totaled $2.1 million at September 30,
2000, accrue interest at 1.5% over the bank's prime rate, which was of 9.5% at
September 30, 2000, for a borrowing rate of 11.0%. The amount available for
borrowing is calculated as a percentage of eligible accounts receivable and
inventory of Aseco, and amounted to $3.0 million at September 30, 2000. As a
result of purchase accounting adjustments related to the acquisition of Aseco,
we were in default of certain financial covenants of the line of credit related
to tangible net worth at September 30, 2000. The bank has waived noncompliance
with these covenants through September 30, 2000. We intend to negotiate new
financial covenants on the line of credit. Although we cannot assure you that we
will be successful in negotiating such financial covenants, we believe our
cash and cash equivalents on hand at September 30, 2000, are sufficient to
pay off this line and fund our operating requirements through the expiration
of this line.
Our anticipated capital needs for the next twelve months are expected to be less
than $1.0 million and concentrated in development of additional products and
upgrading our management information systems. We believe that cash and cash
equivalents on hand at September 30, 2000, anticipated cash from continued
operations and funds available through our bank lines of credit are sufficient
to finance our continuing operations for at least the next twelve months, but
that one or more additional business acquisitions or unforeseen changes in
market conditions could cause us to seek additional financing sooner. We believe
that we will be able to raise additional capital and/or negotiate an increase to
one or both of our bank lines of credit at terms acceptable to us if required,
but no assurance can be made that such financing will be available if needed. We
may acquire other companies, product lines or technologies that are
complementary to our business and our working capital needs may change as a
result of such acquisitions.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The vast majority of our transactions are denominated in U.S. dollars; as such,
fluctuations in foreign currency exchange rates have historically had little
impact on us. Inflation has not been a significant factor in our operations in
any of the periods presented, and it is not expected to affect operations in the
future. Our bank lines of credit carry variable interest rates. At September 30,
2000, we had approximately $2.1 million outstanding on our lines of credit, at
an interest rate of 11.0%. An increase in the interest rates could expose us to
market risk in the event we are continue to borrow under the lines to finance
our operations in the future. At September 30, 2000, all of our outstanding
long-term debt carries interest at a fixed rate. There is no material market
risk relating to our bank lines or long-term debt.
IMPACT OF ACCOUNTING STANDARDS
SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" -
Issued in June 1998, 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. We believe adopting the provisions
of SFAS No. 133 will not have a material impact on our financial statements. The
standard is effective for us in 2001.
14
<PAGE>
STAFF ACCOUNTING BULLETIN NO. 101-REVENUE RECOGNITION IN FINANCIAL STATEMENTS
(SAB 101) - In December 1999, the Securities and Exchange Commission staff
issued SAB 101, which, among other things, establishes the SEC's interpretation
that if uncertainty exists about customer acceptance of a product, revenue
should not be recognized until acceptance occurs. The implementation date of SAB
101 has been delayed until no later than the fourth fiscal quarter of fiscal
years beginning after December 15, 1999. We are currently evaluating, and have
not determined the effect, if any, SAB 101 will have on our financial position
and results of operations.
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 we respond to successfully
in order for our products to avoid becoming noncompetitive or obsolete; (3)
customer acceptance of our new products, including the MCT 5100, MCT 7632,
Tapestry handling systems, Smart Sort, Smart Mark and MCT 5115 products in which
we have invested significant amounts of inventory; (4) possible loss of any of
our key customers, who account for a substantial percentage of our business; (5)
the possible adverse impact of competition in markets which are highly
competitive; (6) the possible adverse impact of economic or political changes in
markets we serve; (7) failure to realize the expected benefits of the MCT and
Aseco merger; and, (8) other factors detailed from time to time in our SEC
reports, including but not limited to the discussion in the Management's
Discussion & Analysis included in the Form S-1 dated August 16, 2000. All
forecasts and projections in this report are "forward-looking statements," and
are based on our current expectations of our near-term results, based on current
information available pertaining to us, including risk factors discussed above.
Actual results could differ materially.
15
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On January 31, 2000, we completed the acquisition of Aseco Corporation, a
Massachusetts-based manufacturer of singulated handling equipment for the
back-end of the semiconductor manufacturing process. The acquisition was
structured as a stock-for-stock purchase and Aseco is now a wholly-owned
subsidiary of MCT. The purchase price totaled $24.0 million, comprising a total
of 2.9 million shares of our common stock issued to former Aseco shareholders or
reserved for issuance under existing Aseco stock option agreements valued at
$22.5 million 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 are included in our consolidated financial
statements beginning 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 net assets acquired, amounting to
$9.6 million, has been preliminarily allocated to goodwill, and is being
amortized using a straight-line method over the estimated useful life of five
years. Other intangible assets, including established workforce, customer list,
and core and developed technology, totaling $9.9 million are being amortized
using the straight-line method over the estimated useful lives of two to five
years. In accordance with generally accepted accounting principles, 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
No reports on Form 8-K were filed during the quarter.
16
<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: November 14, 2000 By: /s/ Roger E. Gower
-------------------------------
Roger E. Gower
President and Chief Executive Officer
And
Dated: November 14, 2000 By: /s/ Jeffrey S. Mathiesen
-------------------------------
Jeffrey S. Mathiesen
Chief Financial Officer
Chief Accounting Officer
17
<PAGE>
MICRO COMPONENT TECHNOLOGY, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit
Number Page
27 Financial Data Schedule 19
18
